Pilgrim(SM)
- -------
FUNDS FOR SERIOUS INVESTORS
Annual Report
Classes: A, B, C and I
October 31, 1999
Pilgrim Mayflower Trust
Pilgrim Growth + Value Fund
Pilgrim International Value Fund
Pilgrim Emerging Markets Value Fund
Pilgrim Research Enhanced Index Fund
Pilgrim Income & Growth Fund
Pilgrim High Total Return Fund II
Pilgrim High Total Return Fund
<PAGE>
PILGRIM MAYFLOWER TRUST
ANNUAL REPORT
OCTOBER 31, 1999
Dear Shareholder:
We are pleased to present the Annual Report for the Pilgrim Mayflower Trust
(formerly the Northstar Trust) for the year ended October 31, 1999. On October
29th, ReliaStar Financial Corp., parent of Northstar Holding Inc., purchased
Pilgrim Capital Corporation and merged Pilgrim's investment management and
distribution operations into Northstar's. All of the entities and the funds we
now manage and distribute have been renamed as Pilgrim. The combined entities
now manage over $13.4 billion of assets including 32 open-end funds, one
closed-end fund, ten structured finance vehicles, several variable annuity
portfolios and other private accounts.
As a result of the acquisition of Pilgrim by ReliaStar, our open-end family of
funds has grown to $7.6 billion in assets under management, with funds covering
most asset classes and investment styles. The Pilgrim Funds now include twelve
domestic equity funds, seven international equity funds, nine fixed income funds
and four equity and income blend funds. Each fund is offered in several share
classes, with varying sales charges designed to meet the investor's individual
needs.
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 broad range of core investments
designed to help you reach your financial goals. Our goal is for every investor
to have a successful investment experience.
Sincerely,
/s/ Robert W. Stallings
Robert W. Stallings
President and Chief Executive Officer
Pilgrim Mayflower Trust
November 29, 1999
<PAGE>
(This Page Left Blank Intentionally)
<PAGE>
PILGRIM
GROWTH + VALUE FUND
The Markets
o The trailing twelve months ended October 31, 1999 generated significant
gains for most investors. Once again large cap stocks finished ahead of
small caps for the period. The S&P 500(1) generated a return of 25.67%
over the past twelve months, the Russell 2000(2) was up 14.87% while the
NASDAQ Composite(3) surged 67.46% for the same period.
o Small caps suffered dramatically during the first quarter of 1999 with
the Russell 2000 down 5.41%, however they came roaring back in the second
quarter with a return of 15.55% for the quarter. The significance of the
sudden resurgence of small capitalization stocks is that the breadth and
power of the overall stock market has broadened out. This is a very
bullish event, because it is a signal that the stock market is no longer
focusing on blue chip and index investments.
o Interest rates continued to drift higher over the course of the year,
with the greatest impact on the market occurring during the third
quarter. With investor worries escalating over the future prospects of
inflation, the S&P 500 and the Russell 2000 suffered losses in excess of
6%.
o During the third quarter, investors gravitated towards technology stocks,
which continued to demonstrate accelerating earnings momentum. Corporate
earnings are now accelerating and earnings for the entire stock market
are expected to be quite strong over the next two quarters.
The Fund
o The Fund returned 89.27%, 87.95%, and 87.85% for Class A, B, and C
shares, respectively, for the fiscal year ended October 31, 1999. The
Russell 2000 Index returned 14.87% for the same period.
o Over the period, Navellier continued to reduce the median market
capitalization of the Fund. Small cap stocks continue to post better
earnings growth than the large capitalization stocks and are benefiting
from an exceptionally strong U.S. economy. Weaker foreign demand for U.
S. products and a strong U.S. dollar hindered the profits of many large
multi-national companies in the S&P 500.
o Overall, tech stocks led the way for the Fund. The top performing stocks
for the twelve month period included: VISX Inc., CMG Information, Gemstar
International, Qlogic Corp. and BroadVision Inc. Amongst the
under-performing stocks were: K-Swiss Inc., Icos Corp., Electronics For
Imaging, Andrx Corp. and Colorado Medtech.
Current Strategy
o Currently, the earnings environment is ideal. Not only are corporate
profits strong, but also the analyst community is forecasting that
corporate earnings will get even stronger over the next couple of
quarters. We believe strong corporate earnings combined with stable
interest rates, and a lessening of Y2K fears, has set the stage for a
powerful year-end rally.
o Technology stocks now dominate the Fund. As these stocks become
increasingly risky, we will trim our positions and lower our technology
exposure. The stock market is now being led by stocks with the strongest
earnings momentum. We will continue to realign the Fund in order to
capitalize on stocks with growing sales and earnings, while remaining in
positions with strong earnings momentum.
o We will continue focusing our investment process on growth
characteristics. Our model continues to demand that the Fund invest in
companies that are fundamentally superior to the broader market. As this
strong growth market develops, Navellier has de-emphasized some of the
value characteristics screened by our model.
<TABLE>
<S> <C>
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Fund Information (All data are as of 10/31/99) Total Net Assets $392,842,356
- ---------------------------------------------------------------------------------------------
</TABLE>
Top 10 Holdings
Name % Fund
1 Macromedia, Inc. 5.7%
2 Applied Micro Circuits Corp. 4.0
3 Broadvision, Inc. 4.0
4 Emulex Corp. 4.0
5 Adobe Systems, Inc. 3.9
6 Powerwave Technologies, Inc. 3.5
7 Gemstar International Group Ltd. 3.3
8 Qlogic Corp. 3.2
9 In Focus Systems, Inc. 3.0
10 Adaptec, Inc. 2.9
-----
37.5%
=====
Top 5 Industries
(by percentage of net assets)
Computer Software 12.2%
Computer Communications 10.9%
EDP Peripherals 9.5%
Semiconductor 8.3%
Telecommunications
Equipment 7.9%
SEC Average Annual Rates of Return
(at maximum applicable sales charge)
- --------------------------------------------------------------------------------
Inception 5 years 1 year
- --------------------------------------------------------------------------------
Class A 24.61% N/A 80.29%
- --------------------------------------------------------------------------------
Class B 25.12% N/A 82.95%
- --------------------------------------------------------------------------------
Class C 25.75% N/A 86.85%
- --------------------------------------------------------------------------------
Cumulative Total Return
(do not reflect sales charge)
- --------------------------------------------------------------------------------
Inception 5 years 1 year
- --------------------------------------------------------------------------------
Class A 100.92% N/A 89.27%
- --------------------------------------------------------------------------------
Class B 96.68% N/A 87.95%
- --------------------------------------------------------------------------------
Class C 96.58% N/A 87.85%
- --------------------------------------------------------------------------------
Past performance is no guarantee of future results.
Principal Risk Factor(s): Exposure to financial and market risks that accompany
investments in equities. 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,
investing in stocks of smaller companies may entail greater price variability
than investing in stocks of larger companies.
3
<PAGE>
PILGRIM
GROWTH + VALUE FUND
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE PILGRIM GROWTH +
VALUE FUND AND COMPARATIVE INDICES FROM INCEPTION OF EACH CLASS OF SHARES
THROUGH THE FUND'S FISCAL YEAR END.(5)
In accordance with the reporting requirements of the Securities and
Exchange Commission, the following data is supplied for the fiscal year ended
October 31, 1999, with all distributions reinvested in shares. The average
annualized total return for Class A shares of 24.61% for the period since the
Fund's inception of November 18, 1996 reflects payment of the maximum sales
charge of 4.75%. Average annualized total return of 25.12% and 25.75% since
inception for Class B and Class C shares of November 18, 1996, respectively,
reflect applicable contingent deferred sales charges (maximum contingent
deferred sales charge for Class B shares of 5.00% declines to 0% after five
years; and maximum charge for Class C shares is 1.00% during the first year of
investment only). All performance data shown represents past performance, and
should not be considered indicative of future performance. Investment return and
principal value will fluctuate. Fund shares when redeemed may be worth more or
less than their original cost.
Pilgrim Growth + Value Fund -- Class A
Average Annual Total Return
1-Year 80.29%
Since Inception 24.61%
S&P 500 Lipper Growth Class A Growth + Value
11/18/96 10000 10000 9525
10734 10632 9524
10503 10430 9257
11147 10978 9495
11213 10893 9019
10735 10395 8762
11362 10852 8952
12028 11603 9714
12550 12036 10286
13530 13034 11248
12754 12553 11324
13432 13270 12400
10/31/97 12969 12842 11571
13547 13137 11238
13760 13359 10933
13900 13449 10759
14879 14397 11504
15622 15012 12173
15764 15173 12085
15467 14799 11456
16077 15439 11911
15890 15275 11553
13573 12822 9248
14420 13677 9965
10/31/98 15578 14624 10110
16499 15496 11117
17429 16791 12870
18144 17508 14322
17558 16911 13286
18240 17646 14933
18932 18093 15853
18459 17740 15068
19464 18789 16530
18840 18325 16201
17662 18117 16831
17157 17815 16869
10/31/99 18231 18912 19135
S&P 500 Lipper Growth(4) Class A Growth + Value
Pilgrim Growth + Value Fund -- Class B
Average Annual Total Return
1-Year 82.95%
Since Inception 25.12%
S&P 500 Lipper Growth Class B Growth + Value
11/18/96 10000 10000 10000
10734 10632 10000
10503 10430 9720
11147 10978 9960
11213 10893 9460
10735 10395 9190
11362 10852 9380
12028 11603 10170
12550 12036 10770
13530 13034 11760
12754 12553 11830
13432 13270 12950
10/31/97 12969 12842 12080
13547 13137 11730
13760 13359 11400
13900 13449 11217
14879 14397 11979
15622 15012 12661
15764 15173 12569
15467 14799 11908
16077 15439 12376
15890 15275 12000
13573 12822 9600
14420 13677 10332
10/31/98 15578 14624 10464
16499 15496 11502
17429 16791 13312
18144 17508 14807
17558 16911 13729
18240 17645 15407
18932 18093 16352
18459 17740 15529
19464 18789 17034
18840 18325 16678
17662 18117 17318
17157 17815 17359
10/31/99 18231 18912 19668
S&P 500 Lipper Growth Class B Growth + Value
Pilgrim Growth + Value Fund -- Class C
Average Annual Total Return
1-Year 86.85%
Since Inception 25.75%
S&P 500 Lipper Growth Class C Growth + Value
11/18/96 10000 10000 10000
10734 10632 10000
10503 10430 9720
11147 10978 9960
11213 10893 9460
10735 10395 9190
11362 10852 9380
12028 11603 10170
12550 12036 10770
13530 13034 11760
12754 12553 11830
13432 13270 12960
10/31/97 12969 12842 12080
13547 13137 11730
13760 13359 11400
13900 13449 11207
14879 14397 11979
15622 15012 12661
15764 15173 12569
15467 14799 11898
16077 15439 12366
15890 15275 11990
13573 12822 9590
14420 13677 10332
10/31/98 15578 14624 10464
16499 15496 11502
17429 16791 13302
18144 17508 14807
17558 16911 13718
18240 17645 15396
18932 18093 16342
18459 17740 15529
19464 18789 17023
18840 18325 16668
17662 18117 17308
17157 17815 17349
10/31/99 18231 18912 19657
S&P 500 Lipper Growth Class C Growth + Value
(1.) The Standard & Poors 500 Index is a widely recognized index of common
stock. Index returns do not reflect fees, brokerage commissions or other
expenses of investing. Returns for Standard & Poors 500 Index are based on
average annual returns, and include reinvestment of dividends and
distributions, if any.
(2.) The Russell 2000 Index measures the performance of small companies.
(3.) The NASDAQ Composite Index measures the performance of all issues listed in
the NASDAQ stock market, except for rights, warrants, units, and
convertible debentures.
(4.) The Lipper Growth Fund Index is calculated using an equally weighted
aggregative composite of the top 30 Funds by net asset size. This index is
released quarterly.
(5.) Sales charges reflected below represent those sales charges in effect as of
October 31, 1999. Effective November 1, 1999 the sales charge schedule has
been changed to conform with similar Funds in the Pilgrim Fund Family, and
can be found in the related Pilgrim Fund prospectus.
All indices are unmanaged.
4
<PAGE>
PILGRIM GROWTH + VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Shares Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks - 95.28%
Advertising - 1.63%
Valassis Communications, Inc. @ 148,600 $ 6,389,800
-----------
Capital Goods - 1.83%
The DII Group, Inc. @ 200,100 7,203,600
-----------
Cellular Telephone - 2.07%
Western Wireless Corp. @ 153,800 8,132,175
-----------
Clothing/Shoe/Accessory Stores - 1.41%
Factory 2-U Stores, Inc. @ 216,900 5,530,950
-----------
Communication Services - 3.54%
Powerwave Technologies, Inc. @ 214,000 13,923,375
-----------
Computer Communications - 10.92%
Adaptec, Inc. @ 254,600 11,457,000
Applied Micro Circuits Corp. @ 200,200 15,578,062
Emulex Corp. @ 101,700 15,858,844
-----------
42,893,906
-----------
Computer Software - 12.19%
Adobe Systems, Inc. 221,400 15,484,162
Macromedia, Inc. @ 348,600 22,462,912
Mercury Interactive Corp. @ 122,700 9,954,038
-----------
47,901,112
-----------
Diversified Commerical Services - 1.44%
Catalina Marketing Corp. @ 60,500 5,664,312
-----------
Diversified Electronic Products - 3.30%
Gemstar International Group Ltd. @ 149,400 12,979,125
-----------
EDP Peripherals - 9.49%
Electronics for Imaging, Inc. @ 215,900 8,703,469
In Focus Systems, Inc. @ 598,600 11,859,762
MTI Technology Corp. @ 248,600 4,210,663
QLogic Corp. @ 120,000 12,495,000
-----------
37,268,894
-----------
EDP Services - 0.68%
4Front Technologies, Inc. @ 195,900 2,669,138
-----------
Electronic Components - 4.05%
Power Integrations, Inc. @ 103,000 10,499,562
SanDisk Corp. @ 89,100 5,401,688
-----------
15,901,250
-----------
Electronic Production/Equipment - 2.06%
Helix Technology Corp. 200,400 8,078,625
-----------
Generic Drugs - 1.78%
Andrx Corp. @ 146,300 6,985,825
-----------
Health Technology - 2.65%
MedImmune, Inc. @ 93,100 10,427,200
-----------
Industrial - 2.12%
Optical Coating Laboratory, Inc. 77,800 8,314,875
-----------
Industrial Machinery/Component - 0.84%
NUR Macroprinters Ltd. @ 413,400 3,281,363
-----------
Insurance Broker/Services - 2.12%
E.W. Blanch Holdings, Inc. 128,400 8,313,900
-----------
Internet Services - 3.99%
BroadVision, Inc. @ 213,000 15,682,125
-----------
</TABLE>
5
<PAGE>
PILGRIM GROWTH + VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Medical Electronics -- 2.19%
VISX, Inc. @ 137,500 $ 8,602,344
-----------
Medical Specialties -- 3.85%
ArthroCare Corp. @ 90,100 6,532,250
MiniMed, Inc. @ 113,300 8,589,556
-----------
15,121,806
-----------
Metal Fabrications -- 3.16%
CommScope, Inc. @ 193,000 7,695,875
Mobile Mini, Inc. @ 217,100 4,735,494
-----------
12,431,369
-----------
Precision Instruments -- 1.70%
Waters Corp. @ 125,800 6,683,125
-----------
Savings & Loan -- 0.08%
PDS Financial Corp. @ 152,955 334,589
-----------
Semiconductor -- 8.31%
Alpha Industries, Inc. 160,500 8,867,625
Galileo Technology Ltd. @ 290,800 6,652,050
Semtech Corp. @ 166,800 6,390,525
TriQuint Semiconductor, Inc. @ 134,000 10,720,000
-----------
32,630,200
-----------
Telecommunications Equipment -- 7.88%
ANTEC Corp. @ 124,000 6,014,000
CIDCO, Inc. @ 435,900 5,557,725
Harmonic, Inc. @ 106,800 6,341,250
RF Micro Devices, Inc. @ 94,200 4,863,075
Scientific-Atlanta, Inc. 142,900 8,181,025
-----------
30,957,075
-----------
Total Common Stocks
(cost $278,307,985) 374,302,058
-----------
Total Investment Securities -- 95.28%
(cost $278,307,985) 374,302,058
Repurchase Agreement -- 3.08%
Agreement with State Street Bank and Trust bearing interest at 5.07% dated
10/29/99, to be repurchased 11/01/99 in the amount of $12,119,118 and
collateralized by $11,940,000 U.S. Treasury Bonds, 6.50% due 5/31/01, value
$12,357,900
(cost $12,114,000) $12,114,000 12,114,000
Other assets less liabilities -- 1.64% 6,426,298
-----------
Net Assets -- 100.00% $392,842,356
===========
</TABLE>
@ Non-income producing security.
See accompanying notes to financial statements.
6
<PAGE>
PILGRIM
INTERNATIONAL VALUE FUND
The Markets
o The international markets were up over the six-month period ended October
31, 1999. The MSCI Europe Australasia Far East Index1 (EAFE) rose 23.03%
for the period. India was the best performing market for the period,
rising over 39.22% in dollar terms, while Colombia was the worst
performing market, declining over 33.30% in dollar terms.
o The Far East continues to benefit from economic recovery and aggressive
corporate restructuring. The Asian equity-market rally was broad-based,
with nearly every major market up over 20% for the period with the
exception of Hong Kong. Latin American markets, however, declined, over
continued concerns regarding the direction of U.S.
interest rates.
The Fund
o The Fund returned 32.55%, 31.55%, and 31.50% for Class A, B, and C
shares, respectively, for the fiscal year ended October 31, 1999. The
Lipper Index of International Equity Funds2 returned 23.05%.
o Japanese holdings were the most significant contributors to the Fund's
performance, followed by France, Germany, Singapore, Mexico and South
Africa. Holdings in the United Kingdom were the largest detractors from
performance. On a sector basis, Capital Equipment and Materials had the
strongest results.
o Our largest regional commitments continue to be in Europe and Asia.
Banking and Telecommunications remain the most concentrated industry
holdings
Current Strategy
o Non U.S. markets represent at least two-thirds of the overseas capital
markets. Non-U.S. firms dominate the world's major company sectors. Of
the globe's 10 largest Beverage, Electronics, Gas and Electric,
Insurance, Chemical, Metal, Machinery and Equipment and Banking
Companies, most of them per category are foreign owned.
o Foreign markets continue to be misunderstood by domestic analysts and
investors. This lack of understanding of the intrinsic worth of many
offshore businesses is a distinct advantage to the value investor. The
ability to normalize the balance sheets of non U.S. companies to U.S.
accounting standards allows your fund managers to discover under priced
businesses overlooked by others.
o This method of portfolio management can establish a true value of a
business and what the stock price should be. The next step is to then
find companies that are trading appreciably below the established value.
Once these undervalued businesses are found, they are purchased and held
generally for 3 to 5 years or until their price reflects their value.
There is little focus on top-down macroeconomic evaluations or forecasts
in structuring the Fund. In most cases, country and industry exposure is
ultimately the residual of the purchase of individual businesses that
meet the strict value criteria.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Fund Information (All data are as of 10/31/99) Total Net Assets $1,040,913,097
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Top 10 Holdings
Name % Fund
1 Kyocera Corp. 4.0%
2 Deutsche Telekom AG 3.7
3 Hitachi Ltd. 3.6
4 Alcatel Alsthom SA 3.4
5 HSBC Holdings 3.4
6 Total Fina 3.4
7 Telefonos de Mexico SA 3.1
8 DBS Group Ltd. 3.0
9 Tokio Marine & Fire Insurance Co. 3.0
10 ING Groep NV. 2.6
-----
33.2%
=====
Top 5 Industries
(by percentage of net assets)
Telecommunications 16.4%
Banking 10.5%
Insurance 9.5%
Electrical & Electronics 8.8%
Machinery & Engineering 6.9%
SEC Average Annual Rates of Return
(at maximum applicable sales charge)
- --------------------------------------------------------------------------------
Inception 5 years 1 year
- --------------------------------------------------------------------------------
Class A 16.76% N/A 26.28%
- --------------------------------------------------------------------------------
Class B 18.21% N/A 26.55%
- --------------------------------------------------------------------------------
Class C 17.24% N/A 30.50%
- --------------------------------------------------------------------------------
Cumulative Total Return
(do not reflect sales charge)
- --------------------------------------------------------------------------------
Inception 5 years 1 year
- --------------------------------------------------------------------------------
Class A 116.27% N/A 32.55%
- --------------------------------------------------------------------------------
Class B 55.95% N/A 31.55%
- --------------------------------------------------------------------------------
Class C 109.82% N/A 31.50%
- --------------------------------------------------------------------------------
Past performance is no guarantee of future results.
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,
investing in stocks of smaller companies may entail greater price variability
than investing in stocks of larger companies.
7
<PAGE>
PILGRIM
INTERNATIONAL VALUE FUND
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE PILGRIM
INTERNATIONAL VALUE FUND AND COMPARATIVE INDICES FROM INCEPTION OF EACH CLASS OF
SHARES THROUGH THE FUND'S FISCAL YEAR END.3
In accordance with the reporting requirements of the Securities and
Exchange Commission, the following data is supplied for the fiscal year ended
October 31, 1999, with all distributions reinvested in shares. The average
annualized total return for Class A shares of 16.76% for the period since the
Fund's inception of March 6, 1995 reflects payment of the maximum sales charge
of 4.75%. Average annualized total return of 18.21% and 17.24% since inception
for Class B and Class C shares of April 18, 1997 and March 6, 1995,
respectively, reflect applicable contingent deferred sales charges (maximum
contingent deferred sales charge for Class B shares of 5.00% declines to 0%
after five years; and maximum charge for Class C shares is 1.00% during the
first year of investment only). All performance data shown represents past
performance, and should not be considered indicative of future performance.
Investment return and principal value will fluctuate. Fund shares when redeemed
maybe worth more or less than their original cost.
Pilgrim International Value Fund -- Class A
Average Annual Total Return
1-Year 26.28%
Since Inception 16.76%
EAFE International Value
02/28/95 10000 9525
10609 9681
10993 10009
10847 10077
10642 10085
11289 10443
10844 10359
11041 10344
10/31/95 10730 10092
11014 10359
11443 10677
11475 10953
11499 10876
11728 10769
12054 11205
11817 11159
11868 11259
11506 10853
11515 11067
11806 11350
10/31/96 11669 11327
12118 12092
11946 12304
11513 12691
11686 12699
11712 13126
11759 13050
12508 13685
13182 14594
13380 14983
12365 14023
13043 15281
10/31/97 12024 14139
11886 14035
11974 14501
12506 14919
13293 15677
13686 16972
13778 16828
13695 16370
13782 16240
13906 16462
12166 13795
11776 13847
10/31/98 12987 15534
13636 16328
14157 16453
14098 16564
13746 16243
14303 17652
14865 19534
14083 18600
14615 19869
15033 20357
15070 20315
15205 20019
10/31/99 15757 20591
International Value EAFE
Pilgrim International Value Fund -- Class B
Average Annual Total Return
1-Year 26.55%
Since Inception 18.21%
EAFE International Value
04/18/97 10000 10000
10040 10000
10680 10540
11255 11240
11424 11530
10558 10790
11136 11740
10/31/97 10266 10860
10148 10780
10224 11129
10678 11441
11349 12026
11685 13004
11764 12883
11693 12520
11767 12419
11873 12580
10387 10534
10054 10564
10/31/98 11088 11855
11642 12446
12087 12546
12037 12610
11736 12364
12212 13423
12692 14845
12024 14139
12479 15081
12835 15444
12867 15401
12982 15166
10/31/99 13454 15594
International Value EAFE
Pilgrim International Value Fund -- Class C
Average Annual Total Return
1-Year 30.50%
Since Inception 17.24%
EAFE International Value
02/28/95 10000 10000
10609 10168
10993 10504
10847 10576
10642 10584
11289 10952
10844 10856
11041 10840
10/31/95 10730 10560
11014 10840
11443 11171
11475 11452
11499 11364
11728 11251
12054 11693
11817 11637
11868 11741
11506 11308
11515 11532
11806 11813
10/31/96 11669 11781
12118 12576
11946 12789
11513 13192
11686 13192
11712 13638
11759 13552
12508 14199
13182 15142
13380 15532
12365 14522
13043 15815
10/31/97 12024 14630
11886 14509
11974 14979
12506 15400
13293 16187
13686 17504
13778 17341
13695 16853
13782 16717
13906 16934
12166 14177
11776 14232
10/31/98 12987 15956
13636 16753
14157 16889
14098 16975
13746 16644
14303 18070
14865 19987
14083 19021
14615 20304
15033 20794
15070 20736
15205 20419
10/31/99 15757 20982
International Value EAFE
1. The MSCI EAFE Index is comprised of more than 1,400 securities in the U.S.,
Europe, Canada, Australia, New Zealand, and the Far East Index. This Index is
the generally accepted benchmark of major overseas markets.
2. The Lipper Index of International Equity Funds is rebased quarterly. It is
calculated using an equally weighted aggregate composite of the top 30 Funds
by net asset size.
3. Sales charges reflected below represent those sales charges in effect as of
October 31, 1999. Effective November 1, 1999 the sales charge schedule has
been changed to conform with similar Funds in the Pilgrim Fund Family, and
can be found in the related Pilgrim Fund prospectus.
All indices are unmanaged.
8
<PAGE>
PILGRIM INTERNATIONAL VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Country Value % of Net Assets
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Austria $ 3,244,852 0.31%
Brazil 71,421,855 6.86
Denmark 18,942,919 1.82
France 89,729,698 8.62
Germany 86,372,427 8.30
Hong Kong 32,001,448 3.07
Italy 41,812,369 4.02
Japan 191,845,454 18.43
Korea 4,230,000 0.41
Mexico 32,407,065 3.11
Netherlands 46,700,284 4.49
New Zealand 7,478,051 0.72
Portugal 11,372,423 1.09
Singapore 41,711,183 4.01
South Africa 30,499,139 2.93
Spain 17,238,928 1.66
Switzerland 32,848,677 3.16
United Kingdom 215,505,864 20.70
United States 44,155,000 4.24
Venezuela 19,609,756 1.88
Other assets less liabilities 1,785,705 0.17
-------------- -------
Net Assets $1,040,913,097 100.00%
============== =======
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
PILGRIM INTERNATIONAL VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Shares Value
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks -- 90.63%
Automobiles -- 3.75%
Bayerische Motoren Werke AG ( Germany ) 609,300 $ 19,419,032
Compagnie Generale des Etablissements Michelin ( France ) 450,100 19,600,318
------------
39,019,350
------------
Banking -- 9.51%
Argentaria SA ( Spain ) 582,920 12,937,345
DBS Group Ltd. ( Singapore ) 2,799,341 31,640,480
Den Danske Bank A/S ( Denmark ) 166,280 18,942,919
HSBC Holdings ( United Kingdom ) 2,945,600 35,452,610
------------
98,973,354
------------
Beverages/Tobacco -- 4.92%
Allied Domecq PLC ( United Kingdom ) 980,000 5,491,242
British America Tobacco PLC ( United Kingdom ) 1,952,200 12,959,727
Diageo PLC ( United Kingdom ) 2,450,012 24,920,057
South African Breweries PLC @ ( South Africa ) 886,400 7,865,271
------------
51,236,297
------------
Chemicals -- 3.49%
BOC Group PLC ( United Kingdom ) 415,000 8,933,252
Imperial Chemical Industries PLC ( United Kingdom ) 992,800 9,877,933
Invensys PLC ( Germany ) 390,500 17,559,450
------------
36,370,635
------------
Electrical & Electronics -- 8.78%
Alcatel Alsthom SA ( France ) 225,900 35,285,514
Hitachi Ltd. ( Japan ) 3,485,900 37,677,272
Matsushita Electric Industrial Co. Ltd. ( Japan ) 875,000 18,419,727
------------
91,382,513
------------
Energy -- 3.02%
ENI SpA ( Italy ) 3,670,300 21,464,962
Nippon Oil Co. Ltd. ( Japan ) 2,268,000 10,005,562
------------
31,470,524
------------
Energy Services -- 3.35%
Total Fina SA ( France ) 257,792 34,843,866
------------
Food & Household Products -- 1.90%
Reckitt & Colman PLC ( United Kingdom ) 1,633,500 19,809,142
------------
Health/Personal Care -- 0.52%
Daiichi Pharmaceutical Co. Ltd. ( Japan ) 377,000 5,405,342
------------
Industrial Components -- 4.01%
Kyocera Corp. ( Japan ) 434,600 41,680,252
------------
Insurance -- 9.53%
Allied Zurich ( Switzerland ) 1,568,700 19,074,879
ING Groep NV ( Netherlands ) 466,386 27,511,057
Munchener Rueckversicheruns-Gesellschaft AG ( Germany ) 45,500 10,433,299
Royal & Sun Alliance Insurance Group PLC ( United Kingdom ) 1,640,909 11,176,330
Tokio Marine & Fire Insurance Co. ( Japan ) 2,370,400 31,030,937
------------
99,226,502
------------
Machinery & Engineering -- 6.90%
Canon, Inc. ( Japan ) 253,000 7,157,859
Invensys PLC ( United Kingdom ) 4,931,898 24,231,229
Komatsu ( Japan ) 2,836,000 16,482,363
Mitsubishi Heavy Industries Ltd. ( Japan ) 6,115,000 23,986,141
------------
71,857,592
------------
Materials & Commodities -- 2.01%
De Beers Centenary AG ( South Africa ) 765,000 20,894,087
------------
</TABLE>
10
<PAGE>
PILGRIM INTERNATIONAL VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Shares Value
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Merchandising -- 3.03%
Marks & Spencer PLC ( United Kingdom ) 5,193,750 $ 23,981,566
Safeway PLC ( United Kingdom ) 2,409,100 7,600,571
------------
31,582,137
------------
Metals - Steel -- 0.17%
Iscor Ltd. ( South Africa ) 4,491,050 1,739,782
------------
Multi - Industry -- 4.04%
Citic Pacific Ltd. ( Hong Kong ) 4,095,000 10,621,645
Jardine Matheson Holdings Ltd. ( Singapore ) 2,342,024 10,070,703
Swire Pacific Ltd. ( Hong Kong ) 4,314,000 21,379,803
------------
42,072,151
------------
Telecommunications -- 16.08%
Compania Anonima Nacional Telefonos de Venezuela ** ( Venezuela ) 759,700 19,609,756
Deutsche Telekom AG ( Germany ) 847,600 38,960,646
Korea Telecom Corp. ** @ ( South Korea ) 120,000 4,230,000
Portugal Telecom SA ( Portugal ) 254,996 11,372,423
Royal PTT Nederland NV ( Netherlands ) 373,915 19,189,227
Swisscom AG @ ( Switzerland ) 45,200 13,773,798
Telecom Corp. Of New Zealand Ltd. ( New Zealand ) 1,858,000 7,478,051
Telecom Italia SpA ( Italy ) 2,356,200 20,347,407
Telefonos de Mexico SA ** ( Mexico ) 379,030 32,407,065
------------
167,368,373
------------
Utilities - Electrical & Gas -- 5.62%
Centrais Eletricas Brasileiras SA ** ( Brazil ) 2,299,900 19,676,105
Centrais Geradoras do Sul do Brasil SA ** @ ( Brazil ) 53,730 167,901
Corus Group PLC ( United Kingdom ) 5,955,000 11,350,890
EVN Energie-Versorgung Niederoesterreich AG ( Austria ) 22,600 3,244,852
National Power PLC ( United Kingdom ) 2,906,000 19,721,313
Union Electrica Fenosa SA ( Spain ) 294,000 4,301,582
------------
58,462,643
------------
Total Common Stocks
(cost $836,982,199) 943,394,542
------------
Preferred Stocks -- 4.96%
Banking -- 0.94%
Banco Bradesco SA ** ( Brazil ), $0.1356 2,002,000 9,769,760
------------
Beverages/Tobacco -- 1.47%
Companhia Cervejaria Brahma SA ** ( Brazil ), $0.1598 1,224,200 15,302,500
------------
Energy -- 2.26%
Petroleo Brasileiro SA ** ( Brazil ), $0.305344 1,472,300 23,532,213
------------
Telecommunications -- 0.29%
Embratel Participacoes SA ** ( Brazil ), $0.2304 39,940 514,227
Tele Celular Sul Participacoes SA ** ( Brazil ), $0.0932 3,994 69,895
Tele Centro Oeste Celular Participacoes SA ** ( Brazil ), $0.3139 13,313 46,595
Tele Centro Sul Participacoes SA ** ( Brazil ), $1.02 7,988 477,283
Tele Leste Celular Participacoes SA ** ( Brazil ), $0.6731 798 24,239
Tele Nordeste Celular Participacoes SA ** ( Brazil ), $0.9942 1,997 50,674
Tele Norte Celular Participacoes SA ** ( Brazil ), $0.3101 798 21,746
Tele Norte Leste Participacoes SA ** ( Brazil ), $0.3872 39,940 673,987
Telemig Celular Participacoes SA ** ( Brazil ), $0.3341 1,997 54,793
Telesp Celular Participacoes SA ** ( Brazil ), $0.6552 15,976 393,409
Telesp Participacoes SA ** ( Brazil ), $1.21 39,940 646,529
------------
2,973,377
------------
</TABLE>
11
<PAGE>
PILGRIM INTERNATIONAL VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Principal Amount Value
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Total Preferred Stocks
(cost $53,840,732) $ 51,577,850
-------------
Total Investment Securities -- 95.59%
(cost $890,822,931) 994,972,392
Repurchase Agreement -- 4.24%
Agreements with State Street Bank and Trust bearing interest at 5.07% dated
10/29/99, to be repurchased 11/01/99 in the amount of $19,163,093 and
$25,010,563 and collateralized by $18,880,000 U.S. Treasury Bonds, 6.50% due
5/31/01, and $25,135,000 U.S. Treasury Bonds, 6.375% due 9/30/01, value
$19,540,800 and $25,502,046, respectively
(cost $44,155,000) $44,155,000 44,155,000
Other assets less liabilities -- 0.17% 1,785,705
-------------
Net Assets-- 100.00% $1,040,913,097
=============
</TABLE>
@ Non-income producing security.
** American depositary receipts.
See accompanying notes to financial statements.
12
<PAGE>
PILGRIM
EMERGING MARKETS VALUE FUND
The Markets
o For the six months ended October 31, 1999, the MSCI Emerging Markets Free
Index(1) rose 7.23%. The leading countries were India (39.2%), Indonesia
(38.49%), Malaysia (35.2%), Greece (31.17%) and the Czech Republic
(25.85%). Most of the performance came during the first three months of
the period, with many emerging market countries, especially in Latin
America, finishing the second three month period in negative territory
over interest rate concerns in the U.S.
o Geopolitical events affected much of the positive movement in the
emerging markets this period. India, Indonesia, Greece, and Malaysia
strengthened as investors felt that governments would begin to focus on
their economies and continue with economic reform and liberalization.
The Fund
o The Fund returned 41.48%, 40.41%, and 40.49% for Class A, B, and C
shares, respectively, for the period ended October 31, 1999. This
compared to a return of 36.40% for Lipper Index of Emerging Markets
Funds(2) for the same period.
o Returns in the Fund were driven by strong performance in its holdings in
India, Malaysia, Turkey and South Africa, while positions in the
Philippines, Hong Kong, and Brazil finished with negative returns. At the
industry level, Fund holdings in the Machinery, Leisure, Beverages and
Appliance industries showed the greatest strength for the period, while
Utitlity, and Telecommunication stocks detracted from Fund performance.
Strategy
o Brandes Investment Partners applies a bottom-up, value philosophy to make
investment decisions for the Fund. We do not focus on top-down
macroeconomic evaluations or forecasts in making securities selections.
Country and industry allocations are generally a residual of the purchase
of individual businesses that meet our rigorous value criteria.
o Investor interest in emerging markets continues to improve, but the asset
class still trades at relatively attractive valuation levels. While
market sentiment is decidedly affected by political and other top down
sentiments in the short-term, we continue to seek stocks whose values
reflect meaningful discounts to intrinsic value. Our investments are
attractively valued relative to business fundamentals and we believe are
likely to perform well over the long term.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Fund Information (All data are as of 10/31/99) Total Net Assets $19,778,258
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Top 10 Holdings
Name % Fund
1 Arcelik AS 2.9%
2 Resorts World Berhad. 2.8
3 Grupo Financiero Inbursa SA 2.7
4 Uniao de Bancos Brasileiros SA 2.7
5 Telefonica de Argentina SA. 2.6
6 Ceske Energeticke Zavody 2.3
7 Petroleo Brasileiro SA 2.3
8 Telefonos de Mexico SA 2.3
9 Banco de Galicia y Buenos Aires SA 2.2
10 Larsen & Toubro Ltd. 2.2
-----
25.0%
=====
Top 5 Industries
(by percentage of net assets)
Banking 15.3%
Telecommunications 15.0%
Utilities-Electrical & Gas 10.3%
Beverages/Tobacco 8.2%
Multi-Industry 7.5%
SEC Average Annual Rates of Return(4)
(at maximum applicable sales charge)
Inception 5 years 1 year
- --------------------------------------------------------------------------------
Class A 1.96% N/A 34.82%
- --------------------------------------------------------------------------------
Class B 1.85% N/A 35.41%
- --------------------------------------------------------------------------------
Class C 3.87% N/A 39.49%
- --------------------------------------------------------------------------------
Cumulative Total Return
(do not reflect sales charge)
- --------------------------------------------------------------------------------
Inception 5 years 1 year
- --------------------------------------------------------------------------------
Class A 8.80% N/A 41.48%
- --------------------------------------------------------------------------------
Class B 7.41% N/A 40.41%
- --------------------------------------------------------------------------------
Class C 7.19% N/A 40.49%
- --------------------------------------------------------------------------------
Past performance is no guarantee of future results.
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. In exchange for higher growth
potential, investing in stocks of smaller companies may entail greater price
variability than investing in stocks of larger companies.
13
<PAGE>
PILGRIM
EMERGING MARKETS VALUE FUND
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE PILGRIM EMERGING
MARKETS VALUE FUND AND COMPARATIVE INDICES FROM INCEPTION OF EACH CLASS OF
SHARES THROUGH THE FUND'S FISCAL YEAR END.(5)
In accordance with the reporting requirements of the Securities and
Exchange Commission, the following data is supplied for the fiscal year ended
October 31, 1999, with all distributions reinvested in shares. The average
annualized total return for Class A shares of 1.96% for the period since the
Fund's inception of January 1, 1998 reflects payment of the maximum sales charge
of 4.75%. Cumulative total returns of 1.85% and 3.87% since inception for Class
B and Class C shares of January 1, 1998, respectively, reflect applicable
contingent deferred sales charges (maximum contingent deferred sales charge for
Class B shares of 5.00% declines to 0% after five years; and maximum charge for
Class C shares is 1.00% during the first year of investment only). All
performance data shown represents past performance, and should not be considered
indicative of future performance. Investment return and principal value will
fluctuate. Fund shares when redeemed maybe worth more or less than their
original cost.
Pilgrim Emerging Markets Value Fund -- Class A
Average Annual Total Return
1-Year 34.82%
Since Inception 1.96%
Class A EAFE
01/01/97 9525 9525
9410 9948
10105 10574
10295 10887
10010 10960
8743 10894
06/30/98 7743 10963
7857 11061
5762 9677
6305 9367
10/31/98 7324 10330
8000 10847
7373 11261
7141 11215
7199 10934
8237 11377
9741 11825
9362 11202
10439 11626
10129 11958
9828 11988
9973 12095
10/31/99 10362 12534
EAFE(3) Class A
Pilgrim Emerging Markets Value Fund -- Class B
Average Annual Total Return
1-Year 35.41%
Since Inception 1.85%
Class B EAFE
01/01/97 10000 10000
9880 10444
10600 11101
10790 11430
10490 11506
9160 11437
06/30/98 8100 11510
8220 11613
6020 10160
6590 9835
10/31/98 7650 10846
8350 11387
7691 11823
7448 11774
7499 11479
8573 11944
10133 12414
9728 11761
10853 12206
10518 12554
10204 12586
10346 12698
10/31/99 10741 13159
EAFE Class B
Pilgrim Emerging Markets Value Fund -- Class C
Average Annual Total Return
1-Year 39.49%
Since Inception 3.87%
Class C EAFE
01/01/97 10000 10000
9880 10444
10600 11101
10790 11430
10490 11506
9160 11437
06/30/98 8100 11510
8220 11613
6020 10160
6590 9835
10/31/98 7650 10846
8350 11387
7691 11823
7448 11774
7499 11479
8573 11944
10133 12414
9728 11761
10853 12206
10518 12554
10204 12586
10346 12698
10/31/99 10741 13159
EAFE Class C
1. The MSCI Emerging Markets Free Index is comprised of companies representative
of the market structure of 22 emerging countries in Europe, Latin America,
and the Pacific Rim Basin.
2. The Lipper Index of Emerging Markets Funds is calculated using a equally
weighted aggregate composite of the top 30 Funds by net asset size. The index
is rebased quarterly.
3. The MSCI EAFE Index is comprised of more than 1,400 securities in the U.S.,
Europe, Canada, Australia, New Zealand, and the Far East Index. This Index is
the generally accepted benchmark of major overseas markets.
4. The investment manager waived certain fees and expenses without which total
return results may have been lower.
5. Sales charges reflected below represent those sales charges in effect as of
October 31, 1999. Effective November 1, 1999 the sales charge schedule has
been changed to conform with similar Funds in the Pilgrim Fund Family, and
can be found in the related Pilgrim Fund prospectus.
All indices are unmanaged.
14
<PAGE>
PILGRIM EMERGING MARKETS VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Country Value % of Net Assets
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Argentina $ 2,060,083 10.42%
Brazil 3,157,033 15.96
Chile 714,913 3.61
China 784,890 3.97
Columbia 232,056 1.17
Czech Republic 455,977 2.31
Greece 381,405 1.93
Hong Kong 513,608 2.60
Hungary 312,550 1.58
India 1,073,540 5.43
Israel 856,556 4.33
Korea 794,183 4.02
Malaysia 884,426 4.47
Mexico 1,365,721 6.91
Panama 306,400 1.55
Philippines 1,169,718 5.91
Poland 266,000 1.34
Russia 387,641 1.96
Singapore 816,283 4.13
South Africa 1,611,905 8.15
Turkey 580,122 2.93
United States 216,000 1.09
Venezuela 322,656 1.63
Other assets less liabilities 514,592 2.60
---------- -------
Net Assets $19,778,258 100.00%
========== =======
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
PILGRIM EMERGING MARKETS VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Shares Value
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks-80.96%
Appliances & Household Durables -- 2.93%
Arcelik AS ( Turkey ) 15,712,960 $ 580,122
----------
Automobiles -- 1.36%
Toyota South Africa Ltd. ( South Africa ) 99,500 268,844
----------
Banking -- 11.36%
Banco de Galicia y Buenos Aires S.A. de C.V. ( Argentina ) 83,000 438,446
Banco Latinoamericano de Exportaciones, SA ( Panama ) 12,800 306,400
Banco Rio de la Plata SA ** ( Argentina ) 18,000 231,750
Banco Santiago SA ** ( Chile ) 13,400 268,000
Bank Handlowy w Warszawie ## ( Poland ) 19,000 266,000
Bank Leumi Le-Israel ( Israel ) 179,400 316,390
DBS Group Ltd. ( Singapore ) 37,216 420,646
----------
2,247,632
----------
Beverages/Tobacco -- 5.26%
Massalin Particulares SA ( Argentina ) 40,500 344,412
Panamerican Beverages, Inc. ( Mexico ) 24,050 386,303
South African Breweries PLC @ ( South Africa ) 34,800 308,790
----------
1,039,505
----------
Chemicals -- 2.52%
Beijing Yanhua Petrochemical Co. Ltd. ( China ) 1,426,000 264,329
Beijing Yanhua Petrochemical Co. Ltd. ** ( China ) 25,630 233,874
----------
498,203
----------
Electrical & Electronics -- 1.97%
Solid Group, Inc. ( Philippines ) 14,708,100 388,793
----------
Energy -- 3.80%
LUKoil Holding ** ( Russia ) 7,400 234,432
OAO Gazprom ** @ ( Russia ) 20,360 153,209
Petron Corp. ( Philippines ) 1,490,400 124,510
Sasol Ltd. ( South Africa ) 28,000 191,415
Sasol Ltd. ** ( South Africa ) 7,000 47,250
----------
750,816
----------
Financial Services -- 3.65%
Administradora de Fondos de Pensiones Provida ** ( Chile ) 10,900 188,025
Grupo Financiero Inbursa SA de CV ** ( Mexico ) 35,070 534,817
----------
722,842
----------
Food & Household Products -- 1.82%
RFM Corp. ( Philippines ) 3,246,600 360,284
----------
Healthcare/Pharmaceutical -- 1.58%
Gedeon Richter Ltd. ## ( Hungry ) 7,000 312,550
----------
Insurance -- 1.64%
Pacific and Orient Berhad ( Malaysia ) 347,000 325,084
----------
Leisure & Tourism -- 4.27%
Resorts World Berhad ( Malaysia ) 195,000 559,342
Shangri-La Asia Ltd. ## ( Hong Kong ) 262,000 284,984
----------
844,326
----------
Machinery & Engineering -- 2.21%
Larsen & Toubro Ltd. ## ( India ) 20,500 436,650
----------
Materials & Commodities -- 2.13%
De Beers Centenary AG ( South Africa ) 15,400 420,613
----------
</TABLE>
16
<PAGE>
PILGRIM EMERGING MARKETS VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Shares Value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Merchandising -- 1.34%
Dairy Farm International Holdings Ltd.**( Singapore ) 45,900 $ 180,157
Dairy Farm International Holdings Ltd. ( Singapore ) 108,900 85,487
----------
265,644
----------
Metals - Steel -- 1.90%
Iscor Ltd. ( South Africa ) 968,000 374,992
----------
Multi - Industry -- 7.46%
First Pacific Co. Ltd. @ ( Hong Kong ) 394,681 228,624
Grasim Industries Ltd. ## ( India ) 12,000 150,000
Indian Rayon and Industries Ltd. ## ( India ) 95,800 148,490
Jardine Matheson Holdings Ltd. ( Singapore ) 30,231 129,993
JG Summit Holding, Inc. ( Philippines ) 3,442,000 296,132
Koors Industries Ltd. ** ( Israel ) 15,610 263,419
Quinenco SA ** ( Chile ) 27,800 258,888
---------
1,475,546
---------
Telecommunications -- 13.73%
Bezeq Israeli Telecommunications Corp. Ltd. ( Israel ) 67,900 276,748
Compania Anonima Nacional Telefonos de Venezuela ** ( Venezuela ) 12,500 322,656
Hellenic Telecommunications Organization SA ( Greece ) 18,000 381,405
Korea Telecom Corp. ** @ ( South Korea ) 11,400 401,850
Telecom Argentina Stet - France Telecom SA ** ( Argentina ) 13,930 383,075
Telefonica de Argentina SA ** ( Argentina ) 19,740 505,837
Telefonos de Mexico SA ** ( Mexico ) 5,200 444,600
---------
2,716,171
---------
Textile/Apparel -- 1.71%
Bombay Dyeing and Manufacturing Co. Ltd. ## ( India ) 144,000 338,400
---------
Utilities - Electrical & Gas -- 8.32%
Centrais Eletricas Brasileiras SA ** ( Brazil ) 33,900 290,021
Centrais Geradoras do Sul do Brasil SA ** @ ( Brazil ) 70,490 220,274
Ceske Energeticke Zavody ( Czech Republic ) 176,100 455,977
Korea Electric Power Corp. ** ( South Korea ) 24,910 392,332
Shandong Huaneng Power Co. Ltd. ** ( China ) 69,500 286,688
---------
1,645,292
---------
Total Common Stocks
(cost $14,061,578) 16,012,309
---------
Preferred Stocks -- 15.35%
Banking - 3.90%
Banco Ganadero SA ** ( Colombia ), $0.2821 34,700 232,056
Uniao de Bancos Brasileiros SA ## ( Brazil ), $0.46899 23,310 539,044
---------
771,100
---------
Beverages/Tobacco -- 2.90%
Companhia Cervejaria Brahma ** ( Brazil ), $0.1598 33,300 416,250
Quilmes Industrial SA ** ( Argentina ), $0.2215 15,000 156,563
---------
572,813
---------
Chemicals -- 1.11%
Copene-Petroquimica do Nordeste SA ** ( Brazil ), $0.312312 23,400 219,969
---------
Energy -- 2.27%
Petroleo Brasileiro SA ** ( Brazil ), $0.305344 28,130 449,610
---------
</TABLE>
17
<PAGE>
PILGRIM EMERGING MARKETS VALUE FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Forest & Paper Products - 1.28%
Aracruz Celulose SA ** ( Brazil ), $0.1576 12,300 $ 252,150
----------
Metals - Steel - 0.67%
Usinas Siderurgicas de Minas Gerais SA ** ( Brazil ), $0.1767 36,300 132,216
----------
Telecommunications - 1.24%
Embratel Participacoes SA ** ( Brazil ), $0.2304 2,900 37,338
Tele Centro Sul Participacoes SA ** ( Brazil ), $1.02 1,880 112,330
Tele Norte Leste Participacoes SA ** ( Brazil ), $0.3872 2,900 48,937
Telesp Participacoes SA ** ( Brazil ), $1.21 2,900 46,944
----------
245,549
----------
Utilities - Electrical & Gas - 1.98%
Centrais Eletricas de Santa Catarina SA ** ( Brazil ), $0.6605 6,500 206,450
Companhia Paranaense de Energia-Copel ** ( Brazil ), $0.3082 28,000 185,500
----------
391,950
----------
Total Preferred Stocks
(cost $3,238,754) 3,035,357
----------
Total Investment Securities - 96.31%
(cost $17,300,332) 19,047,666
Repurchase Agreement - 1.09%
Agreement with State Street Bank and Trust bearing interest at 5.07% dated
10/29/99, to be repurchased 11/01/99 in the amount of $216,091 and collateralized
by $220,000 U.S. Treasury Bonds, 6.375% due 9/30/01, value $223,213
(cost $216,000) $216,000 216,000
Other assets less liabilities - 2.60% 514,592
----------
Net Assets - 100.00% $19,778,258
==========
</TABLE>
** American depositary receipt.
## Global depositary receipt.
@ Non-income producing security.
See accompanying notes to financial statements.
18
<PAGE>
PILGRIM
RESEARCH ENHANCED INDEX FUND
The Markets
o First Quarter -- The S&P 500 Index1 reached a new all-time high during
the first quarter of 1999, but was unable to hold that level through
quarter-end. Leadership remained extremely narrow, with two stocks,
Microsoft and America Online, accounting for one-third of the S&P's
advance. These narrow market conditions, along with investor
profit-taking in stocks such as IBM and Bristol Myers Squibb, resulted in
a slight lag of the Index (4.20% vs.
4.98%).
o Second Quarter -- The Fund rebounded during the second quarter, outpacing
the S&P's 7.0% return by nearly 120 basis points. Equity markets saw a
reversal of previously established trends during this time period. Value
stocks (+10.8%) outperformed growth stocks (3.8%), and the "Nifty Fifty"
stocks (+4.5%) underperformed the next 450 stocks in the S&P 500
(+10.1%). The market broadened out as investors moved away from the high
multiple growth stocks in favor of more economically sensitive cyclical
stocks. This broadening effect was favorable to the Fund as it benefited
as much from being underweight many of the former market leaders such as
GE and Microsoft as it did from being overweight many of the formerly
overlooked non -"Nifty-Fifty" names.
o Third Quarter -- By the end of the third quarter however, growth stocks
and the "Nifty Fifty" made up for lost ground, resulting in slight
underperformance (-6.42% vs. -6.25%). Market conditions have since
deteriorated amid higher interest rates, Y2K anxiety, and ebbing
liquidity in October. The market has been extraordinarily focused on the
near term and a few specific stocks were severely punished for
disappointing news. IBM, fell after the company warned investors that
earnings in the next few quarters would be hurt by Y2K related issues.
Tyco International shares were pummeled after an article detailed
potential accounting irregularities with their acquisition accounting.
The Fund
o For the period since the Fund's inception on December 30, 1998 through
fiscal year-end October 31, 1999, the Pilgrim Research Enhanced Index
Fund returned 11.40%, 10.90%, 10.90%, and 11.70% for Class A, B, C, and I
shares respectively, slightly underperforming the S&P 500 Index by 63
basis points. Despite the Fund's lag of the S&P, it fared rather well
against its competitors in the Lipper Growth & Income category, which
returned 6.85%
Current Strategy
o Fears of further Fed tightening, anxiety concerning potential Y2K
glitches, and worries about profit pressures have cast a shadow over
equities. This has caused the market to favor some of the same stocks
that have already shown strong performance. Additionally, with many
mutual funds' October fiscal year end, tax loss selling may have placed
added pressure on many stocks that had been down earlier in the year.
This near-term focus presents a challenging environment for our
longer-term valuation process. However, we believe solid prospects for a
synchronized global economic expansion in 2000 should eventually refocus
investors on valuation. Our valuation discipline has kept the Fund
concentrated in stocks which our analysts have identified as being the
most attractively priced relative to their long-term fundamentals.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
Fund Information (All data are as of 10/31/99) Total Net Assets $230,206,657
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Top 10 Holdings
Name % Fund
1 Microsoft Corp. 4.5%
2 General Electric Co. 3.2
3 Intel Corp. 2.6
4 Cisco Systems, Inc. 2.5
5 Wal-Mart Stores, Inc. 2.4
6 Citigroup, Inc. 2.1
7 Lucent Technologies, Inc. 2.0
8 MCI WorldCom, Inc. 1.9
9 SBC Communications, Inc. 1.9
10 International Business
Machines Corp. 1.8
-----
24.9%
=====
Top 5 Industries
(by percentage of net assets)
Technology 20.2%
Finance 11.8%
Drugs 9.0%
Telecommunications 7.9%
Multi-Industry 7.4%
SEC Average Annual Rates of Return2
(at maximum applicable sales charge)
- --------------------------------------------------------------------------------
Inception 5 years 1 year
- --------------------------------------------------------------------------------
Class A 6.10% N/A N/A
- --------------------------------------------------------------------------------
Class B 5.90% N/A N/A
- --------------------------------------------------------------------------------
Class C 9.90% N/A N/A
- --------------------------------------------------------------------------------
Class I 11.70% N/A N/A
- --------------------------------------------------------------------------------
Cumulative Total Return
(do not reflect sales charge)
- --------------------------------------------------------------------------------
Inception 5 years 1 year
- --------------------------------------------------------------------------------
Class A 11.40% N/A N/A
- --------------------------------------------------------------------------------
Class B 10.90% N/A N/A
- --------------------------------------------------------------------------------
Class C 10.90% N/A N/A
- --------------------------------------------------------------------------------
Class I 11.70% N/A N/A
- --------------------------------------------------------------------------------
Past performance is no guarantee of future results.
Principal Risk Factor(s): Exposure to financial and market risks that accompany
investments in equities.
19
<PAGE>
PILGRIM
RESEARCH ENHANCED INDEX FUND
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE PILGRIM RESEARCH
ENHANCED INDEX FUND AND COMPARATIVE INDICES FROM INCEPTION OF EACH CLASS OF
SHARES THROUGH THE FUND'S FISCAL YEAR END.(3)
In accordance with the reporting requirements of the Securities and
Exchange Commission, the following data is supplied for the fiscal year ended
October 31, 1999, with all distributions reinvested in shares. The average
annualized total return for Class A shares of 6.10% for the period since the
Fund's inception of December 30, 1998 reflects payment of the maximum sales
charge of 4.75%. Average annualized total return of 5.90%, 9.90% and 11.70%
since inception for Class B, Class C and Class I shares of December 30, 1998,
respectively, reflect applicable contingent deferred sales charges (maximum
contingent deferred sales charge for Class B shares of 5.00% declines to 0%
after five years; and maximum charge for Class C shares is 1.00% during the
first year of investment only). All performance data shown represents past
performance, and should not be considered indicative of future performance.
Investment return and principal value will fluctuate. Fund shares when redeemed
maybe worth more or less than their original cost.
Pilgrim Research Enhanced Index Fund -- Class A
Average Annual Total Return
Since Inception 6.10%
S&P 500 Class A
12/30/98 9525 9525
01/31/99 9916 9924
02/26/99 9596 9590
03/31/99 9968 9924
04/30/99 10346 10448
05/31/99 10088 10229
06/30/99 10637 10733
07/31/99 10296 10410
08/31/99 9652 10362
09/30/99 9376 10048
10/31/99 9963 10610
S&P 500 Class A
Pilgrim Research Enhanced Index Fund -- Class B
Average Annual Total Return
Since Inception 5.90%
S&P 500 Class B
12/30/98 10000 10000
01/31/99 10410 10420
02/26/99 10074 10060
03/31/99 10465 10400
04/30/99 10862 10950
05/31/99 10591 10710
06/30/99 11167 11240
07/31/99 10809 10890
08/31/99 10133 10840
09/30/99 9844 10510
10/31/99 10460 11090
S&P 500 Class B
Pilgrim Research Enhanced Index Fund -- Class C
Average Annual Total Return
Since Inception 9.90%
S&P 500 Class C
12/30/98 10000 10000
01/31/99 10410 10420
02/26/99 10074 10070
03/31/99 10465 10410
04/30/99 10862 10960
05/31/99 10591 10710
06/30/99 11167 11240
07/31/99 10809 10890
08/31/99 10133 10840
09/30/99 9844 10510
10/31/99 10460 11090
S&P 500 Class C
Pilgrim Research Enhanced Index Fund -- Class I
Average Annual Total Return
Since Inception 11.70%
S&P 500 Class I
12/30/98 10000 10000
01/31/99 10410 10420
02/26/99 10074 10080
03/31/99 10465 10420
04/30/99 10862 10980
05/31/99 10591 10740
06/30/99 11167 11290
07/31/99 10809 10950
08/31/99 10133 10910
09/30/99 9844 10580
10/31/99 10460 11170
S&P 500 Class I
1. The Standard & Poors 500 Index is a widely recognized unmanaged index of
common stock. Index returns do not reflect fees, brokerage commissions or
other expenses of investing. Returns for Standard & Poors 500 Index are based
on average annual returns, and include reinvestment of dividends and
distributions, if any.
2. The investment manager waived certain fees and expenses without which total
return results may have been lower.
3. Sales charges reflected below represent those sales charges in effect as of
October 31, 1999. Effective November 1, 1999 the sales charge schedule has
been changed to conform with similar Funds in the Pilgrim Fund Family, and
can be found in the related Pilgrim Fund prospectus.
20
<PAGE>
PILGRIM RESEARCH ENHANCED INDEX FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks -- 95.88%
Basic Industry -- 2.76%
Air Products and Chemicals, Inc. 12,900 $ 354,750
Alcoa, Inc. 12,100 735,075
Allegheny Teledyne, Inc. 7,800 118,462
Boise Cascade Corp. 700 24,938
Bowater, Inc. 1,300 68,250
E. I. du Pont de Nemours and Co. 2,699 173,917
Fort James Corp. 5,800 152,612
Freeport-McMoRan Copper & Gold, Inc. (Class A) @ 1,600 22,600
Freeport-McMoRan Copper & Gold, Inc. (Class B) @ 8,900 148,519
Georgia-Pacific Corp. 4,500 178,594
IMC Global, Inc. 6,500 82,875
International Paper Co. 11,500 605,187
Louisiana-Pacific Corp. 2,400 30,450
Lyondell Chemical Co. 5,700 69,113
PPG Industries, Inc. 800 48,500
Praxair, Inc. 7,200 336,600
Quantum Corp.-DLT & Storage Systems @ 3,700 57,119
Reynolds Metals Co. 7,000 423,062
Rohm and Haas Co. 12,000 459,000
Smurfit-Stone Container Corp. @ 5,700 123,262
Solutia, Inc. 6,300 108,281
Temple-Inland, Inc. 1,500 87,188
The Dow Chemical Co. 8,100 957,825
The Mead Corp. 1,400 50,400
Union Carbide Corp. 10,400 634,400
USG Corp. 1,200 59,475
USX-U. S. Steel Group 3,800 97,138
Weyerhaeuser Co. 2,400 143,250
-----------
6,350,842
-----------
Capital Goods -- 1.18%
Cooper Industries, Inc. 3,800 163,637
Deere & Co. 9,800 355,250
Eaton Corp. 3,000 225,750
Emerson Electric Co. 15,100 906,944
Herman Miller, Inc. 3,100 67,231
Hubbell, Inc. 2,200 60,913
Ingersoll-Rand Co. 6,400 334,400
PACCAR, Inc. 3,200 150,800
Parker-Hannifin Corp. 4,400 201,575
Rockwell International Corp. 1,900 92,031
W.W. Grainger, Inc. 3,800 161,025
-----------
2,719,556
-----------
</TABLE>
21
<PAGE>
PILGRIM RESEARCH ENHANCED INDEX FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cyclical -- 2.11%
Dana Corp. 6,300 $ 186,244
Delphi Automotive Systems Corp. @ 21,600 355,050
Ford Motor Co. 39,100 2,145,612
General Motors Corp. 11,200 786,800
Genuine Parts Co. 6,800 177,225
Hasbro, Inc. 7,400 152,625
Jones Apparel Group, Inc. @ 6,800 215,050
Lear Corp. @ 2,600 87,750
Leggett & Platt, Inc. 7,500 166,406
Mattel, Inc. 14,200 189,925
Owens Corning 500 10,250
The B.F. Goodrich Co. 5,600 132,650
The Goodyear Tire & Rubber Co. 6,000 247,875
-----------
4,853,462
-----------
Drugs -- 9.01%
Abbott Laboratories 41,700 1,683,638
American Home Products Corp. 34,200 1,786,950
Amgen, Inc. @ 2,300 183,425
Bristol-Myers Squibb Co. 52,200 4,009,612
Eli Lilly & Co. 28,600 1,969,825
Forest Laboratories, Inc. @ 2,100 96,338
Genzyme Corp. @ 2,100 80,325
Johnson & Johnson 15,300 1,602,675
Merck & Co., Inc. 39,200 3,118,850
Monsanto Co. 16,700 642,950
Pfizer, Inc. 45,500 1,797,250
Schering-Plough Corp. 38,500 1,905,750
Warner-Lambert Co. 22,500 1,795,781
Watson Pharmaceuticals, Inc. @ 2,400 76,200
-----------
20,749,569
-----------
Energy -- 5.89%
Amerada Hess Corp. 1,200 68,850
Chevron Corp. 16,000 1,461,000
Conoco, Inc. (Class A) 3,500 96,031
Conoco, Inc. (Class B) 17,903 485,619
Cooper Cameron Corp. @ 1,400 54,163
Diamond Offshore Drilling, Inc. 1,800 57,150
DTE Energy Co. 5,000 165,937
ENSCO International, Inc. 3,900 75,563
Exxon Corp. 47,000 3,480,937
Global Marine, Inc. @ 4,900 74,419
Mobil Corp. 27,100 2,615,150
Phillips Petroleum Co. 7,400 344,100
R&B Falcon Corp. @ 5,600 69,650
Royal Dutch Petroleum Co. ** 53,000 3,176,687
Smith International, Inc. @ 1,400 48,388
Texaco, Inc. 14,600 896,075
Tosco Corp. 4,300 108,844
Ultramar Diamond Shamrock Corp. 2,400 58,800
Unocal Corp. 6,000 207,000
-----------
13,544,363
-----------
</TABLE>
22
<PAGE>
PILGRIM RESEARCH ENHANCED INDEX FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Finance -- 11.75%
American Express Co. 900 $ 138,600
AmSouth Bancorp. 12,300 316,725
Associated Banc-Corp. 1,700 65,397
Associates First Capital Corp. 21,200 773,800
Astoria Financial Corp. 1,200 43,200
BancWest Corp. 400 16,725
Bank of America Corp. 49,200 3,167,250
Bank One Corp. 33,700 1,265,856
CCB Financial Corp. 700 32,200
Charter One Financial, Inc. 6,600 162,113
Citigroup, Inc. 88,900 4,811,712
Comerica, Inc. 4,100 243,694
Commerce Bancshares, Inc. 1,600 62,000
Compass Bancshares, Inc. 3,400 90,738
Countrywide Credit Industries, Inc. 3,000 101,813
Dime Bancorp, Inc. 4,600 82,225
E*TRADE Group, Inc. @ 3,300 78,581
Fannie Mae 16,000 1,132,000
First Tennessee National Corp. 4,000 136,000
First Union Corp. 29,200 1,246,475
First Virginia Banks, Inc. 1,400 67,025
Firstar Corp. 6,900 202,687
FirstMerit Corp. 2,800 74,025
Fleet Boston Corp. 25,900 1,129,887
Freddie Mac 21,800 1,178,562
Golden West Financial Corp. 1,500 167,625
GreenPoint Financial Corp. 3,300 94,050
Hibernia Corp. 4,500 63,844
Household International, Inc. 13,700 611,362
Huntington Bancshares, Inc. 7,200 213,300
KeyCorp 13,100 365,981
M&T Bank Corp. 200 99,100
Mercantile Bankshares Corp. 1,800 64,800
Merrill Lynch & Co., Inc. 10,400 816,400
National City Corp. 19,400 572,300
North Fork Bancorporation, Inc. 3,800 78,613
Pacific Century Financial Corp. 400 9,125
Paine Webber Group, Inc. 4,800 195,600
Peoples Heritage Financial Group, Inc. 1,900 36,100
PNC Bank Corp. 8,900 530,662
Regions Financial Corp. 6,400 192,400
SouthTrust Corp. 5,600 224,000
Sovereign Bancorp, Inc. 3,800 33,488
Summit Bancorp. 5,100 176,587
SunTrust Banks, Inc. 4,700 343,981
TCF Financial Corp. 2,300 67,850
TD Waterhouse Group, Inc. @ 9,900 125,606
The Bear Stearns Cos., Inc. 3,100 132,138
The Charles Schwab Corp. 2,600 101,238
The Chase Manhattan Corp. 1,900 166,013
The CIT Group, Inc. 4,800 114,600
The FINOVA Group, Inc. 1,900 83,719
The Goldman Sachs Group, Inc. 13,000 923,000
U.S. Bancorp. 22,900 848,731
Union Planters Corp. 3,900 173,550
</TABLE>
23
<PAGE>
PILGRIM RESEARCH ENHANCED INDEX FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(continued)
Washington Mutual, Inc. 18,700 $ 672,031
Wells Fargo Co. 41,000 1,962,875
Wilmington Trust Corp. 400 21,700
Zions Bancorp. 2,600 153,238
-----------
27,054,897
-----------
Health Services -- 1.40%
Aetna, Inc. 4,600 231,150
Baxter International, Inc. 800 51,900
Becton, Dickinson & Co. 8,300 210,612
Biomet, Inc. 3,700 111,463
Boston Scientific Corp. @ 13,600 273,700
CIGNA Corp. 6,600 493,350
Columbia/HCA Healthcare Corp. 17,900 431,837
HEALTHSOUTH Corp. @ 13,700 78,775
Humana, Inc. @ 4,300 29,563
IDEC Pharmaceuticals Corp. @ 500 58,094
Manor Care, Inc. @ 2,900 45,675
Medtronic, Inc. 13,700 474,362
PE Corp. - PE Biosystems Group 800 51,900
St. Jude Medical, Inc. 2,800 76,650
Tenet Healthcare Corp. @ 9,800 190,487
United HealthCare Corp. 5,700 294,619
Wellpoint Health Networks, Inc. @ 2,100 121,800
-----------
3,225,937
-----------
Insurance -- 2.88%
Ambac Financial Group, Inc. 3,200 191,200
American International Group, Inc. 17,500 1,801,406
Aon Corp. 11,200 397,600
AXA Financial, Inc. 7,200 230,850
Lincoln National Corp. 2,900 133,763
Marsh & McLennan Cos., Inc. 6,900 545,531
MBIA, Inc. 4,400 251,075
Mercury General Corp. 1,000 28,188
SAFECO Corp. 5,900 162,250
The Allstate Corp. 41,200 1,184,500
The Chubb Corp. 3,900 214,012
The Hartford Financial Services Group, Inc. 9,300 481,856
The St. Paul Cos., Inc. 10,400 332,800
Torchmark Corp. 5,800 180,888
Travelers Property Casualty Corp. 2,700 97,200
UnumProvident Corp. 12,200 401,837
-----------
6,634,956
-----------
Multi - Industry -- 7.38%
AlliedSignal, Inc. 27,800 1,582,862
Eastman Kodak Co. 17,600 1,213,300
General Electric Co. 55,100 7,469,494
Harris Corp. 2,300 51,606
ITT Industries, Inc. 4,900 167,519
Lockheed Martin Corp. 20,300 406,000
Raytheon Co. (Class A) 13,300 364,919
Raytheon Co. (Class B) 4,100 119,413
Symbol Technologies, Inc. 4,400 174,900
Tenneco, Inc. 5,400 86,400
The Boeing Co. 18,800 865,975
</TABLE>
24
<PAGE>
PILGRIM RESEARCH ENHANCED INDEX FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(continued)
The Seagram Co. Ltd. 18,400 $ 908,500
Tyco International Ltd. 52,800 2,108,700
Waste Management, Inc. 29,100 534,712
Xerox Corp. 33,600 940,800
-----------
16,995,100
-----------
Pharmaceutical -- 0.33%
ALZA Corp. @ 1,000 42,813
Human Genome Sciences, Inc. @ 500 43,688
Pharmacia & Upjohn, Inc. 12,600 679,612
-----------
766,113
-----------
Retail -- 6.10%
Abercrombie & Fitch Co. @ 3,600 98,100
Albertson's, Inc. 14,100 512,006
CVS Corp. 7,600 330,125
Dayton Hudson Corp. 16,700 1,079,237
Federated Department Stores, Inc. @ 7,700 328,694
J. C. Penney, Inc. 7,200 182,700
Kmart Corp. @ 15,800 158,988
Kohl's Corp. @ 4,200 314,212
Lowe's Cos., Inc. 6,000 330,000
Nordstrom, Inc. 4,200 104,738
Safeway, Inc. @ 18,900 667,406
Sears, Roebuck & Co. 11,700 329,794
The Gap, Inc. 29,600 1,098,900
The Home Depot, Inc. 20,600 1,555,300
The Kroger Co. 31,700 659,756
The May Department Stores Co. 10,700 371,156
The TJX Cos., Inc. 11,500 311,938
Tiffany & Co. 200 11,900
Wal-Mart Stores, Inc. 98,500 5,583,719
-----------
14,028,669
-----------
Services -- 7.11%
America Online, Inc. @ 26,700 3,462,656
AT&T Corp. - Liberty Media Group @ 29,800 1,182,687
Automatic Data Processing, Inc. 14,300 689,081
Cendant Corp. @ 30,900 509,850
Comcast Corp. @ 30,400 1,280,600
Electronic Data Systems Corp. 11,500 672,750
Equifax, Inc. 6,200 167,400
Gannett Co., Inc. 12,000 925,500
Hilton Hotels Corp. 9,800 90,650
Knight-Ridder, Inc. 3,300 209,550
Mandalay Resort Group @ 3,100 57,738
McDonald's Corp. 23,300 961,125
MediaOne Group, Inc. @ 27,400 1,947,112
Mirage Resorts, Inc. @ 8,500 123,781
Service Corp. International 11,200 107,100
Starwood Hotels & Resorts Worldwide, Inc. 7,300 167,444
The New York Times Co. 5,000 201,250
The Times Mirror Co. 3,000 216,375
The Walt Disney Co. 75,400 1,988,675
The Washington Post Co. 400 212,825
Time Warner, Inc. 7,000 487,813
Viacom, Inc. @ 15,800 707,050
-----------
16,369,012
-----------
</TABLE>
25
<PAGE>
PILGRIM RESEARCH ENHANCED INDEX FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Staples -- 6.69%
Bestfoods 7,100 $ 417,125
General Mills, Inc. 1,900 165,656
H.J. Heinz Co. 9,100 434,525
Hershey Foods Corp. 3,500 176,750
Kimberly-Clark Corp. 13,700 864,812
Nabisco Holdings Corp. 1,300 48,588
PepsiCo, Inc. 37,600 1,304,250
Philip Morris Cos., Inc. 67,200 1,692,600
Ralston-Ralston Purina Group Co. 3,800 119,463
Sara Lee Corp. 22,400 606,200
The Clorox Co. 6,100 249,719
The Coca-Cola Co. 63,600 3,752,400
The Gillette Co. 27,900 1,009,631
The Procter & Gamble Co. 33,400 3,502,825
The Quaker Oats Co. 1,200 84,000
Unilever NV ** 14,700 980,306
-----------
15,408,850
-----------
Technology -- 20.24%
3Com Corp. @ 8,100 234,900
Apple Computer, Inc. @ 2,100 168,263
Applied Materials, Inc. @ 8,900 799,331
BMC Software, Inc. @ 5,500 353,031
Cisco Systems, Inc. @ 76,600 5,668,400
Computer Associates International, Inc. 11,600 655,400
Dell Computer Corp. @ 60,100 2,411,512
DoubleClick, Inc. @ 900 126,000
Electronic Arts, Inc. @ 1,200 96,975
EMC Corp. 23,800 1,737,400
Exodus Communications, Inc. @ 1,600 137,600
First Data Corp. 9,900 452,306
Guidant Corp. @ 7,700 380,188
Hewlett-Packard Co. 15,100 1,118,344
Intel Corp. 78,200 6,055,612
International Business Machines Corp. 42,700 4,200,612
Lucent Technologies, Inc. 72,300 4,645,275
Microsoft Corp. @ 111,200 10,292,950
Motorola, Inc. 14,300 1,393,356
National Semiconductor Corp. @ 3,800 113,763
Oracle Corp. @ 30,800 1,464,925
Seagate Technology, Inc. @ 5,200 153,075
Sun Microsystems, Inc. @ 18,400 1,946,950
Symantec Corp. @ 600 28,650
Texas Instruments, Inc. 18,500 1,660,375
Xilinx, Inc. @ 3,700 290,913
-----------
46,586,106
-----------
Telecommunications -- 7.88%
AT&T Corp. 56,800 2,655,400
Bell Atlantic Corp. 35,000 2,272,812
BellSouth Corp. 11,500 517,500
Global Crossing Ltd. @ 20,000 692,500
GTE Corp. 27,100 2,032,500
Level 3 Communications, Inc. @ 10,300 704,263
MCI WorldCom, Inc. @ 50,500 4,333,531
Nortel Networks Corp. 5,100 315,881
</TABLE>
26
<PAGE>
PILGRIM RESEARCH ENHANCED INDEX FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Shares Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(continued)
SBC Communications, Inc. 86,546 $ 4,408,437
U. S. West, Inc. 3,400 207,613
-----------
18,140,437
-----------
Transportation -- 0.75%
AMR Corp. 3,400 215,900
Burlington Northern Santa Fe Corp. 10,600 337,875
CNF Transportation, Inc. 1,100 36,369
CSX Corp. 4,900 200,900
FDX Corp. @ 2,500 107,656
Norfolk Southern Corp. 8,700 212,607
Northwest Airlines Corp. @ 1,600 40,500
Ryder System, Inc. 1,000 21,375
Southwest Airlines Co. 11,300 189,981
Union Pacific Corp. 5,900 328,925
US Airways Group, Inc. @ 800 22,400
-----------
1,714,488
-----------
Utilities -- 2.42%
Allegheny Energy, Inc. 4,000 127,250
Ameren Corp. 2,000 75,625
Carolina Power & Light Co. 10,300 355,350
Central & South West Corp. 18,200 403,812
Cinergy Corp. 5,200 146,900
CMS Energy Corp. 3,600 132,750
Columbia Energy Group 2,000 130,000
Consolidated Edison, Inc. 1,200 45,825
Consolidated Natural Gas Co. 1,900 121,600
Constellation Energy Group, Inc. 4,900 150,369
Dominion Resources, Inc. 8,600 413,875
Edison International 5,900 174,787
El Paso Energy Corp. 1,900 77,900
Entergy Corp. 8,300 248,481
FPL Group, Inc. 6,300 316,969
GPU, Inc. 4,200 142,538
NiSource, Inc. 4,100 84,050
Northern States Power Co. 11,600 249,400
PG&E Corp. 13,400 307,362
Pinnacle West Capital Corp. 2,700 99,563
PP&L Resources, Inc. 5,300 143,431
Public Service Enterprise Group, Inc. 3,700 146,381
Reliant Energy, Inc. 10,100 275,225
TECO Energy, Inc. 4,200 92,663
Texas Utilities Co. 9,600 372,000
The Southern Co. 14,100 374,531
Unicom Corp. 7,100 272,019
Wisconsin Energy Corp. 4,100 91,738
-----------
5,572,394
-----------
Total Common Stocks
(cost $215,502,699) 220,714,751
-----------
</TABLE>
27
<PAGE>
PILGRIM RESEARCH ENHANCED INDEX FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Principal Amount Value
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Government and Agencies -- 0.43%(1)
U.S. Treasury Notes
5.875%, 11/15/99 $ 460,000 $ 460,290
5.875%, 2/15/00 535,000 536,102
-----------
Total U.S. Government and Agencies
(cost $996,322) 996,392
-----------
Total Investment Securities -- 96.31%
(cost $216,499,021) 221,711,143
Repurchase Agreement -- 3.34%
Agreement with State Street Bank and
Trust bearing interest at 5.07% dated
10/29/99, to repurchased 11/01/99 in the
amount of $7,698,251 and collateralized
by $7,740,000 U.S. Treasury Bonds, 6.375%
due 9/30/01, value $7,853,027
(cost $7,695,000) 7,695,000 7,695,000
Other assets less liabilities-- 0.35% 800,514
-----------
Net Assets-- 100.00% $230,206,657
===========
</TABLE>
@ Non-income producing security.
**American depositary receipts.
(1)The security has been segregated as collateral for futures contracts.
See accompanying notes to financial statements.
28
<PAGE>
PILGRIM
INCOME AND GROWTH FUND
The Markets
o U.S. equity markets were locked in a trading range for most of the past
six months. Although in the first half of this period the equity markets
staged a very strong rally, in the second half of the period they were
weighed down by interest rate fears, in the wake of the Federal Reserve's
first rate hike in over two years.
o Although S&P 500(1) operating profits continued to grow in excess of 14%,
concerns over increasing inflation and fears of further rate hikes as the
Fed attempted to slow the economy created volatility in the markets. The
bond market was under severe pressure for most of the quarter, as bond
yields moved up as high as 6.40%.
o Larger capitalization issues outperformed the smaller capitalization
indices, with the Russell 2000(2) returning (0.25)%, versus 2.74% for the
S&P 500 and 1.86% for the S&P Midcap.(3) Technology stocks continued to
outperform while more cyclical and interest rate sensitive issues
suffered; the growth style of investing significantly outperformed the
value style of investing.
The Fund
o The Fund's one year total return was 11.99%, 11.24%, and 11.12% for Class
A, B, and C shares, respectively. The Lipper Average for Balanced
Funds(4) returned 12.56% for the same period.
o The Fund was helped by the restructuring undertaken earlier in the year,
as the weightings in energy, telecommunications and technology stocks
were increased and the Fund's exposure to financial issues was pared
back.
o The corporate bond portion of the the portfolio also benefited from the
re-structuring, as the percentage of the portfolio in bonds had been
lowered in favor of a greater allocation to equities. In the fixed income
portion of the portfolio, we focused on those issues with a greater
opportunity to improve earnings growth as the global economic recovery
continued, and took on more credit risk relative to interest rate risk.
Current Strategy
o The Federal Reserve has now taken back all of the interest rate cuts it
made in the wake of the financial crisis triggered by Russia's 1998
default. While interest rate hikes normally have a dampening effect on
the stock market, we believe this last rate hike was widely anticipated
and is viewed as preemptive. The overall outlook for the financial
markets remains benign, and we believe that interest rates have peaked
for the moment. As we move into next year, we believe we will see further
evidence of a global economic recovery and we believe this can be
accomplished without a significant increase in inflation.
o We believe that the Pilgrim Income & Growth Fund is well positioned given
our current outlook. We have focused on companies that are less sensitive
to interest rates and those that are at the early stages of growth
cycles, while trying to keep the Fund's current yield attractive and
paying careful attention to valuation.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
<S> <C>
Fund Information (All data are as of 10/31/99) Total Net Assets $92,414,563
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Top 10 Holdings
Name % Fund
1 Halliburton Co. 4.1%
2 Avon Products, Inc. 3.7
3 MCI Worldcom, Inc. 3.1
4 First Union Corp. 2.9
5 IES Utilities, Inc. 2.8
6 FleetBoston Financial Corp. 2.7
7 International Business
Machines Corp. 2.7
8 General Motors Acceptance Corp. 2.6
9 Delphi Automotive Systems Corp. 2.1
10 Taiwan Semiconductor
Manufacturing Co. 2.0
-----
28.7%
=====
Top 5 Industries
(by percentage of net assets)
Finance 15.1%
Energy 14.1%
Consumer Staples 12.9%
Utilities 11.0%
Communication Services 10.0%
SEC Average Annual Rates of Return
(at maximum applicable sales charge)
- --------------------------------------------------------------------------------
Inception 5 years 1 year
- --------------------------------------------------------------------------------
Class A 8.92% 10.24% 6.70%
- --------------------------------------------------------------------------------
Class B 8.33% 10.27% 7.11%
- --------------------------------------------------------------------------------
Class C 8.98% 10.54% 10.29%
- --------------------------------------------------------------------------------
Cumulative Total Return
(do not reflect sales charge)
- --------------------------------------------------------------------------------
Inception 5 years 1 year
- --------------------------------------------------------------------------------
Class A 75.03% 70.96% 11.99%
- --------------------------------------------------------------------------------
Class B 58.07% 65.00% 11.24%
- --------------------------------------------------------------------------------
Class C 62.16% 65.05% 11.12%
- --------------------------------------------------------------------------------
Past performance is no guarantee of future results.
Principal Risk Factor(s): Price volatility and other risks that accompany an
investment in equity securities. Credit, interest rate and other risks that
accompany an investment in debt securities.
29
<PAGE>
PILGRIM
INCOME AND GROWTH FUND
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE PILGRIM INCOME AND
GROWTH FUND AND COMPARATIVE INDICES FROM INCEPTION OF EACH CLASS OF SHARES
THROUGH THE FUND'S FISCAL YEAR END.(5)
In accordance with the reporting requirements of the Securities and
Exchange Commission, the following data is supplied for the fiscal year ended
October 31, 1999, with all distributions reinvested in shares. The average
annualized total return for Class A shares of 8.92% for the period since the
Fund's inception of November 8, 1993 reflects payment of the maximum sales
charge of 4.75%. Average annualized total returns of 8.33% and 8.98% since
inception for Class B and Class C shares of February 9, 1994 and March 21, 1994,
respectively, reflect applicable contingent deferred sales charges (maximum
contingent deferred sales charge for Class B shares of 5.00% declines to 0%
after five years; and maximum charge for Class C shares is 1.00% during the
first year of investment only). All performance data shown represents past
performance, and should not be considered indicative of future performance.
Investment return and principal value will fluctuate. Fund shares when redeemed
maybe worth more or less than their original cost.
Pilgrim Income and Growth Fund -- Class A
Average Annual Total Return
1-Year 6.70%
Since Inception 8.92%
Lehman Gov't/Corp Lipper Balanced Income and Growth S&P 500
11/08/93 10000 10000 9525 10000
10030 9840 9667 9871
10074 10005 9805 9971
10225 10267 10225 10295
10002 10065 9938 9985
9757 9700 9536 9528
9676 9721 9488 9638
9659 9796 9536 9758
9637 9626 9432 9496
9829 9843 9645 9795
9833 10090 9936 10163
9685 9908 9819 9890
10/31/94 9674 9939 9751 10097
9657 9707 9448 9698
9721 9800 9455 9817
9907 9922 9416 10056
10137 10211 9643 10419
10205 10392 9808 10703
10347 10587 9997 11003
10780 10925 10364 11402
10867 11119 10527 11645
10824 11354 10758 12015
10963 11443 10868 12012
11075 11716 11039 12493
10/31/95 11237 11686 10948 12431
11423 12049 11291 12942
11591 12239 11472 13168
11663 12460 11574 13597
11415 12466 11533 13691
11319 12513 11622 13799
11241 12596 11734 13984
11222 12725 11928 14304
11373 12767 11977 14336
11399 12438 11596 13681
11371 12634 11843 13939
11574 13102 12208 14694
10/31/96 11843 13380 12591 15077
12061 14003 13253 16184
11927 13831 13219 15836
11942 14254 13601 16806
11967 14307 13798 16906
11824 13891 13192 16185
11997 14309 13472 17130
12109 14895 14008 18134
12254 15373 14408 18922
12629 16255 14936 20400
12487 15739 14467 19229
12684 16367 15003 20251
10/31/97 12886 16069 14719 19553
12954 16364 15168 20425
13090 16623 15275 20746
13275 16741 15188 20957
13248 17405 15598 22433
13289 17938 15966 23553
13355 18063 15953 23767
13499 17881 15841 23320
13636 18210 15848 24239
13647 17997 15445 23958
13914 16447 13971 20465
14312 17156 14388 21742
10/31/98 14211 17798 14884 23487
14296 18450 15292 24876
14330 19130 16155 26278
14432 19437 16295 27356
14088 18970 15819 26473
14159 19439 16195 27500
14194 20076 16926 28543
14048 19767 16617 27831
14005 20313 16923 29346
13965 19933 16768 28405
13954 19723 16584 26629
14080 19471 16341 25869
10/31/99 14116 20036 16669 27486
S&P 500 Income and Growth Lipper Balanced Lehman Gov't/Corp
Pilgrim Income and Growth Fund -- Class B
Average Annual Total Return
1-Year 7.11%
Since Inception 8.33%
Lehman Gov't/Corp Lipper Balanced Income and Growth S&P 500
02/09/94 10000 10000 10000 10000
9921 9804 9784 9699
9678 9447 9388 9255
9598 9468 9340 9362
9580 9541 9388 9478
9558 9376 9278 9224
9749 9587 9488 9515
9753 9827 9773 9872
9606 9650 9647 9607
9596 9680 9580 9808
9578 9454 9283 9420
12/31/94 9641 9545 9275 9536
9827 9664 9236 9768
10055 9946 9439 10120
10122 10121 9598 10397
10263 10311 9782 10688
10693 10641 10132 11076
10778 10830 10289 11312
10736 11059 10505 11671
10874 11145 10603 11668
10984 11411 10771 12136
11146 11382 10673 12075
11330 11736 10998 12571
12/31/95 11496 11921 11165 12791
11568 12136 11264 13208
11322 12142 11214 13299
11227 12188 11293 13404
11150 12268 11392 13584
11131 12394 11581 13895
11280 12435 11627 13926
11306 12115 11248 13290
11279 12306 11467 13540
11480 12761 11819 14273
11747 13032 12181 14646
11963 13639 12813 15721
12/31/96 11830 13472 12787 15382
11845 13883 13146 16325
11870 13935 13325 16422
11728 13530 12735 15722
11900 13937 12994 16640
12010 14508 13500 17615
12154 14973 13885 18381
12526 15832 14383 19816
12386 15330 13919 18679
12580 15941 14421 19672
10/31/97 12782 15651 14148 18993
12849 15938 14568 19840
12984 16190 14666 20152
13167 16305 14570 20357
13140 16953 14952 21791
13181 17471 15293 22879
13247 17593 15281 23087
13389 17416 15161 22652
13525 17737 15164 23546
13536 17529 14765 23272
13801 16019 13353 19879
14195 16710 13735 21119
10/31/98 14095 17335 14209 22815
14180 17970 14586 24164
14214 18633 15395 25526
14315 18931 15515 26573
13974 18477 15060 25715
14044 18933 15405 26713
14079 19554 16088 27726
13934 19253 15793 27034
13891 19784 16067 28506
13852 19414 15920 27592
13841 19211 15732 25867
13965 18965 15496 25128
10/31/99 14002 19515 15807 26700
13954 19723 16584 26629
14080 19471 16341 25869
10/31/99 14116 20036 16669 27486
S&P 500 Income and Growth Lipper Balanced Lehman Gov't/Corp
Pilgrim Income and Growth Fund -- Class C
Lehman Gov't/Corp Lipper Balanced Income and Growth S&P 500
03/21/94 10000 10000 10000 10000
9893 9637 9632 9542
9811 9658 9584 9653
9793 9732 9632 9772
9771 9563 9517 9510
9966 9779 9732 9810
9970 10024 10025 10179
9820 9843 9894 9905
9809 9874 9825 10112
9791 9644 9520 9713
12/31/94 9856 9736 9510 9832
10045 9857 9471 10071
10278 10145 9679 10434
10347 10324 9838 10720
10491 10518 10027 11020
10930 10854 10387 11420
11018 11047 10554 11663
10975 11280 10775 12034
11115 11368 10875 12030
11229 11640 11039 12512
11394 11610 10948 12450
11582 11971 11282 12962
12/31/95 11752 12160 11455 13188
11825 12379 11557 13618
11574 12385 11506 13712
11477 12432 11588 13820
11398 12514 11690 14005
11378 12642 11976 14326
11531 12684 11923 14358
11557 12357 11543 13702
11530 12552 11769 13960
11735 13016 12132 14716
12008 13293 12503 15100
12229 13912 13153 16208
12/31/96 12093 13741 13117 15860
12108 14161 13485 16832
12133 14214 13670 16931
11989 13801 13064 16210
12164 14216 13341 17157
12277 14798 13862 18162
12424 15273 14248 18951
12805 16149 14759 20431
12661 15637 14294 19258
12860 16260 14800 20282
10/31/97 13066 15964 14519 19583
13135 16258 14952 20456
13272 16514 15054 20778
13459 16632 14955 20989
13432 17292 15349 22467
13474 17821 15700 23589
13541 17946 15688 23803
13687 17764 15565 23355
13826 18092 15568 24276
13837 17880 15158 23994
14107 16340 13706 20496
14511 17045 14106 21775
10/31/98 14408 17682 14593 23523
14495 18330 14981 24914
14530 19006 15807 26318
14633 19310 15931 27398
14284 18847 15463 26513
14356 19312 15796 27542
14392 19946 16498 28587
14244 19638 16195 27873
14199 20180 16476 29390
14160 19803 16325 28449
14148 19595 16132 26669
14276 19344 15880 25908
10/31/99 14313 19905 16216 27528
S&P 500 Income and Growth Lipper Balanced Lehman Gov't/Corp.
1. The Standard & Poors 500 Index is a widely recognized index of common stock.
Index returns do not reflect fees, brokerage commissions or other expenses of
investing. Returns for Standard & Poors 500 Index are based on average annual
returns, and include reinvestment of dividends and distributions, if any.
2. The Russell 2000 Index is an index that measures the performance of small
companies.
3. The S&P Midcap 400 Index is an Index which measures the performance of the
mid-size company segment of the U.S. market.
4. Lipper Average for Balanced Funds includes 430,324, and 206 Funds for the 1,
3, and 5 years pending, respectively.
5. Sales charges reflected below represent those sales charges in effect as of
October 31, 1999. Effective November 1, 1999 the sales charge schedule has
been changed to conform with similar Funds in the Pilgrim Fund Family, and
can be found in the related Pilgrim Fund prospectus.
The Lipper Average for Balanced Funds and all indices are unmanaged.
30
<PAGE>
PILGRIM INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Industry Value % of Net Assets
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Basic Material $ 5,651,581 6.11%
Capital Goods 5,104,375 5.52
Communication Services 9,248,007 10.01
Computer Communications 1,139,600 1.23
Consumer Cyclicals 3,785,115 4.10
Consumer Staples 11,882,092 12.86
EDP Peripherals 1,752,000 1.90
EDP Services 2,422,544 2.62
Electronic Data Processing 2,536,092 2.74
Electronic Production/Equipment 1,856,870 2.01
Energy 12,991,738 14.06
Federal Agencies 1,789,900 1.94
Financial 13,951,312 15.10
Major Pharmaceuticals 2,728,072 2.95
Photography 1,068,531 1.16
Real Estate Investment Trust 443,213 0.48
Semiconductor 2,522,894 2.73
Utilities 10,197,211 11.03
Other assets less liabilities 1,343,416 1.45
---------- ------
Net Assets $92,414,563 100.00%
========== ======
</TABLE>
See accompanying notes to financial statements.
31
<PAGE>
PILGRIM INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Shares Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks -- 68.09%
Basic Material -- 6.11%
Abitibi-Consolidated, Inc. 59,500 $ 717,719
Alcoa, Inc. 14,400 874,800
American National Can Group, Inc. @ 15,800 197,500
Bowater, Inc. 19,000 997,500
International Paper Co. 27,300 1,436,662
Union Carbide Corp. 23,400 1,427,400
----------
5,651,581
----------
Capital Goods -- 5.52%
AlliedSignal, Inc. 15,400 876,838
Briggs & Stratton Corp. 25,900 1,513,531
Danaher Corp. 27,300 1,318,931
Ingersoll-Rand Co. 26,700 1,395,075
----------
5,104,375
----------
Communication Services -- 6.92%
BellSouth Corp. 28,100 1,264,500
Global Crossing Ltd. @ 37,925 1,313,153
GTE Corp. 19,900 1,492,500
Qwest Communications International, Inc. @ 26,800 964,800
SBC Communications, Inc. 26,714 1,360,744
----------
6,395,697
----------
Computer Communications -- 1.23%
Cisco Systems, Inc. @ 15,400 1,139,600
----------
Consumer Cyclicals -- 2.03%
Dayton Hudson Corp. 20,300 1,311,887
General Motors Corp. 500 35,125
Office Depot, Inc. @ 42,200 524,863
----------
1,871,875
----------
Consumer Staples -- 9.16%
Church & Dwight Co., Inc. 39,400 1,026,862
Comcast Corp. @ 34,400 1,449,100
Cox Communications, Inc. @ 36,000 1,635,750
Emmis Communications Corp. @ 9,800 706,825
General Mills, Inc. 16,000 1,395,000
Kimberly-Clark Corp. 19,755 1,247,034
The Seagram Co. Ltd. 20,300 1,002,313
----------
8,462,884
----------
EDP Peripherals -- 1.90%
EMC Corp. 24,000 1,752,000
----------
EDP Services -- 2.62%
Electronic Data Systems Corp. 27,900 1,632,150
First Data Corp. 17,300 790,394
----------
2,422,544
----------
Electronic Production/Equipment -- 2.01%
Taiwan Semiconductor Manufacturing Co. Ltd. @ ** 53,628 1,856,870
----------
Energy -- 9.98%
Apache Corp. 42,700 1,665,300
Baker Hughes, Inc. 56,200 1,570,087
Chevron Corp. 15,000 1,369,688
Conoco, Inc. (Class B) 29,851 809,708
Mobil Corp. 15,500 1,495,750
Noble Drilling Corp. @ 62,200 1,380,063
Texaco, Inc. 15,200 932,900
----------
9,223,496
----------
</TABLE>
32
<PAGE>
PILGRIM INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Shares Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Financial -- 6.91%
Bank of New York Co., Inc. 36,200 $ 1,515,875
Bank One Corp. 13,400 503,338
Citigroup, Inc. 33,450 1,810,481
J. P. Morgan & Co., Inc. 9,000 1,177,875
The Chase Manhattan Corp. 15,800 1,380,525
----------
6,388,094
----------
Major Pharmaceuticals -- 1.07%
Merck & Co., Inc. 12,400 986,575
----------
Photography -- 1.16%
Eastman Kodak Co. 15,500 1,068,531
----------
Real Estate Investment Trust -- 0.48%
Equity Residential Properties Trust 10,600 443,213
----------
Semiconductor -- 2.73%
LSI Logic Corp. @ 23,300 1,239,269
Micron Technology, Inc. 18,000 1,283,625
----------
2,522,894
----------
Utilities -- 8.26%
El Paso Energy Corp. 36,900 1,512,900
Enron Corp. @ 39,800 1,589,512
Kinder Morgan, Inc. 61,300 1,233,663
The AES Corp. 16,800 948,150
The Montana Power Co. 45,600 1,296,750
Williams Cos., Inc. 28,200 1,057,500
----------
7,638,475
----------
Total Common Stocks
(cost $49,672,121) 62,928,704
----------
</TABLE>
33
<PAGE>
PILGRIM INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Principal Amount Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Domestic Corporate Bonds -- 28.52%
Communication Services -- 3.09%
MCI Worldcom, Inc.
6.50%, Sr. Notes, 4/15/10 $ 3,000,000 $ 2,852,310
----------
Consumer Cyclicals -- 2.07%
Delphi Automotive Systems Corp.
6.125%, Notes, 5/01/04 2,000,000 1,913,240
----------
Consumer Staples -- 3.70%
Avon Products, Inc.
6.55%, Notes, 8/01/07 3,600,000 3,419,208
----------
Electronic Data Processing -- 2.74%
International Business Machines Corp.
6.45%, Notes, 8/01/07 2,600,000 2,536,092
----------
Energy -- 4.08%
Halliburton Co.
5.625%, Notes, 12/01/08 4,165,000 3,768,242
----------
Financial -- 8.18%
First Union Corp.
7.50%, Subordinated Notes, 7/15/06 2,600,000 2,645,994
FleetBoston Financial Corp.
7.19%, Subordinated Notes, 10/02/12 2,600,000 2,484,508
General Motors Acceptance Corp.
6.125%, Notes, 1/22/08 2,600,000 2,432,716
----------
7,563,218
----------
Major Pharmaceuticals -- 1.89%
American Home Products Corp.
7.90%, Notes, 2/15/05 1,700,000 1,741,497
----------
Utilities -- 2.77% IES Utilities, Inc.
6.625%, Sr. Debentures, 8/01/09 2,700,000 2,558,736
----------
Total Domestic Corporate Bonds
(cost $27,687,603) 26,352,543
----------
U.S. Government and Agencies -- 1.94%
Federal Home Loan Mortgage Corp.
5.125%, 10/15/08 2,000,000 1,789,900
----------
Total U.S. Government and Agencies
(cost $1,990,700) 1,789,900
----------
Total Investment Securities -- 98.55%
(cost $79,350,424) 91,071,147
Repurchase Agreement-- 1.66%
Agreement with State Street Bank and Trust bearing interest at 5.07%
dated 10/29/99, to be repurchased 11/01/99 in the amount of
$1,533,648 and collateralized by $1,545,000 U.S. Treasury Bonds,
6.375% due 9/30/01, value $1,567,562
(cost $1,533,000) 1,533,000 1,533,000
Liabilities in excess of other assets-- (0.21%) (189,584)
----------
Net Assets-- 100.00% $92,414,563
==========
</TABLE>
@ Non-income producing security.
** American depositary receipts.
See accompanying notes to financial statements.
34
<PAGE>
PILGRIM
HIGH TOTAL RETURN FUND II
The Markets
o The fiscal year ended October 31, 1999 closed with robust equity markets
and GDP growth rates of approximately 4%. The equity markets' outstanding
performance was primarily due to the strength of the U.S. economy and the
absence of inflation indicators. Additionally, worldwide markets
stabilized, rebounding off their lows. Inflation continued to remain low
at roughly 1.5%, as both lower commodity prices and imports kept prices
in check. During the twelve months, yields of 10- and 30-year Treasury
bonds had a significant backup. Their yields as of October 31, 1999 stood
at 6.02% and 6.16%, up 142 bps and 101 bps, respectively. The backup in
interest rates was primarily due to the continued strength of the U.S.
economy, which heightened expectations that the Fed might need to raise
rates further to hold inflation in check. The Federal Reserve tightened
rates by 25 basis points in June and then tightened an additional 25
basis points in August, to the current level of 5.25%. High yield bond
spreads widened as liquidity concerns returned, redemptions in mutual
funds increased and stock market investor confidence wavered, all while
the domestic economic outlook remained robust.
o The Lehman Brothers Corporate High Yield Index(1) returned 4.34% for the
twelve months ended October 31, 1999 compared to 0.53% for the Lehman
Brothers U.S. Aggregate Bond Index.(2) As economic and financial concerns
returned during the quarter, high yield bonds underperformed all other
fixed income assets in the third quarter. At the end of the third quarter
1999, high yield spreads still remained historically wide to Treasuries
at 525-650 basis points. In general, bonds with lower credit ratings
substantially underperformed the upper tier of the high yield market.
The Fund
o From November 1, 1998 through October 31, 1999, the total return of the
Fund's Class A, B, and C shares was (3.10%), (4.00%), and (3.77%),
respectively; the Lipper average for high yield funds was 6.61%.
o The Fund's under-performance was attributed to the underperformance of
the lower tier of the high yield market. Furthermore, prices of non-rated
issues were taken down precipitously as investors hit one-time bids 40 to
50 points lower than where they were marked.
o Since the third quarter 1998 meltdown, high yield investors have demanded
a significant liquidity premium. This bias for more liquid issues has
flowed into the out-performance by larger-sized issues. The Fund's
allocation to smaller-sized issues adversely affected the Fund's
performance during the period.
o Distressed and under-performing assets such as shipping, oil and gas and
emerging market credits were cut back. As the Fund's exposure to more
commodities driven credits decreased, weightings in the cable, gaming and
telecommunications sectors were increased. These sectors should provide
both growth and stability to the Fund.
o As the liquidity was flushed from the market, the upper tier issues
substantially out-performed the middle and lower tier issues. This upper
tier out-performance was prompted by the high yield market's poor
liquidity, increasing default rates and mutual fund outflows.
35
<PAGE>
PILGRIM
HIGH TOTAL RETURN FUND II
Current Strategy
o We will continue the Fund's above-average allocation to non-cyclical
industries, will maintain positions in bonds that have equity kickers and
will focus on investments in undervalued bonds that have high yields and
above-average potential for capital appreciation.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
Fund Information (All data are as of 10/31/99) Total Net Assets $176,813,481
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Top 10 Holdings
Name % Fund
1 Intracel Corp. 3.9%
2 Globix Corp. 3.0
3 Amazon.com, Inc. 2.8
4 TransAmerican Refining Corp. 2.8
5 Nextel Communications, Inc. 2.7
6 Worldport International, Inc. 2.6
7 Crown Castle International 2.5
Corp.
8 EchoStar DBS Corp. 2.5
9 Compass Aerospace Corp. 2.4
10 Virgin Cinemas Group Ltd. 2.3
-----
27.5%
=====
Top 5 Industries
(by percentage of net assets)
Telecommunications 22.3%
Cable Television 10.7%
Food/Beverage/Tobacco 8.1%
Healthcare 7.1%
Oil & Gas 7.0%
SEC Average Annual Rates of Return
(at maximum applicable sales charge)
- --------------------------------------------------------------------------------
Inception 5 years 1 year
- --------------------------------------------------------------------------------
Class A 1.01% N/A -7.73%
- --------------------------------------------------------------------------------
Class B 1.19% N/A -8.36%
- --------------------------------------------------------------------------------
Class C 2.17% N/A -4.65%
- --------------------------------------------------------------------------------
Cumulative Total Return
(do not reflect sales charge)
- --------------------------------------------------------------------------------
Inception 5 years 1 year
- --------------------------------------------------------------------------------
Class A 7.93% N/A -3.10%
- --------------------------------------------------------------------------------
Class B 5.83% N/A -4.00%
- --------------------------------------------------------------------------------
Class C 6.08% N/A -3.77%
- --------------------------------------------------------------------------------
Past performance is no guarantee of future results.
Principal Risk Factor(s): Exposure to financial and 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. Up to 50% of total assets may be invested in
foreign securities including 35% in emerging market debt. International
investing does pose special risks, including currency fluctuation and political
risks not found in investments that are solely domestic. Risks of foreign
investments generally intensified for investments in emerging markets.
36
<PAGE>
PILGRIM
HIGH TOTAL RETURN FUND II
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE PILGRIM HIGH TOTAL
RETURN II FUND AND COMPARATIVE INDICES FROM INCEPTION OF EACH CLASS OF SHARES
THROUGH THE FUND'S FISCAL YEAR END.(3)
In accordance with the reporting requirements of the Securities and
Exchange Commission, the following data is supplied for the fiscal year ended
October 31, 1999, with all distributions reinvested in shares. The average
annualized total return for Class A shares of 1.01% for the period since the
Fund's inception of January 31, 1997 reflects payment of the maximum sales
charge of 4.75%. The average annualized returns of 1.19% and 2.17% since
inception for Class B and Class C shares of January 31, 1997, reflect applicable
contingent deferred sales charges (maximum contingent deferred sales charge for
Class B shares of 5.00% declines to 0% after five years; and maximum charge for
Class C shares is 1.00% during the first year of investment only). All
performance data shown represents past performance, and should not be considered
indicative of future performance. Investment return and principal value will
fluctuate. Fund shares when redeemed maybe worth more or less than their
original cost.
Pilgrim High Total Return Fund II -- Class A
Average Annual Total Return
1-Year (7.73)%
Since Inception 1.01%
Lehman Gov't/Corp Lehman High Yield High Total Return
11/08/93 10000 10000 9525
10030 10048 9605
12/31/93 10074 10173 9792
10225 10393 10077
10002 10366 10054
9757 9974 9716
9676 9907 9577
9659 9912 9475
9637 9942 9511
9829 10027 9390
9833 10098 9308
9685 10099 9247
9674 10123 9226
9657 9996 9038
12/31/94 9721 10070 8953
9907 10207 9059
10137 10557 9403
10205 10671 9556
10347 10942 9818
10780 11248 9950
10867 11320 9906
10824 11463 10221
10963 11498 10267
11075 11640 10381
11237 11712 10427
11423 11815 10567
12/31/95 11591 12000 10849
11663 12212 11205
11415 12221 11373
11319 12213 11445
11241 12240 11664
11222 12313 11910
11373 12415 11861
11399 12472 11786
11371 12607 11887
11574 12911 12318
11843 13010 12319
12061 13267 12422
12/31/96 11927 13362 12552
11942 13493 12762
11967 13716 12994
11824 13511 12616
11997 13653 12557
12109 13946 12930
12254 14139 13279
12629 14528 13659
12487 14495 13764
12684 14782 14262
10/31/97 12886 14795 14172
12954 14936 14052
13090 15067 13989
13275 15339 14252
13248 15429 14456
13289 15574 14693
13355 15635 14718
13499 15689 14650
13636 15746 14644
13647 15835 14700
13914 14961 13176
14312 15029 12629
10/31/98 14211 14721 12237
14296 15332 12915
14330 15349 12875
14432 15576 12968
14088 15484 12861
14159 15631 12922
14194 15934 13531
14048 15719 13283
14005 15686 13276
13965 15749 13033
13954 15574 12540
14080 15462 12294
10/31/99 14116 15360 12009
Lehman Gov't/Corp Lehman High Yield High Total Return II
Pilgrim High Total Return Fund II -- Class B
Average Annual Total Return
1-Year (8.36)%
Since Inception 1.19%
Lehman Gov't/Corp Lehman High Yield High Total Return
02/09/94 10000 10000 10000
9921 9974 9937
9678 9597 9598
9598 9532 9455
9580 9536 9348
9558 9566 9379
9749 9647 9254
9753 9716 9169
9606 9717 9102
9596 9740 9076
9578 9617 8885
12/31/94 9641 9689 8796
9827 9820 8895
10055 10157 9206
10122 10267 9350
10263 10528 9601
10693 10822 9748
10778 10892 9699
10736 11029 9980
10874 11063 10018
10984 11199 10147
11146 11269 10163
11330 11368 10293
12/31/95 11496 11546 10562
11568 11750 10903
11322 11759 11084
11227 11751 11124
11150 11777 11331
11131 11847 11563
11280 11946 11532
11306 12000 11452
11279 12130 11519
11480 12422 11955
11747 12518 11923
11963 12765 12016
12/31/96 11830 12857 12160
11845 12983 12331
11870 13197 12548
11728 13000 12174
11942 13493 12762
11967 13716 12994
11824 13511 12616
11997 13653 12557
12109 13946 12930
12254 14139 13279
12629 14528 13659
12487 14495 13764
12684 14782 14262
10/31/97 12886 14795 14172
12954 14936 14052
13090 15067 13989
13275 15339 14252
13248 15429 14456
13289 15574 14693
13355 15635 14718
13499 15689 14650
13636 15746 14644
13647 15835 14700
13914 14961 13176
14312 15029 12629
10/31/98 14211 14721 12237
14296 15332 12915
14330 15349 12875
14432 15576 12968
14088 15484 12861
14159 15631 12922
14194 15934 13531
14048 15719 13283
14005 15686 13276
13965 15749 13033
13954 15574 12540
14080 15462 12294
10/31/99 14116 15360 12009
Lehman Gov't/Corp Lehman High Yield High Total Return II
Pilgrim High Total Return Fund II -- Class C
Lehman Gov't/Corp Lehman High Yield High Total Return
03/21/94 10000 10000 10000
9893 9622 9769
9811 9557 9623
9793 9561 9514
9771 9591 9545
9966 9673 9418
9970 9741 9331
9820 9742 9264
9809 9766 9237
9791 9642 9043
12/31/94 9856 9714 8952
10045 9846 9052
10278 10184 9412
10347 10294 9558
10491 10555 9815
10930 10851 9964
11018 10920 9915
10975 11058 10200
11115 11092 10239
11229 11228 10370
11394 11298 10386
11582 11397 10519
12/31/95 11752 11576 10793
11825 11780 11141
11574 11790 11324
11477 11781 11365
11398 11807 11577
11378 11878 11813
11531 11977 11782
11557 12032 11701
11530 12162 11769
11735 12455 12214
12008 12551 12181
12229 12798 12275
12/31/96 12093 12890 12422
12108 13016 12596
12133 13231 12843
11989 13034 12437
12164 13171 12399
12277 13453 12758
12424 13640 13093
12805 14015 13459
12661 13983 13554
12860 14259 14034
10/31/97 13066 14272 13939
13135 14409 13786
13272 14535 13744
13459 14797 13994
13432 14883 14156
13474 15023 14380
13541 15082 14425
13687 15135 14320
13826 15189 14335
13837 15276 14351
14107 14433 12890
14511 14498 12350
10/31/98 14408 14201 11930
14495 14790 12583
14530 14806 12569
14633 15026 12619
14284 14937 12540
14356 15079 12559
14392 15371 13142
14244 15164 12894
14199 15132 12880
14160 15192 12637
14148 15024 12154
14276 14916 11909
10/31/99 14313 14817 11663
13954 15574 12540
14080 15462 12294
10/31/99 14116 15360 12009
Lehman Gov't/Corp Lehman High Yield High Total Return II
1. The Lehman Brothers, ("LB"), Corporate High Yield Bond Index is comprised of
bonds rated Baa 3 or better.
2. The LB U.S. Aggregated Bond Index is comprised of fixed income securities.
3. Sales charges reflected below represent those sales charges in effect as of
October 31, 1999. Effective November 1, 1999 the sales charge schedule has
been changed to conform with similar Funds in the Pilgrim Fund Family, and
can be found in the related Pilgrim Fund prospectus.
All indices are unmanaged.
37
<PAGE>
PILGRIM HIGH TOTAL RETURN FUND II
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Principal Amount Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Domestic Bonds & Notes -- 65.44%
Aerospace & Defense -- 2.37%
Compass Aerospace Corp. #
10.125%, Sr. Subordinated Notes, 4/15/05 $ 5,210,000 $ 4,194,050
Willcox & Gibbs, Inc. *
12.25%, Company Guarantee, 12/15/03 4,000 300
-----------
4,194,350
-----------
Automotive Manufacturing -- 1.84%
Prestolite Electric, Inc.
9.625%, Company Guarantee, 2/01/08 2,000,000 1,610,000
Safelite Glass Corp.
9.875%, Sr. Subordinated Notes, 12/15/06 2,500,000 1,637,500
-----------
3,247,500
-----------
Broadcasting -- 2.58%
Brill Media Company LLC $
7.50/12.00%, Sr. Notes, 12/15/07 3,000,000 2,115,000
Unisite, Inc.++
13.00%, Notes, 12/15/04 2,064,000 2,443,260
-----------
4,558,260
-----------
Cable Television -- 7.33%
Charter Communications LLC $
0/9.92%, Sr. Discount Notes, 4/01/11 6,500,000 3,867,500
Diva Systems Corp. $
0/12.625%, Sr. Discount Notes, 3/01/08 6,300,000 1,795,500
EchoStar DBS Corp.
9.25%, Sr. Notes, 2/01/06 4,500,000 4,477,500
NTL Communications, Inc. $
0/9.75%, Sr. Notes, 4/01/08 4,150,000 2,822,000
-----------
12,962,500
-----------
Capital Goods Manufacturing -- 0.77%
Indesco International, Inc.
9.75%, Sr. Subordinated Notes, 4/15/08 2,538,000 1,357,830
-----------
Chemical -- 0.90%
Laroche Industries, Inc.
9.50%, Sr. Subordinated Notes, 9/15/07 2,500,000 712,500
Simcala, Inc.
9.625%, Sr. Notes, 4/15/06 1,500,000 885,000
-----------
1,597,500
-----------
Computer/Electronics -- 1.16% Cooperative Computing, Inc.
9.00%, Sr. Subordinated Notes, 2/01/08 3,000,000 2,055,000
-----------
Consumer Products -- 3.87%
Decora Industries, Inc.
11.00%, Sr. Secured Notes, 5/01/05 4,000,000 3,500,000
Packaged Ice, Inc.
9.75%, Company Guarantee, 2/01/05 4,000,000 3,340,000
-----------
6,840,000
-----------
Energy -- 0.65%
Michael Petroleum Corp.
11.50%, Sr. Notes, 4/01/05 2,500,000 1,156,250
-----------
</TABLE>
38
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND II
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Principal Amount Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Food/Beverage/Tobacco -- 4.43%
Ameriserve Food Distribution, Inc.
8.875%, Company Guarantee, 10/15/06 $ 5,000,000 $ 3,275,000
North Atlantic Trading, Inc.
11.00%, Company Guarantee, 6/15/04 3,600,000 3,402,000
Standard Commercial Tobacco Co., Inc.
8.875%, Company Guarantee, 8/01/05 350,000 289,625
Tom's Foods, Inc.
10.50%, Sr. Secured Notes, 11/01/04 1,000,000 865,000
-----------
7,831,625
-----------
Healthcare -- 4.68%
Intracel Corp.++
12.00%, Escrow Notes, 8/25/03 1,317,073 1,165,610
Intracel Corp.++
12.00%, Notes, 8/25/03 7,682,927 6,799,390
Mediq, Inc. $
0/13.00%, Debentures, 6/01/09 7,000,000 315,000
-----------
8,280,000
-----------
Homebuilders/Home Construction -- 1.73%
Engle Homes, Inc.
9.25%, Sr. Notes, 2/01/08 3,500,000 3,062,500
-----------
Hotel & Gaming -- 1.37%
Venetian Casino Resort LLC $
10/14.25%, Sr. Subordinated Notes, 11/15/05 4,000,000 2,420,000
-----------
Leisure -- 3.42%
Globix Corp.
13.00%, Sr. Notes, 5/01/05 6,000,000 5,310,000
Silverleaf Resorts, Inc.
10.50%, Company Guarantee, 4/01/08 500,000 332,500
Source Media, Inc.
12.00%, Sr. Notes, 11/01/04 1,000,000 405,000
-----------
6,047,500
-----------
Oil & Gas -- 5.11%
Forman Petroleum Corp. *
13.50%, Company Guarantee, 6/01/04 2,000,000 1,010,000
TransAmerican Refining Corp. # &
15.00%, Sr. Notes, 12/01/03 5,345,830 4,971,622
Windsor Petroleum Transport Corp. #
7.84%, Notes, 1/15/21 4,000,000 3,060,000
-----------
9,041,622
-----------
Restaurants -- 1.54%
Romacorp, Inc.
12.00%, Company Guarantee, 7/01/06 3,000,000 2,715,000
-----------
Services -- 4.16%
Allied Waste North America, Inc. #
10.00%, Sr. Subordinated Notes, 8/01/09 4,000,000 3,420,000
</TABLE>
39
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND II
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Principal Amount Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(continued)
Comforce Corp. &
15.00%, Sr. Secured Debentures, 12/01/09 $ 3,111,764 $ 2,193,793
Mentus Media Corp. &
12.00%, Sr. Secured Notes, 2/01/03 1,777,000 364,285
Sabreliner Corp. #
11.00%, Sr. Notes, 6/15/08 2,000,000 1,380,000
-----------
7,358,078
-----------
Shipping -- 0.42%
Ultralpetrol Bahamas Ltd.
10.50%, 1st Mortage Notes, 4/01/08 900,000 733,500
-----------
Specialty Retailing -- 2.76%
Amazon.com, Inc. $
0/10.00%, Sr. Discount Notes, 5/01/08 7,500,000 4,875,000
-----------
Telecommunications -- 14.35%
Crown Castle International Corp. # $
0/11.25%, Sr. Discount Notes, 8/01/11 7,250,000 4,350,000
International Wireless Communications Holdings, Inc. *
0%, Sr. Discount Notes, 8/15/01 1,500,000 157,500
Iridium LLC Capital Corp. *
13.00%, Sr. Subordinated Notes, 7/15/05 1,250,000 81,250
ITC Deltacom, Inc.
11.00%, Sr. Notes, 6/01/07 3,000 3,105
Level 3 Communications, Inc.
9.125%, Sr. Notes, 5/01/08 3,000,000 2,812,500
Metromedia Fiber Network, Inc.
10.00%, Sr. Notes, 11/15/08 4,000,000 3,995,000
Nextel Communications, Inc. $
0/9.75%, Sr. Discount Notes, 10/31/07 6,500,000 4,712,500
Nextlink Communications, Inc.
10.75%, Sr. Notes, 11/15/08 3,000,000 3,060,000
Nextlink Communications, Inc. $
0/9.45%, Sr. Discount Notes, 4/15/08 3,500,000 2,100,000
Northeast Optic Network, Inc.
12.75%, Sr. Notes, 8/15/08 3,000,000 3,105,000
RCN Corp.
10.00%, Sr. Notes, 10/15/07 1,000,000 997,500
-----------
25,374,355
-----------
Total Domestic Bonds & Notes
(cost $142,428,418) 115,708,370
-----------
Foreign Bonds & Notes - 16.82%
Cable Television - 3.14%
NTL Communications, Inc. $
0/9.75%, Sr. Notes, 4/15/09 3,250,000 3,057,377
Star Choice Communications, Inc.
13.00%, Sr. Notes, 12/15/05 2,500,000 2,487,500
-----------
5,544,877
-----------
Chemical - 0.56%
Tri Polyta Finance BV *
11.375%, Company Guarantee, 12/01/03 3,000,000 990,000
-----------
Entertainment/Film - 2.32%
Virgin Cinemas Group Ltd. ++ (1)
13.00%, Subordinated Notes, 6/30/09 2,500,000 4,107,998
-----------
</TABLE>
40
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND II
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Principal Amount/Shares Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Food/Beverage/Tobacco - 2.15%
Fage Dairy Industries SA
9.00%, Sr. Notes, 2/01/07 $ 4,250,000 $ 3,803,750
-----------
Oil & Gas - 1.75%
Hurricane Hydrocarbons # *
11.75%, Sr. Notes, 11/01/04 2,750,000 1,251,250
Northern Offshore ASA
10.00%, Company Guarantee, 5/15/05 3,000,000 1,845,000
-----------
3,096,250
-----------
Shipping - 1.27%
Equimar Shipholdings Ltd.
9.875%, Company Guarantee, 7/01/07 3,700,000 2,238,500
-----------
Telecommunications - 4.57%
Esprit Telecom Group PLC
11.50%, Sr. Notes, 12/15/07 2,000,000 2,050,000
Occidente Y Caribe Celular SA $
0/14.00%, Sr. Discount Notes, 3/15/04 7,000 3,955
Paging Do Brazil Holdings Co. LLC
13.50%, Sr. Notes, 6/06/05 1,000,000 360,000
Poland Telecom Finance BV
14.00%, Company Guarantee, 12/01/07 2,000,000 1,645,000
RSL Communications PLC
12.25%, Sr. Notes, 11/15/06 2,000,000 2,020,000
Worldwide Fiber Inc. #
12.00%, Sr. Notes, 8/01/09 2,000,000 2,010,000
-----------
8,088,955
-----------
Utilities -- 1.06%
CE Casecnan Water & Energy Co.
11.95%, Sr. Secured Notes, 11/15/10 2,000,000 1,870,000
-----------
Total Foreign Bonds & Notes
(cost $35,719,827) 29,740,330
-----------
Municipal Bonds -- 1.64%
Healthcare -- 1.64%
Health Insurance Plan of Greater New York Revenue Bonds
11.25%, due 7/01/10 3,000,000 2,895,000
-----------
Total Municipal Bonds
(cost $3,174,430) 2,895,000
-----------
Convertible Bonds -- 0.00%
Aerospace & Defense -- 0.00%
Simula, Inc. ++
8.00%, Sr. Subordinated Notes, 5/01/04 4,000 2,700
-----------
Total Convertible Bonds
(cost $4,000) 2,700
-----------
Common Stocks -- 0.01% @
Food/Beverage/Tobacco -- 0.01%
International Fast Food Corp. 13,012 8,458
-----------
Telecommunications -- 0.00%
Jordan Telecommunications Products, Inc. 250 5,125
Paging Do Brazil Holdings Co. LLC @@ 1,000 0
-----------
5,125
-----------
</TABLE>
41
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND II
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Shares/Units Value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Total Common Stocks
(cost $0) $ 13,583
-----------
Convertible Preferred Stocks -- 0.88%
Food/Beverage/Tobacco -- 0.88%
International Fastfood Corp. ++, 3.00% 15,460 1,549,865
-----------
Total Convertible Preferred Stocks
(cost $1,566,059) 1,549,865
-----------
Preferred Stocks -- 5.27%
Broadcasting -- 1.81%
Paxson Communications Corp., 13.25% & 29,400 3,204,600
-----------
Cable Television -- 0.03%
21st Century Telecom Group, Inc., 13.75% & 1,060 53,265
-----------
Capital Goods Manufacturing -- 0.37%
Clark Material Handling Co., 13.00% & 11,698 658,025
-----------
Entertainment/Film -- 0.10%
Virgin Entertainment Group Ltd., 13.00% ++ @@ 272,133 181,551
-----------
Food/Beverage/Tobacco -- 0.64%
North Atlantic Trading, Inc., 12.00% & 69,825 1,134,656
-----------
Insurance -- 0.77%
Superior National Insurance Group, Inc., 10.75% 15,000 1,361,250
-----------
Oil & Gas -- 0.11%
TCR Holding Corp., $.053 ++ 145,000 1,450
TCR Holding Corp., $.056 ++ 55,000 550
TCR Holding Corp., $.060 ++ 100,000 1,000
TCR Holding Corp., $.063 ++ 300,000 3,000
TransContinental Refining Corp., $.0683 ++ 200,000 186,600
-----------
192,600
-----------
Telecommunications -- 0.65%
Adelphia Business Solutions, Inc., 12.875% & 9,011 824,506
Jordan Telecommunication Products, Inc., 13.25% & 3,307 332,340
-----------
1,156,846
-----------
Textile/Apparel -- 0.26%
Anvil Holdings, Inc., 13.00% & 112,986 451,944
-----------
Utilities -- 0.53%
International Utility Structures, Inc., 13.00% # & 207 18,682
International Utility Structures, Inc., 13.00% # & (2) 1,000 915,000
-----------
933,682
-----------
Total Preferred Stocks
(cost $12,034,195) 9,328,419
-----------
Warrants -- 1.14% @
Broadcasting -- 0.00%
Unisite, Inc. ++, (expires 12/15/04) 1,003 10
Unisite, Inc. ++, (expires 12/15/04 second series warrants) 18 0
-----------
10
-----------
Cable Television -- 0.16%
Diva Systems Corp., (expires 3/01/08) 18,900 151,200
Star Choice Communications, Inc. @@, (expires 12/15/05) 57,900 138,714
-----------
289,914
-----------
</TABLE>
42
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND II
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Shares/Principal Amount Value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Consumer Products -- 0.02%
Packaged Ice, Inc., (expires 4/15/04) 1,000 $ 40,000
Packaged Ice, Inc. #, (expires 4/15/04) 5 200
-----------
40,200
-----------
Food/Beverage/Tobacco -- 0.03%
North Atlantic Trading, Inc. #, (expires 6/15/07) 550 55,000
-----------
Healthcare -- 0.77%
Intracel Corp. ++, (expires 08/25/03) 397,774 1,362,932
Mediq, Inc. #, (expires 6/01/09) 7,000 70
-----------
1,363,002
-----------
Leisure -- 0.04%
Bell Technology Group Ltd., (expires 5/01/05) 6,000 61,500
-----------
Oil & Gas -- 0.00%
Forman Petroleum Corp. #, (expires 6/01/04) 2,000 2
-----------
Services -- 0.01%
Comforce Corp., (expires 12/01/09) 21,125 5,281
Mentus Media Corp., (expires 2/01/08) 4,174 2,129
-----------
7,410
-----------
Telecommunications -- 0.11%
Globalstar Telecommunications Ltd. #, (expires 2/15/04) 5 152
International Wireless Communications Holdings, Inc. #, (expires 8/15/01) 1,500 15
Iridium LLC Capital Corp. #, (expires 7/15/05) 25 0
Occidente Y Caribe Celular SA #, (expires 3/15/04) 28 0
Poland Telecom Finance BV # @@, (expires 12/01/07) 2,000 110,000
UNIFI Communications, Inc. #, (expires 5/01/07) 505 5
Worldport Communications Inc. ++, (expires 6/23/08) 117,164 87,873
-----------
198,045
-----------
Total Warrants
(cost $1,763,352) 2,015,083
-----------
Total Investment Securities -- 91.20%
(cost $196,690,281) 161,253,350
-----------
Short Term Securities -- 2.59%
Worldport International Inc. ++
12.50%, Sr Secured Notes, 11/18/99 $ 4,585,926 4,585,926
-----------
Total Short-Term Securities
(cost $4,585,926) 4,585,926
-----------
</TABLE>
43
<PAGE>
NORTHSTAR HIGH TOTAL RETURN FUND II
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Principal Amount Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement -- 4.39%
Agreement with State Street Bank and Trust bearing
interest at 5.07% dated 10/29/99, to be repurchased
11/01/99 in the amount of $7,755,275 and collateralized
by $7,640,000 U.S. Treasury Bonds, 6.50% due 5/31/01,
value $7,907,400.
(cost $7,752,000) $ 7,752,000 $ 7,752,000
Other assets less liabilities -- 1.82% 3,222,205
------------
Net Assets -- 100.00% $176,813,481
============
</TABLE>
# Sales restricted to qualified institutional investors. 144A
* Defaulted security.
$ Step bond.
++ Private Placement.
& Payment-in-kind security.
@ Non-income producing security.
@@ Foreign security.
(1) The Principal amount shown is shown in the respective country's currency.
(2) A unit consists of 1,000 shares of 13.00% Sr. Exchangeable preferred stock
and 1 warrant.
See accompanying notes to financial statements.
44
<PAGE>
PILGRIM
HIGH TOTAL RETURN FUND
The Markets
o The fiscal year ended October 31, 1999 closed with robust equity markets
and GDP growth rates of approximately 4%. The equity markets' outstanding
performance was primarily due to the strength of the U.S. economy and the
absence of inflation indicators. Additionally, worldwide markets
stabilized, rebounding off their lows. Inflation continued to remain low
at roughly 1.5%, as both lower commodity prices and imports kept prices
in check. During the twelve months, yields of 10- and 30-year Treasury
bonds had a significant backup. Their yields as of October 31, 1999 stood
at 6.02% and 6.16%, up 142 bps and 101 bps, respectively. The backup in
interest rates was primarily due to the continued strength of the U.S.
economy, which heightened expectations that the Fed might need to raise
rates further to hold inflation in check. The Federal Reserve tightened
rates by 25 basis points in June and then tightened an additional 25
basis points in August, to the current level of 5.25%. High yield bond
spreads widened as liquidity concerns returned, redemptions in mutual
funds increased and stock market investor confidence wavered, all while
the domestic economic outlook remained robust.
o The Lehman Brothers Corporate High Yield Index1 returned 4.34% for the
twelve months ended October 31, 1999 compared to 0.53% for the Lehman
Brothers U.S. Aggregate Bond Index.2 As economic and financial concerns
returned during the quarter, high yield bonds underperformed all other
fixed income assets in the third quarter. At the end of the third quarter
1999, high yield spreads still remained historically wide to Treasuries
at 525-650 basis points. In general, bonds with lower credit ratings
substantially underperformed the upper tier of the high yield market.
The Fund
o From November 1, 1998 through October 31, 1999, the total return of the
Fund's Class A, B, and C shares was (1.86%), (2.56%), and (2.24%)
respectively; the Lipper average for high yield funds was 6.61%.
o The Fund's under-performance was attributed to the under-performance of
the lower tier of the high yield market. Additionally, the Fund's
exposure to Source Media's common stock price decline from roughly
$127/16 to $721/32 contributed to approximately 1% of the
under-performance. Furthermore, prices of non-rated issues were taken
down precipitously as investors hit one-time bids 40 to 50 points lower
than where they were marked.
o Since the third quarter 1998 meltdown, high yield investors have demanded
a significant liquidity premium. This bias for more liquid issues has
flowed into the out-performance by larger-sized issues. The Fund's
allocation to smaller-sized issues adversely affected the Fund's
performance during the period.
o Distressed and under-performing assets such as shipping, oil and gas and
emerging market credits were cut back. As the Fund's exposure to more
commodities driven credits decreased, weightings in the cable, gaming and
telecommunications sectors were increased. These sectors should provide
both growth and stability to the Fund.
o As the liquidity was flushed from the market, the upper tier issues
substantially out-performed the middle and lower tier issues. This upper
tier out-performance was prompted by the high yield market's poor
liquidity, increasing default rates and mutual fund outflows.
o Many of the stocks and equity rights attached to bonds ("equity kickers")
held by the Fund showed little to no gains during the period.
45
<PAGE>
Current Strategy
o We will continue the Fund's above-average allocation to non-cyclical
industries, will maintain positions in bonds that have equity kickers and
will focus on investments in undervalued bonds that have high yields and
above-average potential for capital appreciation.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
Fund Information (All data are as of 10/31/99) Total Net Assets $412,906,121
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Top 10 Holdings
Name % Fund
1 Intracel Corp. 4.8%
2 Unisite, Inc. 3.7
3 International Fastfood Corp. 3.1
4 North Atlantic Trading, Inc. 2.9
5 Occidente Y Caribe Celular SA 2.5
6 EchoStar DBS Corp. 2.4
7 TransAmerican Refining Corp. 2.4
8 Paxson Communications Corp. 2.2
9 NTL Communications, Inc. 2.1
10 RCN Corp. 2.1
-----
28.2%
=====
Top 5 Industries
(by percentage of net assets)
Telecommunications 20.2%
Broadcasting 11.3%
Cable Television 9.0%
Healthcare 8.2%
Food/Beverage/Tobacco 7.8%
SEC Average Annual Rates of Return
(at maximum applicable sales charge)
- --------------------------------------------------------------------------------
Inception 5 years 1 year
- --------------------------------------------------------------------------------
Class A 3.11% N/A -6.57%
- --------------------------------------------------------------------------------
Class B 2.32% N/A -6.93%
- --------------------------------------------------------------------------------
Class C 2.77% N/A -3.12%
- --------------------------------------------------------------------------------
Cumulative Total Return
(do not reflect sales charge)
- --------------------------------------------------------------------------------
Inception 5 years 1 year
- --------------------------------------------------------------------------------
Class A 26.09% N/A -1.86%
- --------------------------------------------------------------------------------
Class B 13.99% N/A -2.56%
- --------------------------------------------------------------------------------
Class C 16.63% N/A -2.24%
Past performance is no guarantee of future results.
Principal Risk Factor(s): Exposure to financial and 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 may at times invest in foreign
securities. 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.
46
<PAGE>
PILGRIM
HIGH TOTAL RETURN FUND
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE PILGRIM HIGH TOTAL
RETURN FUND AND COMPARATIVE INDICES FROM INCEPTION OF EACH CLASS OF SHARES
THROUGH THE FUND'S FISCAL YEAR END.(3)
In accordance with the reporting requirements of the Securities and
Exchange Commission, the following data is supplied for the fiscal year ended
October 31, 1999, with all distributions reinvested in shares. The average
annualized total return for Class A shares of 3.11% for the period since the
Fund's inception of November 8, 1993 reflects payment of the maximum sales
charge of 4.75%. Average annualized total returns of 2.32% and 2.77% since
inception for Class B and Class C shares of February 9, 1994 and March 21, 1994,
respectively, reflect applicable contingent deferred sales charges (maximum
contingent deferred sales charge for Class B shares of 5.00% declines to 0%
after five years; and maximum charge for Class C shares is 1.00% during the
first year of investment only). All performance data shown represents past
performance, and should not be considered indicative of future performance.
Investment return and principal value will fluctuate. Fund shares when redeemed
maybe worth more or less than their original cost.
Pilgrim High Total Return Fund -- Class A
Average Annual Total Return
1-Year (6.57)%
Since Inception 3.11%
Lehman Gov't/Corp Lehman High Yield High Total Return
11/08/93 10000 10000 9525
10030 10048 9605
12/31/93 10074 10173 9792
10225 10393 10077
10002 10366 10054
9757 9974 9716
9676 9907 9577
9659 9912 9475
9637 9942 9511
9829 10027 9390
9833 10098 9308
9685 10099 9247
9674 10123 9226
9657 9996 9038
12/31/94 9721 10070 8953
9907 10207 9059
10137 10557 9403
10205 10671 9556
10347 10942 9818
10780 11248 9950
10867 11320 9906
10824 11463 10221
10963 11498 10267
11075 11640 10381
11237 11712 10427
11423 11815 10567
12/31/95 11591 12000 10849
11663 12212 11205
11415 12221 11373
11319 12213 11445
11241 12240 11664
11222 12313 11910
11373 12415 11861
11399 12472 11786
11371 12607 11887
11574 12911 12318
11843 13010 12319
12061 13267 12422
12/31/96 11927 13362 12552
11942 13493 12762
11967 13716 12994
11824 13511 12616
11997 13653 12557
12109 13946 12930
12254 14139 13279
12629 14528 13659
12487 14495 13764
12684 14782 14262
10/31/97 12886 14795 14172
12954 14936 14052
13090 15067 13989
13275 15339 14252
13248 15429 14456
13289 15574 14693
13355 15635 14718
13499 15689 14650
13636 15746 14644
13647 15835 14700
13914 14961 13176
14312 15029 12629
10/31/98 14211 14721 12237
14296 15332 12915
14330 15349 12875
14432 15576 12968
14088 15484 12861
14159 15631 12922
14194 15934 13531
14048 15719 13283
14005 15686 13276
13965 15749 13033
13954 15574 12540
14080 15462 12294
10/31/99 14116 15360 12009
High Total Return Lehman High Yield Lehman Gov't/Corp
Pilgrim High Total Return Fund -- Class B
Average Annual Total Return
1-Year (6.93)%
Since Inception 2.32%
Lehman Gov't/Corp Lehman High Yield High Total Return
02/09/94 10000 10000 10000
9921 9974 9937
9678 9597 9598
9598 9532 9455
9580 9536 9348
9558 9566 9379
9749 9647 9254
9753 9716 9169
9606 9717 9102
9596 9740 9076
9578 9617 8885
12/31/94 9641 9689 8796
9827 9820 8895
10055 10157 9206
10122 10267 9350
10263 10528 9601
10693 10822 9748
10778 10892 9699
10736 11029 9980
10874 11063 10018
10984 11199 10147
11146 11269 10163
11330 11368 10293
12/31/95 11496 11546 10562
11568 11750 10903
11322 11759 11084
11227 11751 11124
11150 11777 11331
11131 11847 11563
11280 11946 11532
11306 12000 11452
11279 12130 11519
11480 12422 11955
11747 12518 11923
11963 12765 12016
12/31/96 11830 12857 12160
11845 12983 12331
11870 13197 12548
11728 13000 12174
11942 13493 12762
11967 13716 12994
11824 13511 12616
11997 13653 12557
12109 13946 12930
12254 14139 13279
12629 14528 13659
12487 14495 13764
12684 14782 14262
10/31/97 12886 14795 14172
12954 14936 14052
13090 15067 13989
13275 15339 14252
13248 15429 14456
13289 15574 14693
13355 15635 14718
13499 15689 14650
13636 15746 14644
13647 15835 14700
13914 14961 13176
14312 15029 12629
10/31/98 14211 14721 12237
14296 15332 12915
14330 15349 12875
14432 15576 12968
14088 15484 12861
14159 15631 12922
14194 15934 13531
14048 15719 13283
14005 15686 13276
13965 15749 13033
13954 15574 12540
14080 15462 12294
10/31/99 14116 15360 12009
High Total Return Lehman High Yield Lehman Gov't/Corp
Pilgrim Growth + Value Fund -- Class C
Average Annual Total Return
1-Year (3.12)%
Since Inception 2.77%
Lehman Gov't/Corp Lehman High Yield High Total Return
03/21/94 10000 10000 10000
9893 9622 9769
9811 9557 9623
9793 9561 9514
9771 9591 9545
9966 9673 9418
9970 9741 9331
9820 9742 9264
9809 9766 9237
9791 9642 9043
12/31/94 9856 9714 8952
10045 9846 9052
10278 10184 9412
10347 10294 9558
10491 10555 9815
10930 10851 9964
11018 10920 9915
10975 11058 10200
11115 11092 10239
11229 11228 10370
11394 11298 10386
11582 11397 10519
12/31/95 11752 11576 10793
11825 11780 11141
11574 11790 11324
11477 11781 11365
11398 11807 11577
11378 11878 11813
11531 11977 11782
11557 12032 11701
11530 12162 11769
11735 12455 12214
12008 12551 12181
12229 12798 12275
12/31/96 12093 12890 12422
12108 13016 12596
12133 13231 12843
11989 13034 12437
12164 13171 12399
12277 13453 12758
12424 13640 13093
12805 14015 13459
12661 13983 13554
12860 14259 14034
10/31/97 13066 14272 13939
13135 14409 13786
13272 14535 13744
13459 14797 13994
13432 14883 14156
13474 15023 14380
13541 15082 14425
13687 15135 14320
13826 15189 14335
13837 15276 14351
14107 14433 12890
14511 14498 12350
10/31/98 14408 14201 11930
14495 14790 12583
14530 14806 12569
14633 15026 12619
14284 14937 12540
14356 15079 12559
14392 15371 13142
14244 15164 12894
14199 15132 12880
14160 15192 12637
14148 15024 12154
14276 14916 11909
10/31/99 14313 14817 11663
13954 15574 12540
14080 15462 12294
10/31/99 14116 15360 12009
High Total Return Lehman High Yield Lehman Gov't/Corp
1. The Lehman Brothers, ("LB"), Corporate High Yield Bond Index is comprised of
bonds rated Baa 3 or better.
2. The LB U.S. Aggregated Bond Index is comprised of fixed income securities.
3. Sales charges reflected below represent those sales charges in effect as of
October 31, 1999. Effective November 1, 1999 the sales charge schedule has
been changed to conform with similar Funds in the Pilgrim Fund Family, and
can be found in the related Pilgrim Fund prospectus.
All indices are unmanaged.
47
<PAGE>
PILGRIM HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Principal Amount Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Domestic Bonds & Notes -- 49.84%
Aerospace & Defense -- 1.03%
Simula, Inc. ++
15.00%, Subordinated Notes, 12/31/99 $ 4,250,000 $ 3,507,568
Willcox & Gibbs, Inc. *
12.25%, Company Guarantee, 12/15/03 10,096,000 757,200
-----------
4,264,768
-----------
Broadcasting -- 5.34%
Brill Media Company LLC $
7.50/12.00%, Sr. Notes, 12/15/07 9,800,000 6,909,000
Unisite, Inc. ++
13.00%, Notes, 12/15/04 12,798,000 15,149,633
-----------
22,058,633
-----------
Cable Television -- 5.86%
21st Century Telecom Group, Inc. $
0/12.25%, Sr. Discount Notes, 2/15/08 9,500,000 4,322,500
Charter Communications LLC $
0/9.92%, Sr. Discount Notes, 4/01/11 10,000,000 5,950,000
Diva Systems Corp. $
0/12.625%, Sr. Discount Notes, 3/01/08 13,900,000 3,961,500
EchoStar DBS Corp.
9.375%, Sr. Notes, 2/01/09 10,000,000 9,950,000
-----------
24,184,000
-----------
Consumer Products -- 3.29%
Decora Industries, Inc.
11.00%, Sr. Secured Notes, 5/01/05 6,750,000 5,906,250
Packaged Ice, Inc.
9.75%, Company Guarantee, 2/01/05 9,200,000 7,682,000
-----------
13,588,250
-----------
Containers and Packaging -- 0.98%
Packaging Resources, Inc. #
13.00%, Sr. Notes, 6/30/03 5,014,257 4,036,477
-----------
Food/Beverage/Tobacco -- 1.63% Tom's Foods, Inc.
10.50%, Sr. Secured Notes, 11/01/04 7,800,000 6,747,000
-----------
Healthcare -- 5.89%
Intracel Corp. ++
12.00%, Escrow Notes, 8/25/03 3,804,878 3,367,317
Intracel Corp. ++
12.00%, Notes, 8/25/03 22,195,122 19,642,683
Mediq, Inc. $
0/13.00%, Debentures, 6/01/09 29,000,000 1,305,000
-----------
24,315,000
-----------
Hotel & Gaming -- 2.50%
Hollywood Casino Shreveport Capital Corp. #
13.00%, 1st Mortgage Notes, 8/01/06 5,000,000 5,200,000
Venetian Casino Resort LLC $
10/14.25%, Sr. Subordinated Notes, 11/15/05 8,500,000 5,142,500
-----------
10,342,500
-----------
</TABLE>
48
<PAGE>
PILGRIM HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Principal Amount Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Leisure -- 5.08%
Globix Corp.
13.00%, Sr. Notes, 5/01/05 $ 8,991,000 $ 7,957,035
Silverleaf Resorts, Inc.
10.50%, Company Guarantee, 4/01/08 2,500,000 1,662,500
Source Media, Inc.
12.00%, Sr. Notes, 11/01/04 7,500,000 3,037,500
U.S. Interactive LLC
12.00%, Sr. Secured Notes, 4/17/05 8,267,451 8,308,788
-----------
20,965,823
-----------
Manufacturing -- 1.72%
Jordan Industries, Inc. $
0/11.75%, Sr. Subordinated Debentures, 4/01/09 10,865,000 7,116,575
-----------
Oil & Gas -- 4.22%
Forman Petroleum Corp. *
13.50%, Company Guarantee, 6/01/04 5,000,000 2,525,000
TransAmerican Refining Corp. # &
15.00%, Sr. Notes, 12/01/03 10,691,660 9,943,244
Windsor Petroleum Transport Corp. #
7.84%, Notes, 1/15/21 6,500,000 4,972,500
-----------
17,440,744
-----------
Services -- 3.77%
Allied Waste North America, Inc. #
10.00%, Sr. Subordinated Notes, 8/01/09 7,500,000 6,412,500
Comforce Corp. &
15.00%, Sr. Secured Debentures, 12/01/09 10,579,935 7,458,854
Mentus Media Corp. &
12.00%, Sr. Secured Notes, 2/01/03 8,291,000 1,699,655
-----------
15,571,009
-----------
Shipping -- 1.20%
Ultralpetrol Bahamas Ltd.
10.50%, 1st Mortage Notes, 4/01/08 6,100,000 4,971,500
-----------
Telecommunications -- 7.31%
Advanced Radio Telecom Corp.
14.00%, Sr. Notes, 2/15/07 4,000,000 3,540,000
Arch Communications, Inc.
13.75%, Sr. Notes, 4/15/08 6,000,000 4,410,000
International Wireless Communications Holdings, Inc. *
0%, Sr. Discount Notes, 8/15/01 8,500,000 892,500
Iridium LLC Capital Corp. *
13.00%, Sr. Subordinated Notes, 7/15/05 9,275,000 602,875
Metromedia International Group, Inc.
10.50%, Notes, 9/30/07 10,195,500 4,842,862
Northeast Optic Network, Inc.
12.75%, Sr. Notes, 8/15/08 2,000,000 2,070,000
PSINet, Inc. #
11.00%, Sr. Notes, 8/01/09 4,000,000 4,120,000
RCN Corp.
10.00%, Sr. Notes, 10/15/07 1,000,000 997,500
RCN Corp. $
0/11.125%, Sr. Discount Notes, 10/15/07 12,500,000 8,718,750
</TABLE>
49
<PAGE>
PILGRIM HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Principal Amount Value
- -------------------------------------------------------------------------------------------------------------
(continued)
<S> <C> <C>
SA Telecommunications, Inc. *
10.00%, Sr. Debentures, 8/15/06 $ 3,800,000 $ 0
-----------
30,194,487
-----------
Total Domestic Bonds & Notes
(cost $290,684,066) 205,796,766
-----------
Foreign Bonds & Notes -- 18.42%
Cable Television -- 3.01%
NTL Communications, Inc. $
0/9.75%, Sr. Notes, 4/15/09 9,000,000 8,466,583
Star Choice Communications, Inc.
13.00%, Sr. Notes, 12/15/05 4,000,000 3,980,000
-----------
12,446,583
-----------
Chemical -- 0.40%
Tri Polyta Finance BV *
11.375%, Company Guarantee, 12/01/03 5,000,000 1,650,000
-----------
Entertainment/Film -- 1.59%
Virgin Cinemas Group Ltd. ++ (1)
13.00%, Subordinated Notes, 6/30/09 4,000,000 6,572,796
-----------
Oil & Gas -- 1.96%
Hurricane Hydrocarbons # *
11.75%, Sr. Notes, 11/01/04 11,000,000 5,005,000
Northern Offshore ASA
10.00%, Company Guarantee, 5/15/05 5,000,000 3,075,000
-----------
8,080,000
-----------
Shipping -- 1.46%
Equimar Shipholdings Ltd.
9.875%, Company Guarantee, 7/01/07 10,000,000 6,050,000
-----------
Telecommunications -- 7.18%
Esprit Telecom Group
11.50%, Sr. Notes, 12/15/07 8,000,000 4,237,882
Esprit Telecom Group PLC
11.50%, Sr. Notes, 12/15/07 2,000,000 2,050,000
Occidente Y Caribe Celular SA $
0/14.00%, Sr. Discount Notes, 3/15/04 18,011,000 10,176,215
Paging Do Brazil Holdings Co. LLC
13.50%, Sr. Notes, 6/06/05 1,000,000 360,000
Poland Telecom Finance Bv
14.00%, Company Guarantee, 12/01/07 7,000,000 5,757,500
RSL Communications PLC
12.25%, Sr. Notes, 11/15/06 3,000,000 3,030,000
Worldwide Fiber, Inc. #
12.00%, Sr. Notes, 8/01/09 4,000,000 4,020,000
-----------
29,631,597
-----------
</TABLE>
50
<PAGE>
PILGRIM HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Principal Amount Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Utilities -- 2.82%
CE Casecnan Water & Energy Co.
11.45%, Sr. Secured Notes, 11/15/05 $3,580,000 $ 3,418,900
CE Casecnan Water & Energy Co.
11.95%, Sr. Secured Notes, 11/15/10 8,800,000 8,228,000
-----------
11,646,900
-----------
Total Foreign Bonds & Notes
(cost $97,196,880) 76,077,876
-----------
Municipal Bonds -- 0.47%
Healthcare -- 0.47%
Health Insurance Plan of Greater New York Revenue Bonds
11.25%, due 7/01/10 2,000,000 1,930,000
-----------
Total Municipal Bonds
(cost $2,116,287) 1,930,000
-----------
Convertible Bonds -- 0.77%
Aerospace & Defense -- 0.65%
Simula, Inc. ++
8.00%, Sr. Subordinated Notes, 5/01/04 3,996,000 2,697,300
-----------
Telecommunications -- 0.12%
GST Telecommunications, Inc. # $
0/13.875%, Sr. Notes, 12/15/05 650,000 503,750
SA Telecommunications, Inc. # *
10.00%, Notes, 8/15/06 8,500,000 0
SA Telecommunications, Inc. *
10.00%, Notes, 8/15/06 5,000,000 0
-----------
503,750
-----------
Total Convertible Bonds
(cost $16,557,403) 3,201,050
-----------
</TABLE>
51
<PAGE>
PILGRIM HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Shares Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks -- 3.50% @
Broadcasting -- 0.85%
Spanish Broadcasting Systems, Inc. 250,000 $ 3,500,000
-----------
Food/Beverage/Tobacco -- 0.02%
International Fast Food Corp. 108,839 70,745
-----------
Healthcare -- 0.26%
General Healthcare Group Ltd. @@ 801 0
Intracel Corp. ++ 79,537 1,093,634
-----------
1,093,634
-----------
Publishing/Printing -- 0.08%
Affiliated Newspapers Investments, Inc. 2,500 312,500
-----------
Services -- 0.01%
Sabreliner Corp. 2,450 24,500
-----------
Telecommunications -- 2.28%
Avt Corp. 63,916 2,141,186
Jordan Telecommunications Products, Inc. 2,100 43,050
Paging Do Brazil Holdings Co. LLC @@ 1,000 0
Verio, Inc. 194,304 7,249,968
-----------
9,434,204
-----------
Total Common Stocks
(cost $2,048,563) 14,435,583
-----------
Convertible Preferred Stocks -- 5.19%
Broadcasting -- 1.19%
Unisite, Inc., 8.50% ++ 75,600 4,886,028
-----------
Food/Beverage/Tobacco -- 3.14%
International Fastfood Corp., 3.00% ++ 129,423 12,974,656
-----------
Healthcare -- 0.86%
Intracel Corp., 8.00% ++ 254,147 3,558,058
-----------
Total Convertible Preferred Stocks
(cost $18,889,035) 21,418,742
-----------
Preferred Stocks -- 10.40%
Broadcasting -- 3.89%
AMFM, Inc., 12.00% & 58,869 6,902,390
Paxson Communications Corp., 12.50% & 90,020 9,137,030
-----------
16,039,420
-----------
Capital Goods Manufacturing -- 0.07%
Telos Corp., 12.00% & 129,687 275,585
-----------
Consumer Products -- 0.49%
Commemorative Brands, Inc., 12.00% ++ 100,000 2,025,000
-----------
Entertainment/Film -- 0.07%
Virgin Entertainment Group Ltd., 13.00% ++ @@ 435,414 290,482
-----------
</TABLE>
52
<PAGE>
PILGRIM HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Shares Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Food/Beverage/Tobacco -- 2.86%
North Atlantic Trading, Inc., 12.00% & 727,204 $ 11,817,065
-----------
Oil & Gas -- 0.09%
TCR Holding Corp., $.053 ++ 290,000 2,900
TCR Holding Corp., $.056 ++ 110,000 1,100
TCR Holding Corp., $.060 ++ 200,000 2,000
TCR Holding Corp., $.063 ++ 600,000 6,000
TransContinental Refining Corp., $.0683 ++ 400,000 373,200
-----------
385,200
-----------
Restaurants -- 0.26%
Ameriking, Inc., 13.00% & 61,050 1,068,375
-----------
Supermarkets -- 1.59%
Supermarkets General Holdings Corp., $3.52 & 165,000 6,575,250
-----------
Telecommunications -- 0.69%
Jordan Telecommunication Products, Inc., 13.25% & 28,181 2,832,164
-----------
Textile/Apparel -- 0.39%
Anvil Holdings, Inc., 13.00% & 403,637 1,614,548
-----------
Total Preferred Stocks
(cost $60,544,703) 42,923,089
-----------
Warrants -- 2.75% @
Air Transportation -- 0.00%
CHC Helicopter Corp. @@, (expires 12/15/00) 2,000 2,000
-----------
Banks & Thrifts -- 0.00%
Arcadia Financial Ltd., (expires 3/15/07) 5,000 6,250
-----------
Broadcasting -- 0.00%
Unisite, Inc. ++, (expires 12/15/04) 6,217 62
Unisite, Inc. ++, (expires 12/15/04 (second series warrants)) 114 0
-----------
62
-----------
Cable Television -- 0.14%
American Telecasting, Inc., (expires 8/10/00) 4,000 0
Diva Systems Corp., (expires 3/01/08) 41,700 333,600
Heartland Wireless Communications, Inc. #, (expires 4/15/00) 46,402 464
Star Choice Communications, Inc. @@, (expires 12/15/05) 92,640 221,943
Wireless One, Inc., (expires 10/19/00) 1,500 15
-----------
556,022
-----------
Capital Goods Manufacturing -- 0.00%
Roller Bearing Co. America, Inc., (expires 6/15/09) 1,262 0
-----------
Consumer Products -- 0.20%
Packaged Ice, Inc., (expires 4/15/04) 6,350 254,000
Packaged Ice, Inc. #, (expires 4/15/04) 14,350 574,000
-----------
828,000
-----------
</TABLE>
53
<PAGE>
PILGRIM HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Shares Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Food/Beverage/Tobacco -- 0.14%
Colorado Prime Corp., (expires 12/31/03) 7,000 $ 0
North Atlantic Trading, Inc. #, (expires 6/15/07) 5,550 555,000
-----------
555,000
-----------
Healthcare -- 0.66%
Intracel Corp. ++, (expires 08/25/03) 125,347 423,046
Intracel Corp. ++, (expires 08/25/03) 686,992 2,318,598
Mediq, Inc. #, (expires 6/01/09) 29,000 290
-----------
2,741,934
-----------
Leisure -- 0.55%
Bell Technology Group Ltd., (expires 5/01/05) 6,000 61,500
Source Media, Inc., (expires 3/31/04) 500,000 875,000
Source Media, Inc., (expires 6/23/00) 750,000 1,312,500
U.S. Interactive LLC, (expires 3/31/05) 3,833 39
-----------
2,249,039
-----------
Oil & Gas -- 0.00%
Forman Petroleum Corp. #, (expires 6/01/04) 5,000 5
-----------
Paper -- 0.09%
SD Warren Holdings Corp., (expires 12/15/06) 80,000 380,000
-----------
Services -- 0.01%
Comforce Corp., (expires 12/01/09) 71,825 17,956
ICF Kaiser International, Inc., (expires 12/31/99) 24,500 245
Mentus Media Corp., (expires 2/01/08) 19,481 9,936
-----------
28,137
-----------
Steel -- 0.03%
Bar Technologies, Inc., (expires 4/01/01) 7,000 140,000
Gulf States Steel, Inc., (expires 4/15/03) 5,010 50
Sheffield Steel Corp., (expires 11/01/01) 12,500 0
-----------
140,050
-----------
Supermarkets -- 0.00%
Dairy Mart Convenience Stores, Inc., (expires 01/01/01) 23,632 14,179
-----------
Telecommunications -- 0.93%
Adelphia Business Solutions, Inc . #, (expires 4/15/01) 10,200 1,785,000
Cellnet Data Systems, Inc. #, (expires 10/01/07) 10,000 42,500
Clearnet Communications, Inc. @@, (expires 9/15/05) 38,280 497,640
E Spire Communications, Inc., (expires 11/01/05) 14,500 797,500
Geotek Communications, Inc., (expires 6/20/01) 177,000 0
Globalstar Telecommunications Ltd. #, (expires 2/15/04) 4,495 135,973
ICG Holdings, Inc., (expires 10/15/05) 6,600 95,700
International Wireless Communications Holdings, Inc. #, (expires 8/15/01) 8,500 85
Iridium LLC Capital Corp. #, (expires 7/15/05) 4,475 45
McCaw International, Inc., (expires 4/15/07) 9,500 26,125
Occidente Y Caribe Celular SA #, (expires 3/15/04) 72,044 0
Petersburg Long Distance, Inc., (expires 06/01/06) 7,000 350
PLD Telekom Inc. @@, (expires 3/31/03) 7,000 0
Poland Telecom Finance BV # @@, (expires 12/01/07) 7,000 385,000
UNIFI Communications, Inc. #, (expires 5/01/07) 7,795 78
Worldport Communications Inc. ++, (expires 6/23/08) 110,997 83,248
Worldport Communications Inc. ++, (expires 6/23/08) 64,748 0
-----------
3,849,244
-----------
</TABLE>
54
<PAGE>
PILGRIM HIGH TOTAL RETURN FUND
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Security Principal Amount Value
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Total Warrants
(cost $7,949,933) $ 11,349,922
-----------
Total Investment Securities -- 91.34%
(cost $495,986,870) 377,133,028
-----------
Short Term Securities -- 1.66%
Worldport International Inc. ++
12.50%, Sr Secured Notes, 11/18/99 $ 6,878,597 6,878,597
-----------
Total Short-Term Securities
(cost $6,878,597) 6,878,597
-----------
Repurchase Agreement -- 1.15%
Agreement with State Street Bank and Trust bearing interest at 5.07% dated
10/29/99, to be repurchased 11/01/99 in the amount of $4,743,003 and
collateralized by $4,770,000 U.S. Treasury Bonds, 6.375% due 9/30/01, value
$4,839,656
(cost $4,741,000) 4,741,000 4,741,000
Other assets less liabilities -- 5.85% 24,153,496
-----------
Net Assets -- 100.00% $412,906,121
===========
</TABLE>
++ Private Placement.
* Defaulted security.
$ Step bond.
# Sales restricted to qualified institutional investors. 144A
& Payment-in-kind security.
@ Non-income producing security.
@@ Foreign security.
(1) The Principal amount shown is shown in the respective country's currency.
See accompanying notes to financial statements.
55
<PAGE>
PILGRIM MAYFLOWER TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Pilgrim Pilgrim
Pilgrim Pilgrim Emerging Research Pilgrim Pilgrim
Growth + International Markets Enhanced Income and High Total
Value Fund Value Fund Value Fund Index Fund Growth Fund Return Fund II
--------------------------------------------------------------------------------------
ASSETS:
<S> <C> <C> <C> <C> <C> <C>
Investments in securities, at value (cost
$278,307,985, $890,822,931, $17,300,332,
$215,502,699, $79,350,424, $196,690,281
and $495,986,870, respectively) $374,302,058 $ 994,972,392 $19,047,666 $220,714,751 $ 91,071,147 $ 161,253,350
Short-term securities, at value
(cost $0, $0, $0, $996,322,
$0, $4,585,926 and
$6,878,597, respectively) 0 0 0 996,392 0 4,585,926
Repurchase agreements 12,114,000 44,155,000 216,000 7,695,000 1,533,000 7,752,000
Cash 702 870 940 214 705 554
Foreign cash, at value
(cost $0, $157,474, $62,767, $0
$0, $0 and $0, respectively) 0 156,087 62,512 0 0 0
Receivable for investments sold 6,629,710 13,512,614 439,078 1,912,754 0 130,010
Receivable for shares of beneficial
interest sold 2,013,740 16,121,971 58,575 1,566,877 86,592 143,063
Dividends and interest receivable 29,166 2,991,455 52,602 221,306 518,004 6,288,316
Receivable for future variation margin 0 0 0 143,000 0 0
Prepaid expenses 23,643 19,379 4,095 7,672 7,870 9,968
--------------------------------------------------------------------------------------
Total Assets 395,113,019 1,071,929,768 19,881,468 233,257,966 93,217,318 180,163,187
--------------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 1,074,281 25,478,376 0 2,115,603 358,451 0
Payable for shares of beneficial
interest reacquired 456,478 3,357,383 32,390 493,797 267,844 3,003,971
Investment advisory fee payable 301,566 834,120 16,285 127,370 58,364 119,488
Distribution fee payable 257,857 582,945 10,946 144,176 55,016 145,995
Transfer agent fee payable 48,119 22,636 970 7,627 1,958 2,634
Administrative services fee payable 30,157 83,412 1,628 18,196 7,782 15,932
Tax withholding liability 0 130,393 2,651 0 0 0
Unrealized depreciation of foreign
forward currency contracts 0 111,898 0 0 0 0
Accrued expenses 102,205 415,508 38,340 144,540 53,340 61,686
--------------------------------------------------------------------------------------
Total Liabilities 2,270,663 31,016,671 103,210 3,051,309 802,755 3,349,706
--------------------------------------------------------------------------------------
NET ASSETS $392,842,356 $1,040,913,097 $19,778,258 $230,206,657 $ 92,414,563 $ 176,813,481
=====================================================================================
NET ASSETS WERE COMPOSED OF:
Capital paid in for shares of
beneficial interest, $.01 par
value outstanding (unlimited
shares authorized) $244,213,296 $ 879,970,501 $17,103,477 $222,077,540 $ 78,056,101 $ 244,741,551
Undistributed (overdistributed)
net investment income 0 3,538,149 124,077 0 57,859 (471,247)
Accumulated net realized gain (loss)
on investments foreign currency and
futures contracts 52,634,987 53,114,627 803,625 2,684,456 2,579,880 (32,022,030)
Net unrealized appreciation
(depreciation) of investments foreign
currency and futures contracts 95,994,073 104,289,820 1,747,079 5,444,661 11,720,723 (35,434,793)
--------------------------------------------------------------------------------------
Net Assets $392,842,356 $1,040,913,097 $19,778,258 $230,206,657 $ 92,414,563 $ 176,813,481
======================================================================================
Class A:
Net Assets $ 81,225,023 $ 451,815,099 $ 9,280,837 $ 27,090,562 $ 39,312,991 $ 20,003,419
--------------------------------------------------------------------------------------
Shares outstanding 4,111,397 30,633,263 869,205 2,432,765 4,067,978 4,787,673
--------------------------------------------------------------------------------------
Net asset value and redemption
value per share (net assets/shares
outstanding) $ 19.76 $ 14.75 $ 10.68 $ 11.14 $ 9.66 $ 4.18
======================================================================================
Maximum offering price per share
(net asset value plus sales
charge of 4.75% of offering price) $ 20.75 $ 15.49 $ 11.21 $ 11.70 $ 10.14 $ 4.39
======================================================================================
Class B:
Net Assets $227,226,556 $ 278,871,368 $ 3,823,208 $ 99,248,788 $ 39,762,594 $ 125,796,417
--------------------------------------------------------------------------------------
Shares outstanding 11,748,965 19,141,011 360,591 8,952,933 4,121,300 30,080,002
--------------------------------------------------------------------------------------
Net asset value and offering
price per share* (net assets/shares
outstanding) $ 19.34 $ 14.57 $ 10.60 $ 11.09 $ 9.65 $ 4.18
======================================================================================
Class C:
Net Assets $ 84,390,777 $ 310,226,630 $ 6,674,213 $ 75,940,796 $ 13,338,978 $ 31,013,645
--------------------------------------------------------------------------------------
Shares outstanding 4,366,276 21,314,800 631,836 6,847,662 1,384,337 7,406,894
--------------------------------------------------------------------------------------
Net asset value and offering
price per share* (net assets/shares
outstanding) $ 19.33 $ 14.55 $ 10.56 $ 11.09 $ 9.64 $ 4.19
======================================================================================
Class I:
Net Assets $ 27,926,511
-----------
Shares outstanding 2,500,010
-----------
Net asset value, offering and redemption
price per share (net assets/shares
outstanding) $ 11.17
===========
<CAPTION>
Pilgrim
High Total
Return Fund
----------------
ASSETS:
<S> <C>
Investments in securities, at value (cost
$278,307,985, $890,822,931, $17,300,332,
$215,502,699, $79,350,424, $196,690,281
and $495,986,870, respectively) $377,133,028
Short-term securities, at value
(cost $0, $0, $0, $996,322,
$0, $4,585,926 and
$6,878,597, respectively) 6,878,597
Repurchase agreements 4,741,000
Cash 850
Foreign cash, at value
(cost $0, $157,474, $62,767, $0
$0, $0 and $0, respectively) 0
Receivable for investments sold 13,527,829
Receivable for shares of beneficial
interest sold 184,620
Dividends and interest receivable 14,806,802
Receivable for future variation margin 0
Prepaid expenses 11,997
----------------
Total Assets 417,284,723
----------------
LIABILITIES:
Payable for investments purchased 0
Payable for shares of beneficial
interest reacquired 3,607,138
Investment advisory fee payable 269,646
Distribution fee payable 311,926
Transfer agent fee payable 22,109
Administrative services fee payable 37,004
Tax withholding liability 0
Unrealized depreciation of foreign
forward currency contracts 0
Accrued expenses 130,779
----------------
Total Liabilities 4,378,602
----------------
NET ASSETS $412,906,121
================
NET ASSETS WERE COMPOSED OF:
Capital paid in for shares of
beneficial interest, $.01 par
value outstanding (unlimited
shares authorized) $639,908,323
Undistributed (overdistributed)
net investment income (2,245,345)
Accumulated net realized gain (loss)
on investments foreign currency and
futures contracts (105,908,602)
Net unrealized appreciation
(depreciation) of investments foreign
currency and futures contracts (118,848,255)
----------------
Net Assets $412,906,121
================
Class A:
Net Assets $ 91,990,814
----------------
Shares outstanding 27,924,564
----------------
Net asset value and redemption
value per share (net assets/shares
outstanding) $ 3.29
================
Maximum offering price per share
(net asset value plus sales
charge of 4.75% of offering price) $ 3.45
================
Class B:
Net Assets $280,412,519
----------------
Shares outstanding 85,204,798
----------------
Net asset value and offering
price per share* (net assets/shares
outstanding) $ 3.29
================
Class C:
Net Assets $ 40,502,788
----------------
Shares outstanding 12,249,122
----------------
Net asset value and offering
price per share* (net assets/shares
outstanding) $ 3.31
================
Class I:
Net Assets
Shares outstanding
Net asset value, offering and redemption
price per share (net assets/shares
outstanding)
</TABLE>
* Redemption price varies by length of time shares are held.
See accompanying notes to financial statements.
56
<PAGE>
PILGRIM MAYFLOWER TRUST
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED OCTOBER 31, 1999
<TABLE>
<CAPTION>
Pilgrim Pilgrim
Pilgrim Pilgrim Emerging Research Pilgrim Pilgrim
Growth + International Markets Enhanced Income and High Total
Value Fund Value Fund Value Fund Index Fund(1) Growth Fund Return Fund II
-------------------------------------------------------------------------------------
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C> <C>
Dividends (net of withholding tax of
$12,678, $1,456,704, $29,371, $16,865,
$2,097,$0 and $0, respectively) $ 279,961 $ 16,888,587 $ 461,213 $1,273,488 $ 1,202,190 $ 1,203,255
Interest 787,982 1,704,399 31,033 228,956 2,175,797 25,824,234
-----------------------------------------------------------------------------------
Total investment income 1,067,943 18,592,986 492,246 1,502,444 3,377,987 27,027,489
-----------------------------------------------------------------------------------
EXPENSES:
Investment advisory and management fees 2,711,399 7,164,823 145,031 690,257 902,463 1,877,964
Distribution fees:
Class A 163,021 926,893 20,620 32,146 132,761 105,028
Class B 1,596,480 2,002,151 33,230 377,775 494,843 1,668,025
Class C 571,516 2,073,029 43,069 277,518 265,904 485,833
Transfer agent fees and expenses:
Class A 88,124 355,139 10,679 15,109 51,331 48,195
Class B 270,285 298,783 4,058 61,224 69,244 255,187
Class C 101,962 303,888 6,089 40,981 26,535 76,445
Class I 0 0 0 7,039 0 0
Administrative service fees 358,875 931,067 20,184 122,493 138,464 308,071
Custodian and fund accounting expenses 81,586 549,742 26,238 133,546 47,201 94,601
Printing and postage expenses 68,918 170,405 3,106 31,196 12,982 39,966
Registration fees 39,273 118,835 31,219 99,302 29,784 17,056
Audit expenses 25,281 35,269 20,195 22,677 23,725 21,632
Trustee expenses 11,251 13,905 9,224 18,411 10,048 11,393
Miscellaneous expenses 25,701 68,321 2,248 5,873 17,555 28,623
-----------------------------------------------------------------------------------
6,113,672 15,012,250 375,190 1,935,547 2,222,840 5,038,019
Less expenses reimbursed by
management company 0 0 25,059 272,628 0 0
-----------------------------------------------------------------------------------
Total expenses 6,113,672 15,012,250 350,131 1,662,919 2,222,840 5,038,019
-----------------------------------------------------------------------------------
Net investment income (loss) (5,045,729) 3,580,736 142,115 (160,475) 1,155,147 21,989,470
-----------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain (loss) on investments
and futures contracts 83,963,594 49,724,160 926,219 2,844,931 19,503,145 (32,191,393)
Net realized gain (loss) on foreign currency 0 3,476,523 (9,987) 0 9 123,782
Net change in unrealized
appreciation (depreciation)
of investments, foreign currency,
and futures contracts 83,444,021 128,073,707 3,931,451 5,444,661 (5,793,539) 5,135,407
-----------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments,
foreign currency, and futures contracts 167,407,615 181,274,390 4,847,683 8,289,592 13,709,615 (26,932,204)
-----------------------------------------------------------------------------------
Increase (decrease) in net assets resulting
from operations $162,361,886 $184,855,126 $4,989,798 $8,129,117 $14,864,762 $ (4,942,734)
===================================================================================
<CAPTION>
Pilgrim
High Total
Return Fund
-------------
INVESTMENT INCOME:
<S> <C>
Dividends (net of withholding tax of
$12,678, $1,456,704, $29,371, $16,865,
$2,097,$0 and $0, respectively) $ 5,573,604
Interest 62,597,691
-------------
Total investment income 68,171,295
-------------
EXPENSES:
Investment advisory and management fees 4,228,374
Distribution fees:
Class A 412,017
Class B 3,958,275
Class C 602,141
Transfer agent fees and expenses:
Class A 176,000
Class B 585,366
Class C 90,901
Class I 0
Administrative service fees 726,605
Custodian and fund accounting expenses 174,672
Printing and postage expenses 99,516
Registration fees 34,670
Audit expenses 34,302
Trustee expenses 18,880
Miscellaneous expenses 109,442
-------------
11,251,161
Less expenses reimbursed by
management company 0
-------------
Total expenses 11,251,161
-------------
Net investment income (loss) 56,920,134
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain (loss) on investments
and futures contracts (98,451,507)
Net realized gain (loss) on foreign currency 12,477
Net change in unrealized
appreciation (depreciation)
of investments, foreign currency,
and futures contracts 41,058,535
-------------
Net realized and unrealized
gain (loss) on investments,
foreign currency, and futures contracts (57,380,495)
-------------
Increase (decrease) in net assets resulting
from operations $ (460,361)
==============
</TABLE>
(1) For the period December 30, 1998 (commencement of operations) to October 31,
1999. See accompanying notes to financial statements.
57
<PAGE>
PILGRIM MAYFLOWER TRUST
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Pilgrim Pilgrim
Growth+Value International Value
Fund Fund
----------------------------------- ------------------------------
For the year For the year For the year For the year
ended ended ended ended
October 31, October 31, October 31, October 31,
1999 1998 1999 1998
----------------------------------------------------------------------
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income (loss) $ (5,045,729) $ (2,563,828) $ 3,580,736 $ 3,729,388
Net realized gain (loss) on investments 83,963,594 (26,282,879) 49,724,160 28,663,723
Net realized gain (loss) on foreign currency 0 0 3,476,523 (957,107)
Net change in unrealized appreciation (depreciation) of
investments and foreign currency 83,444,021 2,033,312 128,073,707 (25,052,571)
----------------------------------------------------------------------
Increase (decrease) in net assets resulting from
operations 162,361,886 (26,813,395) 184,855,126 6,383,433
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income:
Class A 0 0 (2,447,955) 0
Class B 0 0 (638,225) 0
Class C 0 0 (652,956) 0
Net realized gain from investments 0 (2,294,760) (28,295,922) (1,549,040)
----------------------------------------------------------------------
Total distributions 0 (2,294,760) (32,035,058) (1,549,040)
----------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 215,319,842 142,517,062 765,122,980 482,660,108
Net asset value of shares issued to shareholders in
reinvestment of dividends 0 1,274,079 25,417,235 1,115,780
----------------------------------------------------------------------
215,319,842 143,791,141 790,540,215 483,775,888
Cost of shares redeemed (161,711,440) (75,727,057) (397,092,669) (175,792,173)
----------------------------------------------------------------------
Net increase in net assets derived from capital share
transactions 53,608,402 68,064,084 393,447,546 307,983,715
----------------------------------------------------------------------
Net increase in net assets 215,970,288 38,955,929 546,267,614 312,818,108
NET ASSETS:
Beginning of period 176,872,068 137,916,139 494,645,483 181,827,375
----------------------------------------------------------------------
End of period $ 392,842,356 $176,872,068 $1,040,913,097 $ 494,645,483
======================================================================
Undistributed net investment income $ 0 $ 0 $ 3,538,149 $ 3,746,253
----------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
58
<PAGE>
PILGRIM MAYFLOWER TRUST
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Pilgrim Pilgrim Pilgrim
Emerging Markets Value Research Enhanced Income and Growth
Fund Index Fund Fund
---------------------- -------------- --------------------------
or the year For the year For the period For the year For the year
ended ended December 30, 1998(1) ended ended
October 31, October 31, to October 31, October 31, October 31,
1999 1998 1999 1999 1998
----------------------------------------------------------------------------
FROM OPERATIONS:
<S> <C> <C> <C> <C> <C>
Net investment income (loss) $ 142,115 $ 130,079 $ (160,475) $ 1,155,147 $ 4,652,829
Net realized gain (loss) on investments and
futures contracts 926,219 (114,095) 2,844,931 19,503,145 12,372,668
Net realized gain (loss) on foreign currency (9,987) 1,224 0 9 0
Net change in unrealized appreciation (depreciation)
of investments, foreign currency, and
futures contracts 3,931,451 (2,184,372) 5,444,661 (5,793,539) (14,833,769)
----------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations 4,989,798 (2,167,164) 8,129,117 14,864,762 2,191,728
FROM DIVIDENDS TO
SHAREHOLDERS:
Net investment income:
Class A (68,673) 0 0 (644,691) (1,645,418)
Class B (40,034) 0 0 (351,341) (1,649,267)
Class C (39,146) 0 0 (149,541) (1,532,895)
Class I -- -- 0 -- --
Net realized gain from investments 0 0 0 (29,400,842) (8,297,946)
----------------------------------------------------------------------------
Total distributions (147,853) 0 0 (30,546,415) (13,125,526)
----------------------------------------------------------------------------
FROM CAPITAL SHARE
TRANSACTIONS:
Net proceeds from sale of shares 10,710,032 13,039,367 231,460,935 13,352,685 23,793,209
Net asset value of shares issued to
shareholders in reinvestment
of dividends 101,215 0 0 24,845,426 10,902,341
----------------------------------------------------------------------------
10,811,247 13,039,367 231,460,935 38,198,111 34,695,550
Cost of shares redeemed (5,576,842) (1,170,295) (9,383,395) (74,538,516) (76,452,625)
----------------------------------------------------------------------------
Net increase (decrease) in net assets
derived from capital share transactions 5,234,405 11,869,072 222,077,540 (36,340,405) (41,757,075)
----------------------------------------------------------------------------
Net increase (decrease) in net assets 10,076,350 9,701,908 230,206,657 (52,022,058) (52,690,873)
NET ASSETS:
Beginning of period 9,701,908 0 0 144,436,621 197,127,494
----------------------------------------------------------------------------
End of period $19,778,258 $ 9,701,908 $230,206,657 $ 92,414,563 $144,436,621
============================================================================
Undistributed net investment income $ 124,077 $ 131,303 $ 0 $ 57,859 $ 82,834
============================================================================
</TABLE>
(1) Commencement of Operations See accompanying notes to financial statements.
59
<PAGE>
PILGRIM MAYFLOWER TRUST
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Pilgrim Pilgrim
High Total Return High Total Return
Fund II Fund
----------------------------- ------------------------------
For the year For the year For the year For the year
ended ended ended ended
October 31, October 31, October 31, October 31,
1999 1998 1999 1998
------------------------------------------------------------------
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income $ 21,989,470 $ 16,225,997 $ 56,920,134 $ 77,293,831
Net realized gain (loss) on investments (32,191,393) 239,074 (98,451,507) (7,859,695)
Net realized gain on foreign currency 123,782 199,374 12,477 353,140
Net change in unrealized appreciation (depreciation)
of investments and foreign currency 5,135,407 (40,605,250) 41,058,535 (178,347,256)
--------------------------------------------------------------------
Increase (decrease) in net assets resulting from
operations (4,942,734) (23,940,805) (460,361) (108,559,980)
FROM DIVIDENDS TO SHAREHOLDERS:
Net investment income:
Class A (3,313,676) (2,724,046) (14,655,522) (19,771,933)
Class B (14,809,329) (10,361,927) (39,701,333) (51,139,518)
Class C (4,292,131) (3,578,472) (6,029,049) (8,241,961)
Return of capital
Class A (217,482) (184,498) (1,294,305) 0
Class B (971,960) (760,637) (3,506,231) 0
Class C (281,699) (241,600) (532,457) 0
Net realized gain from investments 0 0 0 (27,484,835)
--------------------------------------------------------------------
Total distributions (23,886,277) (17,851,180) (65,718,897) (106,638,247)
--------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares 55,051,024 288,856,753 100,856,295 111,204,153
Net asset value of shares issued to
shareholders in reinvestment of dividends 6,839,575 5,327,944 21,713,962 37,990,952
--------------------------------------------------------------------
61,890,599 294,184,697 122,570,257 149,195,105
Cost of shares redeemed (119,733,819) (47,864,975) (285,177,676) (182,472,430)
--------------------------------------------------------------------
Net increase (decrease) in net assets derived from capital
share transactions (57,843,220) 246,319,722 (162,607,419) (33,277,325)
--------------------------------------------------------------------
Net increase (decrease) in net assets. (86,672,231) 204,527,737 (228,786,677) (248,475,552)
NET ASSETS:
Beginning of period 263,485,712 58,957,975 641,692,798 890,168,350
--------------------------------------------------------------------
End of period $ 176,813,481 $263,485,712 $ 412,906,121 $ 641,692,798
====================================================================
Undistributed (overdistributed) net investment income $ (471,247) $ 0 $ (2,245,345) $ 1,508,011
====================================================================
</TABLE>
See accompanying notes to financial statements.
60
<PAGE>
PILGRIM MAYFLOWER TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
Net realized Dividends Distributions Net
Net Asset & unrealized Total declared declared Asset
Value, Net gain (loss) from from net from net Value,
Period beginning investment on investment investment realized end of
ended of period income (loss) investments operations income gain period
- ---------------------------------------------------------------------------------------------------------------------------------
Growth + Value Fund, Class A
----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
11/18/96 -
10/31/97 $10.00 ($0.05) $2.20 $2.15 $ -- $ -- $12.15
10/31/98 12.15 (0.11) (1.42) (1.53) -- (0.18) 10.44
10/31/99 10.44 (0.17) 9.49 9.32 -- -- 19.76
Growth + Value Fund, Class B
----------------------------
11/18/96 -
10/31/97 10.00 (0.08) 2.16 2.08 -- -- 12.08
10/31/98 12.08 (0.16) (1.45) (1.61) -- (0.18) 10.29
10/31/99 10.29 (0.27) 9.32 9.05 -- -- 19.34
Growth + Value Fund, Class C
----------------------------
11/18/96 -
10/31/97 10.00 (0.08) 2.16 2.08 -- -- 12.08
10/31/98 12.08 (0.16) (1.45) (1.61) -- (0.18) 10.29
10/31/99 10.29 (0.26) 9.30 9.04 -- -- 19.33
International Value Fund, Class A
---------------------------------
3/06/95 -
10/31/95 7.64 0.09 0.37 0.46 -- -- 8.10
10/31/96 8.10 0.14 0.85 0.99 (0.04) -- 9.05
10/31/97 9.05 (0.09) 2.30 2.21 (0.14) (0.22) 10.90
10/31/98 10.90 0.11 0.96 1.07 -- (0.09) 11.88
10/31/99 11.88 0.08 3.58 3.66 (0.12) (0.67) 14.75
International Value Fund, Class B
---------------------------------
4/17/97 -
10/31/97 10.00 (0.02) 0.89 0.87 -- -- 10.87
10/31/98 10.87 0.07 0.91 0.98 -- (0.09) 11.76
10/31/99 11.76 0.01 3.51 3.52 (0.04) (0.67) 14.57
International Value Fund, Class C
---------------------------------
3/06/95 -
10/31/95 7.61 0.06 0.38 0.44 -- -- 8.05
10/31/96 8.05 0.05 0.86 0.91 (0.03) -- 8.93
10/31/97 8.93 (0.06) 2.20 2.14 (0.04) (0.17) 10.86
10/31/98 10.86 0.06 0.92 0.98 -- (0.09) 11.75
10/31/99 11.75 0.00 3.51 3.51 (0.04) (0.67) 14.55
Emerging Markets Value Fund, Class A
------------------------------------
1/01/98 -
10/31/98 10.00 0.12 (2.43) (2.31) -- -- 7.69
10/31/99 7.69 0.12 3.01 3.13 (0.14) -- 10.68
Emerging Markets Value Fund, Class B
------------------------------------
1/01/98 -
10/31/98 10.00 0.09 (2.44) (2.35) -- -- 7.65
10/31/99 7.65 0.08 2.97 3.05 (0.10) -- 10.60
Emerging Markets Value Fund, Class C
------------------------------------
1/01/98 -
10/31/98 10.00 0.09 (2.46) (2.37) -- -- 7.63
10/31/99 7.63 0.04 3.00 3.04 (0.11) -- 10.56
Research Enhanced Index Fund, Class A
------------------------------------
12/30/98 -
10/31/99 10.00 0.01 1.13 1.14 -- -- 11.14
Research Enhanced Index Fund, Class B
-------------------------------------
12/30/98 -
10/31/99 10.00 (0.02) 1.11 1.09 -- -- 11.09
Research Enhanced Index Fund, Class C
------------------------------------
12/30/98 -
10/31/99 10.00 (0.02) 1.11 1.09 -- -- 11.09
Research Enhanced Index Fund, Class I
------------------------------------
12/30/98 -
10/31/99 10.00 0.06 1.11 1.17 -- -- 11.17
<CAPTION>
Net Ratio of Ratio of Ratio of net
Assets, expenses Expense investment
end of to average reimbursement income to
Period Total period net to average average Portfolio
ended return (000's) assets(1), (2) net assets(1) net assets(1) turnover
- ----------- ---------------------------------------------------------------------------------------
Growth + Value Fund, Class A
----------------------------
<S> <C> <C> <C> <C> <C> <C>
11/18/96 -
10/31/97 21.50% $34,346 1.84% 0.02% (0.94)% 144%
10/31/98 (12.63) 33,425 1.72 -- (0.92) 162
10/31/99 89.27 81,225 1.69 -- (1.30) 197
Growth + Value Fund, Class B
----------------------------
11/18/96 -
10/31/97 20.80 76,608 2.55 0.02 (1.68) 144
10/31/98 (13.38) 105,991 2.45 -- (1.67) 162
10/31/99 87.95 227,227 2.39 -- (2.00) 197
Growth + Value Fund, Class C
----------------------------
11/18/96 -
10/31/97 20.80 26,962 2.56 0.02 (1.70) 144
10/31/98 (13.38) 37,456 2.46 -- (1.69) 162
10/31/99 87.85 84,391 2.40 -- (2.01) 197
International Value Fund, Class A
---------------------------------
3/06/95 -
10/31/95 9.39 5,188 1.85 6.08 1.67 0
10/31/96 12.15 16,777 1.85 0.97 1.52 74
10/31/97 27.59 60,539 1.80 0.27 0.46 26
10/31/98 9.86 211,018 1.74 -- 1.62 32
10/31/99 32.55 451,815 1.68 -- 0.92 29
International Value Fund, Class B
---------------------------------
4/17/97 -
10/31/97 8.70 59,185 2.50 0.08 (0.71) 26
10/31/98 9.16 145,976 2.47 -- 0.69 32
10/31/99 31.55 278,871 2.41 -- 0.18 29
International Value Fund, Class C
---------------------------------
3/06/95 -
10/31/95 8.89 5,749 2.50 6.08 1.13 0
10/31/96 11.39 14,530 2.50 1.21 0.62 74
10/31/97 25.92 62,103 2.50 0.24 (0.23) 26
10/31/98 9.07 137,651 2.47 -- 0.68 32
10/31/99 31.50 310,227 2.41 -- 0.19 29
Emerging Markets Value Fund, Class A
------------------------------------
1/01/98 -
10/31/98 (23.10) 3,815 1.80 2.08 3.38 7
10/31/99 41.48 9,281 2.06 0.15 1.36 38
Emerging Markets Value Fund, Class B
------------------------------------
1/01/98 -
10/31/98 (23.50) 3,583 2.50 2.24 2.55 7
10/31/99 40.41 3,823 2.70 0.23 0.67 38
Emerging Markets Value Fund, Class C
------------------------------------
1/01/98 -
10/31/98 (23.70) 2,304 2.50 2.37 2.60 7
10/31/99 40.49 6,674 2.75 0.16 0.61 38
Research Enhanced Index Fund, Class A
------------------------------------
12/30/98 -
10/31/99 11.40 27,091 1.29 0.27 0.23 26
Research Enhanced Index Fund, Class B
-------------------------------------
12/30/98 -
10/31/99 10.90 99,249 1.99 0.30 (0.49) 26
Research Enhanced Index Fund, Class C
------------------------------------
12/30/98 -
10/31/99 10.90 75,941 1.99 0.28 (0.49) 26
Research Enhanced Index Fund, Class I
------------------------------------
12/30/98 -
10/31/99 11.70 27,927 0.98 0.25 0.62 26
</TABLE>
(1) Annualized
(2) Expenses calculated net of taxes and advisor reimbursement
See accompanying notes to financial statements.
61
<PAGE>
PILGRIM MAYFLOWER TRUST
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD -- (CONTINUED)
<TABLE>
<CAPTION>
Net realized Dividends Distributions Net
Net Asset & unrealized Total declared declared Asset
Value, Net gain (loss) from from net from net Distributions Value,
Period beginning investment on investment investment realized declared end of
ended of period income (loss) investments operations income gain from Capital period
- ------------------------------------------------------------------------------------------------------------------------------------
Income and Growth Fund, Class A
-------------------------------
11/08/93 -
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10/31/94 $10.00 $0.30 ($0.05) $0.25 ($0.25) $ -- $ -- $10.00
10/31/95 10.00 0.35 0.84 1.19 (0.33) -- -- 10.86
10/31/96 10.86 0.32 1.29 1.61 (0.31) -- -- 12.16
10/31/97 12.16 0.38 1.53 1.91 (0.34) (1.26) -- 12.47
10/31/98 12.47 0.37 (0.22) 0.15 (0.39) (0.53) -- 11.70
10/31/99 11.70 0.17 1.11 1.28 (0.18) (3.14) -- 9.66
Income and Growth Fund, Class B
-------------------------------
2/09/94 -
10/31/94 10.64 0.20 (0.65) (0.45) (0.20) -- -- 9.99
10/31/95 9.99 0.27 0.85 1.12 (0.27) -- -- 10.84
10/31/96 10.84 0.24 1.28 1.52 (0.23) -- -- 12.13
10/31/97 12.13 0.27 1.55 1.82 (0.25) (1.26) -- 12.44
10/31/98 12.44 0.29 (0.22) 0.07 (0.30) (0.53) -- 11.68
10/31/99 11.68 0.09 1.11 1.20 (0.09) (3.14) -- 9.65
Income and Growth Fund, Class C
-------------------------------
3/21/94 -
10/31/94 10.37 0.20 (0.38) (0.18) (0.20) -- -- 9.99
10/31/95 9.99 0.27 0.85 1.12 (0.28) -- -- 10.83
10/31/96 10.83 0.24 1.28 1.52 (0.23) -- -- 12.12
10/31/97 12.12 0.28 1.54 1.82 (0.26) (1.26) -- 12.42
10/31/98 12.42 0.31 (0.24) 0.07 (0.30) (0.53) -- 11.66
10/31/99 11.66 0.13 1.06 1.19 (0.07) (3.14) -- 9.64
High Total Return Fund II, Class A
----------------------------------
1/31/97 -
10/31/97 5.00 0.28 0.53 0.81 (0.28) -- (0.04) 5.49
10/31/98 5.49 0.50 (0.70) (0.20) (0.48) -- (0.03) 4.78
10/31/99 4.78 0.43 (0.55) (0.12) (0.43) -- (0.05) 4.18
High Total Return Fund II, Class B
----------------------------------
1/31/97 -
10/31/97 5.00 0.25 0.53 0.78 (0.25) -- (0.04) 5.49
10/31/98 5.49 0.47 (0.70) (0.23) (0.44) -- (0.03) 4.79
10/31/99 4.79 0.41 (0.57) (0.16) (0.42) -- (0.03) 4.18
High Total Return Fund II, Class C
----------------------------------
1/31/97 -
10/31/97 5.00 0.25 0.54 0.79 (0.25) -- (0.04) 5.50
10/31/98 5.50 0.47 (0.71) (0.24) (0.44) -- (0.03) 4.79
10/31/99 4.79 0.40 (0.55) (0.15) (0.41) -- (0.04) 4.19
High Total Return Fund, Class A
-------------------------------
11/08/93 -
10/31/94 5.00 0.41 (0.60) (0.19) (0.40) -- -- 4.41
10/31/95 4.41 0.48 0.07 0.55 (0.48) -- -- 4.48
10/31/96 4.48 0.46 0.32 0.78 (0.48) -- -- 4.78
10/31/97 4.78 0.48 0.20 0.68 (0.46) -- -- 5.00
10/31/98 5.00 0.46 (1.07) (0.61) (0.47) (0.15) -- 3.77
10/31/99 3.77 0.37 (0.41) (0.04) (0.39) -- (0.05) 3.29
High Total Return Fund, Class B
-------------------------------
2/09/94 -
10/31/94 5.20 0.33 (0.80) (0.47) (0.32) -- -- 4.41
10/31/95 4.41 0.45 0.06 0.51 (0.45) -- -- 4.47
10/31/96 4.47 0.43 0.32 0.75 (0.45) -- -- 4.77
10/31/97 4.77 0.44 0.22 0.66 (0.43) -- -- 5.00
10/31/98 5.00 0.43 (1.07) (0.64) (0.44) (0.15) -- 3.77
10/31/99 3.77 0.34 (0.41) (0.07) (0.37) -- (0.04) 3.29
High Total Return Fund, Class C
-------------------------------
3/21/94 -
10/31/94 5.06 0.26 (0.65) (0.39) (0.26) -- -- 4.41
10/31/95 4.41 0.44 0.09 0.53 (0.45) -- -- 4.49
10/31/96 4.49 0.43 0.32 0.75 (0.45) -- -- 4.79
10/31/97 4.79 0.44 0.22 0.66 (0.43) -- -- 5.02
10/31/98 5.02 0.43 (1.08) (0.65) (0.44) (0.15) -- 3.78
10/31/99 3.78 0.34 (0.40) (0.06) (0.37) -- (0.04) 3.31
<CAPTION>
Ratio of
Net expense Ratio of net
Assets, Ratio of reimbursement investment
end of expenses to average income
Period Total period to average net net to average Portfolio
ended Return (000's) assets(1),(2) assets(1) net assets(1) turnover
- ----------- ----------------------------------------------------------------------------------------------
Income and Growth Fund, Class A
-------------------------------
11/08/93 -
<S> <C> <C> <C> <C> <C> <C>
10/31/94 2.48% $72,223 1.50% 0.47% 3.73% 26%
10/31/95 13.19 76,031 1.51 -- 3.39 91
10/31/96 14.48 85,250 1.52 -- 2.78 147
10/31/97 17.02 53,805 1.47 -- 2.90 56
10/31/98 1.12 47,378 1.40 -- 2.99 102
10/31/99 11.99 39,313 1.40 -- 1.40 102
Income and Growth Fund, Class B
-------------------------------
2/09/94 -
10/31/94 (4.20) 37,767 2.20 0.16 3.00 26
10/31/95 12.31 60,347 2.23 -- 2.66 91
10/31/96 13.60 71,123 2.26 -- 2.04 147
10/31/97 15.06 73,829 2.18 -- 2.18 56
10/31/98 0.44 55,873 2.12 -- 2.28 102
10/31/99 11.24 39,763 2.12 -- 0.68 102
Income and Growth Fund, Class C
-------------------------------
3/21/94 -
10/31/94 (1.75) 4,823 2.20 0.06 2.87 26
10/31/95 12.33 53,661 2.22 -- 2.67 91
10/31/96 13.68 60,458 2.20 -- 2.10 147
10/31/97 15.04 69,494 2.15 -- 2.21 56
10/31/98 0.51 41,186 2.09 -- 2.32 102
10/31/99 11.12 13,339 2.08 -- 0.74 102
High Total Return Fund II, Class A
----------------------------------
1/31/97 -
10/31/97 16.53 8,548 1.26 3.36 5.89 164
10/31/98 (4.23) 40,924 1.44 0.01 8.90 150
10/31/99 (3.10) 20,003 1.40 -- 9.46 110
High Total Return Fund II, Class B
----------------------------------
1/31/97 -
10/31/97 15.91 38,076 1.95 0.75 5.20 164
10/31/98 (4.90) 168,859 2.17 0.02 8.17 150
10/31/99 (4.00) 125,796 2.11 -- 8.66 110
High Total Return Fund II, Class C
----------------------------------
1/31/97 -
10/31/97 16.12 12,334 1.95 0.78 5.17 164
10/31/98 (4.90) 53,703 2.17 0.01 8.16 150
10/31/99 (3.77) 31,014 2.12 -- 8.70 110
High Total Return Fund, Class A
-------------------------------
11/08/93 -
10/31/94 (4.11) 50,797 1.50 0.99 10.09 163
10/31/95 13.02 88,552 1.55 -- 10.90 145
10/31/96 18.14 167,698 1.52 -- 9.86 158
10/31/97 15.03 215,361 1.42 -- 9.88 183
10/31/98 (13.65) 148,650 1.30 -- 9.93 123
10/31/99 (1.86) 91,991 1.34 -- 10.16 59
High Total Return Fund, Class B
-------------------------------
2/09/94 -
10/31/94 (9.30) 25,880 2.20 0.20 9.72 163
10/31/95 11.97 96,362 2.25 -- 10.20 145
10/31/96 17.08 346,919 2.23 -- 9.14 158
10/31/97 14.46 577,351 2.12 -- 9.18 183
10/31/98 (14.28) 428,903 2.02 -- 9.20 123
10/31/99 (2.56) 280,413 2.06 -- 9.42 59
High Total Return Fund, Class C
-------------------------------
3/21/94 -
10/31/94 (7.21) 2,330 2.20 0.11 9.46 163
10/31/95 12.44 11,011 2.27 -- 10.18 145
10/31/96 17.28 54,382 2.23 -- 9.14 158
10/31/97 14.42 97,457 2.13 -- 9.18 183
10/31/98 (14.41) 64,141 2.03 -- 9.19 123
10/31/99 (2.24) 40,503 2.07 -- 9.42 59
</TABLE>
(1) Annualized
(2) Expenses calculated net of taxes and advisor reimbursement
See accompanying notes to financial statements.
62
<PAGE>
PILGRIM MAYFLOWER TRUST
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31,1999
Note 1. Organization and Significant Accounting Policies
Organization -- Reliastar Financial Corp., parent of Northstar Holdings,
Inc., purchased Pilgrim Capital Corporation and merged the entities' investment
management and distribution operations. Consequently, the Funds have been
renamed as disclosed. The Pilgrim Mayflower Trust (the "Trust"), formerly the
Northstar Trust, a business trust, was organized under the laws of the
Commonwealth of Massachusetts and registered under the Investment Company Act of
1940 as a diversified open-end management investment company. The names of each
of the seven investment series (collectively the "Funds") which comprise the
Trust and their respective investment objectives are set forth below.
Pilgrim Growth + Value Fund, ("Growth + Value Fund"), formerly the
Northstar Growth + Value Fund, is a diversified portfolio with the investment
objective of capital appreciation by investing in equity securities. The Fund
seeks to achieve its objective through investments in companies the portfolio
manager identifies as either growth or value through quantitative analysis.
Pilgrim International Value Fund, ("International Value Fund"), formerly
the Northstar International Value Fund, is a diversified portfolio with the
investment objective of long-term capital appreciation. The Fund invests
primarily in foreign companies with a market valuation of greater than $1
billion, but may hold up to 25% of its assets in companies with smaller market
capitalization. Portfolio managers apply the technique of "value investing".
Pilgrim Emerging Markets Value Fund, ("Emerging Markets Value Fund"),
formerly the Northstar Emerging Markets Value Fund, is a diversified portfolio
with the investment objective of long-term capital appreciation. The Fund
invests primarily in foreign companies located in countries with emerging
markets. Portfolio managers apply the technique of "value investing".
Pilgrim Research Enhanced Index Fund, ("Research Enhanced Index Fund"),
formerly the Northstar Research Enhanced Index Fund, is a diversified portfolio
with the investment objective of capital appreciation. The Fund seeks to achieve
its objective by owning a large number of stocks within the S&P 500 with an
emphasis on those that appear undervalued or fairly valued, and by tracking the
industry weightings and other data characteristics of the S&P 500.
Pilgrim Income and Growth Fund, ("Income and Growth Fund"), formerly the
Northstar Income and Growth Fund, is a diversified portfolio with the investment
objective of current income balanced with capital appreciation. The Fund seeks
to achieve its objective through investments in a diversified group of
securities selected for their prospects of providing both current income and
long-term growth of capital.
Pilgrim High Total Return Fund II, ("High Total Return Fund II"), formerly
the Northstar High Total Return Fund II, is a diversified portfolio with the
investment objective of high income and capital appreciation. The Fund invests
primarily in a diversified group of fixed income securities which are selected
for high current income and the potential for capital growth, including
lower-rated fixed income securities, convertible securities, securities issued
by U.S. companies in foreign currencies, and securities issued by foreign
governments and companies.
Pilgrim High Total Return Fund, ("High Total Return Fund"), formerly the
Northstar High Total Return Fund, is a diversified portfolio with the investment
objective of high income and capital appreciation. The Fund invests primarily in
a diversified group of fixed income securities which are selected for high
current income and the potential for capital growth, including lower-rated fixed
income securities, convertible securities, securities issued by U.S. companies
in foreign currencies, and securities issued by foreign governments and
companies.
Security Valuation -- Equity securities are valued at the closing sale
prices reported on recognized securities exchanges or lacking any sales, at the
last available bid price. Prices of long-term debt securities are valued on the
basis of last reported sales price, or if no sales are reported, the value is
determined based upon the mean of representative quoted bid and asked prices for
such securities, or, if such prices are not available, at prices provided by
market makers, or at prices for securities of comparable maturity, quality and
type. Short-term debt instruments with remaining maturities of less than 60 days
are valued at amortized cost, unless the Trustees determine that amortized cost
does not reflect the fair value of such obligations. Securities for which market
quotations are not readily available are valued at fair value determined in good
faith by or under direction of the Trustees of the Trust. The books and records
of the Funds are maintained in U.S. dollars. Securities quoted in foreign
currencies are translated into U.S. dollars based on the prevailing exchange
rates on that day. The Advisor uses independent pricing services to price the
Funds' securities.
Security Transactions, Investment Income, Expenses -- Security
transactions are recorded on the trade date. Realized gains or losses on sales
of investments are calculated on the identified cost basis. Interest income is
recorded on the accrual basis except when collection is not expected; discounts
are accreted, and premiums amortized to par at maturity; dividend income is
recorded on the ex-dividend dates. Income, expenses (except class specific
expenses), and realized/unrealized gains/losses, are allocated proportionately
to each Fund or class of shares based upon the relative daily net asset value.
Distributions to Shareholders -- Dividends from net investment income are
declared and paid monthly by the High Total Return Fund II and High Total Return
Fund, and declared and paid quarterly by the Income and Growth Fund, and
declared and paid annually by the Growth + Value Fund, International Value Fund,
Emerging Markets Value Fund, and Research Enhanced Index Fund. Distributions of
net realized capital gains, if any, are declared annually; however, to the
extent that a net realized capital gain can be reduced by a capital loss
carryover, such gain will not be distributed.
63
<PAGE>
PILGRIM MAYFLOWER TRUST
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31,1999
The Funds may periodically make reclassifications among certain of their
capital accounts as a result of the timing and characterization of certain
income and capital gains distributions determined annually in accordance with
federal tax regulation which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments of net
operating losses and foreign currency transactions. As of October 31, 1999, the
following amounts have been reclassified between undistributed net investment
income, accumulated net realized gain on investments and paid-in-capital:
Accumulated
Undistributed Net Realized
Net Investment Gain on Paid-in-
Income Investments Capital
-------------- ------------ --------
Growth+Value Fund 5,045,729 (5,045,729) 0
International Value Fund (49,704) 49,704 0
Emerging Markets Value
Fund (1,488) 1,488 0
Research Enhanced
Index Fund 160,475 (160,475) 0
Income & Growth
Fund (34,549) 34,549 0
High Total Return Fund II 1,425,560 45,581 (1,471,141)
High Total Return Fund 5,045,407 287,586 (5,332,993)
These restatements did not affect net investment income, net realized gain
on investments, or net assets for the year ended October 31, 1999.
Foreign Currency -- The Funds isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities held.
Net realized gain (loss) on foreign currency transactions represents the
foreign exchange: (1) gains and losses from the sale of holdings of foreign
currencies, (2) gains and losses between trade date and settlement date on
investment securities transactions and forward exchange contracts, and (3) gains
and losses from the difference between amounts of interest and dividends
recorded and the amounts actually received. Net change in unrealized
appreciation (depreciation) of investment and foreign currency arise from
changes in the value of assets and liabilities including investment in
securities at fiscal year end, resulting from changes in the exchange rate.
Foreign Currency Forward Contracts -- The Funds may enter into foreign
currency forward contracts primarily to hedge against foreign currency exchange
rate risks on their non-U.S. dollar denominated investment securities. When
entering into a currency forward contract, the Funds agree to receive or deliver
a fixed quantity of foreign currency for an agreed-upon price on an agreed
future date. These contracts are valued daily and the Funds' net equity therein,
representing unrealized gain or loss on the contracts as measured by the
difference between the forward foreign exchange rates at the dates of entry into
the contracts and the forward rates at the reporting date, is included in the
statement of assets and liabilities. Realized and unrealized gains and losses
are included in the statement of operations. These instruments involve market
and/or credit risk in excess of the amount recognized in the statement of assets
and liabilities. Risks arise from the possible inability of counterparties to
meet the terms of their contracts and from movement in currency and securities
values and interest rates.
Options - The Funds may write (sell) and purchase put and call options.
The premium collected or paid by a Fund for the sale or purchase of a call or
put option is recorded as an investment and subsequently "marked to market" to
reflect the current market value of the option. If an option which a Fund has
sold or purchased expires on the stipulated expiration date, the Fund realizes a
gain or loss in the amount of the premium received or paid for the option.
For written options, the Fund's obligation may be discharged in three
ways: (1) the option expires on the stipulated expiration date; (2) the option
holder exercises the right to call (buy) or put (sell) the security, or (3) the
Fund enters into a closing transaction. If the option is held until expiration,
the Fund recognizes a gain equal to the amount of premium received. If the
written call option is exercised by the counterparty, the premium is added to
the proceeds from the sale of the underlying security or currency in determining
whether the Fund has realized a gain or loss. If the written put option is
exercised by the counterparty, the premium reduces the cost basis of the
securities purchased by the Fund. If the Fund enters into a closing transaction,
a gain or loss is recognized equal to the difference between the premium
received by the Fund from the counterparty and the amount paid by the Fund on
effecting a closing purchase transaction, including brokerage commissions. As
the writer of options, the Fund bears the market risk of an unfavorable change
in the price of the security underlying the written option.
Futures contracts - The Funds may invest in futures contracts solely for
the purpose of hedging its existing portfolio securities, or securities that the
Funds intend to purchase, against fluctuations in fair value caused by changes
in prevailing market or interest rates.
Initial margin deposits made upon entering into futures contracts are
recognized as assets due from the broker (the Funds' agent in acquiring the
futures position). During the period the futures contract is open, changes in
the value of the contract are recognized as unrealized gains or losses by
"marking to market" on a daily basis to reflect the daily market value of the
contract.
64
<PAGE>
PILGRIM MAYFLOWER TRUST
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31,1999
Variation margin payments are received or made by the Funds each day,
depending upon the daily fluctuations in the fair value of the underlying
instrument. The Funds recognize a gain or loss equal to the daily variation
margin. When the contract is closed, the Funds record a realized gain or loss
equal to the difference between the proceeds from (or cost of) the closing
transaction and the Funds' basis in the contract.
Should market conditions move unexpectedly, the Funds may not achieve the
anticipated benefits of the financial futures contracts and may realize a loss.
The use of futures transactions involves the risk of imperfect correlation in
movements in the price of futures contracts, interest rates, and the underlying
hedged assets.
Repurchase Agreements -- The Funds' Custodian takes possession of
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to assure that the value,
including accrued interest, is at least equal to the repurchase price. In the
event of default of the obligation to repurchase, the Funds have the right to
liquidate the collateral and apply the proceeds in satisfaction of the
obligation. If the seller defaults and the value of the collateral declines or
if bankruptcy proceedings are commenced with respect to the seller of the
security, realization of the collateral by the Funds may be delayed or limited.
Federal Income Taxes -- The Trust intends to comply with the special
provisions of the Internal Revenue Code available to investment companies and to
distribute all of the taxable net income to their respective shareholders.
Therefore, no Federal income tax provision or excise tax provision is required.
Management's Use of Estimates -- The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of financial statements and the reported amounts of
income and expenses during the reporting period. Actual results could differ
from those estimates.
Organization Costs -- Costs incurred by the Trust in connection with its
organization of each Fund have been deferred and are being amortized over a
period of five years from the date the Funds commenced operations.
Note 2. Investment Advisor, Administrator and Distributor
Pilgrim Holdings Corp., formerly Northstar Holdings, Inc. (and its
wholly-owned operating subsidiaries, Pilgrim Advisors, Inc., (the Advisor),
formerly Northstar Investment Management Corp., Pilgrim Securities, Inc. (the
"Distributor"), (on November 16, 1999 Northstar Distributors, Inc. was merged
into Pilgrim Securities, Inc.), and Pilgrim Group, Inc. (the "Administrator"),
(on October 29, 1999 Northstar Administrators Corp. was merged into Pilgrim
Group, Inc.), is an indirect wholly-owned subsidiary of ReliaStar Financial
Corp. The Advisor serves as each Fund's investment advisor. The Growth + Value
Fund, International Value Fund, and Emerging Markets Value Fund pay the Advisor
an investment advisory fee calculated at an annual rate of 1.00% of average
daily net assets. The Research Enhanced Index pays the Advisor an investment
advisory fee calculated at an annual rate of 0.70% of average daily net assets.
The Income and Growth Fund and High Total Return Fund pay the Advisor an
investment advisory fee calculated at an annual rate of 0.75% on the first
$250,000,000 of aggregate average daily net assets, 0.70% on the next
$250,000,000 of such assets, 0.65% on the next $250,000,000 of such assets,
0.60% on the next $250,000,000 of such assets, and 0.55% on the assets of each
Fund in excess of $1 billion. The High Total Return Fund II pays the Advisor an
investment advisory fee calculated at an annual rate of 0.75% of average daily
net assets. For the period ended October 31, 1999, the Advisor earned
$17,720,311 in investment advisory fees. Navellier Fund Management, Inc.
("Navellier"), a registered investment advisor, serves as subadvisor to the
Growth + Value Fund pursuant to a Subadvisory Agreement dated July 31, 1996 and
amended and restated on July 1, 1998, between the Advisor and Navellier. For its
services, Navellier receives from the Advisor, a fee equal to 0.50% of the
average daily net assets of the Fund. For the period ended October 31, 1999,
Navellier received $1,355,700 in subadvisory fees from the Advisor. Brandes
Investment Partners, L.P. ("Brandes"), a registered investment advisor, serves
as subadvisor to the International Value Fund and Emerging Markets Value Fund
pursuant to Subadvisory Agreements dated January 23, 1997 and November 8, 1997,
respectively, between the Advisor and Brandes. For its services, Brandes
receives from the Advisor an annual fee equal to 50% of the management fee that
each of the Funds it subadvises pays the Advisor (currently 0.50% of the average
daily net assets of each Fund). For the period December 1, 1998 through February
28, 1999, Brandes agreed to waive the subadvisory fee on the Emerging Markets
Value Fund. For the period ended October 31, 1999, Brandes received $3,582,411
and $56,232 in subadvisory fees from the Advisor for the International Value
Fund and Emerging Markets Value Fund, respectively. J.P. Morgan Investment
Management, Inc. ("J.P. Morgan"), a registered investment advisor, serves as
subadvisor to the Research Enhanced Index Fund pursuant to a Subadvisory
Agreement dated December 21, 1998, between the Advisor and J.P. Morgan. For its
services, J.P. Morgan receives from the Advisor, a fee equal to 0.20% of the
average daily net assets of the Fund. For the period ended October 31, 1999,
J.P. Morgan received $199,666 in subadvisory fees from the Advisor. The Advisor
voluntarily undertook to limit the expenses of the Emerging Markets Value Fund
to 1.80% (Class A) and 2.50% (Class B and C) of each respective class's average
net assets from inception through February 28, 1999. The Advisor has voluntarily
undertaken to limit the expenses of the Research Enhanced Index Fund to 1.30%
(Class A), 2.00% (Class B and C), and 1.00% (Class I) of each respective class's
average net assets. The Advisor will reimburse the
65
<PAGE>
PILGRIM MAYFLOWER TRUST
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31,1999
funds for amounts in excess of such limits. As of October 31, 1999, the
Advisor's reimbursements totaled $25,059 and $272,628 for the Emerging Markets
Value Fund and Research Enhanced Index Fund, respectively.
The Funds pay the Administrator a fee calculated at an annual rate of
0.10% of each Fund's average daily net assets, and an annual shareholder account
servicing fee of $5.00, payable semi-annually, for each account of beneficial
owners of shares. For the period ended October 31, 1999, the Administrator
earned $2,605,759 in administrative and account servicing fees.
Under separate Distribution Plans pertaining to Class A, B, and C shares,
the Trust pays the Distributor monthly service fees at an annual rate of 0.25%
of the average daily net assets in the case of Class A, B and C shares and
monthly distribution fees at the annual rate of 0.05% of the average daily net
assets of Class A shares and 0.75% of the average daily net assets of Class B
and C shares. Class I shares do not pay distribution or service fees. As of
October 31, 1999, the Trust owed the Distributor $1,508,861 in service and
distribution fees.
The Distributor also receives the proceeds of initial sales charges paid
by shareholders upon the purchase of Class A shares and contingent deferred
sales charges paid by shareholders upon certain redemptions of Class A, B and C
shares. For the period ended October 31, 1999, the Distributor earned the
following amounts in sales charges:
Class A Class B Class C
Shares Shares Shares
------- -------- -------
Initial sales charges $477,146 n/a n/a
Contingent deferred sales
charges $259,833 $6,055,717 $247,753
Note 3. Futures Contracts
On October 31, 1999, the Research Enhanced Index Fund had $995,000
principal amount of U.S. Treasury obligations pledged as collateral to cover
margin requirements for open futures contracts.
Open futures contracts at October 31, 1999, were as follows:
<TABLE>
<CAPTION>
Number of Unrealized
Contract Contracts Month Commitment Depreciation
-------- --------- -------- ---------- ------------
<S> <C> <C> <C> <C>
S&P 500 Index 24 Dec Buy $232,609
</TABLE>
Note 4. Purchases and Sales of Investment Securities
The aggregate cost of purchases and proceeds from sales of investments
(excluding short-term investments) for the period ended October 31, 1999, were
as follows:
<TABLE>
<CAPTION>
Growth + Value International Emerging Markets Research Enhanced
Fund Value Fund Value Fund Index Fund
------------ ----------- -------------- ---------------
<S> <C> <C> <C> <C>
Aggregate purchases $539,414,201 $539,999,681 $10,316,328 $245,170,723
Aggregate sales $503,779,799 $197,723,425 $ 5,238,196 $ 32,298,693
<CAPTION>
Income & Growth Fund High Total Return Fund II High Total Return Fund
-------------------- ------------------------- ---------------------
<S> <C> <C> <C>
Aggregate purchases $118,740,992 $250,002,883 $319,968,619
Aggregate sales $184,323,819 $286,827,818 $503,275,345
</TABLE>
U.S. Government Securities included above were as follows:
<TABLE>
<CAPTION>
Growth + Value International Value Emerging Markets Research Enhanced
Fund Fund Value Fund Index Fund
------------ ------------------- --------------- -----------------
<S> <C> <C> <C> <C>
Aggregate purchases -- -- -- $999,074
Aggregate sales -- -- -- --
<CAPTION>
Income & Growth Fund High Total Return Fund II High Total Return Fund
-------------------- ------------------------- ----------------------
<S> <C> <C> <C>
Aggregate purchases $ 3,956,300 -- --
Aggregate sales $14,333,640 -- --
</TABLE>
66
<PAGE>
PILGRIM MAYFLOWER TRUST
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31,1999
Note 5. Portfolio Securities (Tax Basis)
The cost of securities for federal income tax purposes and the aggregate
appreciation and depreciation of securities at October 31, 1999 were as follows:
<TABLE>
<CAPTION>
Growth + Value International Emerging Markets Research Enhanced
Fund Value Fund Value Fund Index Fund
-------------- ------------ ---------------- -----------------
<S> <C> <C> <C> <C>
Cost (tax basis) $278,612,990 $890,839,004 $17,300,332 $216,861,850
Appreciated Securities 107,578,437 148,549,579 3,303,823 16,585,022
Depreciated Securities (11,889,369) (44,416,191) (1,556,489) (11,735,799)
------------ ------------ ----------- ------------
Net Unrealized Appreciation $ 95,689,068 $104,133,388 $ 1,747,334 $ 4,849,223
------------ ------------ ----------- ------------
<CAPTION>
Income & Growth Fund High Total Return Fund II High Total Return Fund
------------------- -------------------- -------------------
<S> <C> <C> <C>
Cost (tax basis) $79,358,237 $201,785,835 $ 503,323,247
Appreciated Securities 13,834,033 2,615,895 27,265,431
Depreciated Securities (2,121,123) (38,562,454) (146,577,053)
------------ ------------ -------------
Net Unrealized Appreciation
(Depreciation) $11,712,910 $(35,946,559) $(119,311,622)
------------ ------------ -------------
</TABLE>
Note 6. Capital Share Transactions
Transactions in capital shares of each Fund for the period ended October
31, 1999, were as follows:
<TABLE>
<CAPTION>
Pilgrim Growth + Value Fund
--------------------------------------------------------------------------------------------
Class A Class B Class C
--------------------------- --------------------------- ----------------------------
Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 8,330,313 $119,944,285 3,968,213 $62,085,069 2,142,358 $33,290,488
Reinvested dividends 0 0 0 0 0 0
Shares redeemed (7,420,035) (104,892,760) (2,518,709) (36,547,165) (1,416,685) (20,271,515)
----------- ----------- ----------- ----------- ----------- -----------
Net increase 910,278 $15,051,525 1,449,504 $25,537,904 725,673 $13,018,973
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Pilgrim International Value Fund
--------------------------------------------------------------------------------------------
Class A Class B Class C
--------------------------- --------------------------- ----------------------------
Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 37,389,180 $491,487,619 8,274,008 $111,215,626 12,104,834 $162,419,735
Reinvested dividends 1,139,195 13,398,457 520,861 6,044,049 515,060 5,974,729
Shares redeemed (25,654,229) (331,576,463) (2,066,590) (26,329,963) (3,018,495) (39,186,243)
----------- ----------- ----------- ----------- ----------- -----------
Net increase 12,874,146 $173,309,613 6,728,279 $90,929,712 9,601,399 $129,208,221
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Pilgrim Emerging Markets Value Fund
--------------------------------------------------------------------------------------------
Class A Class B Class C
--------------------------- --------------------------- ----------------------------
Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 655,250 $5,675,647 108,938 $1,036,248 436,868 $3,998,137
Reinvested dividends 4,477 33,577 4,574 34,258 4,474 33,380
Shares redeemed (286,580) (2,642,410) (221,319) (1,848,348) (111,375) (1,086,084)
----------- ----------- ----------- ----------- ----------- -----------
Net increase/decrease 373,147 $3,066,814 (107,807) ($777,842) 329,967 $2,945,433
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Pilgrim Research Enhanced Index Fund
---------------------------------------------------------------------------------------------------------
Class A Class B Class C Class I
------------------------ ------------------------ ------------------------ -------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 2,723,102 $29,720,302 9,270,282 $100,006,579 7,106,428 $76,733,954 2,500,010 $25,000,100
Reinvested dividends 0 0 0 0 0 0 0 0
Shares redeemed (290,337) (3,146,624) (317,349) (3,429,082) (258,766) (2,807,689) 0 0
--------- ----------- --------- ------------ --------- ----------- --------- -----------
Net increase 2,432,765 $26,573,678 8,952,933 $ 96,577,497 6,847,662 $73,926,265 2,500,010 $25,000,100
--------- ----------- --------- ------------ --------- ----------- --------- -----------
</TABLE>
67
<PAGE>
PILGRIM MAYFLOWER TRUST
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31,1999
<TABLE>
<CAPTION>
Pilgrim Income and Growth Fund
--------------------------------------------------------------------------------------------
Class A Class B Class C
--------------------------- ------------------------- --------------------------
Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 580,037 $6,597,201 573,550 $6,242,558 48,090 $512,926
Reinvested dividends 1,090,994 10,962,013 811,024 8,140,199 554,994 5,743,214
Shares redeemed (1,652,082) (19,135,919) (2,047,790) (23,535,754) (2,749,520) (31,866,843)
----------- ----------- ----------- ----------- ----------- -----------
Net increase/decrease 18,949 ($1,576,705) (663,216) ($9,152,997) (2,146,436) ($25,610,703)
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Pilgrim High Total Return Fund II
--------------------------------------------------------------------------------------------
Class A Class B Class C
--------------------------- --------------------------- ----------------------------
Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 1,794,866 $8,643,904 6,738,331 $32,524,712 2,873,473 $13,882,408
Reinvested dividends 252,341 1,186,807 878,947 4,141,238 320,184 1,511,530
Shares redeemed (5,815,058) (27,242,596) (12,809,519) (59,589,557) (6,990,259) (32,901,666)
----------- ----------- ----------- ----------- ----------- -----------
Net increase/decrease (3,767,851) ($17,411,885) (5,192,241) ($22,923,607) (3,796,602) ($17,507,728)
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Pilgrim High Total Return Fund
--------------------------------------------------------------------------------------------
Class A Class B Class C
--------------------------- --------------------------- ----------------------------
Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 8,697,448 $32,933,540 13,334,418 $50,908,759 4,400,033 $17,013,996
Reinvested dividends 1,876,811 7,018,801 3,352,068 12,515,097 580,868 2,180,064
Shares redeemed (22,068,969) (81,688,893) (45,307,016) (167,404,229) (9,679,733) (36,084,554)
----------- ----------- ----------- ----------- ----------- -----------
Net decrease (11,494,710) ($41,736,552) (28,620,530) ($103,980,373) (4,698,832) ($16,890,494)
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
Transactions in capital shares of each class of shares of each Fund for the
period ended October 31, 1998, were as follows:
<TABLE>
<CAPTION>
Pilgrim Growth + Value Fund
--------------------------------------------------------------------------------------------
Class A Class B Class C
--------------------------- --------------------------- ----------------------------
Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 4,527,627 $52,348,896 5,430,943 $62,929,378 2,339,701 $27,238,788
Reinvested dividends 35,555 384,794 62,402 668,329 20,745 220,956
Shares redeemed (4,188,964) (47,906,940) (1,536,021) (17,178,931) (952,396) (10,641,186)
----------- ----------- ----------- ----------- ----------- -----------
Net increase 374,218 $4,826,750 3,957,324 $46,418,776 1,408,050 $16,818,558
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Pilgrim International Value Fund
--------------------------------------------------------------------------------------------
Class A Class B Class C
--------------------------- --------------------------- ----------------------------
Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 23,471,551 $278,306,972 8,027,215 $96,730,318 8,950,805 $107,622,818
Reinvested dividends 36,151 393,327 31,621 342,751 35,060 379,702
Shares redeemed (11,301,948) (128,653,076) (1,093,303) (12,477,274) (2,992,118) (34,661,823)
----------- ----------- ----------- ----------- ----------- -----------
Net increase 12,205,754 $150,047,223 6,965,533 $84,595,795 5,993,747 $73,340,697
----------- ------------ ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Pilgrim Emerging Markets Value Fund
--------------------------------------------------------------------------------------------
Class A Class B Class C
--------------------------- --------------------------- ----------------------------
Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 586,703 $5,310,769 487,684 $4,541,148 348,558 $3,187,450
Reinvested dividends 0 0 0 0 0 0
Shares redeemed (90,645) (709,667) (19,286) (143,736) (46,689) (316,892)
----------- ----------- ----------- ----------- ----------- -----------
Net increase 496,058 $4,601,102 468,398 $4,397,412 301,869 $2,870,558
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Pilgrim Income and Growth Fund
--------------------------------------------------------------------------------------------
Class A Class B Class C
--------------------------- --------------------------- ----------------------------
Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 1,460,784 $17,299,976 385,541 $4,710,280 143,591 $1,782,953
Reinvested dividends 286,311 3,468,930 250,270 3,026,653 364,493 4,406,758
Shares redeemed (2,013,738) (24,214,525) (1,788,219) (21,794,555) (2,573,208) (30,443,545)
----------- ----------- ----------- ----------- ----------- -----------
Net decrease (266,643) ($3,445,619) (1,152,408) ($14,057,622) (2,065,124) ($24,253,834)
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
68
<PAGE>
PILGRIM MAYFLOWER TRUST
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31,1999
<TABLE>
<CAPTION>
Pilgrim High Total Return Fund II
--------------------------------------------------------------------------------------------
Class A Class B Class C
--------------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 9,464,888 $52,213,452 30,726,099 $169,510,680 12,093,890 $67,132,621
Reinvested dividends 195,435 1,047,749 533,502 2,853,263 265,028 1,426,932
Shares redeemed (2,663,248) (14,330,427) (2,921,191) (15,435,403) (3,399,441) (18,099,145)
----------- ----------- ----------- ----------- ----------- -----------
Net increase 6,997,075 $38,930,774 28,338,410 $156,928,540 8,959,477 $50,460,408
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Pilgrim High Total Return Fund
--------------------------------------------------------------------------------------------
Class A Class B Class C
--------------------------- --------------------------- ----------------------------
Shares Amount Shares Amount Shares Amount
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 7,307,502 $33,700,237 13,631,735 $63,015,584 3,164,086 $14,488,332
Reinvested dividends 2,832,172 13,014,409 4,666,940 21,417,535 773,187 3,559,008
Shares redeemed (13,775,835) (63,140,734) (19,998,694) (90,185,269) (6,407,467) (29,146,427)
----------- ----------- ----------- ----------- ----------- -----------
Net decrease (3,636,161) ($16,426,088) (1,700,019) ($5,752,150) (2,470,194) ($11,099,087)
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
Note 7. Credit Risk and Defaulted Securities
Although each Fund is a diversified portfolio, the High Total Return Fund
II and High Total Return Fund had 71.23% and 86.49%, respectively, of their
portfolios invested in lower-rated and comparable quality unrated high-yield
securities. Investments in higher-yield securities are accompanied by a greater
degree of credit risk and such lower-rated securities tend to be more sensitive
to economic conditions than higher-rated securities. The risk of loss due to
default by the issuer may be significantly greater for the holders of
high-yielding securities, because such securities are generally unsecured and
are often subordinated to other creditors of the issuer. At October 31, 1999,
the High Total Return Fund II held Irridium LLC, Forman Petroleum, Hurricane
Hydrocarbons, Tri Polyta, Willcox & Gibbs, defaulted securities, and
International Wireless, a bankrupt security. The aggregate value for these
securities is $3,490,300. At October 31, 1999 the High Total Return Fund held
Forman Petroleum, Hurricane Hydrocabons, Tri Polyta, Willcox & Gibbs, Irridium
LLC, defaulted securities, International Wireless and SA Telecom, bankrupt
securities. The aggregate value for these securities is $11,432,575.
For financial reporting purposes, it is each Fund's accounting practice to
discontinue accrual of income and provide an estimate for probable losses due to
unpaid interest income on defaulted bonds for the current reporting period.
Note 8. Forward Foreign Currency Contracts as of October 31, 1999 for the
Pilgrim International Value Fund.
<TABLE>
<CAPTION>
Currency Settlement In Exchange Net Unrealized
To Deliver Date For Value $ (Depreciation)
---------- ---------- ------------- ------- -------------
<S> <C> <C> <C> <C> <C>
Euro Dollar EURO 1,799,718 11/2/99 USD 1,922,459 1,893,547 (28,912)
Euro Dollar EURO 2,261,492 11/30/99 USD 2,419,344 2,383,961 (35,383)
British Pound GBP 2,231,785 11/1/99 USD 3,713,746 3,667,285 (46,461)
British Pound GBP 909,001 11/3/99 USD 1,494,407 1,493,689 (718)
--------------- --------- ---------------
9,549,956 9,438,482 (111,474)
--------------- --------- ---------------
<CAPTION>
Currency Settlement In Exchange Net Unrealized
To Purchase Date For Value $ (Depreciation)
----------- ---------- --------------- --------- --------------
<S> <C> <C> <C> <C> <C>
Hong Kong Dollar HKD 18,734,566 11/1/99 USD 2,411,048 2,411,472 (424)
--------------- --------- ---------------
</TABLE>
69
<PAGE>
PILGRIM MAYFLOWER TRUST
NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 1999
Note 9. Security Loans
Each Fund may lend its securities to brokers, dealers and other financial
institutions in amounts up to one third of the value of its total assets. The
loans are fully collateralized at all times by cash or liquid high grade
securities. As with other extensions of credit, each Fund may bear risk of delay
in recovery or even loss of rights in the collateral should the borrower of the
securities fail financially. The Funds receive compensation for lending their
securities in the form of fees or all or a portion of the income from
investments of the collateral. The Funds also continue to earn income on the
securities loaned. At October 31, 1999, the Funds did not have any securities on
loan.
Note 10. Federal Income Tax - Capital Loss Carryforward
During 1999, the Growth + Value Fund and the Emerging Market Value Fund
utilized the prior years capital loss carryforward amounts of $26,282,878 and
$114,095, respectively.
At October 31, 1999, the High Total Return Fund II had capital loss
carryforwards of $31,512,402 expiring October 31, 2006, and the High Total
Return Fund had capital loss carryforwards of $6,107,124 and $99,343,698
expiring October 31, 2006 and 2007 respectively.
Note 11. Letter of Credit
The Pilgrim Mayflower Trust, Pilgrim Equity Trust, Pilgrim Trust, and
Pilgrim Funds (collectively the "Funds") have entered into an unsecured
committed revolving line of credit agreement (the "Credit Agreement") with State
Street Bank and Trust Company for an aggregate amount of $50,000,000. The
proceeds may be used only to (1) temporarily finance the purchase and sale of
securities; (2) finance the redemption of shares of an investor in the Funds;
and (3) enable the Funds to meet other emergency expenses as defined in the
Credit Agreement. The Funds pays a commitment fee equal to 0.08% per annum on
the daily unused portion of the committed line amount payable quarterly in
arrears. During the period ended October, 31, 1999, the Funds did not have any
loans outstanding.
Note 12. Tax Information (Unaudited)
The amount of long-term capital gain paid for the fiscal year ended
October 31, 1999 was $14,936,347 and $25,873,089 for the International Value
Fund and Income and Growth Fund, respectively.
Of the ordinary distributions made during the fiscal year ended October
31, 1999, the following percentages qualify for the dividends received deduction
available to corporate shareholders; 96%, 5%, and 9% for the Income and Growth
Fund, High Total Return Fund II, and High Total Return Fund, respectively.
The above figures may differ from those cited elsewhere in this report due
to differences in the calculation of income and gains for Securities and
Exchange Commission (book) purposes and Internal Revenue Service (tax) purposes.
The foreign taxes paid or withheld per share, $1,456,704 in total and
$0.02 per share for the International Value Fund, represent taxes incurred by
the Fund on interest and dividends received by the Fund from foreign sources.
Foreign taxes paid or withheld should be included in taxable income with an
offsetting deduction from gross income or as a credit for taxes paid to foreign
governments. You should consult your tax advisor regarding the appropriate
treatment of foreign taxes paid.
70
<PAGE>
PILGRIM MAYFLOWER TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees
of Pilgrim Mayflower Trust:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, 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 Pilgrim Mayflower
Trust (formerly Northstar Trust), comprising Pilgrim Growth + Value Fund
(formerly Northstar Growth + Value Fund), Pilgrim International Value Fund
(formerly Northstar International Value Fund), Pilgrim Emerging Markets Value
Fund (formerly Northstar Emerging Markets Value Fund), Pilgrim Research Enhanced
Index Fund (formerly Northstar Research Enhanced Index Fund), Pilgrim Income and
Growth Fund (formerly Northstar Income and Growth Fund), Pilgrim High Total
Return Fund II (formerly Northstar High Total Return Fund II) and Pilgrim High
Total Return Fund (formerly Northstar High Total Return Fund), (collectively,
the "Trust") at October 31, 1999, and the results of each of their operations
for the year then ended, except for Pilgrim Research Enhanced Index Fund for
which the period was from December 30, 1998 (commencement of operations) to
October 31, 1999, the changes in each of their net assets for each of the two
years in the period then ended, except for Pilgrim Research Enhanced Index Fund
for which the period was from December 30, 1998 (commencement of operations) to
October 31, 1999, and the financial highlights for each of the periods
presented, except for the financial highlights for Pilgrim International Value
Fund for the year ended October 31, 1996 and the period from March 6, 1995 to
October 31, 1995, 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
Trust's management; 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 October 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
The financial highlights for the year ended October 31, 1996 and the
period from March 6, 1995 to October 31, 1995 of Pilgrim International Value
Fund were audited by other auditors whose report dated December 4, 1996
expressed an unqualified opinion on these financial highlights.
PricewaterhouseCoopers LLP
New York, New York
December 6, 1999
71
<PAGE>
Investment Manager
Pilgrim Advisors, Inc.
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004-4408
Distributor
Pilgrim Securities, Inc.
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004-4408
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
Custodian
State Street Bank and Trust
1 Heritage Place
North Quincy, Massachusetts 02171
Legal Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006
Independent Auditors
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
Prospectuses containing more complete information regarding the Funds, including
charges and expenses, may be obtained by calling Pilgrim Securities, Inc.
Distributor at 1-800-334-3444.
Please read the prospectuses carefully before you invest or send money.
