-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S+0OEvTfnCiGb5SqHfjXLOKeU+i/C2uccyOW56ecPOl9yVoLbjKAlN+jjuzyoP+H eVNzCvE6u84YnLSeHmwzEg== /in/edgar/work/20000907/0000950147-00-001377/0000950147-00-001377.txt : 20000922 0000950147-00-001377.hdr.sgml : 20000922 ACCESSION NUMBER: 0000950147-00-001377 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000907 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PILGRIM MUTUAL FUNDS CENTRAL INDEX KEY: 0000895430 STANDARD INDUSTRIAL CLASSIFICATION: [0000 ] STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-07428 FILM NUMBER: 718472 BUSINESS ADDRESS: STREET 1: TWO RENAISSANCE SQUARE STREET 2: 40 NORTH CENTRAL AVE #1200 CITY: PHOENIX STATE: AZ ZIP: 85004 BUSINESS PHONE: 6024178100 MAIL ADDRESS: STREET 1: TWO RENAISSANCE SQUARE STREET 2: 40 NORTH CENTRAL AVE #1200 CITY: PHOENIX STATE: AZ ZIP: 85004 FORMER COMPANY: FORMER CONFORMED NAME: NICHOLAS APPLEGATE MUTUAL FUNDS DATE OF NAME CHANGE: 19930328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PILGRIM INVESTMENT FUNDS INC/MD CENTRAL INDEX KEY: 0000061448 STANDARD INDUSTRIAL CLASSIFICATION: [0000 ] IRS NUMBER: 136066974 STATE OF INCORPORATION: MD FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-01939 FILM NUMBER: 718473 BUSINESS ADDRESS: STREET 1: TWO RENAISSANCE SQUARE 40 N CENTRAL STREET 2: STE 1200 CITY: PHOENIX STATE: AZ ZIP: 85004-4424 BUSINESS PHONE: 6024178100 MAIL ADDRESS: STREET 1: TWO RENAISSANCE SQ STREET 2: 40 N CENTRAL STE 1200 CITY: PHOENIX STATE: AZ ZIP: 85004-4424 FORMER COMPANY: FORMER CONFORMED NAME: PILGRIM INVESTMENT FUNDS INC DATE OF NAME CHANGE: 19950503 FORMER COMPANY: FORMER CONFORMED NAME: PILGRIM MAGNACAP FUND INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: MAGNACAP FUND INC DATE OF NAME CHANGE: 19850701 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PILGRIM GOVERNMENT SECURITIES INCOME FUND INC CENTRAL INDEX KEY: 0000746575 STANDARD INDUSTRIAL CLASSIFICATION: [0000 ] IRS NUMBER: 222544280 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-04031 FILM NUMBER: 718474 BUSINESS ADDRESS: STREET 1: TWO RENAISSANC SQUARE 40 N CENTRAL STREET 2: STE 1200 CITY: PHOENIX STATE: AZ ZIP: 85004-4424 BUSINESS PHONE: 6024178100 MAIL ADDRESS: STREET 1: TWO RENAISSANCE SQ STREET 2: 40 N CENTRAL STE 1200 CITY: PHOENIX STATE: AZ ZIP: 85004-4424 FORMER COMPANY: FORMER CONFORMED NAME: PILGRIM GOVERNMENT SECURITIES INC DATE OF NAME CHANGE: 19950530 FORMER COMPANY: FORMER CONFORMED NAME: PILGRIM GNMA FUND DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PILGRIM BANK & THRIFT FUND INC CENTRAL INDEX KEY: 0000784055 STANDARD INDUSTRIAL CLASSIFICATION: [0000 ] IRS NUMBER: 954020286 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-04504 FILM NUMBER: 718475 BUSINESS ADDRESS: STREET 1: 40 NORTH CENTRAL AVE STE 1200 STREET 2: TWO RENAISSANCE SQUARE CITY: PHOENIX STATE: AZ ZIP: 85004-4424 BUSINESS PHONE: 6024178100 MAIL ADDRESS: STREET 1: TWO RENAISSANCE SQ STREET 2: 40 N CENTRAL STE 1200 CITY: PHOENIX STATE: AZ ZIP: 85004-4424 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PILGRIM ADVISORY FUNDS INC CENTRAL INDEX KEY: 0000944689 STANDARD INDUSTRIAL CLASSIFICATION: [0000 ] IRS NUMBER: 954532342 STATE OF INCORPORATION: MD FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-09040 FILM NUMBER: 718476 BUSINESS ADDRESS: STREET 1: 2 RENAISSANCE SQUARE 12TH FLR STREET 2: 40 NORTH CENTRAL CITY: PHOENIX STATE: AZ ZIP: 85004-4424 BUSINESS PHONE: 6024178100 MAIL ADDRESS: STREET 1: 2 RENAISSANCE SQUARE 12TH FLR STREET 2: 40 NORTH CENTRAL CITY: PHOENIX STATE: AZ ZIP: 85004 N-30D 1 0001.txt ANNUAL REPORT DATED 6/30/2000 PILGRIM (R) - --------------------------- FUNDS FOR SERIOUS INVESTORS Annual Report Classes: A, B, C, M and T June 30, 2000 U.S. EQUITY FUNDS Pilgrim MagnaCap Pilgrim LargeCap Leaders Pilgrim LargeCap Growth Pilgrim MidCap Value Pilgrim MidCap Growth Pilgrim SmallCap Growth Pilgrim Bank and Thrift INTERNATIONAL EQUITY FUNDS Pilgrim Worldwide Growth Pilgrim International Core Growth Pilgrim International SmallCap Growth Pilgrim Emerging Countries Pilgrim Asia-Pacific Equity INCOME FUNDS Pilgrim Government Securities Income Pilgrim Strategic Income Pilgrim High Yield Pilgrim High Yield II Pilgrim Money Market EQUITY & INCOME FUNDS Pilgrim Balanced Pilgrim Convertible - ------- Pilgrim Funds - ------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- Chairman's Message ........................................................ 1 Portfolio Managers' Reports: U.S. Equity Funds ....................................................... 2 International Equity Funds .............................................. 16 Income Funds ............................................................ 26 Equity & Income Funds ................................................... 36 Index Descriptions ........................................................ 40 Report of Independent Auditors ............................................ 43 Statements of Assets and Liabilities ...................................... 44 Statements of Operations .................................................. 52 Statements of Changes in Net Assets ....................................... 56 Financial Highlights ...................................................... 66 Notes to Financial Statements ............................................. 85 Portfolios of Investments ................................................. 109 Shareholder Meetings ...................................................... 153 Tax Information ........................................................... 154 Primary Institutional Fund ................................................ 156 - ------- Pilgrim Funds - ------- CHAIRMAN'S MESSAGE - -------------------------------------------------------------------------------- Dear Shareholder: We are pleased to present the Annual Report for the Pilgrim Funds. On October 29, 1999 Reliastar Financial Corporation acquired Pilgrim Investments, Inc. Our fund family now has 41 funds of varying types which provide more core investment choices for the serious investor. There are seven U.S. Equity Funds, five International Equity Funds, five Income Funds and two Equity & Income Funds which are included in this Annual Report. MagnaCap, LargeCap Leaders, MidCap Value, MidCap Growth, SmallCap Growth, MidCap Value, Bank and Thrift, Government Securities Income, Strategic Income, High Yield, High Yield II and Balanced Funds are all managed by seasoned investment professionals at Pilgrim Investments, Inc. Money Market Fund solely invests all of its assets in Class A shares of the Primary Reserve Institutional Fund, a series of Reserve Institutional Trust. On July 31, 2000, Pilgrim Investments, Inc. notified Nicholas-Applegate Capital Management ("NACM") of its intention to terminate NACM as sub-advisor to the Convertible fund, LargeCap Growth Fund, Worldwide Growth Fund, International Core Growth Fund and Emerging Countries Fund effective September 30, 2000. Beginning October 1, 2000, Pilgrim Investments, Inc. will advise the Funds directly. International SmallCap Growth Fund continues to be managed by Nicholas-Applegate Capital Management. Asia-Pacific Equity Fund is advised by HSBC Asset Management Americas, Inc. and HSBC Asset Management Hong Kong Limited. Both of these private money managers typically manage portfolios primarily for high net worth individuals and institutional investors. Each money manager has extensive knowledge and proven experience in their specialized market segments. At Pilgrim, we are dedicated to providing core investments for the serious investor. We believe that the key to success is matching quality core investments to the individual needs of investors. Core investments are the foundation of every portfolio and the basis of other important investment decisions. Pilgrim prides itself on providing a family of core investments designed to help you reach your financial goals. Our goal is for every investor to have a successful investment experience.(SM) Sincerely, /s/ Robert W. Stallings Robert W. Stallings Chairman and Chief Executive Officer Pilgrim Group, Inc. July 31, 2000 1 - ----------- U.S. Equity Funds - ----------- Portfolio PILGRIM MAGNACAP FUND Manager's Report - -------------------------------------------------------------------------------- Management Team: Howard N. Kornblue, Senior Vice President and Senior Portfolio Manager; G. David Underwood, CFA, Vice President and Director of Research; Robert M. Kloss, Equity Analyst. Goal: The MagnaCap Fund (the "Fund" or "MagnaCap") seeks growth of capital, with dividend income as a secondary consideration. As a disciplined investment philosophy fund, MagnaCap invests in a very select group of companies that have been able to sustain growth over a 10-year period. In selecting portfolio securities, companies are generally assessed with reference to the following criteria as ideal: * A company must have paid or had the financial capability from its operations to have paid a dividend in 8 out of the last 10 years. * A company must have increased its dividend or had the financial capability from its operations to have increased its dividend at least 100% over the past 10 years. * Dividend payout must be less than 65% of current earnings. * Long-term debt should be no more than 25% of the company's total capitalization, or a company's bonds must be rated at least A- or A-3. * The current price should be in the lower half of the stock's price/earnings ratio range for the past ten years, or the ratio of the price of the company's stock at the time of purchase to its anticipated future earnings must be an attractive value in relation to the average for its industry peer group or that of the S&P 500 Composite Stock Price Index. Market Overview: Stocks finished the second quarter with losses in all the major indexes. The S&P 500 Index finished the second quarter down 2.9%, while the Dow Jones Industrial Average lost 4.3%. After reaching a record on March 10 of 5,049, the Nasdaq Composite Index fell 37% to 3,165 on May 23. Ultimately, the technology-heavy composite finished at 3,966, down 607, or 13.3%, for the second quarter. The index had a particularly strong June, increasing 16.6% -- the fifth best month in the Nasdaq' history. Leading the way higher in the broader market in the second quarter were drug stocks, and consumer and food stocks. Merger agreements struck by Bestfoods and Nabisco helped bolster the whole food sector. The vastly different picture on the technology side of the market also encompassed telecommunications stocks, with AT&T, Ericsson and Motorola coming in as some of the biggest decliners. The market focused on earnings. One of the biggest drivers of the stock market has been corporate earnings preannouncements. Surprises on the profit front have roiled whole sectors of the stock market. On June 28 the Federal Reserve Bank decided to hold the line on interest rates, choosing to pause after raising them six times since last June. The central bank's decision came amid signs the U.S. economy is slowing. As a result, the federal funds rate remained at 6.5%, the highest level in nine years. Over the last year, the Federal Reserve Bank has been boosting interest rates in an effort to slow the economy and keep inflation from escalating. They are seeking to achieve a "soft landing" in which growth slows enough to keep inflation under control but not so much that it threatens the country's record 9.5 year economic expansion. Performance: For the one year ended June 30, 2000, the Fund's Class A shares, excluding sales charges, declined 0.36%, compared to the Standard & Poor's 500 index, which gained 7.24% for the same period. Portfolio Specifics: We believe that the Fund's past success can be attributed to the very explicit investment criteria which normally determine the kinds of companies that qualify for inclusion in the portfolio. Out of a universe of approximately 4,000 publicly traded companies, and based upon both in-house and external research, we aim to select the 60 to 80 equities which we believe will be most likely to exhibit a high degree of performance. Among the top performing holdings were Altera (semiconductors), Intel (semiconductors), Alliance Capital Management (financial services), Hewlett-Packard (computers), and Disney (entertainment). At the end of June 2000, the top industry groups were diversified manufacturing, medical products, intergrated oil, telephone, and computers. The top stock holdings were AFLAC, Johnson & Johnson, McDonalds, General Electric and Tellabs. Market Outlook: Going forward, we will continue to employ a "bottom-up" approach to stock selection, drawing from the pool of companies that come closest to meeting the Fund's strict investment criteria given market conditions, the circumstances of the company and the sector within which it falls. The bull market in U.S. stocks is in its ninth year. It has been firmly based on extraordinary changes in the economy that have given us the longest economic expansion in U.S. history. This bull market has been one of the best in U.S. history and we believe it is likely to continue for several reasons. First, the economic expansion that has propelled stock prices higher has been one of the most durable. It has been accompanied by mild inflation, job creation and high-quality profit growth. Second, the current economic and market cycles have benefited from several long-term structural changes. This includes a notable reduction in the government's budget deficit. There has also been a shift to a more sophisticated, technology driven private sector that has spurred widespread productivity gains, which offers new opportunities for growth and jobs. Most bull markets end when stocks are overpriced. However, it has traditionally been extremely difficult to identify the degree of overpricing at which any particular bull market will end. We believe stock prices can continue to rise selectively in 2000 in concert with improvements in corporate earnings and cash flows. Accordingly, we intend to remain almost fully invested, selecting stocks on the basis described at the beginning of this paragraph. 2 Portfolio Manager's Report PILGRIM MAGNACAP FUND - --------------------------------------------------------------------------------
6/30/90 6/91 6/92 6/93 6/94 6/95 6/96 6/97 6/98 6/99 6/30/00 ------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ------- Pilgrim MagnaCap Fund Class A With Sales Charge 10,000 9,912 11,095 1,2006 13,102 15,803 19,170 25,077 30,225 35,039 34,914 Pilgrim MagnaCap Fund Class A Without Sales Charge 10,000 10,521 11,777 12,744 13,907 16,774 20,348 26,619 32,083 37,192 37,060 S&P 500 Index 10,000 10,739 12,180 13,840 14,035 17,693 22,294 30,029 39,087 47,982 51,458 Average Annual Total Returns for the periods ended June 30, 2000 -------------------------------------------------------------------------- Since Inception Since Inception of Class A, B and M of Class C 1 Year 5 Years 10 Years 7/17/95 6/1/99 ------ ------- -------- ------- ------ Including Sales Charge: Class A (1) -6.09% 15.79% 13.32% -- -- Class B (2) -6.11% -- -- 15.99% -- Class C (3) -2.17% -- -- -- 2.64% Class M (4) -4.18% -- -- 15.70% -- Excluding Sales Charge: Class A -0.36% 17.18% 14.00% -- -- Class B -1.11% -- -- 16.22% -- Class C -1.17% -- -- -- 2.64% Class M -0.71% -- -- 16.54% -- S&P 500 Index 7.24% 23.80% 17.80% 23.43%(5) 12.12%
Based upon a $10,000 intitial investment, the graph and table above illustrate the total return of Pilgrim MagnaCap Fund against the Standard & Poor's 500 Composite Stock Price Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of the sales charges. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This letter contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio manager, only through the end of the period as stated on the cover. The portfolio manager's views are subject to change at any time based on market and other conditions. Portfolio holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1.00% for the since inception return. (4) Reflects deduction of the maximum Class M sales charge of 3.50%. (5) Since inception performance for the index is shown from 8/01/95. Principal Risk Factor(s): Exposure to financial and market risks that accompany investments in equities. See accompanying index descriptions on pages 40 and 41. 3 - ----------- U.S. Equity Funds - ----------- Portfolio PILGRIM LARGECAP LEADERS FUND Manager's Report - -------------------------------------------------------------------------------- Management Team: G. David Underwood, CFA, Senior Vice President and Senior Portfolio Manager; Robert M. Kloss, Equities Research Analyst. Goal: The LargeCap Leaders Fund (the "Fund" or "LargeCap Leaders") seeks long-term capital appreciation by investing in a portfolio of stocks of U.S. companies with market capitalizations over $10 billion and believed to be leaders in their industry. Market Overview: During the 12-month period ended June 30, 2000, the U.S. equity market was characterized by: * Volatile stock prices. * Speculative excesses, followed by corrective sell-offs. * Continued narrowing of both the number of stocks and the number of groups influencing market performance. Heightened volatility punctuated the equity markets over the past year. Sentiment swung from positive to speculative to cautionary following in step with investors perceptions of economic recovery, expansion and then impending slowdown. At period end, the major indices appeared to have gone nearly nowhere, although those of the smaller stocks held on to substantial gains. Initially, market participants still felt very positive that a global recession did not develop from earlier economic crises in Asia, Latin America and Europe. Solid economic growth in the U.S. helped as well. The broad market S&P 500 advanced to a then new high in July 1999, lost it over the subsequent quarter, and surged in late 1999. It repeated a similar pattern through the first half of 2000. Mid-sized and smaller stocks echoed this pattern, although mid-capitalization stocks managed to hold more of their gains through June 2000. Rising interest rates over the past year were a major factor in causing market volatility. With the world having moved past its post-crisis healing and economic recovery more sustained, monetary policy shifted toward controlling inflation. To policymakers, the U.S. economy was vulnerable to inflation. The Federal Reserve Bank therefore instituted a series of interest rate increases to tighten monetary policy. Nonetheless, the U.S. economy grew relentlessly but remained non-inflationary. The markets tended to sell off in anticipation of each of rate increase. Affected most were stocks of companies more sensitive to the economy, which investors traded in to and out of. But investors took prices of technology stocks to extremes in Fourth Quarter, 1999 and again in early 2000, thinking these companies would grow through any downturn. As with any market euphoria, the corrective phases were sharp. Testimony to the narrowness of the market, five companies, four of which are technology, were primarily responsible for the S&P 500 Index's return over the past year. Performance: For the one year ended June 30, 2000, the Fund's Class A shares, excluding sales charges, provided a total return of 3.05% versus -5.12% for the S&P/BARRA Value Index and 7.24% for the S&P 500 Index. Portfolio Specifics: Timely sector allocation, a disciplined portfolio management approach and good stock selection for the produced solid equity performance in the Fund. The Technology, Healthcare and Retailing sectors had the most positive influence. Holdings in Texas Instruments, Warner Lambert and Walgreens appreciated nicely. Market Outlook: Though still challenged by interest rates, market conditions should continue to be favorable for equity investment. Growth of corporate profits remains on track and valuations have become more reasonable. 4 Portfolio Manager's Report PILGRIM LARGECAP LEADERS FUND - --------------------------------------------------------------------------------
8/31/95 6/96 6/97 6/98 6/99 6/30/00 ------- ---- ---- ---- ---- ------- Pilgrim LargeCap Leaders Fund Class A With Sales Charge 10,000 11,269 13,888 16,348 19,725 20,326 Pilgrim LargeCap Leaders Fund Class A Without Sales Charge 10,000 11,956 14,735 17,345 20,928 21,566 S&P 500 Index 10,000 12,165 16,386 21,329 26,183 28,079 S&P Barra/Value Index 10,000 11,962 15,658 19,591 22,832 21,666
Average Annual Total Returns for the Periods Ended June 30, 2000 ----------------------------------------------- Since Inception Since Inception of Class A, B and M of Class C 1 Year 9/1/95 6/17/99 ------ ------ ------- Including Sales Charge: Class A (1) -2.88% 15.78% -- Class B (2) -2.70% 16.10% -- Class C (3) 1.30% -- 4.47% Class M (4) -1.05% 15.78% -- Excluding Sales Charge: Class A 3.05% 17.21% -- Class B 2.30% 16.33% -- Class C 2.30% -- 4.47% Class M 2.54% 16.63% -- S&P 500 Index 7.24% 23.81% 7.24%(5) S&P/BARRA Value Index -5.12% 17.27%(6) -4.19% Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim LargeCap Leaders Fund against the S&P 500 Index and the S&P/Barra Value Index. The Indices have an inherent performance advantage over the Fund since they have no cash in their portfolios, impose no sales charges and incur no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Adviser has contractually agreed to waive or defer its management fee and to pay other operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no deferral to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This letter contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio manager, only through the end of the period as stated on the cover. The portfolio manager's views are subject to change at any time based on market and other conditions. Portfolio holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1.00% for the since inception return. (4) Reflects deduction of the maximum Class M sales charge of 3.50%. (5) Since inception performance for the index is shown from 07/01/99. (6) Since inception performance for the index is shown from 08/31/95. Principal Risk Factor(s): Exposure to financial and market risks that accompany investments in equities. See accompanying index descriptions on pages 40 and 41. 5 - ----------- U.S. Equity Funds - ----------- Portfolio PILGRIM LARGECAP GROWTH FUND Manager's Report - -------------------------------------------------------------------------------- Management Team: Catherine Somhegyi, Chief Investment Officer; Andrew B. Gallagher, Partner, Portfolio Manager; William H. Chenoweth, CFA, Partner, Portfolio Manager; Kenneth H. Lee, Portfolio Manager; Trisha C. Schuster, CFA, Portfolio Manager; Evan C. Lundquist, Portfolio Manager; Michael P. Carroll, Portfolio Manager; Thomas J. Smith, CFA, Investment Analyst; Lianne Nelson, Investment Analyst. Goal: The Large Cap Growth Fund (the "Fund" or "Large Cap Growth") seeks to maximize long-term capital appreciation by investing primarily in stocks from a universe of US companies with market capitalizations corresponding to the upper 90% of the Russell 1000 Growth Index. Market Overview: Despite rising interest rates and market volatility, strong corporate profits and investor confidence in the durability of the economic expansion propelled US stocks higher during the fiscal year. For the twelve months ended June 30, 2000, the S&P 500 Index rose 7.2% and the tech-heavy Nasdaq Composite Index advanced 47.7%. Most of the market's gains were concentrated in the fourth quarter of 1999 and the first quarter of 2000 when the S&P 500 Index and Nasdaq increased 17.5% and 66.5%, respectively. Concerns over rising interest rates and the threat of inflation sent equities lower in the third quarter of 1999. These same factors, along with worries over lofty valuations among technology stocks, negatively impacted equity performance in the second quarter of 2000. In response to booming GDP growth, the Federal Reserve Bank raised short-term interest rates a total of 1.75% on six separate occasions from June 1999 through May 2000. Renewed optimism that the Federal Reserve Bank may be close to completing its round of rate hikes drove equity prices higher in June 2000. During the month, most US stock indexes posted gains, led by the Nasdaq, which was up 16.6%. Growth stocks substantially outperformed value stocks this period, mainly due to strength in the technology sector. The Russell 1000 Growth Index advanced 25.7% during the twelve months ended June 30, 2000 while the Russell 1000 Value Index declined 8.9%. This was a continuation of 1999 when the difference between the Russell 1000 Growth and Russell 1000 Value indexes was 25.8%--the largest performance divergence ever recorded for any single calendar year. Performance: For the one year ended June 30, 2000, the Fund's Class A shares, excluding sales charges, provided a total return of 55.35%, significantly outperforming the Russell 1000 Growth Index, which was up 25.67% for the same period. Portfolio Specifics: The Fund's outperformance during the period was primarily attributable to stock selection in the technology and health technology sectors. Among the Fund's top-performing holdings were semiconductor equipment manufacturer Applied Materials, software developer Oracle Corporation, telecommunications equipment providers Qualcomm and Nokia, and biotechnology companies Genentech and Amgen. As of June 30, 2000, 54.7% of the Fund's assets were in technology stocks, comparable to the 55.0% weighting of its Russell 1000 Growth Index benchmark. Market Outlook: Robust corporate earnings, strong cash flows into mutual funds, and optimism that the Federal Reserve Bank series of rate increases has started to cool the overheated US economy provide a positive backdrop for large-cap growth stocks. In addition, market volatility and the recent technology correction have created a more discriminating environment-one that is conducive to our bottom-up, fundamentally driven investment process. 6 Portfolio Manager's Report PILGRIM LARGECAP GROWTH FUND - -------------------------------------------------------------------------------- 7/21/97 6/98 6/99 6/30/00 ------- ---- ---- ------- Pilgrim LargeCap Growth Fund Class A With Sales Charge 10,000 12,810 21,842 33,919 Pilgrim LargeCap Growth Fund Class A Without Sales Charge 10,000 13,589 23,170 35,981 Russell 1000 Growth Index 10,000 12,072 15,363 19,306 Average Annual Total Returns for the periods ended June 30, 2000 -------------------------------- Since Inception 1 Year 7/21/97 ------ ------- Including Sales Charge: Class A (1) 46.42% 51.29% Class B (2) 50.37% 52.92% Class C (3) 53.38% 53.37% Excluding Sales Charge: Class A 55.35% 54.35% Class B 55.37% 53.37% Class C 54.38% 53.37% Russell 1000 Growth Index 25.67% 25.30%(4) Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim LargeCap Growth Fund against the Russell 1000 Growth Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Adviser has contractually agreed to waive or defer its management fees and to pay other operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower has there been no deferral to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This letter contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio manager, only through the end of the period as stated on the cover. The portfolio manager's views are subject to change at any time based on market and other conditions. Portfolio holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75% (2) Reflects deduction of the Class B deferred sales charge of 5% and 3%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. (4) Since inception performance for the Index is shown from 8/1/97. Principal Risk Factor(s): Exposure to financial and market risks that accompany investments in equities. See accompanying index descriptions on pages 40 and 41. 7 - ----------- U.S. Equity Funds - ----------- Portfolio PILGRIM MIDCAP VALUE FUND Manager's Report - -------------------------------------------------------------------------------- Management Team: G. David Underwood, CFA, Senior Vice President and Senior Portfolio Manager; Robert M. Kloss, Equities Research Analyst.* Goal: The MidCap Value Fund (the "Fund" and "MidCap Value") seeks long-term capital appreciation by investing in a portfolio of attractively valued stocks of U.S. companies with market capitalizations between $1.0 billion and $8.0 billion. Market Overview: During the 12-month period ended June 30, 2000, the U.S. equity market was characterized by: * Volatile stock prices. * Speculative excesses, followed by corrective sell-offs. * Continued narrowing of both the number of stocks and the number of groups influencing market performance. Heightened volatility punctuated the equity markets over the past year. Sentiment swung from positive to speculative to cautionary following in step with investors perceptions of economic recovery, expansion and then impending slowdown. At period end, the major indices appeared to have gone nearly nowhere, although those of the smaller stocks held on to substantial gains. Initially, market participants still felt very positive that a recession did not develop from earlier economic crises in Asia, Latin America and Europe. Solid growth in the U.S. helped as well. The broad market S&P 500 Index advanced to a then new high in July 1999, lost it over the subsequent quarter, and surged at year-end. It repeated the pattern in the first half of 2000. Mid-sized and smaller stocks echoed this pattern, although mid-capitalization stocks managed to hold their gains through June 2000. Rising interest rates over the past year were a major factor in market volatility. With the world having moved past its post-crisis healing and economic recovery sustained, monetary policy shifted toward controlling inflation. The U.S. economy was vulnerable to inflation, leading the Federal Reserve Bank to institute a series of interest rate increases to tighten monetary policy. Nonetheless, the U.S. economy grew relentlessly but remained non-inflationary. The markets tended to sell off in anticipation of each of the rate increases. Affected most were stocks of companies more sensitive to the economy, which investors traded in to and out of. But investors took prices of technology stocks to extremes in Fourth Quarter, 1999 and again in early 2000, thinking these companies would grow through any downturn. As with any market euphoria, the corrective phases were sharp. Testimony to the narrowness of the market, five companies, four of which are technology, were primarily responsible for the S&P 500 Index's return over the past year. Performance: For the one year ended June 30, 2000, the Fund's Class A shares, exlcuding sales charges, declined 8.05% versus an increase of 12.64% for the Russell MidCap Index and a decline of 7.91% for the Russell MidCap Value Index. Portfolio Specifics: The Telecommunications, Consumer Noncyclicals and Health Care sectors assisted fund performance the most. Holdings in Champion International, Convergys, Bausch & Lomb andd Republic Services were major factors. Market Outlook: Though still challenged by interest rates, market conditions should continue to be favorable for equity investment. Growth of corporate profits remains on track and valuations have become more reasonable. * Effective October 1, 1999 Pilgrim Investments, Inc. began providing investment advisory services directly for the Fund. Prior to that date the Fund had been sub-advised by Cramer, Rosenthal, McGynn LLC. 8 Portfolio Manager's Report PILGRIM MIDCAP VALUE FUND - --------------------------------------------------------------------------------
8/31/95 6/96 6/97 6/98 6/99 6/30/00 ------- ---- ---- ---- ---- ------- Pilgrim MidCap Value Fund Class A With Sales Charge 10,000 11,355 14,068 16,657 16,816 15,462 Pilgrim MidCap Value Fund Class A Without Sales Charge 10,000 12,048 14,926 17,673 17,841 16,406 Russell MidCap Index 10,000 11,506 14,148 17,685 19,685 22,172 Russell MidCap Value Index 10,000 11,508 14,727 18,519 19,560 18,014
Average Annual Total Returns for the Periods Ended June 30, 2000 ----------------------------------------------- Since Inception Since Inception of Class A, B and M of Class C 1 Year 9/1/95 6/2/99 ------ ------ ------ Including Sales Charge: Class A (1) -13.33% 9.42% -- Class B (2) -13.81% 9.63% -- Class C (3) -9.75% -- -6.07% Class M (4) -11.70% 9.37% -- Excluding Sales Charge: Class A -8.05% 10.77% -- Class B -8.81% 9.92% -- Class C -8.75% -- -6.07% Class M -8.49% 10.17% -- Russell MidCap Index 12.64% 17.91% 15.24%(5) Russell MidCap Value Index -7.91% 12.95% -6.35%(5) Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim MidCap Value Fund against the Russell Midcap Index and Russell MidCap Value Index. The Indices have an inherent performance advantage over the Fund since they have no cash in their portfolio, impose no sales charges and incur no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Adviser has contractually agreed to waive or defer its management fee and to pay other operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no deferral to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This letter contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio manager, only through the end of the period as stated on the cover. The portfolio manager's views are subject to change at any time based on market and other conditions. Portfolio holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1.00% for the since inception return. (4) Reflects deduction of the maximum Class M sales charge of 3.50%. (5) Since inception performance for index is shown from 06/01/99. Principal Risk Factor(s): Exposure to financial and market risks that accompany investments in equities. To the extent the Fund invests in medium-sized companies, it may entail greater price variability than investing in larger companies. See accompanying index descriptions on pages 40 and 41. 9 - ----------- U.S. Equity Funds - ----------- Portfolio PILGRIM MIDCAP GROWTH FUND Manager's Report - -------------------------------------------------------------------------------- Management: Mary Lisanti, Executive Vice President and Portfolio Manager.* Goal: The MidCap Growth Fund (the "Fund" or "MidCap Growth") seeks long-term capital appreciation by investing at least 65% of its total assets in equity securities of medium-sized U.S. companies, and at least 75% of its total assets in common stocks that the portfolio managers feel have above average prospects for growth. Market Overview: The first half of 2000 was a particularly difficult time to navigate the financial markets, as volatility reached all-time highs for all major stock indices. Stock performance varied greatly across economic sectors, as well as across small, mid, and large-cap equities. All of the major indices reached record highs in the first three months of the year, but they went through a quick, sharp correction early in the second quarter. Bonds were just as erratic as the stock market, as investors struggled to analyze the conflicting influences of the Federal Reserve Bank, the massive repurchase of US treasury debt, and the highest level of oil prices in a decade. However, the overriding theme was the Federal Reserve Bank acting to curb the continued strong growth of the US economy by moving short term interest rates higher. In the first six months of the year, technology and telecommunications shares drove the market volatility. After recording spectacular gains in January and February, these "new economy" stocks corrected quickly as investors sought protection from a slowing economy and an aggressive Federal Reserve Bank. In this environment, healthcare stocks provided an excellent defensive investment, as the managed care and pharmaceutical sectors outperformed the market. Biotechnology was more volatile than the rest of the healthcare sector, but these stocks staged a significant rally over the final six weeks of the quarter. At the same time, energy and utilities provided support to a market that has become biased against high-growth, high-beta stocks. Despite the record levels achieved at the outset of the year, 2000 has been a difficult time for investors. All of the major large cap benchmarks are in negative territory for the year, with the Dow Jones Industrials Index having the worst performance, dropping 9.13% through June. After reaching another record in March, the NASDAQ Composite Index fell into negative territory and has now lost 2.54% in 2000, while the S&P 500 Index has fallen 0.42%. However, small and mid-cap stocks have been the best performers for the year, with the Russell 2000 Index gaining 3.04% and the S&P Midcap Index jumping 8.98%. Performance: For the one year ended June 30, the Fund's Class A shares, excluding sales charges, provided a total return of 77.33% versus 48.60% for the Russell Midcap Growth Index for the same period. Portfolio Specifics: The Fund invests in high-growth, high-beta stocks, which were extremely volatile during the period, but the portfolio has been diversified substantially since the beginning of the year to reflect our view that the economy would slow in a rising interest rate environment. While exposure to technology stocks remains significant, it is clearly more selective, and the Fund continued to increase weightings in themes such as "Flourishing in the Managed Care Environment," the "Life Sciences Revolution," and "Re-Energizing America." We also used the volatility in the market to add to or enter into new positions in the portfolio. Some of the individual stocks that were significant contributors to performance in the first half of 2000 were Brocade Communications, Mercury Interactive, Siebel Systems and Waters Corp. Market Outlook: We expect that the Federal Reserve Bank's six rate increases will slow the US economy, creating a more challenging backdrop for investors in the remainder of 2000. The market has already started to broaden from the technology and telecommunications driven market of late 1999 and the first quarter of this year. However, this broadening will create a "market of stocks" as opposed to a "stock market," where company performance will vary significantly within specific industries. Competitive positioning and business strategies will differentiate companies, as they deal with secular changes such as globalization and the Internet. Companies will not be treated equally in the slowing US economy, and the stock market will do the same, creating significant opportunities for active portfolio managers to outperform their benchmarks. The ability to identify companies with consistent earnings growth will be essential to steering through the current economic environment. By blending bottoms-up research and a top-down thematic approach, we believe that we will be able to identify stocks that will flourish in the changing economy. At the same time, we will continue to seek to exploit the market volatility to our investors' advantage, using weakness to accumulate or add to positions opportunistically. - ---------- * Effective April 1, 2000 Pilgrim Investments, Inc. began providing investment advisory services directly for the Fund. Prior to that date the Fund had been sub-advised by Nicholas Applegate Capital Management. 10 Portfolio Manager's Report PILGRIM MIDCAP GROWTH FUND - --------------------------------------------------------------------------------
4/19/93 6/93 6/94 6/95 6/96 6/97 6/98 6/99 6/30/00 ------- ---- ---- ---- ---- ---- ---- ---- ------- Pilgrim MidCap Growth Fund Class A With Sales Charge 10,000 10,234 9,429 11,418 14,994 15,822 19,656 24,597 43,616 Pilgrim MidCap Growth Fund Class A Without Sales Charge 10,000 10,856 10,002 12,112 15,906 16,784 20,851 26,092 46,268 Russell MidCap Growth Index 10,000 10,429 10,646 13,459 16,633 19,560 24,257 29,184 43,366 Average Annual Total Returns for the Periods Ended June 30, 2000 ------------------------------------------------------------- Since Inception Since Inception of Class A and C of Class B 1 Year 5 Year 4/19/93 5/31/95 ------ ------ ------- ------- Including Sales Charge: Class A (1) 67.13% 29.20% 22.70% -- Class B (2) 71.28% 29.81% -- 31.08% Class C (3) 75.18% 29.98% 22.95% -- Excluding Sales Charge: Class A 77.33% 30.74% 23.71% -- Class B 76.28% 29.95% -- 31.15% Class C 76.18% 29.98% 22.95% -- Russell MidCap Growth Index 48.60% 26.37% 22.72%(4) 26.99%(5)
Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim MidCap Growth Fund against the Russell MidCap Growth Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Adviser has contractually agreed to waive or defer its management fees and to pay other operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no deferral to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This letter contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio manager, only through the end of the period as stated on the cover. The portfolio manager's views are subject to change at any time based on market and other conditions. Portfolio holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75% (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1.00% for the 1 year return. (4) Since inception performance for index is shown from 5/01/93. (5) Since inception performance for the index is shown form 06/01/95. Principal Risk Factor(s): Exposure to financial and market risks that accompany investments in equities. To the extent the Fund invests in mid-size companies, stocks of mid-size companies may entail greater price variability than those of larger companies. See accompanying index descriptions on pages 40 and 41. 11 - ----------- U.S. Equity Funds - ----------- Portfolio PILGRIM SMALLCAP GROWTH FUND Manager's Report - -------------------------------------------------------------------------------- Portfolio Management: Mary Lisanti, Executive Vice President and Portfolio Manager. Goal: The SmallCap Growth Fund (the "Fund" or "SmallCap Growth") seeks maximum long-term capital appreciation by investing at least 65% of its total assets in equity securities of small U.S. companies, and at least 75% of its total assets in common stocks that the portfolio manager feels have above average prospects for growth. Market Overview: The first half of 2000 was a particularly difficult time to navigate the financial markets, as volatility reached all-time highs for all major stock indices. Stock performance varied greatly across economic sectors, as well as across small, mid, and large-cap equities. All of the major indices reached record highs in the first three months of the year, but they went through a quick, sharp correction early in the second quarter. Bonds were just as erratic as the stock market, as investors struggled to analyze the conflicting influences of the Federal Reserve Bank, the massive repurchase of US treasury debt, and the highest level of oil prices in a decade. However, the overriding theme was the Federal Reserve Bank acting to curb the continued strong growth of the US economy by moving short term interest rates higher. In the first six months of the year, technology and telecommunications shares drove the market volatility. After recording spectacular gains in January and February, these "new economy" stocks corrected quickly as investors sought protection from a slowing economy and an aggressive Federal Reserve Bank. In this environment, healthcare stocks provided an excellent defensive investment, as the managed care and pharmaceutical sectors outperformed the market. Biotechnology was more volatile than the rest of the healthcare sector, but these stocks staged a significant rally over the final six weeks of the quarter. At the same time, energy and utilities provided support to a market that has become biased against high-growth, high-beta stocks. Despite the record levels achieved at the outset of the year, 2000 has been a difficult time for investors. All of the major large cap benchmarks are in negative territory for the year, with the Dow Jones Industrials having the worst performance, dropping 9.13% through June. After reaching another record in March, the NASDAQ Composite Index fell into negative territory and has now lost 2.54% in 2000, while the S&P 500 Index has fallen 0.42%. However, small and mid-cap stocks have been the best performers for the year, with the Russell 2000 Index gaining 3.04% and the S&P Midcap Index jumping 8.98%. Performance: For the one year ended ended June 30, 2000 the Funds Class A shares, excluding sales charges, provided a total return of 60.66% versus 28.39% for the Russell 2000 Growth Index for the same period. Portfolio Specifics: The Fund invests in high-growth, high-beta stocks, which were very volatile during the period, but the portfolio has been diversified substantially since the beginning of the year to reflect our view that the economy would slow in response to rising interest rates. While our allocation towards technology stocks remains significant, it is more selective, and the rest of the Fund has continued to diversify into themes such as "Flourishing in the Managed Care Environment," the "Life Sciences Revolution," and "Re-Energizing America." We also used the volatility in the market to add to or enter into new positions in the portfolio. Some of the individual stocks that were significant contributors to performance in the first half of 2000 were Alkermes, Digital Lightwave, Power-One, and Virata Corp. Market Outlook: We expect that the Federal Reserve Bank's six rate increases will slow the US economy, creating a more challenging backdrop for investors in the remainder of 2000. The market has already started to broaden from the technology and telecommunications driven market of late 1999 and the first quarter of this year. However, this broadening will create a "market of stocks" as opposed to a "stock market," where company performance will vary significantly within specific industries. Competitive positioning and business strategies will differentiate companies, as they deal with secular changes such as globalization and the Internet. Companies will not be treated equally in the slowing US economy, and the stock market will do the same, creating significant opportunities for active portfolio managers to outperform their benchmarks. The ability to identify companies with consistent earnings growth will be essential to steering through the current economic environment. By blending bottoms-up research and a top-down thematic approach, we believe that we will be able to identify stocks that will flourish in the changing economy. At the same time, we will continue to seek to exploit the market volatility to our investors' advantage, using weakness to accumulate or add to positions opportunistically. 12 Portfolio Manager's Report PILGRIM SMALLCAP GROWTH FUND - --------------------------------------------------------------------------------
12/27/93 6/94 6/95 6/96 6/97 6/98 6/99 6/30/00 ------ ----- ------ ------ ------ ------ ------ ------ Pilgrim SmallCap Growth Fund Class A With Sales Charge 10,000 8,439 10,958 14,810 15,509 17,718 21,287 34,200 Pilgrim SmallCap Growth Fund Class A Without Sales Charge 10,000 8,952 11,624 15,710 16,452 18,795 22,581 36,279 Russell 2000 Growth Index 10,000 8,991 11,313 14,310 14,969 16,944 18,349 23,558 Average Annual Total Returns for the Periods Ended June 30, 2000 ----------------------------------------------------------------- Since Inception Since Inception of Class A and C of Class B 1 Year 5 Year 12/27/93 5/31/95 ------ ------ -------- ------- Including Sales Charge: Class A (1) 51.42% 24.08% 20.79% -- Class B (2) 54.68% 24.47% -- 26.12% Class C (3) 58.67% 24.77% 21.13% -- Excluding Sales Charge: Class A 60.66% 25.56% 21.89% -- Class B 59.68% 24.64% -- 26.19% Class C 59.67% 24.77% 21.13% -- Russell 2000 Growth Index 28.39% 15.80% 14.09%(4) 17.05%(5)
Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim SmallCap Growth Fund against the Russell 2000 Growth Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Adviser has contractually agreed to waive or defer its management fee and to pay other operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no deferral to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This letter contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio manager, only through the end of the period as stated on the cover. The portfolio manager's views are subject to change at any time based on market and other conditions. Portfolio holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1.00% for the 1 year return. (4) Since inception performance for index is shown from 1/1/94. (5) Since inception performance for index is shown from 6/1/95. Principal Risk Factor(s): In exchange for higher growth potential, stocks of smaller companies may entail greater price variability than those of larger companies. See accompanying index descriptions on pages 40 and 41. 13 - ----------- U.S. Equity Funds - ----------- Portfolio PILGRIM BANK AND THRIFT FUND Manager's Report - -------------------------------------------------------------------------------- Management Team: Carl Dorf, CFA, Senior Vice President and Senior Portfolio Manager; Steven L. Rayner, CFA, CPA, Equity Research Analyst; Julia Hamilton, Junior Research Analyst. Goal: The Bank and Thrift Fund (the "Fund" or "Bank and Thrift") seeks long-term capital appreciation with income as a secondary objective. The Fund invests at least 65% of its total assets in equity securities of national and state-chartered banks (other than money-center banks), thrifts, or their holding companies, and in savings accounts of mutual thrifts that may allow the Fund to participate in stock conversions of the mutual thrift. Market Overview: Financial stocks continued to underperform the overall market during the twelve months ended June 30, 2000. This sector has performed poorly for about two and a half years following five excellent years of performance. On June 30, 1999 the Federal Reserve Bank increased the Federal Reserve Bank rate by 25 basis points, beginning a series of six rate increases totaling 1.75% during this twelve month period, the most recent on May 16, 2000. This environment of monetary tightening meant financial stocks had to swim against the current as investors worried about how much the Federal Reserve Bank would ultimately increase rates and what impact this would have on financial companies. During this period, financial stocks as a group were largely driven by changes in inflationary expectations, as the market constantly assessed the likelihood of further Federal Reserve Bank rate increases. Financial stocks generally underperformed the broader market on days when economic news hinted at inflationary pressures due to a stronger economy and outperformed on days when economic news indicated a weaker economy and subdued inflation. After several rallies and slides during the year, the financial group peaked in early June, then sold off and gave back its gains, as credit quality concerns became more prominent in June when several regional banks pre-announced earnings shortfalls due to increases in problem loans. Performance: For the one year ended June 30, 2000 the Fund's Class A shares, excluding sales charges, declined 22.4%, compared to declines of 22.1% for the S&P Regional Bank Index and 23.5% for the NASDAQ 100 Financials Index. The financial sector underperformed the broader market indices during this period as the Dow Jones Industrials Index declined 3.3% and the S&P 500 Index rose 7.2%. Portfolio Specifics: Our Fund followed its typical historical pattern of generally outperforming the bank index during tougher stretches while lagging somewhat during periods of macro-driven strength in the group. In April, our performance was helped by three acquisitions of companies we owned in the Fund: First United Bancshares, BSB Bancorp, and Highland Bancorp. This is the kind of consolidation activity that we have long been awaiting. We feel that the relative valuations of potential acquisition candidates among many small and mid cap banks have not responded to this consolidation news, creating an opportunity to add to some of our smaller cap holdings at attractive valuations. Credit quality, particularly in the nationally syndicated loan area, has become a major concern and has resulted in weakness in the bank group over the last few weeks. Disappointing results are often preannounced and June saw several high profile credit quality warnings, starting with Wachovia Bank. We had seen this coming in their shifting lending mix and approach and therefore did not own Wachovia Bank in the Fund. Next to preannounce credit problems was Union Bank of California. We had previously reduced our position due to its large syndicated loan exposure, but did not sell fully after it declined to levels that made it appear inexpensive and fully reflective of the risk in its syndicated portfolio. The third shoe to fall came from Pacific Century Financial, which preannounced credit problems in syndicated lending as well as Hawaiian commercial real estate. This one was a surprise since the Hawaiian economy usually lags behind the rest of the country and appeared to still be in recovery mode. Problems should not have surfaced here yet. A fourth shoe to drop was provided by First Union Bank, which announced a restructuring accompanied by a colossal restructuring charge. While the market had expected a restructuring from First Union Bank's new CEO, the sheer size of the charge was a surprise, as was the extent to which management talked down earnings expectations. The Bank also disclosed information that implied to us a subtle but disturbing deterioration in credit quality. Fortunately, we sold our position in First Union Bank earlier this year due to concerns about credit and earnings quality. We have always emphasized quality in the Fund and are paying even more attention to it today. Syndicated lending has become the area to watch out for and we are doing just that by trying to limit our exposure in companies that have large syndicated portfolios, especially if they are not the lead managers in a large percentage of their deals. The best value, in our opinion, is still in the cleaner small-cap names and we are still adding to existing holdings as well as adding new names in this area. We have become more comfortable with our thrift holdings since these companies should have less credit risk, are not involved in syndicated lending, and stand to benefit most directly when the Federal Reserve Bank tightening is perceived to have ended. Market Outlook: The relative valuation of financial stocks, and our Fund in particular, is quite attractive. The bank group trades at about 46% of the P/E of the S&P 500 Index, and the average bank and thrift in our Fund trades at a more attractive 38% relative P/E. We believe selectivity within the financial sector is especially important at this stage. On balance our outlook on the bank group is neutral. Banks are facing pressure on several fronts, including a difficulty growing deposits, which has caused margin pressure, and a tougher credit environment as higher rates put incremental stress on borrowers. But despite the existence of these pressures, we feel it is too early to know how much adversity they will cause for the banks. And banks as a group are very attractively priced relative to the overall market, so in balancing these factors we come out neutral toward the group. Our biggest concern is whether or not the Federal Reserve Bank has already gone too far in raising rates and has set the stage to push us into a recession. If the Federal Reserve Bank is done or nearly done raising rates, and successfully engineers a soft landing, we believe banks and financials will be a very good place to be 14 Portfolio Manager's Report PILGRIM BANK AND THRIFT FUND - -------------------------------------------------------------------------------- invested. If the economy sees a modest, but not severe slowdown, we think that relative to the overall market the banks and financials should perform reasonably well, given their inexpensive valuations. If the economy falls into a recession, however, we believe credit losses could rise, which would impair banks' earnings, rendering current estimates too high and causing the group to perform poorly. While we believe that the overall market would suffer in such an environment, we would not argue for relative outperformance by the banks. We do not believe a recession scenario is likely, but we do not have a crystal ball. For those investors who do not believe a recession is likely and therefore choose to be invested in the market, we believe the financial sector, and our fund in particular, offers attractive value.
6/30/90 6/91 6/92 6/93 6/94 6/95 6/96 6/97 6/98 6/99 6/30/00 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Pilgrim Bank And Thrift Fund Class A With Sales Charge 10,000 10,825 14,669 17,487 18,148 20,430 26,921 43,961 62,603 57,211 44,373 Pilgrim Bank And Thrift Fund Class A Without Sales Charge 10,000 11,482 15,560 18,549 19,250 21,671 28,556 46,632 66,406 60,686 47,068 S&P 500 Index 10,000 10,739 12,180 13,840 14,035 17,693 22,294 30,029 39,087 47,982 51,458 S&P Major Regional Banks Index 10,000 11,307 15,586 19,614 23,242 22,707 25,532 52,605 71,143 74,280 57,872 Average Annual Returns for the Periods Ended June 30, 2000 ----------------------------------------------------------- Since Inception of Class B 1 Year 5 Year 10 Year 10/17/97 ------ ------ ------- -------- Including Sales Charge: Class A (1) -26.90% 15.41% 16.07% -- Class B 2) -28.00% -- -- -7.56% Excluding Sales Charge: Class A -22.44% 16.78% 16.75% -- Class B -23.00% -- -- -6.75% S&P 500 Index 7.25% 23.77% 17.76% 20.64%(3) S&P Major Regional Banks Index -22.09% 17.76% 17.95% -0.33%(3) NASDAQ 100 Financial Index -23.49% 13.08% N/A -4.10%(3)
Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim Bank and Thrift Fund against the S&P 500 Index and the S&P Major Regional Banks Index. In the table, the Fund is also compared to the NASDAQ 100 Financial Index. This index does not have 10 years of total return information available. The Indices have an inherent performance advantage over the Fund since they have no cash in their portfolio, impose no sales charges and incur no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Prior to October 20, 1997, the Fund operated as a closed-end investment company. All performance information prior to this date reflects the historical expense levels of the Fund as a closed-end investment company without adjustment for the higher annual expenses of the Fund's Class A shares. Performance would have been lower if adjusted for these charges and expenses. Ten-year returns assume no participation in the 1992 rights offering and full participation in the 1993 rights offering, and reflect an additional investment of $3,639 into the fund. A simultaneous investment of the same amount is included in each index for comparative reasons. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This letter contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio manager, only through the end of the period as stated on the cover. The portfolio manager's views are subject to change at any time based on market and other conditions. Portfolio holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 3%, respectively, for the 1 year and since inception returns. (3) Since inception return from 10/31/97. Principal Risk Factor(s): Because the Fund's portfolio is concentrated in the banking and thrift industry, it may be subject to greater risk than a portfolio that is not concentrated in one industry. See accompanying index descriptions on pages 40 and 41. 15 - ------------- International Equity Funds - ------------- Portfolio PILGRIM WORLDWIDE GROWTH FUND Manager's Report - -------------------------------------------------------------------------------- Management Team: Catherine Somhegyi, Partner, Chief Investment Officer, Global Equity Management; Andrew B. Gallagher, Partner, Portfolio Manager; Loretta J. Morris, Partner, Portfolio Manager; Randall S. Kahn, CFA, Portfolio Manager; Lawrence S. Speidell, CFA, Partner, Director of Global/Systematic Portfolio Management and Research; Pedro V. Marcal, Partner, Portfolio Manager; Ernesto Ramos, Ph.D., Melisa A. Grigolite, Portfolio Manager. Goal: The Worldwide Growth Fund (the "Fund" or "Worldwide Growth") seeks to maximize long-term capital appreciation through investments in growth-oriented companies around the world, regardless of geographic location. Market Overview: A number of factors contributed to the positive environment for global investing during the twelve-month period ended June 30, 2000. In the US, strong corporate profits and investor confidence in the durability of the economic expansion sent stocks higher in spite of rising interest rates and volatility. For the twelve months ended June 30, 2000, the S&P 500 Index rose 7.2% and the tech-heavy Nasdaq Composite Index advanced 47.7% In response to booming US GDP growth, the Federal Reserve increased short-term interest rates a total of 1.75% on six separate occasions from June 1999 through May 2000. Following a spring correction in the technology sector, renewed optimism that the Federal Reserve Bank may be close to completing its round of rate hikes drove equity prices higher in June 2000. During the month, most US stock indexes posted positive returns, led by the Nasdaq, which was up 16.6%. Amid acceleration in GDP growth in many of its member countries, the European Central Bank also increased rates a total of 1.75% on five separate occasions during the fiscal year. Increased productivity, the technology revolution, and structural reform propelled international stock markets higher during the twelve-month period, despite rising rates. The MSCI EAFE Index gained 17.2% in the period, after advancing 22.2% during the second half of 1999. In the first six months of 2000, equities overseas moved in tandem with the US market, falling in response to concerns over higher interest rates, inflation, and high valuations among technology stocks. Performance: For the one year ended June 30, 2000 the Fund's Class A shares, excluding sales charges, provided a total return of 42.43% versus 12.53% for the MSCI World Index for the same period. Portfolio Specifics: The Fund's strong performance was largely attributable to stock selection in the US, although stock selection in Japan, the UK, and Canada also positively impacted results. Strong domestic performers included computer hardware manufacturer, Sun Microsystems; systems and business applications software provider, Oracle Corporation; and Genentech, a biotechnology firm. Other top-performing holdings were UK-based ARM Holdings, a microprocessor designer, and Nortel Networks, a Canadian telecommunications company. During the period, on a stock-specific basis, we significantly increased the fund's exposure to technology, reflecting our conviction in this sector's compelling long-term growth potential. Market Outlook: We remain optimistic in our outlook for global investing as we continue to identify high-growth companies poised to benefit from positive change. Favorable themes such as increased international trade, deregulation, and restructuring should all bode well for the Worldwide Growth Fund. 16 - ---------------- Portfolio Manager's Report - ---------------- PILGRIM WORLDWIDE GROWTH FUND - --------------------------------------------------------------------------------
4/19/93 6/93 6/94 6/95 6/96 6/97 6/98 6/99 6/30/00 ------ ------ ------ ------ ------ ------ ------ ------ ------ Pilgrim Worldwide Growth Fund Class A With Sales Charge 10,000 9,925 11,071 11,807 14,296 17,279 21,621 29,815 42,464 Pilgrim Worldwide Growth Fund Class A Without Sales Charge 10,000 10,528 11,744 12,524 15,165 18,329 22,936 31,628 45,045 MSCI World Index 10,000 10,148 11,241 12,501 14,876 18,269 21,459 24,909 28,032 Average Annual Total Returns for the Periods Ended June 30, 2000 ---------------------------------------------------------------- Since Inception Since Inception of Class A and C of Class B 1 Year 5 Year 4/19/93 5/31/95 ------ ------ ------- ------- Including Sales Charge: Class A (1) 34.24% 27.66% 22.24% -- Class B (2) 36.54% 28.27% -- 28.20% Class C (3) 40.48% 28.37% 22.48% -- Excluding Sales Charge: Class A 42.43% 29.17% 23.25% -- Class B 41.54% 28.42% -- 28.27% Class C 41.48% 28.37% 22.48% -- MSCI World Index 12.53% 17.53% 15.47%(4) 17.21%(5)
Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim Worldwide Growth Fund against the Morgan Stanley Capital International (MSCI) World Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Adviser has contractually agreed to waive or defer its management fees and to pay other operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no deferral to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This letter contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio manager, only through the end of the period as stated on the cover. The portfolio manager's views are subject to change at any time based on market and other conditions. Portfolio holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75% (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1.00% for the 1 year return. (4) Since inception performance for index is shown from 05/01/93. (5) Since inception performance for index is shown from 06/01/95. Principal Risk Factor(s): International investing does pose special risks, including currency fluctuation, economic and political risks not found in investments that are solely domestic. The Fund may invest in companies located in countries with emerging securities markets when the sub-advisor believes they present attractive invesment opportunities. Risks of foreign investing are generally intensified for investments in emerging markets. See accompanying index descriptions on pages 40 and 41. 17 - ------------- International Equity Funds - ------------- PILGRIM INTERNATIONAL Portfolio CORE GROWTH FUND Manager's Report - -------------------------------------------------------------------------------- Management Team: Catherine Somhegyi, Chief Investment Officer; Loretta Morris, Partner, Portfolio Manager; Randall Kahn, CFA, Portfolio Manager; Lawrence S. Speidell, CFA, Partner, Director of Global/Systematic Portfolio Management and Research; Pedro V. Marcal, Partner, Portfolio Manager; Jason Campbell, Portfolio Manager; Melisa Grigolite, Portfolio Manager; Jessica Goncalves, Portfolio Manager; Ernesto Ramos, Portfolio Manager; Christopher Angioletti, Portfolio Manager; Jon Borchardt, Investment Analyst; John Bracken, Jr., Investment Analyst; Investment Analyst; Theodora Jamison, Investment Analyst; David Lopez, Investment Analyst; John Mazur, Investment Analyst; Andrew Parmet, Investment Analyst; Jacob Pozharny, Investment Analyst; Rolf Schild, Investment Analyst. Goal: The International Core Growth Fund (the "Fund" or "International Core Growth") seeks to maximize total return by investing primarily in companies located outside the United States with market capitalizations corresponding to the top 75% of publicly traded companies as measured by stock market capitalizations within each country. Market Overview: Structural reform, increased productivity, and the technology revolution were among the many positive factors that sent international stock markets higher during the fiscal year ended June 30, 2000. The Morgan Stanley Capital International ("MSCI") EAFE Index advanced 17.2% in the period, after gaining 22.2% during the second half of 1999. In the first six months of 2000, equities overseas moved in tandem with the US market, falling in response to concerns over rising interest rates, inflation, and lofty valuations among technology stocks. Investor optimism over a resurgence in economic growth contributed to a 26.5% advance for Japanese stocks during the period, as measured by the MSCI Japan Index. However, in the first half of 2000, Japanese equities languished over concerns about the sustainability of the budding economic recovery. European stocks produced strong results during the period, particularly bourses in Finland, Sweden, and France. Equity markets benefited from structural reform, growth in the technology and telecommunications sectors, and economic expansion. Amid a pick-up in GDP growth in many countries, the European Central Bank raised interest rates a total of 1.75% on five separate occasions during the fiscal year. Performance: For the one year ended June 30, 2000, the Fund's Class A shares, excluding sales charges, provided a total return of 32.83% versus 17.44% for the MSCI EAFE Index for the same period. Portfolio Specifics: Stock selection within the technology sector was responsible for the majority of the Fund's outperformance this period. Top-performing holdings included telecommunications equipment providers Ericsson, Nokia, and Nortel Networks, headquartered in Sweden, Finland, and Canada, respectively. ASM Lithography, a Netherlands-based supplier of lithography projection systems, and UK-based ARM Holdings, a microprocessor designer, also contributed to the fund's strong results. Over the course of the fiscal year, on a stock-by-stock basis, we modestly increased the Fund's exposure to Europe while paring back holdings in the Pacific Rim. We significantly increased our exposure to technology stocks, demonstrating our belief in the sector's long-term growth potential. At the same time, we trimmed holdings in the manufacturing, building materials, and commodities industries. Market Outlook: International markets remain a source of attractive investment opportunities. In Europe, productivity is rising and the economy is being transformed by a restructuring wave that stands to boost corporate profits. Positive factors for Japan include the developing technology industry and rising corporate confidence, which results in increased capital equipment spending. And as aging populations in both Europe and Japan plan for retirement, the demand for equities should strengthen. In this environment, we are confident that by adhering to our strict investment philosophy we will be able to continue seeking to identify international companies with superior growth prospects. 18 Portfolio PILGRIM INTERNATIONAL Manager's Report CORE GROWTH FUND - --------------------------------------------------------------------------------
2/28/97 6/97 6/98 6/99 6/30/00 ------ ------ ------ ------ ------ Pilgrim International Core Growth Fund Class A With Sales Charge 10,000 11,222 13,916 14,771 19,579 Pilgrim International Core Growth Fund Class A Without Sales Charge 10,000 11,904 14,762 15,669 20,769 MSCI EAFE Index 10,000 11,349 12,073 13,030 15,303 Average Annual Total Returns for the Periods Ended June 30, 2000 -------------------------------- Since Inception 1 Year 2/28/97 ------ ------- Including Sales Charge: Class A (1) 25.19% 27.36% Class B (2) 26.62% 23.20% Class C (3) 30.73% 23.59% Excluding Sales Charge: Class A 32.83% 24.54% Class B 31.62% 23.74% Class C 31.73% 23.59% MSCI EAFE Index 17.44% 13.61%(4)
Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim International Core Growth Fund against the Morgan Stanley Capital International Europe, Australia, Far East (MSCI EAFE) Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Adviser has contractually agreed to waive or defer its management fee and to pay other operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no deferral to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This letter contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio manager, only through the end of the period as stated on the cover. The portfolio manager's views are subject to change at any time based on market and other conditions. Portfolio holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 3%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1.00% for the 1 year return. (4) Since inception performance for index is shown from 03/01/97. Principal Risk Factor(s): International investing does pose special risks, including currency fluctuation, economic and political risks not found in investments that are solely domestic. The Fund may invest in companies located in countries with emerging securities markets when the sub-advisor believes they present attractive invesment opportunities. Risks of foreign investing are generally intensified for investments in emerging markets. See accompanying index descriptions on pages 40 and 41. 19 - ------------- International Equity Funds - ------------- PILGRIM INTERNATIONAL Portfolio SMALLCAP GROWTH FUND Manager's Report - -------------------------------------------------------------------------------- Management Team: Catherine Somhegyi, Chief Investment Officer; Loretta J. Morris, Partner, Portfolio Manager; Randall S. Kahn, CFA, Portfolio Manager; Lawrence S. Speidell, CFA, Partner, Director of Global/Systematic Portfolio Management and Research; Pedro V. Marcal, Partner, Portfolio Manager; Ernesto Ramos, Ph.D., Portfolio Manager; Jason Campbell, Portfolio Manager; Jessica Goncalves, Portfolio Manager; Melisa Grigolite, Portfolio Manager; Christopher Angioletti, Portfolio Manager; Jon Borchardt, Investment Analyst; John Bracken, Jr., Investment Analyst; Investment Analyst; Theodora Jamison, Investment Analyst; David Lopez, Investment Analyst; John Mazur, Investment Analyst; Andrew Parmet, Investment Analyst; Jacob Pozharny, Investment Analyst; Rolf Schild, Investment Analyst. Goal: The International SmallCap Growth Fund (the "Fund" or "International SmallCap Growth") seeks to maximize long-term capital appreciation through investing primarily in companies located outside the United States corresponding to the lower 25% market capitalization within each country with a maximum market cap of $5 billion. Market Overview: International small-cap stocks posted solid gains for the fiscal year ended June 30, 2000, led by advances in Japan, Italy, France, and Switzerland. The Morgan Stanley Capital International ("MSCI") EAFE Small Cap Index advanced 10.7% during the period and was resilient to the spring correction in technology stocks, outperforming both the S&P 500 Index and the Russell 2000 Index during the first six months of 2000. In Japan, the MSCI Japan Small Cap Index advanced 19.2% as the trends of structural reform, corporate restructuring and consolidation helped smaller companies flourish. In Europe, the advent of the Economic Monetary Union (EMU) created a favorable environment for small companies as EMU fostered heightened competition and an increased desire to boost efficiency. Small stocks in Europe rose 8.6% during the period, as measured by the MSCI Europe Small Cap Index. Performance: For the one year ended June 30, 2000, the Fund's Class A shares, excluding sales charges, provided a total return of 82.89% versus 14.54% for the Salomon EPAC EMI (Europe Pacific Australasia Composite Extended Market Index) for the same period. Portfolio Specifics: Technology companies in Japan, the United Kingdom, and Germany drove the Fund's substantial outperformance during the fiscal year. One of the Fund's major contributors to performance was ARM Holdings PLC, a United Kingdom-based designer of reduced instruction set computing (RISC) microprocessors. Another top performer included Dialog Semiconductor, a German chip manufacturer supplying the mobile communications industry. Both companies are involved in computer chips. Market Outlook: We remain optimistic about the investment potential for international small cap stocks due to many positive factors, including: * Continued advances in technology and structural reforms that are reshaping the world's business landscape and creating opportunities for smaller companies The emergence of stock markets such as Neuer Markt in Germany, Nouveau Marche in France, Mothers Exchange in Japan, and Nasdaq Japan which provide new avenues for investors to gain access to smaller, high-growth companies outside the United States. 20 Portfolio PILGRIM INTERNATIONAL Manager's Report SMALLCAP GROWTH FUND - --------------------------------------------------------------------------------
8/31/94 6/95 6/96 6/97 6/98 6/99 6/30/00 ------ ----- ------ ------ ------ ------ ------ Pilgrim International SmallCap Growth Fund Class A With Sales Charge 10,000 8,815 10,655 13,006 16,935 20,794 38,030 Pilgrim International SmallCap Growth Fund Class A Without Sales Charge 10,000 9,351 11,303 13,796 17,965 22,058 40,342 Salomon EPAC EM Index 10,000 9,868 11,550 11,693 11,779 12,206 13,981
Average Annual Total Returns for the Periods Ended June 30, 2000 ---------------------------------------- Since Inception of Class B 1 Year 5 Year 5/31/95 ------ ------ ------- Including Sales Charge: Class A (1) 72.37% 32.39% 25.75% Class B (2) 76.63% 33.04% 32.07% Class C (3) 79.89% 33.14% 26.09% Excluding Sales Charge: Class A 82.89% 33.96% 27.03% Class B 81.63% 33.16% 32.14% Class C 80.89% 33.14% 26.09% Salomon EPAC EMI Index 14.54% 7.22% 6.81%(4) Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim International SmallCap Growth Fund against the Salomon EPAC Extended Market (EM) Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Adviser has contractually agreed to waive or defer its management fee and to pay other operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no deferral to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This letter contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio manager, only through the end of the period as stated on the cover. The portfolio manager's views are subject to change at any time based on market and other conditions. Portfolio holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1.00% for the 1 year return. (4) Since inception performance for index is shown from 06/01/95 Principal Risk Factor(s): International investing does pose special risks, including currency fluctuation, economic and political risks not found in investments that are solely domestic. In exchange for higher growth potential, stocks of smaller companies may entail greater price variability than those of larger companies. The Fund may invest in companies located in countries with emerging securities markets when the sub-adviser believes they present attractive investment opportunities. Risks of foreign investing are generally intensified for investments in emerging markets. See accompanying index descriptions on pages 40 and 41. 21 - ------------- International Equity Funds - ------------- Portfolio PILGRIM EMERGING COUNTRIES FUND Manager's Report - -------------------------------------------------------------------------------- Management Team: Catherine Somhegyi, Chief Investment Officer; Pedro V. Marcal, Partner, Portfolio Manager; Ernesto Ramos, Ph.D., Portfolio Manager; Lawrence S. Speidell, CFA, Partner, Director of Global/Systematic Portfolio Management and Research; Jessica Goncalves, Portfolio Manager; Jason Campbell, Portfolio Manager; Theodora Jamison, Investment Analyst; John Mazur, Investment Analyst; Andrew Parmet, Investment Analyst. Goal: The Emerging Countries Fund (the "Fund" or "Emerging Countries") seeks to provide long-term capital appreciation through investing in companies of developing countries around the world. Market Overview: Stocks in the world's emerging countries trekked higher during the fiscal year ended June 30, 2000. The MSCI Emerging Markets Free Index increased 8.8%, largely due to impressive fourth quarter 1999 gains in the Europe, Middle East, and Africa (EMEA) region and Latin America. Gains in EMEA markets were attributable to the improvement in macroeconomic conditions in the region, such as strength in manufacturing output, a massive decrease in inflation, robust consumption and robust export growth. The MSCI Turkey Index turned in a stellar performance, up 118.0% for the 12-month period. Returns were driven by many factors, including: * Strong capital inflows resulting from the country's privatization program * The Central Bank of Turkey's adoption of a new exchange rate regime in support of the government's disinflation program * An upgrade in Turkey's long-term credit rating by Standard & Poor's. Israel and Russian markets also posted significant gains. The MSCI Israel Index advanced 60.9%. The election of reform-minded Vladimir Putin as Russia's prime minister buoyed stocks in the country, as did massive foreign currency reserves, a revival in domestic industry, and a boom in the price of oil-Russia's chief export. The MSCI Russia index rose 40.2% for the fiscal year. The MSCI EMF Latin America Index returned 16.7% in the period amid the continued strength in the region's economies. Strong fundamentals, such as increases in commodity prices, exports and industrial production boosted Latin American economies. Brazil was the region's top-performing market, with the MSCI Brazil Index advancing 52.2% during the period. Stocks in emerging Asian countries dipped slightly during the fiscal year as strength in Indian and Malaysian markets was offset by losses in Indonesia, the Philippines and Thailand. Nevertheless, Asian markets continued to benefit from the prevalent themes of strong earnings growth, increased exports to the United States and improving domestic economies. Performance: The Fund's Class A shares, excluding sales charges, provided a total return of 20.49%, substantially outperforming the MSCI EMF Index, which was up 9.47% for the same period. Portfolio Specifics: The Fund's relative outperformance was primarily attributable to stock selection in India and Mexico, as well as being in Singapore. The Fund's overweighting in technology also contributed to performance during the period. Among the fund's best-performing stocks were Infosys Technologies, an Indian IT consulting and software services firm; SK Telecoms, a provider of cellular services in South Korea; Brazil's Petrobras, an integrated oil company; and Dimension Data of South Africa, a systems integrator company;and China Telecom, a provider of cellular telecommunications to many of China's most economically developed provinces. On a bottom-up, fundamental basis, we increased the fund's exposure to the technology stocks, while paring back holdings in the financial services and manufacturing sectors. Market Outlook: We remain enthusiastic about the investment prospects for the world's emerging markets, particularly within the technology sector. We believe that technology will be at the core of the improvements in healthcare, education and business that these developing countries are seeking. 22 - ---------------- Portfolio Manager's Report - ---------------- PILGRIM EMERGING COUNTRIES FUND - --------------------------------------------------------------------------------
11/28/94 6/95 6/96 6/97 6/98 6/99 6/30/00 ------ ------ ------ ------ ------ ------ ------ Pilgrim Emerging Countries Fund Class A With Sales Charge 10,000 9,534 11,724 15,260 12,265 13,903 16,751 Pilgrim Emerging Countries Fund Class A Without Sales Charge 10,000 10,114 12,437 16,187 13,011 14,748 17,770 MSCI EMF Index 10,000 8,896 9,649 10,887 6,632 8,536 9,344
Average Annual Total Returns for the Periods Ended June 30, 2000 ------------------------------------------------ Since Inception Since Inception of Class A and C of Class B 1 Year 11/28/94 5/31/95 ------ -------- ------- Including Sales Charge: Class A (1) 13.56% 9.67% -- Class B (2) 14.55% -- 11.23% Class C (3) 18.63% 9.87% -- Excluding Sales Charge: Class A 20.49% 10.83% -- Class B 19.55% -- 11.35% Class C 19.63% 9.87% -- MSCI EMF Index 9.47% -1.21%(4) 1.03%(5) Based on a initial investment, the graph and table above illustrate the total return of Pilgrim Emerging Countries Fund against the Morgan Stanley Capital International Emerging Markets Free (MSCI EMF) Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Adviser has contractually agreed to waive or defer its management fee and to pay other operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no deferral to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This letter contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio manager, only through the end of the period as stated on the cover. The portfolio manager's views are subject to change at any time based on market and other conditions. Portfolio holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1.00% for the 1 year return. (4) Since inception performance for index is shown from 12/01/94. (5) Since inception performance for index is shown from 06/01/95. Principal Risk Factor(s): International investing does pose special risks, including currency fluctuation, economic and political risks not found in investments that are solely domestic. Risks of foreign investing are generally intensified for investments in emerging markets. See accompanying index descriptions on pages 40 and 41. 23 - ------------- International Equity Funds - ------------- Portfolio PILGRIM ASIA-PACIFIC EQUITY FUND Manager's Report - -------------------------------------------------------------------------------- Management Team: David Stuart, Regional CIO, Asia Pacific; Man-Wing Chung, CIO, Asia ex-Japan Equities; Marcus Pakenham, Director; Sam Lau, Director; Richard Wong, Associate Director; Leilani Lam, Associate Director; Simon Yap, Associate Director; Seng-Keong Wan, Senior Investment Manager; Vernon Yu, Senior Investment Manager; Losa Mak, Investment Manager; Krista Yue, Investment Manager. Goal: The Asia-Pacific Equity Fund (the "Fund" or "Asia-Pacific Equity") seeks long-term capital appreciation by investing in equity securities listed on stock exchanges in the Asia-Pacific region or issued by companies based in this region. Market Overview: During the year ended June 30, 2000, rallies in the US and Nasdaq helped performances of a few equity markets before the millennium. However, profit taking and concerns on interest rate hikes erased some of the gains entering into 2000. Hong Kong was the best performer, up 19.4% on the Hang Seng Index. However, the index registered declines both on a six-month and quarterly basis on concerns over the valuation of high tech stocks and rising US interest rates. June saw a rebound as softer economic numbers from the US prompted hopes of interest rate peaking. Malaysia (+2.8%) posted gains, initially on MSCI reinclusion but succumbed to profit taking following downgrades by major brokers after its outperformance. for the one year ended June 30, 2000, the rest of the Asian market underperformed. Taiwan (-2.4%) eased on political concerns despite buying from government-related funds. Singapore DBS50 (-6.0%) fell in the absence of a fresh catalyst for re-rating even as the country's safe haven status remained intact. Korea (-7.0%) eased predominately due to redemption-driven selling by investment trust companies. But June saw a turning in sentiment as both retail and foreign investors stepped up their buying ahead of the historical summit meeting between North and South Korean leaders. Indonesia (-22.2%) abated on MSCI-related asset allocation shift, political uncertainty, religious clashes and a weakening currency. Thailand (-37.6%) dived on concerns over the slow progress of bad debt restructuring in the banking sector, announcements of equity capital raising, and increasing political uncertainties. The better-than-expected corporate earnings and positive economic numbers (1Q00 GDP +5.2%) were largely ignored. Philippines (-38.3%) tumbled on disappointing macro picture, faltering public confidence in President Estrada, the failure to quickly resolve the Sipidan hostage crisis and the heightened tension between the Muslim extremists and the government. Performance: For the year ended June 30, 2000, the Fund's Class A shares, excluding sales charges, provided a total return of 0.14% compared to 14.40% for the Morgan Stanley Capital International All Countries Far East Free ex-Japan Index (the "MSCI"), a performance measurement of Far East markets excluding Japan. Portfolio Specifics: The overweight positions in technology issues performed well until late March as the Nasdaq Index fell significantly. Investors were concerned about the increasingly high valuation of tech-related counters and began switching back into "old economy" stocks. Looking ahead, we will increase exposure to Singapore (valuations improved favorably) and Korea (government measures averted potential financial systemic risk). We will reduce our overweight in Taiwan in the absence of fresh catalyst. We are cautious on Hong Kong based on valuation and interest rate outlook. However, we are turning bullish on China and will look for value stocks. In terms of stock selection, we started to look at banks and financials in anticipation of peaking interest rates in Asia. Market Outlook: The domestic fundamentals within Asia remain positive with strong economic recovery, rising domestic demand, healthy earnings growth and reasonable market valuations. On the other hand, we are wary that investors have recently become a little complacent about interest rates and that global equity markets can therefore still be negatively surprised by strong US economic data. If the correction happens, Asian exchanges may take a big hit. Once there are clearer signals that interest rates are peaking and soft landing is being achieved, we will turn more constructive on Asian equities with a bias/preference for the high growth economies/markets. 24 - ---------------- Portfolio Manager's Report - ---------------- PILGRIM ASIA-PACIFIC EQUITY FUND - --------------------------------------------------------------------------------
9/1/95 6/96 6/97 6/98 6/99 6/30/00 ------ ------ ------ ------ ------ ------ Pilgrim Asia-Pacific Equity Fund Class A With Sales Charge 10,000 9,780 10,345 4,221 6,833 6,843 Pilgrim Asia-Pacific Equity Fund Class A Without Sales Charge 10,000 10,376 10,976 4,479 7,250 7,260 MSCI Far East Free Ex-Japan Index 10,000 11,382 14,501 18,157 18,565 21,238
Average Annual Total Returns for the periods ended June 30, 2000 -------------------------------------------- Since Inception 1 year 3 year 9/1/95 ------ ------ ------ Including Sales Charge: Class A (1) -5.62% -14.41% -7.54% Class B (2) -5.71% -14.53% -7.56% Class M (3) -3.96% -14.47% -7.65% Excluding Sales Charge: Class A 0.14% -12.87% -6.40% Class B -0.71% -13.66% -7.17% Class M -0.42% -13.45% -6.97% MSCI Far East Free Ex-Japan Index 14.40% 13.50% 16.86% Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim Asia-Pacific Equity Fund against the MSCI Far East Ex-Japan Index. The index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charge and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of the maximum sales load. Total returns reflect the fact that the Investment Adviser has contractually agreed to waive or defer its management fee and to pay other operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no deferral to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This letter contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "foward-looking" statements. The views expressed in this report reflect those of the portfolio manager, only through the end of the period as stated on the cover. The portfolio manager's views are subject to change at any time based on market and other conditions. Portfolio holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75% (2) Reflect deduction of the Class B deferred sales charge of 5%, 3% and 2%, respectively, for the 1 year, 3 year and since inception returns. (3) Reflects deduction of the Class M maximum sales charge of 3.50% Principal Risk Factor(s): International investing does pose special risks, including currency fluctuation, economic and political risks not found in investments that are solely domestic. There are also risks associated with investing in a specialized regional fund. Currency devaluation in any one country may have a significant effect on the entire region. Increased political or social unrest in some or all Asian countries could cause further economic and market uncertainty. See accompanying index descriptions on pages 40 and 41. 25 - ------ Income Funds - ------ PILGRIM GOVERNMENT Portfolio SECURITIES INCOME FUND Manager's Report - -------------------------------------------------------------------------------- Portfolio Management: Robert K. Kinsey, Vice President & Senior Portfolio Manager Goals: Pilgrim Government Securities Income Fund (the "Fund" or "Government Securities Income") seeks high current income, consistent with liquidity and preservation of capital, by investing in securities issued or guaranteed by the U. S. Government and certain of its agencies and instrumentalities. Bond Market Overview: The bond market experienced extraordinary bouts of illiquidity up until the latter part of the second quarter of 2000. While weakness in the equity market boded well for U. S. Treasuries, most other government issues were pummelled. However, the successful completion of several record-breaking multi-billion dollar agency offerings marked a turnaround by late May. Government sponsored enterprises (GSEs) faced some very rough sledding early in 2000 as a congressional committee and political pundits questioned the unique relationship between the Treasury Department, Fannie Mae ("FNMA") and Freddie Mac ("FHLMC"). However, the successful completion of several record-breaking new agency issues marked the turnaround in spread product by late May. Despite numerous Federal Reserve Bank tightenings, Treasuries have been well bid in the face of government buybacks and signs that the domestic economy is slowing. Performance: For the one year ended June 30, 2000, the Fund's Class A shares, excluding sales charges, provided a total return of 2.79% compared to the Lehman Government/Mortgage Index and the Lehman Intermediate Treasury Index which returned 5.02% and 4.62%, respectively for the same period Portfolio Specifics: The duration of the Fund remained short of the Lehman Mortgage Index, yet longer than the Lehman Intermediate Treasury Index in order to maintain our dividend. The Fund continues to be concentrated in mortgage backed securities; however, we have added FNMA collateralized by multi-family properties, bonds, Small Business Administration paper, and bullet agencies at compelling levels. Market Outlook: The Fund continues to offer a handsome yield advantage over Treasuries. Owing to our restrictive guidelines, our ongoing strategy is to provide the best dividend possible within the context of the market and with few, if any, negative surprises. We will continue to exploit market inefficiencies in the multi-family sector of the government market while avoiding large duration bets. 26 Portfolio PILGRIM GOVERNMENT Manager's Report SECURITIES INCOME FUND - --------------------------------------------------------------------------------
6/30/90 6/91 6/92 6/93 6/94 6/95 6/96 6/97 6/98 6/99 6/30/00 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Pilgrim Government Securities Income Fund Class A With Sales Charge 10,000 10,398 11,340 12,453 12,143 13,230 13,672 14,674 15,793 16,092 16,541 Pilgrim Government Securities Income Fund Class A Without Sales Charge 10,000 10,919 11,907 13,076 12,750 13,892 14,356 15,408 16,584 16,897 17,368 Lehman Brothers Government/Mortgage Index 10,000 11,077 12,595 14,032 13,857 15,534 16,309 17,617 19,444 20,121 21,131 Lehman Brothers Intermediate Treasury Index 10,000 10,893 12,296 13,555 13,520 14,836 15,560 16,626 18,026 18,835 19,705 Average Annual Total Returns for the Periods Ended June 30, 2000 ---------------------------------------------------------------- Since Inception Since Inception Since Inception of Class B and M of Class C of Class T 1 Year 5 Year 10 Year 7/17/95 6/11/99 3/31/00 ------ ------ ------- ------- ------- ------- Including Sales Charge: Class A (1) -2.11% 3.55% 5.16% -- -- -- Class B (2) -2.81% -- -- 3.41% -- -- Class C (3) 1.09% -- -- -- 3.46% -- Class M (4) -1.04% -- -- 3.31% -- -- Class T(5) -- -- -- -- -- -2.76% Excluding Sales Charge: Class A 2.79% 4.57% 5.68% -- -- -- Class B 2.12% -- -- 3.73% -- -- Class C 2.09% -- -- -- 3.46% -- Class M 2.28% -- -- 4.01% -- -- Class T -- -- -- -- -- 1.24% Lehman Brothers Government/Mortgage Index 5.02% 6.35% 7.77% 6.50%(6) 6.27% 2.12% Lehman Brothers Intermediate Treasury Index 4.62% 5.84% 7.17% 5.82% 5.38% 1.82%
Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim Government Securities Income Fund against the Lehman Brothers Government/Mortgage Index and the Lehman Brothers Intermediate Treasury Index. The Indices have an inherent performance advantage over the Fund since they have no cash in their portfolios, impose no sales charges and incur no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Adviser has contractually agreed to waive or defer its management fee and to pay other operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no deferral to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This letter contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio manager, only through the end of the period as stated on the cover. The manager's views are subject to change at any time based on market and other conditions. Portfolio holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 4.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1.00% for the since inception return. (4) Reflects deduction of the maximum Class M sales charge of 3.25%. (5) Reflects deduction of the Class T deferred Sales charge of 4.00%. (6) Since inception performance is shown from 7/31/95. Principal Risk Factor(s): Exposure to financial, market and interest rate risks and prepayment risk on mortgage-related securities. Fluctuations in the value of the Fund's shares can be expected in response to changes in interest rates. The value of an investment in the Fund is not guaranteed and will fluctuate. See accompanying index descriptions on pages 40 and 41. 27 - ------ Income Funds - ------ Portfolio PILGRIM STRATEGIC INCOME FUND Manager's Report - -------------------------------------------------------------------------------- Management Team: Robert Kinsey, Vice President & Senior Portfolio Manager; Kevin Mathews, Vice President & Senior Portfolio Manager; Charles Ullerich, Vice President & Portfolio Manager. Goals: Pilgrim Strategic Income Fund (the "Fund" or "Strategic Income") seeks maximum total return by investing primarily in debt securities issued by U. S. and foreign entities, as well as U. S. and foreign governments and their agencies and instrumentalities, that are rated investment grade by a nationally recognized statistical rating agency, or of comparable quality if unrated. Up to 40% of the Fund's assets may be invested in high yield securities rated below investment grade. Bond Market Overview: The high quality bond market experienced extraordinary bouts of illiquidity up until the latter part of the second quarter 2000. While weakness in the equity market boded well for U. S. Treasuries, a number of corporate bonds were pummelled by earnings warnings and downgrades. Event risk returned to the corporate market with a vengeance, raising the ugly specter of credit-damaging shareholder enhancement programs. Credit-harming mergers and acquisitions also made headlines. However, the successful completion of several record-breaking new issues marked the turnaround in spread product by late May. Agencies faced some very rough sledding early in 2000 as a congressional committee and political pundits questioned the unique relationship between the Treasury Department, Fannie Mae (FNMA) and Freddie Mac (FHLMC). Despite numerous Federal Reserve Bank tightenings, long-term Treasuries have been well bid in the face of government buybacks and signs that the domestic economy is slowing. The first half of 2000 was better than the second half of 1999, but not by much. The negative returns of 1999 were succeeded by flat returns in 2000. High yield bond prices continued to decline in the first half of 2000, but when combined with coupon income, total returns on the sector came close to zero. Federal Open Market Committee (FOMC) policy continued the tightening bias of 1999 with further interest rate increases in the first half of 2000. After raising the Federal Reserve Bank Funds target rate from 5% to 5.5% in the second half of 1999, the FOMC raised rates from 5.5% to 6.5% in the first half of 2000. The FOMC continues to be concerned that the domestic economy is growing too quickly and that the result might be increased inflation. Much of the price behavior in the high yield market can be directly attributed to participants fear that the Federal Reserve Bank will over-tighten, pushing the economy into a recession. Through the year ended June 30, 2000, the ten-year Treasury yield was basically unchanged yielding just below 6% at the beginning of the period and just above 6% at the end of the period. High yield bonds, reflecting the increased risk premium demanded by the market, rose in yield, falling in price over the same time period. Spreads remained virtually unchanged from the beginning to the end of the second half of 1999, but widened by 100 to 125 basis points on most of the major high yield indices in the first half of 2000. This activity reflected the fear of recession as well as rising default rates, declining recovery rates, and weak technical conditions resulting from mutual fund net redemptions. Mutual fund outflows totaled in excess of $6 billion in the first half of 2000, although trends have been more positive in the latter half with sales outpacing redemptions. In the first half of 2000, trends from the second half of 1999 continued as higher rated issues outperformed lower rated issues. In order of performance for 2000, Double-B issues ranked first followed by Single-B and at the bottom Triple-C and lower rated issues. These results are to be expected with the increased level of investor sensitivity to economic conditions. Concerns about the market did not seem to significantly slow new issuance. First half of 2000 issuances totaled $27 billion, down only marginally from the $35 billion total from the second half of 1999. This is a positive sign as there is still buyer demand for quality issues, even in a slow and cautious market. Performance: For the one year ended June 30, 2000 the Fund's Class A shares, excluding sales charges, provided a total return of 3.42% compared to the Lehman Brothers Aggregate Index which returned 4.57% for the same period. Portfolio Specifics: A significant commitment to U. S. Treasuries on the heels of the government's buyback announcement boosted returns. Following the under-performance of corporate bonds in the early part of the year, we added Lucent, Wal-Mart, and insured Banco Santander paper along with several agency debentures in May. We maintained our presence in puttable corporates. The Fund outperformed most of it's peers over the past year due to a large concentration in the Communications sector. The best performing credits were those on the leading edge of telecommunication technology including providers of digital subscriber lines, wireless voice and internet/data connectivity, and firms that provide access technology for internet data sites. Equally important has been the avoidance of sectors that have significantly underperformed the market including Healthcare, Food & Drug, and Retail credits. Credit quality has played a role in performance the last twelve months. Double-B issues have significantly outperformed the market while Triple-C's have underperformed. The Fund's average credit quality weighting of Single-B has slightly helped the portfolio, providing a return close to the market averages. Overall, the Fund's management feels the credit quality of the portfolio is good and positioned for outperformance in the second half of 2000. Market Outlook: Agency debentures offer excellent relative value especially now that Congress is unlikely to move against the government sponsored enterprises anytime soon. Despite the strong rally relative to Treasuries and swaps, we feel that selective corporate bonds are cheap. We continue to avoid event risk candidates and long-dated corporate paper, and we focus on larger more liquid issues. Recent economic data point to a recent Federal Reserve Bank-engineered slowdown, and the market consensus is for only one more tightening. Consequently the surprise, non-consensus, outcome 28 - ---------------- Portfolio Manager's Report - ---------------- PILGRIM STRATEGIC INCOME FUND - -------------------------------------------------------------------------------- seems to poise the greatest risk to interest rates. Nevertheless, we are slightly long in duration, but would trim that to neutral if rates rally significantly. Our outlook is cautious as we continue to witness an FOMC that has a bias to tighten monetary policy. The danger of recession is real as the Federal Reserve Bank typically creates a soft-landing, or a slowing of economic growth and inflation without a recession, about 50% of the time once they begin tightening. When they create a recession, the results can be problematic for high yield bonds. We have also taken note of the increasingly tough stance taken by banks and other lenders on not being willing to waive convenant violations. This causes high yield credits to get into trouble faster as there is less forbearance on the part of senior bank lenders. Finally, the high yield market itself is less forgiving. Quality names will snap back with the market, marginal credits will eventually recover if investors wait, but weak issuers are given no benefit of the doubt. Weak issues can not hide behind general market trends. Given this, it becomes obvious it is a credit pickers market. Diligence in the credit review and monitoring process has become key to maintaining returns above the benchmark averages. 7/27/98 6/99 6/30/00 ------ ------ ------ Pilgrim Strategic Income Fund Class A With Sales Charge 10,000 9,739 10,073 Pilgrim Strategic Income Fund Class A Without Sales Charge 10,000 10,223 10,574 Lehman Brothers Aggregate Index 10,000 10,293 10,763 Average Annual Total Returns for the Periods Ended June 30, 2000 ------------------------------ Since Inception 1 Year 7/27/98 ------ ------- Including Sales Charge: Class A (1) -1.49% 0.38% Class B (2) -2.00% 0.64% Class C (3) 2.02% 2.54% Excluding Sales Charge: Class A 3.42% 2.93% Class B 3.00% 2.53% Class C 3.02% 2.54% Lehman Brothers Aggregate Index 4.57% 3.91%(4) Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim Strategic Income Fund against the Lehman Brothers Aggregate Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Adviser has contractually agreed to waive or defer its management fee and to pay other operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no deferral to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This letter contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio manager, only through the end of the period as stated on the cover. The portfolio manager's views are subject to change at any time based on market and other conditions. Portfolio holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 4.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 4%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1.00%. (4) Since inception performance for index is shown from 08/01/98. Principal Risk Factor(s): High yield bonds have exposure to financial, market and interest rate risks. High yields reflect the higher credit risks associated with certain lower rated securities in the Fund's portfolio, and in some cases, the lower market prices for those instruments. The Fund's investments in mortgage-related securities may entail prepayment risk. The Fund may invest up to 30% of its total assets in securities payable in foreign currencies. International investing does pose special risks, including currency fluctuation and political risks not found in domestic investments. See accompanying index descriptions on pages 40 and 41. 29 - ------ Income Funds - ------ Portfolio PILGRIM HIGH YIELD FUND Manager's Report - -------------------------------------------------------------------------------- Management Team: Kevin Mathews, Senior Vice President & Senior Portfolio Manager, Charles Ullerich, Vice President & Portfolio Manager Goals: Pilgrim High Yield Fund (the "Fund" or "High Yield") seeks to provide a high level of current income, with capital appreciation as a secondary objective, by investing in high yield debt securities. Market Overview: The first half of 2000 was better than the second half of 1999, but not by much. The negative returns of 1999 were succeeded by flat returns in 2000. High yield bond prices continued to decline in the first half of 2000 but, when combined with coupon income, total returns on the sector came close to zero. Federal Open Market Committee (FOMC) policy continued the tightening bias of 1999 with further interest rate increases in the first half of 2000. After raising the Federal Reserve Bank Funds target rate from 5% to 5.5% in the second half of 1999, the FOMC raised rates from 5.5% to 6.5% in the first half of 2000. The FOMC continues to be concerned that the domestic economy is growing too quickly and that the result might be increased inflation. Much of the price behavior in the high yield market can be directly attributed to participants fear that the Federal Reserve Bank will over-tighten, pushing the economy into a recession. Through the year ended June 30, 2000, the ten-year Treasury yield was basically unchanged, yielding just below 6% at the beginning of the period and just above 6% at the end of the period. High yield bonds, reflecting the increased risk premium demanded by the market, rose in yield, falling in price over the same time period. Spreads remained virtually unchanged from the beginning to the end of the second half of 1999, but widened by 100 to 125 basis points on most of the major high yield indices in the first half of 2000. This activity reflected the fear of recession as well as rising default rates, declining recovery rates, and weak technical conditions resulting from mutual fund net redemptions. Mutual fund outflows totaled in excess of $6 billion in the first half of 2000, although trends have been more positive in the latter half with sales outpacing redemptions. In the first half of 2000 trends from the second half of 1999 continued as higher rated issues outperformed lower rated issues. In order of performance for 2000, Double-B issues ranked first followed by Single-B and at the bottom Triple-C and lower rated issues. These results are to be expected with the increased level of investor sensitivity to economic conditions. Concerns about the market did not seem to significantly slow new issuance. First half of 2000 issuance totaled $27 billion, down only marginally from the $35 billion total from the second half of 1999. This is a positive sign as there is still buyer demand for quality issues, even in a slow and cautious market. Performance: For the one year ended June 30, 2000, the Fund's Class A shares, excluding sales charges, declined 5.20% compared to the Lehman Brothers High Yield Index, which declined 1.02%, and the First Boston High Yield Index, which declined 0.40% for the same period. Portfolio Specifics: The Fund held overweighted positions in the Communications sector, including the wireless, wireline, and internet subsectors, which helped performance for the twelve months. Underperforming issues in the Manufacturing and Electronics sectors adversely impacted returns for the period. Issues that are $100-200 million in size have become less desirable in the last year as market participants have defensively sought the biggest and most liquid issues. The Fund holds many cash pay issues in this size range. Although these issues have negatively impacted performance, the Fund's management feels the credit quality of these issues is sound. Portfolio cash levels have risen recently as we expect the market to provide attractive buying opportunities in the latter part of the second half of 2000. Consistent with our goal of managing a stable dividend fund with an emphasis on domestic cash pay issues, the Fund's management has been taking the opportunity to consolidate positions. Our avoidance of emerging market and foreign issues, and equity investments, hurt performance in the last twelve months as these markets outperformed significantly. Double-B issues have significantly outperformed the market while Triple-C's have underperformed. The Fund's average credit quality weighting of Single-B has slightly helped the portfolio, providing a return close to the market averages. Market Outlook: Our outlook is cautious as we continue to witness an FOMC that has a bias to tighten monetary policy. The danger of recession is real as the Federal Reserve Bank typically creates a soft-landing, or a slowing of economic growth and inflation without a recession, about 50% of the time once they begin tightening. When they create a recession, the results can be problematic for high yield bonds. We have also taken note of the increasingly tough stance taken by banks and other lenders on not being willing to waive convenant violations. This causes high yield credits to get into trouble faster as there is less forbearance on the part of senior bank lenders. Finally, the high yield market itself is less forgiving. Quality names will snap back with the market, marginal credits will eventually recover if investors wait, but weak issuers are given no benefit of the doubt. Weak issues can not hide behind general market trends. Given this, it becomes obvious it is a credit pickers market. Diligence in the credit review and monitoring process has become key to maintaining returns above the benchmark averages. 30 - ---------------- Portfolio Manager's Report - ---------------- PILGRIM HIGH YIELD FUND - --------------------------------------------------------------------------------
6/30/90 6/91 6/92 6/93 6/94 6/95 6/96 6/97 6/98 6/99 6/30/00 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Pilgrim High Yield Fund Class A With Sales Charge 10,000 10,339 12,733 14,820 15,458 16,947 19,103 22,377 24,998 23,605 22,378 Pilgrim High Yield Fund Class A Without Sales Charge 10,000 10,852 13,364 15,554 16,224 17,787 20,050 23,487 26,237 24,775 23,487 First Boston High Yield Index 10,000 11,570 14,481 16,937 17,672 19,880 21,862 25,070 27,822 27,585 27,476 Lehman Brothers High Yield Index 10,000 11,432 14,229 16,500 17,084 19,452 21,334 24,296 27,058 26,956 26,680 Average Annual Total Returns for the Periods Ended June 30, 2000 ------------------------------------------------------------------------ Since Inception Since Inception of Class B and M of Class C 1 Year 5 Year 10 Year 7/17/95 5/27/99 ------ ------ ------- ------- ------- Including Sales Charge: Class A (1) -9.70% 4.68% 8.39% -- -- Class B (2) -10.91% -- -- 4.38% -- Class C (3) -6.99% -- -- -- -5.18% Class M (4) -8.92% -- -- 4.21% -- Excluding Sales Charge: Class A -5.20% 5.72% 8.91% -- -- Class B -5.91% -- -- 4.66% -- Class C -5.99% -- -- -- -5.18% Class M -5.86% -- -- -4.91% -- First Boston High Yield Index -0.40% 6.69% 10.64% 6.47%(5) -0.32% Lehman Brothers High Yield Index -1.02% 6.52% 10.31% 6.37% -1.14%(6)
Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim High Yield Fund against the First Boston High Yield Index and the Lehman Brothers High Yield Index. The Indices have an inherent performance advantage over the Fund since they have no cash in their portfolio, impose no sales charges and incur no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Adviser has contractually agreed to waive or defer its management fee and to pay other operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no deferral to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This letter contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio manager, only through the end of the period as stated on the cover. The portfolio manager's views are subject to change at any time based on market and other conditions. Portfolio holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 4.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1.00% for the since inception return. (4) Reflects deduction of the maximum Class M sales charge of 3.25%. (5) Since inception return from 7/31/95. (6) Since inception, performance for the index is shown from 6/1/99. Principal Risk Factor(s): Exposure to financial, market and interest rate risks. Higher yields reflect the higher credit risks associated with certain lower rated securities in the Fund's portfolio, and in some cases, the lower market prices for those instruments. See accompanying index descriptions on pages 40 and 41. 31 - ------ Income Funds - ------ Portfolio PILGRIM HIGH YIELD FUND II Manager's Report - -------------------------------------------------------------------------------- Management Team: Kevin Mathews, Senior Vice President & Senior Portfolio Manager, Charles Ullerich, Vice President & Portfolio Manager Goals: Pilgrim High Yield Fund II (the "Fund" or "High Yield II") seeks to provide a high level of current income and capital growth by investing in high yield debt securities. Market Overview: The first half of 2000 was better than the second half of 1999, but not by much. The negative returns of 1999 were succeeded by flat returns in 2000. High yield bond prices continued to decline in the first half of 2000 but when combined with coupon income, total returns on the sector came close to zero. Federal Open Market Committee (FOMC) policy continued the tightening bias of 1999 with further interest rate increases in the first half of 2000. After raising the Federal Reserve Bank Funds target rate from 5% to 5.5% in the second half of 1999, the FOMC raised rates from 5.5% to 6.5% in the first half of 2000. The FOMC continues to be concerned that the domestic economy is growing too quickly and that the result might be increased inflation. Much of the price behavior in the high yield market can be directly attributed to participants fear that the Federal Reserve Bank will over-tighten, pushing the economy into a recession. Through the year ended June 30, 2000, the ten-year Treasury yield was basically unchanged yielding just below 6% at the beginning of the period and just above 6% at the end of the period. High yield bonds, reflecting the increased risk premium demanded by the market, rose in yield, falling in price over the same time period. Spreads remained virtually unchanged from the beginning to the end of the second half of 1999, but widened by 100 to 125 basis points on most of the major high yield indices in the first half of 2000. This activity reflected the fear of recession as well as rising default rates, declining recovery rates, and weak technical conditions resulting from mutual fund net redemptions. Mutual fund outflows totaled in excess of $6 billion in the first half of 2000, although trends have been more positive in the latter half with sales outpacing redemptions. In the first half of 2000 trends from the second half of 1999 continued as higher rated issues outperformed lower rated issues. In order of performance for 2000, Double-B issues ranked first followed by Single-B and at the bottom Triple-C and lower rated issues. These results are to be expected with the increased level of investor sensitivity to economic conditions. Concerns about the market did not seem to significantly slow new issuance. First half of 2000 issuances totaled $27 billion, down only marginally from the $35 billion total from the second half of 1999. This is a positive sign as there is still buyer demand for quality issues, even in a slow and cautious market. Performance: For the one year ended June 30, 2000, the Fund's Class A shares, excluding sales charges, provided a total return of 3.96% compared to the Lehman Brothers High Yield Index, which declined 1.02%, and the First Boston High Yield Index, which declined 0.40% for the same period. Portfolio Specifics: The Fund outperformed due to a large concentration in the Communications sector. The best performing credits were those on the leading edge of telecommunication technology including providers of digital subscriber lines, wireless voice and internet/data connectivity, and firms that provide access technology for internet data sites. Equally important has been the avoidance of sectors that have significantly underperformed the market including Healthcare, Food & Drug, and Retail credits. Portfolio cash levels have risen recently as we expect the market to provide attractive buying opportunities in the latter part of the second half of 2000. We will take the opportunity, early in the second half of 2000, to review our Telecommunications exposure, possibly looking for a reduction in weighting, and to consider sectors that have dramatically underperformed the high yield market during the last 12 to 18 months as possible buy candidates. Credit quality has played a role in performance the last twelve months. Double-B issues have significantly outperformed the market while Triple-C's have underperformed. The Fund's average credit quality weighting of Single-B has slightly helped the portfolio, providing a return close to the market averages. Overall, the Fund's management feels the credit quality of the portfolio is good and positioned for outperformance in the second half of 2000. Market Outlook: Our outlook is cautious as we continue to witness an FOMC that has a bias to tighten monetary policy. The danger of recession is real as the Federal Reserve Bank typically creates a soft-landing, or a slowing of economic growth and inflation without a recession, about 50% of the time once they begin tightening. When they create a recession, the results can be problematic for high yield bonds. We have also taken note of the increasingly tough stance taken by banks and other lenders on not being willing to waive convenant violations. This causes high yield credits to get into trouble faster as there is less forbearance on the part of senior bank lenders. Finally, the high yield market itself is less forgiving. Quality names will snap back with the market, marginal credits will eventually recover if investors wait, but weak issuers are given no benefit of the doubt. Weak issues can not hide behind general market trends. Given this, it becomes obvious it is a credit pickers market. Diligence in the credit review and monitoring process has become key to maintaining returns above the benchmark averages. 32 - ---------------- Portfolio Manager's Report - ---------------- PILGRIM HIGH YIELD FUND II - -------------------------------------------------------------------------------- 3/27/98 6/98 6/99 6/30/00 ------ ------ ------ ------ Pilgrim High Yield Fund II Class A With Sales Charge 10,000 9,693 9,779 10,193 Pilgrim High Yield Fund II Class A Without Sales Charge 10,000 10,174 10,265 10,699 Lehman Brothers High Yield Index 10,000 10,110 10,072 9,969 Average Annual Total Returns for the Periods Ended June 30, 2000 ------------------------------- Since Inception Since Inception 1 Year 3/27/98 3/31/00 ------ ------- ------- Including Sales Charge: Class A (1) -0.18% 0.85% -- Class B (2) -1.72% 1.33% -- Class C (3) 2.28% 2.44% -- Class T (4) -- -- -4.49% Excluding Sales Charge: Class A 3.96% 3.03% -- Class B 3.28% 2.44% -- Class C 3.28% 2.44% -- Class T -- -- -0.49% Lehman Brothers High Yield Index -1.02% -0.14%(5) 1.15% Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim High Yield II Fund against the Lehman Brothers High Yield Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Adviser has contractually agreed to waive or defer its management fee and to pay other operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no deferral to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This letter contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio manager, only through the end of the period as stated on the cover. The portfolio manager's views are subject to change at any time based on market and other conditions. Portfolio holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 4.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 4%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1.00% for the 1-year return. (4) Reflects deduction of the Class T deferred sales charge of 4.00%. (5) Since inception performance for index is shown from 04/01/98. Principal Risk Factor(s): Exposure to financial, market and interest rate risks. Higher yields reflect the higher credit risks associated with certain lower rated securities in the Fund's portfolio and in some cases, the lower market price for those instruments. Up to 35% of total assets may be invested in foreign securities. International investing does pose special risks, including currency fluctuation and political risks not found in investments that are solely domestic. Risks of foreign investing are generally intensified for investments in emerging markets. See accompanying index descriptions on pages 40 and 41. 33 - ------ Income Funds - ------ Portfolio PILGRIM MONEY MARKET FUND Manager's Report - -------------------------------------------------------------------------------- Portfolio Management: Robert K. Kinsey, Vice President. Goals: The Money Market Fund (the "Fund" or "Money Market") seeks to provide as high a level of current income as is consistent with the preservation of capital and liquidity by investing all of its assets in the Class A shares of Primary Institutional Fund, a series of Reserve Institutional Trust, a registered open-end management company. Money Market Fund Overview: Sentiment in the money markets shifted dramatically during the second quarter. Initially, the economy showed little, if any, signs of a slowdown. As a result, the market expected the Federal Reserve Bank to raise interest rates at least twice before the end of the summer. We can reach this conclusion by examining the future market for 30-day federal rates. Investors were not disappointed. The Federal Reserve Bank made an aggressive move at the May Federal Open Market Committee meeting by raising the overnight rate to 6.50%, an increase of 50 basis points. However, as more market friendly data was reported during June, it appeared that the past six Federal Reserve Bank tightenings finally were having an impact on an overheated economy. The Federal Funds futures declined. Now, money market yields are reflecting no change in Federal Reserve policy. But in recent years, the economy has experienced a second quarter slowdown only to resume its upward path later in the year. So, we believe that the Federal Reserve Bank may raise rates one more time unless solid evidence continues to demonstrate a definite slowdown. Performance: The Pilgrim Money Market Fund's Class A shares, excluding sales charges, provided a since inception total return of 3.58% for the period November 24, 1999 through June 30, 2000. The Fund's Class B and C shares, excluding sales charges, provided a since inception total return of 3.60% and 3.58%, respectively for the period July 12, 1999 through June 30, 2000. Portfolio Specifics: The Reserve Institutional Trust - Primary Institutional Fund's Class A shares had a 30-day current yield of 6.30% as of June 30, 2000 and an average maturity of 54 days. Market Outlook: Going forward, we are likely to see one additional 25 basis point increase in the federal funds target. An investment in the Pilgrim Money Market Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although this Fund seeks to preserve the net asset value at $1.00 per share, it is possible to lose money by investing in this Fund. 34 THIS PAGE INTENTIONALLY LEFT BLANK 35 - ------------ Equity & Income Funds - ------------ Portfolio PILGRIM BALANCED FUND Manager's Report - -------------------------------------------------------------------------------- Management Team: Kevin Mathews, Senior Vice President & Senior Portfolio Manager; G. David Underwood, Senior Vice President & Senior Portfolio Manager Robert K. Kinsey, Vice President & Senior Portfolio Manager; Charles Ullerich, Vice President & Portfolio Manager. Goals: The Balanced Fund (the "Fund" or "Balanced") seeks a balance of capital appreciation and current income by investing in a blended portfolio of equity and debt securities with an emphasis on overall total return. Equity Market Overview: During the 12-month period ended June 30, 2000, heightened volatility punctuated the U.S. equity markets. Sentiment swung from positive to speculative to cautionary following in step with investors perceptions of economic recovery, expansion and then impending slowdown. At period end, the major indices appeared to have gone nearly nowhere, although those of the smaller stocks held on to substantial gains. Initially, market participants still felt very positive that a global recession did not develop from earlier economic crises in Asia, Latin America and Europe. Solid economic growth in the U.S. helped as well. The broad market S&P 500 Index first responded by advancing to a then new high in July but surrendered it all over the subsequent three months, followed by a surge in late 1999. It repeated a similar pattern through the first half of 2000. Mid-sized and smaller stocks echoed this pattern, although the mid-capitalization stocks managed to hold on to more of their gains through June, 2000. Rising interest rates over the past year were a major factor in causing the market volatility. Generally, the markets tended to sell off in anticipation of each of the rate increases. Affected most in the process were stocks of companies more sensitive to the economy, which investors traded in to and out of. Technology groups benefited the most. Investors took prices of these stocks to extremes in the fourth quarter of 1999 and again in early 2000, thinking that these companies would be insulated from any downturn. As with any market euphoria, the subsequent corrective phases were sharp. Testimony to the narrowness of the market, five companies, four of which are technology, were primarily responsible for the S&P 500 Index's return over the past year. Bond Market Overview: The high quality bond market experienced extraordinary bouts of illiquidity up until the latter part of the second quarter of 2000. While weakness in the equity market boded well for U. S. Treasuries, a number of corporate bonds were pummelled by earnings warnings and downgrades. However, the successful completion of several record-breaking new issues marked the turnaround in spread product by late May. Agencies faced some very rough sledding early in 2000 as a congressional committee and political pundits questioned the unique relationship between the Treasury Department and Fannie Mae (FNMA) and Freddie Mac (FHLMC). Despite numerous Federal Reserve Bank tightenings, long-term Treasuries have been well bid in the face of government buybacks and signs that the domestic economy is slowing. The first half of 2000 was better than the second half of 1999, but not by much. The negative returns of 1999 were succeeded by flat returns in 2000. High yield bond prices continued to decline in the first half of 2000 but, when combined with coupon income, total returns on the sector came close to zero. Through the year ended June 30, 2000, the ten-year Treasury yield was basically unchanged, yielding just below 6% at the beginning of the period and just above 6% at the end of the period. High yield bonds, reflecting the increased risk premium demanded by the market, rose in yield, falling in price over the same time period. Spreads remained virtually unchanged from the beginning to the end of the second half of 1999, but widened by 100 to 125 basis points on most of the major high yield indices in the first half of 2000. This activity reflected the fear of recession as well as rising default rates, declining recovery rates, and weak technical conditions resulting from mutual fund net redemptions. Mutual fund outflows totaled in excess of $6 billion in the first half of 2000, although trends have been more positive at the end of the half with sales outpacing redemptions. In the first half of 2000 trends from the second half of 1999 continued as higher rated issues outperformed lower rated issues. In order of performance for 2000, Double-B issues ranked first followed by Single-B and at the bottom Triple-C and lower rated issues. These results are to be expected with the increased level of investor sensitivity to economic conditions. Concerns about the market did not seem to significantly slow new issuance. First half of 2000 issuance totaled $27 billion, down only marginally from the $35 billion total from the second half of 1999. This is a positive sign as there is still buyer demand for quality issues, even in a slow and cautious market. Performance: For the one year ended June 30, 2000 the Fund's Class A shares, excluding sales charges, declined 1.01% compared to the 60% S&P 500 Index 40% Lehman Aggregate Index which provided a total return of 7.03% for the same period. Portfolio Specifics: Appropriate sector allocation, a disciplined portfolio management approach and good stock selection for the most part produced solid equity performance in the Fund. During the final quarter of the fiscal year, the Fund absorbed another balanced fund, the stocks of which had a temporarily negative impact. The Technology, Healthcare and Retailing sectors had the most positive influence. Holdings in Texas Instruments, Warner Lambert and Walgreens appreciated nicely A significant commitment to U. S. Treasuries on the heels of the government's buyback announcement boosted the Fund's fixed income returns. Following the under-performance of corporate bonds in the early part of the year, we added Lucent, Wal-Mart, Ford, and insured Banco Santander paper along with several agency debentures in May. We maintained our presence in puttable corporates. Market Outlook: Though still challenged by interest rates market conditions are favorable for equity investment. Growth of corporate profits remains on track and valuations have become more reasonable. Agency debentures offer excellent relative value especially now that the Congress is unlikely to move against the government sponsored enterprises anytime soon. Despite the strong rally relative to Treasuries and swaps, we feel that selective corporate bonds are cheap. We continue to avoid event risk candidates and long-dated corporate paper, and we focus on larger more liquid issues. Recent economic data point to a nascent Federal Reserve Bank engineered slowdown, and the market consensus is for only one more tightening. Our outlook is cautious as we continue to witness an Federal Open Market Committee that has a bias to tighten monetary policy. The danger of recession is real as the Federal Reserve Bank typically creates a soft-landing, or a slowing of economic growth and inflation without a recession, about 50% of the time once they begin tightening. When they create a recession, the results can be problematic for high yield bonds. Given this it becomes obvious it is a credit pickers market. Diligence in the credit review and monitoring process has become key to maintaining returns above the benchmark averages. 36 - ---------------- Portfolio Manager's Report - ---------------- PILGRIM BALANCED FUND - --------------------------------------------------------------------------------
4/19/93 6/93 6/94 6/95 6/96 6/97 6/98 6/99 6/30/00 ------ ------ ------ ------ ------ ------ ------ ------ ------ Pilgrim Balanced Fund Class A With Sales Charge 10,000 10,411 9,697 11,622 13,527 15,381 19,482 22,580 22,353 Pilgrim Balanced Fund Class A Without Sales Charge 10,000 11,044 10,286 12,329 14,350 16,316 20,666 23,953 23,713 60% S&P 500 Index / 40% Lehman Aggregate Index 10,000 10,273 10,336 12,662 15,315 19,772 25,067 29,998 32,108 Average Annual Total Returns for the Periods Ended June 30, 2000 -------------------------------------------------------------- Since Inception Since Inception Since Inception of Class A and C of Class B of Class T 1 Year 5 Year 4/19/93 5/31/95 3/31/00 ------ ------ ------- ------- ------- Including Sales Charge: Class A (1) -6.70% 12.63% 11.82% -- -- Class B (2) -6.58% -- -- 13.98% -- Class C (3) -2.53% 13.26% 12.06% -- -- Class T (5) -- -- -- -- -8.16% Excluding Sales Charge: Class A -1.01% 13.98% 12.74% -- -- Class B -1.58% -- -- 14.09% -- Class C -1.53% 13.26% 12.06% -- -- Class T -- -- -- -- -4.34% 60% S&P 500 Index/40% Lehman Aggregate Index 7.03% 20.45% 17.68%(4) 20.54% -2.29%
Based on a $10,000 initial investment, the table above illustrate the total return of Pilgrim Balanced Fund against the 60% S&P 500 Index, 40% Lehman Aggregate Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Adviser has contractually agreed to waive or defer its management fee and to pay other operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no deferral to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This letter contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio manager, only through the end of the period as stated on the cover. The portfolio manager's views are subject to change at any time based on market and other conditions. Portfolio holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1.00% for the 1-year return. (4) Since inception return from 4/30/93. (5) Reflects deduction of the Class T deferred sales charge of 4.00%. Principal Risk Factor(s): Price volatility and other risks that accompany an investment in equity securities. Credit, interest rate and other risks that accompany debt investments. The Fund may invest up to 20% of its total assets in foreign securities. International investing does pose special risks, including currency fluctuation, economic and political risks not found in investments that are solely domestic. Higher yields reflect the higher credit risks associated with certain lower rated securities in the Fund's portfolio and in some cases, the lower market prices for those instruments. See accompanying index descriptions on pages 40 and 41. 37 - ------------ Equity & Income Funds - ------------ Portfolio PILGRIM CONVERTIBLE FUND Manager's Report - -------------------------------------------------------------------------------- Management Team: Catherine Somhegyi, Chief Investment Officer; Douglas G. Forsyth, CFA, Partner, Portfolio Manager; William L. Stickney, Portfolio Manager; Michael E. Yee, Portfolio Manager; Justin Kass, Investment Analyst. Goal: The Convertible Fund (the "Fund" or "Convertible") seeks to maximize total return by investing primarily in convertible and equity securities of US companies. Market Overview: Convertible securities posted significant gains during the fiscal year ended June 30, 2000, despite the Federal Reserve Bank hiking interest rates six times from June 1999 through May 2000. The Credit Swisse First Boston (CSFB) Convertible Index climbed 30.0%, outperforming most major US equity indexes, including the S&P 500, the Russell Midcap, and the Russell 3000 indices, which advanced 7.2%, 12.6%, and 16.4%, respectively. Returns on convertible securities were essentially flat in the third quarter of 1999, due to investor concerns over rising interest rates and inflation. However, convertibles outperformed equities which posted single-digit declines across the majority of market capitalization segments. Bouncing back from a lackluster three months, convertible securities closed out the millennium with their best performance on record. During the fourth quarter of 1999, the CSFB Convertible Index gained a stunning 28.3%, fueled by returns in the technology and telecommunications sectors. In fact, technology and telecommunications dominated the convertible market throughout 1999, in terms of returns, new issuance, and market composition. In the first half of 2000, performance of the technology-biased, equity-sensitive convertible market paralleled that of technology stocks. Following the first quarter's 6.5% gain, the convertible market declined in April and May, However, June was an excellent month for convertibles with the CSFB Index posting a 6.5% increase, led by a rebound in technology issues. Performance: For the one year ended June 30, 2000, the Fund's Class A shares, excluding sales charges, provided a total return of 39.88%, substantially outperforming the CSFB Convertible Index, which was up 30.02% for the same period. Portfolio Specifics: A sell-off in Internet-related issues had a minor negative impact on the fund's relative performance in July, as did a pullback in interest rate-sensitive telecommunications holdings in April and May. For the entire period, however, positions in the technology and telecommunications were major contributors to the fund's strong results. Top-performing holdings included e-commerce companies Siebel Systems and BEA Systems, semiconductor firms Atmel and Conexant Systems, data storage solutions provider Veritas Software, and Vodafone Airtouch, the world's largest mobile telecommunications company. Market Outlook: By consistently applying our bottom-up investment approach, we are optimistic that the convertible market will continue to offer attractive investment opportunities, driven by: * Expectations for continued strength in corporate profits * Signs of moderating US economic growth * Ongoing technology-based productivity gains that should help restrain labor costs * A potential increase in demand for convertible securities as investors seek equity-like returns with downside protection amid a volatile stock market environment 38 - ---------------- Portfolio Manager's Report - ---------------- PILGRIM CONVERTIBLE FUND - --------------------------------------------------------------------------------
4/19/93 6/93 6/94 6/95 6/96 6/97 6/98 6/99 6/30/00 ------ ------ ------ ------ ------ ------ ------ ------ ------ Pilgrim Convertible Fund Class A With Sales Charge 10,000 10,308 10,743 11,744 14,308 17,368 21,139 26,189 36,650 Pilgrim Convertible Fund Class A Without Sales Charge 10,000 10,935 11,396 12,458 15,178 18,424 22,425 27,781 38,879 First Boston Convertible Index 10,000 10,272 10,438 12,162 14,080 16,212 18,479 20,639 26,836 Average Annual Total Returns for the Periods Ended June 30, 2000 ---------------------------------------------------------------- Since Inception Since Inception of Class A and C of Class B 1 Year 5 Year 4/19/93 5/31/95 ------ ------ ------- ------- Including Sales Charge: Class A (1) 31.84% 24.08% 19.77% -- Class B (2) 34.21% -- -- 25.25% Class C (3) 38.24% 24.80% 20.00% -- Excluding Sales Charge: Class A 39.88% 25.56% 20.75% -- Class B 39.21% -- -- 25.33% Class C 39.24% 24.80% 20.00% -- First Boston Convertible Index 30.02% 17.13% 11.75%(4) 17.65%
Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim Convertible Fund against the First Boston Convertible Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Adviser has contractually agreed to waive or defer its management fees and to pay other operating expenses otherwise payable by the Fund, subject to possible later reimbursement during a three-year period. Total returns would have been lower had there been no deferral to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This letter contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio manager, only through the end of the period as stated on the cover. The portfolio manager's views are subject to change at any time based on market and other conditions. Portfolio holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75% (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1.00% for the 1 year return. (4) Since inception performance for index is shown from 04/30/93. Principal Risk Factor(s): The credit standing of the issuer and other factors may affect the investment value of a convertible security. The market value of convertible debt securities tends to vary inversely with the level of interest rates. Lower rated securities may be less liquid than higher quality investments. This fund also has exposure to financial, market and interest rate risks. Higher yields reflect the higher credit risks associated with certain lower rated securities in the Fund's portfolio and in some cases, the lower market prices for those instruments. See accompanying index descriptions on pages 40 and 41. 39 - ------- Pilgrim Funds - ------- INDEX DESCRIPTIONS - -------------------------------------------------------------------------------- The S&P 500 Index is a widely recognized index of 500 common stocks. The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. The S&P Barra Value Index ia a capitalization-weighted index of all the stocks in the S&P 500 Index that have low price-to-book ratios The Russell 1000 Growth Index is an index that measures the performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values. The NASDAQ Composite Index is a broad-based capitalization-weighted index of all NASDAQ National Market & SmallCap stocks. The Russell MidCap Index is generally representative of the smallest 800 stocks in the Russell 1000 Index as ranked by total market capitalization. The Russell MidCap Value Index measures the performance of the 800 smallest companies in the Russell 1000 Index with lower price-to-book ratios and lower forecasted growth values. The Russell MidCap Growth Index consists of securities with capitalizations between $450 million and $3.8 billion with greater than average growth orientation. The Russell 2000 Growth Index measures the performance of those Russell 2000 Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell 2000 Index consists of the smallest 2000 companies in the Russell 3000 Index. The S&P Major Regional Banks Index is a capitalization-weighted index of all stocks designed to measure performance of the major regional banks sector of the S&P 500 Index. The NASDAQ 100 Financial Index is a capitalization-weighted index of the 100 largest financial companies, as well as foreign issues, including American Depositary Receipts, traded on the NASDAQ National Market System and SmallCap Market. The MSCI EAFE Index consists of more than 1,400 securities in the U.S., Europe, Canada, Australia, New Zealand, and the Far East. It is a generally accepted index for major overseas markets. The MSCI Emerging Markets Free (EMF) Index is comprised of companies representative of the market structure of 22 emerging countries in Europe, Latin America and the Pacific Rim Basin. The MSCI World Index consists of more than 1,400 securities located in the U.S., Europe, Canada, Australia, New Zealand and the Far East. The Salomon EPAC Extended Market Index measures the performance of securities of smaller-capitalized companies in 22 countries excluding the U.S. and Canada. The Hang Seng Index is a capitalization weighted index of the stocks of leading Hong Kong corporations. The MSCI Far East Free ex-Japan Index measures performance of securities listed on exchanges in the Far East markets excluding Japan. 40 - ------- Pilgrim Funds - ------- INDEX DESCRIPTIONS (continued) - -------------------------------------------------------------------------------- The Lehman Brothers Aggregate Bond Index is an index of fixed income securities. The Lehman Brothers Government/Mortgage Index measures the performance of U.S. Government agencies and instrumentalities, as well as mortgage pass-through instruments issued by FNMA, FHLMC and GNMA. The Lehman Brothers Intermediate Treasury Index is an index that measures the performance of U.S. Treasuries with maturities of less than ten years. The Lehman Brothers High Yield Bond Index is comprised of non-investment grade bonds with maturities between seven to ten years. The Credit Suisse First Boston High Yield Index is an index of high yield bonds rated BB or below. The Credit Suisse First Boston Convertible Index is an index representing the universe of convertible securities. The SET Index is a capitalization-weighted index of all the stocks traded on the Stock Exchange of Thailand. All indices are unmanaged. An investor cannot invest directly in an index. 41 THIS PAGE INTENTIONALLY LEFT BLANK 42 - ------- Pilgrim Funds - ------- REPORT OF INDEPENDENT AUDITORS - -------------------------------------------------------------------------------- To the Shareholders and Board of Directors The Pilgrim Funds: We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of the Pilgrim MagnaCap Fund, Pilgrim LargeCap Leaders Fund, Pilgrim LargeCap Growth Fund, Pilgrim MidCap Value Fund, Pilgrim MidCap Growth Fund, Pilgrim SmallCap Growth Fund, Pilgrim Bank and Thrift Fund, Pilgrim Worldwide Growth Fund, Pilgrim International Core Growth Fund, Pilgrim International SmallCap Growth Fund, Pilgrim Emerging Countries Fund, Pilgrim Asia-Pacific Equity Fund, Pilgrim Government Securities Income Fund, Pilgrim Strategic Income Fund, Pilgrim High Yield Fund, Pilgrim High Yield Fund II, Pilgrim Money Market Fund, Pilgrim Balanced Fund and Pilgrim Convertible Fund as of June 30, 2000, and the related statements of operations for the year then ended, statements of changes in net assets for each of the years in the two-year period then ended, and financial highlights for the periods indicated herein, except as described below, for all funds except for the Pilgrim LargeCap Growth Fund, Pilgrim MidCap Growth Fund, Pilgrim SmallCap Growth Fund, Pilgrim Worldwide Growth Fund, Pilgrim International Core Growth Fund, Pilgrim International SmallCap Growth Fund, Pilgrim Emerging Countries Fund, Pilgrim Strategic Income Fund, Pilgrim High Yield Fund II, Pilgrim Balanced Fund, and Pilgrim Convertible Fund for which we audited the related statements of changes in net assets and financial highlights for the year ended June 30, 2000 and the three-month period ended June 30, 1999, and the Pilgrim Money Market Fund for which we audited the related statements of operations, changes in net assets and financial highlights for the period from July 12, 1999 (commencement of operations) to June 30, 2000. These financial statements and financial highlights are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. For all periods ending prior to April 1, 1999 for the Pilgrim LargeCap Growth Fund, Pilgrim MidCap Growth Fund, Pilgrim SmallCap Growth Fund, Pilgrim Worldwide Growth Fund, Pilgrim International Core Growth Fund, Pilgrim International SmallCap Growth Fund, Pilgrim Emerging Countries Fund, Pilgrim Strategic Income Fund, Pilgrim High Yield Fund II, Pilgrim Balanced Fund and Pilgrim Convertible Fund the statements of changes in net assets and financial highlights were audited by other auditors whose report thereon dated May 7, 1999 expressed an unqualified opinion on those financial statements and financial highlights. We conducted our audits in accordance with generally accepted auditing standards. Those standards required that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 2000 by correspondence with the custodians and other appropriate audit procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above, excluding those financial statements and financial highlights which were indicated above as having been audited by others, present fairly, in all material respects, the financial position of each of the aforementioned funds as of June 30, 2000, the results of their operations, the changes in their net assets, and their financial highlights for the periods indicated herein, except as noted above, in conformity with generally accepted accounting principles. KPMG LLP Los Angeles, California August 4, 2000 43 - ----------- U.S. Equity Funds - ----------- STATEMENTS OF ASSETS AND LIABILITIES FOR THE YEAR ENDED JUNE 30, 2000 - --------------------------------------------------------------------------------
LargeCap LargeCap MidCap MidCap SmallCap Bank and MagnaCap Leaders Growth Value Growth Growth Thrift Fund Fund Fund Fund Fund Fund Fund ------------ ----------- ------------ ----------- ------------ ------------ ------------- ASSETS: Investments in securities at market value* $406,990,017 $36,730,816 $692,005,187 $29,388,822 $540,375,016 $500,804,265 $ 353,366,711 Short-term investments at amortized cost 13,465,911 2,114,000 15,448,000 3,232,000 5,417,000 13,629,000 3,552,000 Cash 18,204 134,890 48,707 10,210 10,714 10,278 10,717 Receivables: Fund shares sold 110,400 99,464 4,625,769 6,457 1,823,383 2,650,835 334,937 Dividends and interest 526,663 30,282 68,627 18,894 33,989 55,133 876,810 Investment securities sold -- 164,029 13,331,522 82,197 6,479,797 1,372,829 1,559,651 Other 33,356 20,203 -- -- -- -- -- Prepaid expenses 28,948 26,860 41,055 20,496 35,852 25,396 29,854 ------------ ----------- ------------ ----------- ------------ ------------ ------------- Total Assets 421,173,499 39,320,544 725,568,867 32,759,076 554,175,751 518,547,736 359,730,680 LIABILITIES: Payable for investment securities purchased 2,212,865 1,335,301 26,495,350 1,173,228 8,988,122 8,143,975 184,271 Payable for fund shares redeemed 555,164 89,266 982,741 83,628 2,948,935 2,089,753 796,715 Payable to affiliate 417,173 45,432 857,695 46,432 670,213 653,383 408,574 Other accrued expenses and liabilities 320,313 42,559 195,329 40,318 211,888 141,370 411,299 ------------ ----------- ------------ ----------- ------------ ------------ ------------- Total Liabilities 3,505,515 1,512,558 28,531,115 1,343,606 12,819,158 11,028,481 1,800,859 ------------ ----------- ------------ ----------- ------------ ------------ ------------- NET ASSETS $417,667,984 $37,807,986 $697,037,752 $31,415,470 $541,356,593 $507,519,255 $ 357,929,821 ============ =========== ============ =========== ============ ============ ============= NET ASSETS CONSIST OF: Paid-in capital $286,457,020 $31,399,144 $526,337,994 $28,853,491 $291,047,773 $295,285,132 $ 407,249,948 Undistributed net investment income 872,876 -- -- -- -- -- 5,574,859 Accumulated net realized gain on investments 29,968,024 1,746,427 7,618,306 1,920,781 65,413,634 25,892,989 3,133,445 Net unrealized appreciation (depreciation) of investments 100,370,064 4,662,415 163,081,452 641,198 184,895,186 186,341,134 (58,028,431) ------------ ----------- ------------ ----------- ------------ ------------ ------------- Net Assets $417,667,984 $37,807,986 $697,037,752 $31,415,470 $541,356,593 $507,519,255 $ 357,929,821 ============ =========== ============ =========== ============ ============ ============= * Cost of securities $306,619,953 $32,068,401 $528,923,735 $28,747,624 $355,479,830 $314,463,131 $ 411,395,142
See Accompanying Notes to Financial Statements 44 - --------------------------------------------------------------------------------
LargeCap LargeCap MidCap MidCap SmallCap Bank and MagnaCap Leaders Growth Value Growth Growth Thrift Fund Fund Fund Fund Fund Fund Fund ------------ ------------ ------------ ------------ ------------ ------------ ------------ Class A: Net Assets $303,863,754 $ 10,023,911 $186,261,267 $ 8,874,538 $155,975,592 $168,239,310 $209,737,553 Shares authorized 80,000,000 28,000,000 unlimited 28,000,000 unlimited unlimited 100,000,000 Par Value $ 1.00 $ 0.10 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.10 Shares outstanding 19,184,981 631,068 4,319,579 620,787 5,536,240 9,150,735 12,770,498 Net asset value and redemption price per share $ 15.84 $ 15.88 $ 43.12 $ 14.30 $ 28.17 $ 18.39 $ 16.42 Maximum offering price per share(1) $ 16.81 $ 16.85 $ 45.75 $ 15.17 $ 29.89 $ 19.51 $ 17.42 Class B: Net Assets $ 87,166,507 $ 21,543,981 $333,256,132 $ 15,840,407 $116,333,572 $ 97,238,548 $148,192,268 Shares authorized 80,000,000 28,000,000 unlimited 28,000,000 unlimited unlimited 100,000,000 Par Value $ 1.00 $ 0.10 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.10 Shares outstanding 5,645,177 1,407,914 7,760,157 1,149,578 3,521,132 4,222,869 9,063,708 Net asset value and redemption price per share(2) $ 15.44 $ 15.30 $ 42.94 $ 13.78 $ 33.04 $ 23.03 $ 16.35 Maximum offering price per share $ 15.44 $ 15.30 $ 42.94 $ 13.78 $ 33.04 $ 23.03 $ 16.35 Class C: Net Assets $ 3,660,453 $ 1,363,558 $152,682,354 $ 2,687,960 $249,255,124 $229,472,882 n/a Shares authorized 80,000,000 28,000,000 unlimited 28,000,000 unlimited unlimited n/a Par Value $ 1.00 $ 0.10 $ 0.00 $ 0.00 $ 0.00 $ 0.00 n/a Shares outstanding 237,011 89,006 3,565,404 195,028 9,609,355 12,738,582 n/a Net asset value and redemption price per share(2) $ 15.44 $ 15.32 $ 42.82 $ 13.78 $ 25.94 $ 18.01 n/a Maximum offering price per share $ 15.44 $ 15.32 $ 42.82 $ 13.78 $ 25.94 $ 18.01 n/a Class M: Net Assets $ 13,049,521 $ 4,677,457 n/a $ 3,873,298 n/a n/a n/a Shares authorized 40,000,000 14,000,000 n/a 14,000,000 n/a n/a n/a Par Value $ 1.00 $ 0.10 n/a $ 0.00 n/a n/a n/a Shares outstanding 834,479 301,320 n/a 278,473 n/a n/a n/a Net asset value and redemption price per share $ 15.64 $ 15.52 n/a $ 13.91 n/a n/a n/a Maximum offering price per share(3) $ 16.21 $ 16.09 n/a $ 14.41 n/a n/a n/a Class Q: Net Assets $ 9,927,749 $ 199,079 $ 24,837,999 $ 139,267 $ 19,792,305 $ 12,568,515 n/a Shares authorized 40,000,000 28,000,000 unlimited 28,000,000 unlimited unlimited n/a Par Value $ 1.00 $ 0.10 $ 0.00 $ 0.00 $ 0.00 $ 0.00 n/a Shares outstanding 626,744 12,534 568,240 9,749 554,850 614,141 n/a Net asset value and redemption price per share $ 15.84 $ 15.88 $ 43.71 $ 14.29 $ 35.67 $ 20.47 n/a Maximum offering price per share $ 15.84 $ 15.88 $ 43.71 $ 14.29 $ 35.67 $ 20.47 n/a
- ---------- (1) Maximum offering price is computed at 100/94.25 of net asset value. On purchases of $50,000 or more, the offering price is reduced. (2) Redemption price per share may be reduced for any applicable contingent deferred sales charge. (3) Maximum offering price is computed at 100/96.50 of net asset value. On purchases of $50,000 or more, the offering price is reduced. 45 - ------------- International Equity Funds - ------------- STATEMENTS OF ASSETS AND LIABILITIES FOR THE YEAR ENDED JUNE 30, 2000 - --------------------------------------------------------------------------------
Worldwide International International Emerging Asia-Pacific Growth Core Growth SmallCap Countries Equity Fund Fund Growth Fund Fund Fund ------------- ------------- ------------- ------------- ------------- ASSETS: Investments in securities at market value* $ 639,095,933 $ 83,328,917 $ 645,227,279 $ 251,751,858 $ 27,574,363 Short-term investments at amortized cost 27,281,000 4,042,000 66,960,000 1,218,000 -- Foreign Currency** 398 157,647 -- 3,713,846 -- Cash 23,559 10,586 10,203 10,779 -- Receivables: Fund shares sold 4,498,998 727,867 6,256,545 1,950,335 280,549 Dividends and interest 622,494 180,766 419,277 438,193 39,207 Investment securities sold 8,129,229 704,551 7,617,055 6,248,100 288,184 Other -- 167,736 118,941 40,470 -- Prepaid expenses 92,703 17,485 77,753 19,893 15,814 ------------- ------------- ------------- ------------- ------------- Total Assets 679,744,314 89,337,555 726,687,053 265,391,474 28,198,117 ------------- ------------- ------------- ------------- ------------- LIABILITIES: Payable for investment securities purchased 15,496,676 919,194 5,168,931 8,312,796 -- Payable for fund shares redeemed 2,898,211 336,290 1,823,813 1,000,921 134,352 Payable to affiliate 902,056 117,569 889,977 349,236 26,659 Payable to custodian -- -- -- -- 219,881 Estimated tax liability on Indian investments -- -- -- 860,486 -- Other accrued expenses and liabilities 268,101 117,724 385,272 374,076 114,845 ------------- ------------- ------------- ------------- ------------- Total Liabilities 19,565,044 1,490,777 8,267,993 10,897,515 495,737 ------------- ------------- ------------- ------------- ------------- NET ASSETS $ 660,179,270 $ 87,846,778 $ 718,419,060 $ 254,493,959 $ 27,702,380 ============= ============= ============= ============= ============= NET ASSETS CONSIST OF: Paid-in capital $ 518,940,603 $ 72,998,614 $ 570,256,199 $ 253,790,102 $ 48,397,703 Undistributed net investment income (loss) -- -- -- -- -- Accumulated net realized gain (loss) on investments and foreign currency transactions (net of foreign tax on the sale of Indian investments of $0, $0, $784,263, $4,489,899 and $0, respectively -- Note 2) 16,761,834 2,514,180 46,827,954 (38,373,471) (23,718,357) Net unrealized appreciation of investments and other assets, liabilities and forward contracts denominated in foreign currencies (net of estimated tax liability on Indian investments of $0, $0, $0, $860,486 and $0, respectively -- Note 2) 124,476,833 12,333,984 101,334,907 39,077,328 3,023,034 ------------- ------------- ------------- ------------- ------------- Net Assets $ 660,179,270 $ 87,846,778 $ 718,419,060 $ 254,493,959 $ 27,702,380 ============= ============= ============= ============= ============= * Cost of securities $ 514,610,089 $ 70,987,938 $ 543,891,723 $ 211,815,346 $ 24,528,219 ** Cost of foreign currency $ 397 $ 154,193 $ -- $ 3,714,465 $ --
See Accompanying Notes to Financial Statements 46 - --------------------------------------------------------------------------------
Worldwide International International Emerging Asia-Pacific Growth Core Growth SmallCap Countries Equity Fund Fund Growth Fund Fund Fund ------------ ------------ ------------ ------------ ------------ Class A: Net Assets $235,341,134 $ 23,002,771 $278,480,376 $ 75,311,162 $ 11,725,688 Shares authorized unlimited unlimited unlimited unlimited 24,000,000 Par Value $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 1.00 Shares outstanding 7,849,453 964,854 6,801,836 3,734,633 1,621,404 Net asset value and redemption price per share $ 29.98 $ 23.84 $ 40.94 $ 20.17 $ 7.23 Maximum offering price per share(1) $ 31.81 $ 25.29 $ 43.44 $ 21.40 $ 7.67 Class B: Net Assets $130,988,092 $ 21,542,945 $132,027,810 $ 30,321,732 $ 12,227,613 Shares authorized unlimited unlimited unlimited unlimited 24,000,000 Par Value $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 1.00 Shares outstanding 3,891,880 903,931 3,051,432 1,493,431 1,753,705 Net asset value and redemption price per share(2) $ 33.66 $ 23.83 $ 43.27 $ 20.30 $ 6.97 Maximum offering price per share $ 33.66 $ 23.83 $ 43.27 $ 20.30 $ 6.97 Class C: Net Assets $239,432,294 $ 26,734,344 $144,068,173 $ 29,610,258 n/a Shares authorized unlimited unlimited unlimited unlimited n/a Par Value $ 0.00 $ 0.00 $ 0.00 $ 0.00 n/a Shares outstanding 8,001,360 1,117,071 3,627,965 1,513,876 n/a Net asset value and redemption price per share(2) $ 29.92 $ 23.93 $ 39.71 $ 19.56 n/a Maximum offering price per share $ 29.92 $ 23.93 $ 39.71 $ 19.56 n/a Class M: Net Assets n/a n/a n/a n/a $ 3,749,079 Shares authorized n/a n/a n/a n/a 12,000,000 Par Value n/a n/a n/a n/a $ 1.00 Shares outstanding n/a n/a n/a n/a 532,713 Net asset value and redemption price per share n/a n/a n/a n/a $ 7.04 Maximum offering price per share(3) n/a n/a n/a n/a $ 7.30 Class Q: Net Assets $ 54,417,750 $ 16,566,718 $163,842,701 $119,250,807 n/a Shares authorized unlimited unlimited unlimited unlimited n/a Par Value $ 0.00 $ 0.00 $ 0.00 $ 0.00 n/a Shares outstanding 1,575,894 668,527 3,783,688 5,749,575 n/a Net asset value and redemption price per share $ 34.53 $ 24.78 $ 43.30 $ 20.74 n/a Maximum offering price per share $ 34.53 $ 24.78 $ 43.30 $ 20.74 n/a
- ---------- (1) Maximum offering price is computed at 100/94.25 of net asset value. On purchases of $50,000 or more, the offering price is reduced. (2) Redemption price per share may be reduced for any applicable contingent deferred sales charge. (3) Maximum offering price is computed at 100/96.50 of net asset value. On purchases of $50,000 or more, the offering price is reduced. 47 - ------ Income Funds - ------ STATEMENTS OF ASSETS AND LIABILITIES FOR THE YEAR ENDED JUNE 30, 2000 - --------------------------------------------------------------------------------
Government Strategic Securities Income High Yield High Yield Money Market Income Fund Fund Fund Fund II Fund ------------- ------------- ------------- ------------- ------------- ASSETS: Investments in securities at market value* $ 107,186,754 $ 10,907,360 $ 285,672,209 $ 179,559,343 $ -- Investment in Reserve Institutional Trust Primary Institutional Fund* -- -- -- -- 100,415,833 Short-term investments at amortized cost 4,658,000 289,000 13,402,935 21,501,000 -- Cash 576 15,968 17,906 268 -- Receivables: Fund shares sold 3,569,377 86,185 1,403,965 253,636 1,228,493 Interest 672,660 158,632 9,079,960 4,115,502 17,470 Due from affiliate -- 13,244 -- -- -- Investment securities sold -- 202,924 7,018,324 1,550,278 -- Other 3,936 -- -- 1,624 -- Prepaid expenses 61,933 -- -- 79,905 29,805 Deferred organization costs -- 21,534 27,338 -- -- ------------- ------------- ------------- ------------- ------------- Total Assets 116,153,236 11,694,847 316,622,637 207,061,556 101,691,601 ------------- ------------- ------------- ------------- ------------- LIABILITIES: Payable for investment securities purchased -- 250,000 10,993,495 5,350,000 -- Payable for securities sold short (proceeds of $122,387) -- -- 117,250 -- -- Payable for fund shares redeemed 2,570,991 15,577 796,717 1,115,672 8,276,028 Payable to custodian -- -- -- -- 58 Payable to affiliate 101,915 -- 318,118 199,982 75,291 Distributions payable -- -- -- 1,067,065 318,915 Other accrued expenses and liabilities 115,198 49,086 249,381 119,786 124,979 ------------- ------------- ------------- ------------- ------------- Total Liabilities 2,788,104 314,663 12,474,961 7,852,505 8,795,271 ------------- ------------- ------------- ------------- ------------- NET ASSETS $ 113,365,132 $ 11,380,184 $ 304,147,676 $ 199,209,051 $ 92,896,330 ============= ============= ============= ============= ============= NET ASSETS CONSIST OF: Paid-in capital $ 122,508,204 $ 12,441,162 $ 412,069,256 $ 235,891,108 $ 92,896,330 Undistributed (overdistributed) net investment income -- 491,239 -- (256,953) -- Accumulated net realized loss on investments and foreign currency transactions (7,375,294) (1,342,971) (66,808,901) (9,557,114) -- Net unrealized depreciation of investments, securities sold short, and other assets, liabilities and forward contracts denominated in foreign currencies (1,767,778) (209,246) (41,112,679) (26,867,990) -- ------------- ------------- ------------- ------------- ------------- Net Assets $ 113,365,132 $ 11,380,184 $ 304,147,676 $ 199,209,051 $ 92,896,330 ============= ============= ============= ============= ============= * Cost of securities $ 108,954,532 $ 11,116,606 $ 326,790,025 $ 206,427,333 $ 100,415,833
See Accompanying Notes to Financial Statements 48 - --------------------------------------------------------------------------------
Government Strategic Securities Income High Yield High Yield Money Market Income Fund Fund Fund Fund II Fund -------------- -------------- -------------- -------------- -------------- Class A: Net Assets $ 54,206,175 $ 2,726,254 $ 85,869,951 $ 34,415,080 $ 75,430,386 Shares authorized 1,000,000,000 unlimited 80,000,000 unlimited unlimited Par Value $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 Shares outstanding 4,545,302 225,777 17,036,307 3,185,343 75,430,386 Net asset value and redemption price per share $ 11.93 $ 12.07 $ 5.04 $ 10.80 $ 1.00 Maximum offering price per share(1) $ 12.52 $ 12.67 $ 5.29 $ 11.34 $ 1.00 Class B: Net Assets $ 33,692,207 $ 4,460,163 $ 199,617,501 $ 103,246,586 $ 12,035,204 Shares authorized 1,000,000,000 unlimited 80,000,000 unlimited unlimited Par Value $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 Shares outstanding 2,834,631 377,987 39,688,341 9,547,339 12,035,204 Net asset value and redemption price per share(2) $ 11.89 $ 11.80 $ 5.03 $ 10.81 $ 1.00 Maximum offering price per share $ 11.89 $ 11.80 $ 5.03 $ 10.81 $ 1.00 Class C: Net Assets $ 2,047,497 $ 3,966,076 $ 5,930,334 $ 23,323,984 $ 5,430,740 Shares authorized 1,000,000,000 unlimited 80,000,000 unlimited unlimited Par Value $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 Shares outstanding 170,455 322,466 1,180,360 2,156,686 5,430,740 Net asset value and redemption price per share(2) $ 12.01 $ 12.30 $ 5.02 $ 10.81 $ 1.00 Maximum offering price per share $ 12.01 $ 12.30 $ 5.02 $ 10.81 $ 1.00 Class M: Net Assets $ 509,983 n/a $ 12,729,862 n/a n/a Shares authorized 1,000,000,000 n/a 40,000,000 n/a n/a Par Value $ 0.00 n/a n/a n/a n/a Shares outstanding 42,790 n/a 2,528,298 n/a n/a Net asset value and redemption price per share $ 11.92 n/a $ 5.03 n/a n/a Maximum offering price per share(3) $ 12.32 n/a $ 5.20 n/a n/a Class Q: Net Assets $ 21,720 $ 227,691 $ 28 $ 6,881,569 n/a Shares authorized 1,000,000,000 unlimited 80,000,000 unlimited n/a Par Value $ 0.00 $ 0.00 $ 0.00 $ 0.00 n/a Shares outstanding 1,819 19,891 5 635,888 n/a Net asset value and redemption price per share $ 11.94 $ 11.45 $ 5.60 $ 10.82 n/a Maximum offering price per share $ 11.94 $ 11.45 $ 5.60 $ 10.82 n/a Class T: Net Assets $ 22,887,550 n/a n/a $ 31,341,832 n/a Shares authorized 1,000,000,000 n/a n/a unlimited n/a Par Value $ 0.00 n/a n/a $ 0.00 n/a Shares outstanding 1,924,439 n/a n/a 2,899,430 n/a Net asset value and redemption price per share(2) $ 11.89 n/a n/a $ 10.81 n/a Maximum offering price per share $ 11.89 n/a n/a $ 10.81 n/a
- ---------- (1) Maximum offering price is computed at 100/95.25 of net asset value. On purchases of $50,000 or more, the offering price is reduced (with the exception of the Money Market Fund). (2) Redemption price per share may be reduced for any applicable contingent deferred sales charge. (3) Maximum offering price is computed at 100/96.75 of net asset value. On purchases of $50,000 or more, the offering price is reduced. 49 - ------------ Equity & Income Funds - ------------ STATEMENTS OF ASSETS AND LIABILITIES FOR THE YEAR ENDED JUNE 30, 2000 - -------------------------------------------------------------------------------- Balanced Convertible Fund Fund ------------ ------------ ASSETS: Investments in securities at market value* $134,380,839 $463,127,528 Short-term investments at amortized cost 6,624,000 23,043,000 Cash 105,422 10,916 Receivables: Fund shares sold 56,270 3,434,620 Dividends and interest 1,241,211 2,756,429 Investment securities sold 19,843,094 2,602,778 Other -- -- Prepaid expenses 51,201 45,783 ------------ ------------ Total Assets 162,302,037 495,021,054 ------------ ------------ LIABILITIES: Payable for investment securities purchased 20,326,390 10,142,819 Payable for fund shares redeemed 40,139 415,419 Payable to affiliate 128,692 577,098 Other accrued expenses and liabilities 167,522 205,513 ------------ ------------ Total Liabilities 20,662,743 11,340,849 ------------ ------------ NET ASSETS $141,639,294 $483,680,205 ============ ============ NET ASSETS CONSIST OF: Paid-in capital $126,219,252 $336,593,518 Undistributed net investment income 1,009,916 2,762,398 Accumulated net realized gain on investments and foreign currency transactions 9,816,187 64,760,961 Net unrealized appreciation (depreciation) of investments and other assets, liabilities and forward contracts denominated in foreign currencies 4,593,939 79,563,328 ------------ ------------ Net Assets $141,639,294 $483,680,205 ============ ============ * Cost of securities $129,786,900 $383,554,153 See Accompanying Notes to Financial Statements 50 - -------------------------------------------------------------------------------- Balanced Convertible Fund Fund ------------ ------------ Class A: Net Assets $ 63,592,296 $131,218,165 Shares authorized unlimited unlimited Par Value $ 0.00 $ 0.00 Shares outstanding 4,228,007 4,736,872 Net asset value and redemption price per share $ 15.04 $ 27.70 Maximum offering price per share(1) $ 15.96 $ 29.39 Class B: Net Assets $ 41,026,358 $139,704,256 Shares authorized unlimited unlimited Par Value $ 0.00 $ 0.00 Shares outstanding 2,549,070 4,626,136 Net asset value and redemption price per share(2) $ 16.09 $ 30.20 Maximum offering price per share $ 16.09 $ 30.20 Class C: Net Assets $ 25,838,281 $156,592,375 Shares authorized unlimited unlimited Par Value $ 0.00 $ 0.00 Shares outstanding 1,788,579 5,528,130 Net asset value and redemption price per share(2) $ 14.45 $ 28.33 Maximum offering price per share $ 14.45 $ 28.33 Class Q: Net Assets $ 229,777 $ 56,165,409 Shares authorized unlimited unlimited Par Value $ 0.00 $ 0.00 Shares outstanding 15,379 2,091,751 Net asset value and redemption price per share $ 14.94 $ 26.85 Maximum offering price per share $ 14.94 $ 26.85 Class T: Net Assets $ 10,952,582 n/a Shares authorized unlimited n/a Par Value $ 0.00 n/a Shares outstanding 680,390 n/a Net asset value and redemption price per share(2) $ 16.10 n/a Maximum offering price per share $ 16.10 n/a - ---------- (1) Maximum offering price is computed at 100/94.25 of net asset value. On purchases of $50,000 or more, the offering price is reduced. (2) Redemption price per share may be reduced for any applicable contingent deferred sales charge. 51 - ----------- U.S. Equity Funds - ----------- STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2000 - --------------------------------------------------------------------------------
LargeCap LargeCap MidCap MagnaCap Leaders Growth Value Fund Fund Fund Fund ------------- ------------- ------------- ------------- INVESTMENT INCOME: Dividends, net of foreign taxes $ 6,411,880 $ 447,922 $ 979,861 $ 410,689 Interest 1,359,240 110,892 1,001,252 89,322 ------------- ------------- ------------- ------------- Total investment income 7,771,120 558,814 1,981,113 500,011 ------------- ------------- ------------- ------------- EXPENSES: Investment management fees 3,251,123 382,174 2,997,541 396,010 Distribution expenses 2,175,698 300,365 3,229,574 292,106 Transfer agent and registrar fees 721,472 95,282 638,226 117,873 Shareholder reporting 146,421 15,238 145,839 16,015 Registration and filing fees 100,509 55,876 87,246 51,863 Recordkeeping and pricing fees 82,218 6,352 66,942 8,653 Professional fees 60,170 5,810 39,618 6,239 Custodian fees 52,887 6,805 45,643 7,779 Shareholder servicing fee 31,735 4,056 27,554 5,230 Directors' fees 29,515 3,311 16,842 3,607 Insurance 21,139 1,899 998 2,452 Miscellaneous 13,160 1,097 7,788 2,341 Interest and credit facility fee 6,126 483 15,244 645 Organization expense -- 27,603 -- 27,602 ------------- ------------- ------------- ------------- Total expenses 6,692,173 906,351 7,319,055 938,415 ------------- ------------- ------------- ------------- Less: Waived and reimbursed fees -- 31,375 -- 48,900 Earnings credits 740 548 19,972 1,712 ------------- ------------- ------------- ------------- Net expenses 6,691,433 874,428 7,299,083 887,803 ------------- ------------- ------------- ------------- Net investment income (loss) 1,079,687 (315,614) (5,317,970) (387,792) ------------- ------------- ------------- ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain from investments 29,968,024 2,990,062 13,498,698 2,719,300 Net change in unrealized appreciation (depreciation) of investments (35,597,984) (1,997,225) 147,558,169 (9,096,135) ------------- ------------- ------------- ------------- Net gain (loss) from investments (5,629,960) 992,837 161,056,867 (6,376,835) ------------- ------------- ------------- ------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (4,550,273) $ 677,223 $ 155,738,897 $ (6,764,627) ============= ============= ============= ============= MidCap SmallCap Bank and Growth Growth Thrift Fund Fund Fund ------------- ------------- ------------- INVESTMENT INCOME: Dividends, net of foreign taxes $ 240,274 $ 413,944 $ 13,965,652 Interest 831,678 913,329 243,551 ------------- ------------- ------------- Total investment income 1,071,952 1,327,273 14,209,203 ------------- ------------- ------------- EXPENSES: Investment management fees 3,101,608 4,206,863 3,609,716 Distribution expenses 3,308,958 3,219,847 2,893,803 Transfer agent and registrar fees 561,763 610,182 1,564,384 Shareholder reporting 172,610 167,232 125,600 Registration and filing fees 82,483 91,096 96,425 Recordkeeping and pricing fees 77,837 81,596 89,510 Professional fees 45,075 56,326 75,093 Custodian fees 54,743 85,460 58,848 Shareholder servicing fee 23,703 25,209 43,262 Directors' fees 16,500 22,000 35,000 Insurance 4,793 5,699 17,558 Miscellaneous 86,883 185,057 16,809 Interest and credit facility fee 3,556 34,152 7,957 Organization expense -- -- -- ------------- ------------- ------------- Total expenses 7,540,512 8,790,719 8,633,965 ------------- ------------- ------------- Less: Waived and reimbursed fees 10,354 204,352 -- Earnings credits 5,832 -- -- ------------- ------------- ------------- Net expenses 7,524,326 8,586,367 8,633,965 ------------- ------------- ------------- Net investment income (loss) (6,452,374) (7,259,094) 5,575,238 ------------- ------------- ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain from investments 85,093,448 85,003,902 3,137,070 Net change in unrealized appreciation (depreciation) of investments 119,946,995 102,235,975 (157,531,125) ------------- ------------- ------------- Net gain (loss) from investments 205,040,443 187,239,877 (154,394,055) ------------- ------------- ------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 198,588,069 $ 179,980,783 $(148,818,817) ============= ============= =============
See Accompanying Notes to Financial Statements 52 - ------------- International Equity Funds - ------------- STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2000 - --------------------------------------------------------------------------------
Worldwide International International Emerging Asia-Pacific Growth Core Growth SmallCap Countries Equity Fund Fund Growth Fund Fund Fund ------------- ------------- ------------- ------------- ------------- INVESTMENT INCOME: Dividends, net of foreign taxes $ 2,256,981 $ 499,020 $ 1,791,777 $ 1,758,417 $ 429,859 Interest 1,470,882 205,365 2,145,159 283,787 74,595 ------------- ------------- ------------- ------------- ------------- Total investment income 3,727,863 704,385 3,936,936 2,042,204 504,454 ------------- ------------- ------------- ------------- ------------- EXPENSES: Investment management fees 4,327,642 698,942 4,285,711 2,773,339 413,123 Distribution expenses 3,131,578 469,453 2,448,107 1,048,773 213,232 Transfer agent and registrar fees 628,483 168,428 561,375 517,621 119,865 Shareholder reporting 160,859 28,436 167,665 81,878 11,979 Registration and filing fees 43,713 78,072 83,587 77,620 36,084 Recordkeeping and pricing fees 76,299 12,186 78,302 40,236 5,738 Professional fees 51,263 11,733 54,085 39,069 4,847 Custodian fees 271,713 182,792 416,042 642,280 126,026 Shareholder servicing fee 24,761 9,609 28,293 14,946 6,210 Directors' fees 18,000 5,000 34,991 15,000 2,183 Insurance 2,281 618 7,472 2,182 2,068 Miscellaneous 126,776 40,471 12,587 23,960 2,043 Interest and credit facility fee 4,496 14,115 23,117 63,592 4,822 Organization expense -- -- -- -- 27,603 ------------- ------------- ------------- ------------- ------------- Total expenses 8,867,864 1,719,855 8,201,334 5,340,496 975,823 ------------- ------------- ------------- ------------- ------------- Less: Waived and reimbursed fees -- 212,567 -- 346,154 145,502 ------------- ------------- ------------- ------------- ------------- Net expenses 8,867,864 1,507,288 8,201,334 4,994,342 830,321 ------------- ------------- ------------- ------------- ------------- Net investment loss (5,140,001) (802,903) (4,264,398) (2,952,138) (325,867) ------------- ------------- ------------- ------------- ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from: Investments (net of foreign tax on the sale of Indian investments of $0, $0, $784,263, $4,489,899 and $0, respectively -- Note 2) 32,664,018 8,378,791 60,928,025 39,798,714 7,546,867 Foreign currency transactions (1,744,754) (485,310) (2,124,426) (303,058) (47,823) Net change in unrealized appreciation (depreciation) of: Investments (net of change in estimated tax liability on Indian investments of $0, $0, $0, $860,486 and $0, respectively -- Note 2) 91,768,013 7,216,928 73,841,040 (3,923,323) (5,418,615) Translation of other assets, liabilities and forward contracts denominated in foreign currencies 24,751 19,816 3,241 72,100 305,601 ------------- ------------- ------------- ------------- ------------- Net gain from investments and foreign currencies 122,712,028 15,130,225 132,647,880 35,644,433 2,386,030 ------------- ------------- ------------- ------------- ------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 117,572,027 $ 14,327,322 $ 128,383,482 $ 32,692,295 $ 2,060,163 ============= ============= ============= ============= =============
See Accompanying Notes to Financial Statements 53 - ------ Income Funds - ------ STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2000 - --------------------------------------------------------------------------------
Government Strategic Securities Income High Yield High Yield Money Market Income Fund Fund Fund Fund II Fund* ------------ ------------ ------------ ------------ ------------ INVESTMENT INCOME: Dividends, net of foreign taxes $ -- $ 65,811 $ 4,556 $ 110,519 $ -- Interest 3,789,634 1,073,053 41,985,263 12,270,565 2,010,152 ------------ ------------ ------------ ------------ ------------ Total investment income 3,789,634 1,138,864 41,989,819 12,381,084 2,010,152 ------------ ------------ ------------ ------------ ------------ EXPENSES: Investment management fees 263,407 59,874 2,204,503 634,448 -- Distribution expenses 295,808 87,058 2,810,735 887,809 164,855 Transfer agent and registrar fees 116,224 110,300 512,832 168,720 39,317 Shareholder reporting 39,349 6,894 132,754 48,679 19,525 Registration and filing fees 48,021 76,124 141,878 65,175 32,932 Recordkeeping and pricing fees 8,994 10,474 82,633 23,058 10,937 Professional fees 19,934 4,341 58,764 27,764 13,063 Custodian fees 16,274 6,768 65,868 20,371 7,898 Shareholder servicing fee 2,551 4,683 17,387 5,385 1,739 Directors' fees 2,491 961 23,000 5,957 890 Insurance 1,312 247 17,921 1,844 710 Miscellaneous 5,222 7,570 95,047 9,369 551 Interest and credit facility fee 448 1,218 19,712 6,241 59 Organization expenses -- -- -- -- 115,945 Administrative fee -- -- -- -- 80,974 Merger Fees 32,450 -- -- 77,210 -- ------------ ------------ ------------ ------------ ------------ Total expenses 852,485 376,512 6,183,034 1,982,030 489,395 ------------ ------------ ------------ ------------ ------------ Less: Waived and reimbursed fees -- 208,068 423,592 218,609 101,689 Earnings credits 1,131 174 -- -- 844 ------------ ------------ ------------ ------------ ------------ Net expenses 851,354 168,270 5,759,442 1,763,421 386,862 ------------ ------------ ------------ ------------ ------------ Net investment income 2,938,280 970,594 36,230,377 10,617,663 1,623,290 ------------ ------------ ------------ ------------ ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized loss from: Investments (942,655) (763,126) (25,618,407) (5,014,882) -- Foreign currency transactions -- (1,151) -- -- -- Net change in unrealized appreciation (depreciation) of: Investments 192,297 132,524 (31,769,051) (2,564,989) -- Translation of other assets, liabilities and forward contracts denominated in foreign currencies -- 897 -- -- -- ------------ ------------ ------------ ------------ ------------ Net loss from investments and foreign currencies (750,358) (630,856) (57,387,458) (7,579,871) -- ------------ ------------ ------------ ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 2,187,922 $ 339,738 $(21,157,081) $ 3,037,792 $ 1,623,290 ============ ============ ============ ============ ============
- ---------- * Fund commenced operations on July 12, 1999. See Accompanying Notes to Financial Statements 54 - ------------ Equity & Income Funds - ------------ STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2000 - --------------------------------------------------------------------------------
Balanced Convertible Fund Fund ------------- ------------ INVESTMENT INCOME: Dividends, net of foreign taxes $ 623,513 $ 3,844,668 Interest 2,269,878 7,216,183 ------------- ------------ Total investment income 2,893,391 11,060,851 ------------- ------------ EXPENSES: Investment management fees 476,583 2,652,928 Distribution expenses 475,933 2,697,003 Transfer agent and registrar fees 186,550 444,782 Shareholder reporting 44,134 126,626 Registration and filing fees 13,913 62,729 Recordkeeping and pricing fees 21,505 69,402 Professional fees 38,871 48,814 Custodian fees 14,996 56,900 Shareholder servicing fee 7,816 24,890 Directors' fees 3,180 15,000 Insurance 801 2,892 Miscellaneous 15,536 74,289 Interest and credit facility fee 347 9,316 Merger Fees 29,494 -- ------------- ------------ Total expenses 1,329,659 6,285,571 ------------- ------------ Less: Waived and reimbursed fees 179,601 -- Earnings credits 1,211 51,091 ------------- ------------ Net expenses 1,148,847 6,234,480 ------------- ------------ Net investment income 1,744,544 4,826,371 ------------- ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from: Investments 10,482,329 70,655,086 Foreign currency transactions (713) -- Net change in unrealized appreciation (depreciation) of: Investments (17,791,175) 29,680,606 ------------- ------------ Net gain (loss) from investments and foreign currencies (7,309,559) 100,335,692 ------------- ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (5,565,015) $105,162,063 ============= ============
See Accompanying Notes to Financial Statements 55 - ----------- U.S. Equity Funds - ----------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
MagnaCap Fund LargeCap Leaders Fund ------------------------------ ------------------------------ Year Year Year Year Ended Ended Ended Ended June 30, June 30, June 30, June 30, 2000 1999 2000 1999 ------------- ------------- ------------- ------------- Increase (decrease) in net assets from operations: Net investment income (loss) $ 1,079,687 $ 1,122,179 $ (315,614) $ (160,435) Net realized gain from investments 29,968,024 49,186,475 2,990,062 3,547,281 Net change in unrealized appreciation (depreciation) of investments (35,597,984) 17,754,811 (1,997,225) 1,974,289 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations (4,550,273) 68,063,465 677,223 5,361,135 ------------- ------------- ------------- ------------- Distributions to shareholders: From net investment income: Retail class (1,051,329) (714,666) -- -- Advisory and institutional classes -- -- -- -- From net realized gains: Retail class (48,878,271) (45,964,037) (4,377,644) (706,104) Advisory and institutional classes -- -- -- -- ------------- ------------- ------------- ------------- Total distributions (49,929,600) (46,678,703) (4,377,644) (706,104) ------------- ------------- ------------- ------------- Capital Share Transactions: Net proceeds from sale of shares 169,844,202 272,199,176 18,374,425 16,009,174 Shares resulting from dividend reinvestments 45,853,052 37,748,339 4,014,953 647,165 Cost of shares redeemed (245,236,862) (270,865,970) (19,261,366) (11,675,377) Redemption of Class I shares n/a n/a n/a n/a ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions (29,539,608) 39,081,545 3,128,012 4,980,962 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets (84,019,481) 60,466,307 (572,409) 9,635,993 ------------- ------------- ------------- ------------- Net assets, beginning of period 501,687,465 441,221,158 38,380,395 28,744,402 ------------- ------------- ------------- ------------- Net assets, end of period $ 417,667,984 $ 501,687,465 $ 37,807,986 $ 38,380,395 ============= ============= ============= ============= Undistributed net investment income (loss) $ 872,876 $ 536,313 $ -- $ -- ============= ============= ============= =============
See Accompanying Notes to Financial Statements 56 - -------------------------------------------------------------------------------- LargeCap Growth Fund MidCap Value Fund - --------------------------------------------- ----------------------------- Year Three Months Year Year Year Ended Ended Ended Ended Ended June 30, June 30, March 31, June 30, June 30, 2000 1999 1999 2000 1999 - ------------- ------------- ------------- ------------- ------------- $ (5,317,970) $ (163,823) $ (196,384) $ (387,792) $ (644,817) 13,498,698 2,418,689 5,409,155 2,719,300 426,848 147,558,169 6,320,924 9,499,395 (9,096,135) (1,161,622) - ------------- ------------- ------------- ------------- ------------- 155,738,897 8,575,790 14,712,166 (6,764,627) (1,379,591) - ------------- ------------- ------------- ------------- ------------- -- -- -- -- -- -- -- -- -- -- (2,953,187) -- (262,973) (275,268) (5,331,934) (132,325) -- (41,543) -- -- - ------------- ------------- ------------- ------------- ------------- (3,085,512) -- (304,516) (275,268) (5,331,934) - ------------- ------------- ------------- ------------- ------------- 532,535,020 52,500,065 35,925,823 8,647,560 13,030,899 2,521,879 -- 292,849 249,416 4,471,463 (93,636,480) (3,028,700) (11,532,699) (30,837,351) (31,686,611) n/a (6,420,194) -- n/a n/a - ------------- ------------- ------------- ------------- ------------- 441,420,419 43,051,171 24,685,973 (21,940,375) (14,184,249) - ------------- ------------- ------------- ------------- ------------- 594,073,804 51,626,961 39,093,623 (28,980,270) (20,895,774) - ------------- ------------- ------------- ------------- ------------- 102,963,948 51,336,987 12,243,364 60,395,740 81,291,514 - ------------- ------------- ------------- ------------- ------------- $ 697,037,752 $ 102,963,948 $ 51,336,987 $ 31,415,470 $ 60,395,740 ============= ============= ============= ============= ============= $ -- $ -- $ (225,010) $ -- $ -- ============= ============= ============= ============= ============= 57 - ----------- U.S. Equity Funds - ----------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
MidCap Growth Fund SmallCap Growth Fund --------------------------------------------- ----------------------------------------------- Year Three Months Year Year Three Months Year Ended Ended Ended Ended Ended Ended June 30, June 30, March 31, June 30, June 30, March 31, 2000 1999 1999 2000 1999 1999 ------------- ------------- ------------- ------------- ------------- --------------- Increase (decrease) in net assets from operations: Net investment income (loss) $ (6,452,374) $ (1,221,010) $ (4,514,125) $ (7,259,094) $ (1,566,497) $ (7,200,570) Net realized gain from investments 85,093,448 37,699,336 47,761,620 85,003,902 67,438,450 86,043,833 Net change in unrealized appreciation (depreciation) of investments 119,946,995 (14,395,996) 8,536,297 102,235,975 (18,557,187) (93,770,559) ------------- ------------- ------------- ------------- ------------- --------------- Net increase (decrease) in net assets from operations 198,588,069 22,082,330 51,783,792 179,980,783 47,314,766 (14,927,296) ------------- ------------- ------------- ------------- ------------- --------------- Distributions to shareholders: From net investment income: Retail class -- -- -- -- -- -- Advisory and institutional classes -- -- -- -- -- -- From net realized gains: Retail class (85,719,464) -- (17,157,024) (153,334,528) -- (43,179,861) Advisory and institutional classes (2,677,684) -- (6,615,537) (5,061,980) -- (10,999,123) ------------- ------------- ------------- ------------- ------------- --------------- Total distributions (88,397,148) -- (23,772,561) (158,396,508) -- (54,178,984) ------------- ------------- ------------- ------------- ------------- --------------- Capital Share Transactions: Net proceeds from sale of shares 353,806,052 14,162,841 158,133,048 364,010,289 17,931,971 972,155,767 Shares resulting from dividend reinvestments 78,987,177 -- 12,306,426 136,805,877 -- 42,870,637 Cost of shares redeemed (281,762,942) (21,991,325) (249,866,820) (331,453,908) (33,776,345) (1,191,789,767) Redemption of Class I shares n/a (168,592,944) -- n/a (221,318,827) n/a ------------- ------------- ------------- ------------- ------------- --------------- Net increase (decrease) in net assets resulting from capital share transactions 151,030,287 (176,421,428) (79,427,346) 169,362,258 (237,163,201) (176,763,363) ------------- ------------- ------------- ------------- ------------- --------------- Net increase (decrease) in net assets 261,221,208 (154,339,098) (51,416,115) 190,946,533 (189,848,435) (245,869,643) ------------- ------------- ------------- ------------- ------------- --------------- Net assets, beginning of period 280,135,385 434,474,483 485,890,598 316,572,722 506,421,157 752,290,800 ------------- ------------- ------------- ------------- ------------- --------------- Net assets, end of period $ 541,356,593 $ 280,135,385 $ 434,474,483 $ 507,519,255 $ 316,572,722 $ 506,421,157 ============= ============= ============= ============= ============= =============== Undistributed net investment income (loss) $ -- $ -- $ (21,862,409) $ -- $ -- $ (36,692,610) ============= ============= ============= ============= ============= ===============
See Accompanying Notes to Financial Statements 58 - -------------------------------------------------------------------------------- Bank and Thrift Fund - -------------------------------- Year Year Ended Ended June 30, June 30, 2000 1999 - ------------- ------------- $ 5,575,238 $ 6,195,132 3,137,070 86,792,727 (157,531,125) (179,566,903) - ------------- ------------- (148,818,817) (86,579,044) - ------------- ------------- (3,905,691) (4,375,894) n/a n/a (70,854,746) (19,782,011) n/a n/a - ------------- ------------- (74,760,437) (24,157,905) - ------------- ------------- 63,452,556 306,625,647 58,391,711 15,433,927 (285,960,147) (374,806,089) n/a n/a - ------------- ------------- (164,115,880) (52,746,515) - ------------- ------------- (387,695,134) (163,483,464) - ------------- ------------- 745,624,955 909,108,419 - ------------- ------------- $ 357,929,821 $ 745,624,955 ============= ============= $ 5,574,859 $ 3,311,373 ============= ============= 59 - ------------- International Equity Funds - ------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
Worldwide Growth Fund ----------------------------------------------- Year Three Months Year Ended Ended Ended June 30, June 30, March 31, 2000 1999 1999 ------------- ------------- ------------- Increase (decrease) in net assets from operations: Net investment income (loss) $ (5,140,001) $ (238,891) $ (1,461,258) Net realized gain (loss) from investment and foreign currency transactions (net of foreign tax on the sale of Indian investments -- Note 2) 30,919,264 4,825,170 34,449,340 Net change in unrealized appreciation (depreciation) of investments and translation of other assets, liabilities and forward contracts denominated in foreign currencies (net of estimated tax liability on Indian investments -- Note 2) 91,792,764 20,367,556 12,614,021 ------------- ------------- ------------- Net increase in net assets from operations 117,572,027 24,953,835 45,602,103 ------------- ------------- ------------- Distributions to shareholders: From net investment income: Retail class -- -- (136,708) Advisory and institutional classes -- -- (337,084) From net realized gains: Retail class (34,175,463) -- (20,785,812) Advisory and institutional classes (3,489,639) -- (483,831) ------------- ------------- ------------- Total distributions (37,665,102) -- (21,743,435) ------------- ------------- ------------- Capital Share Transactions: Net proceeds from sale of shares 664,789,596 53,831,659 242,170,764 Shares resulting from dividend reinvestments 33,052,649 -- 5,494,245 Cost of shares redeemed (337,872,684) (25,822,612) (168,874,579) Redemption of Class I shares n/a (80,662,778) -- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions 359,969,561 (52,653,731) 78,790,430 ------------- ------------- ------------- Net increase (decrease) in net assets 439,876,486 (27,699,896) 102,649,098 ------------- ------------- ------------- Net assets, beginning of period 220,302,784 248,002,680 145,353,582 ------------- ------------- ------------- Net assets, end of period $ 660,179,270 $ 220,302,784 $ 248,002,680 ============= ============= ============= Undistributed net investment income (loss) $ -- $ -- $ (7,189,744) ============= ============= ============= International Core Growth Fund ----------------------------------------------- Year Three Months Year Ended Ended Ended June 30, June 30, March 31, 2000 1999 1999 ------------- ------------- ------------- Increase (decrease) in net assets from operations: Net investment income (loss) $ (802,903) $ 69,633 $ (310,557) Net realized gain (loss) from investment and foreign currency transactions (net of foreign tax on the sale of Indian investments -- Note 2) 7,893,481 3,913,039 (528,900) Net change in unrealized appreciation (depreciation) of investments and translation of other assets, liabilities and forward contracts denominated in foreign currencies (net of estimated tax liability on Indian investments -- Note 2) 7,236,744 4,018,188 13,512,294 ------------- ------------- ------------- Net increase in net assets from operations 14,327,322 8,000,860 12,672,837 ------------- ------------- ------------- Distributions to shareholders: From net investment income: Retail class -- -- (205,129) Advisory and institutional classes (1,678) -- (29,622) From net realized gains: Retail class (2,344,229) -- (155,723) Advisory and institutional classes (591,813) -- (13,021) ------------- ------------- ------------- Total distributions (2,937,720) -- (403,495) ------------- ------------- ------------- Capital Share Transactions: Net proceeds from sale of shares 192,088,330 35,644,077 173,884,589 Shares resulting from dividend reinvestments 2,747,516 -- 228,203 Cost of shares redeemed (164,147,202) (47,242,674) (82,311,581) Redemption of Class I shares n/a (112,851,333) -- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions 30,688,644 (124,449,930) 91,801,211 ------------- ------------- ------------- Net increase (decrease) in net assets 42,078,246 (116,449,070) 104,070,553 ------------- ------------- ------------- Net assets, beginning of period 45,768,532 162,217,602 58,147,049 ------------- ------------- ------------- Net assets, end of period $ 87,846,778 $ 45,768,532 $ 162,217,602 ============= ============= ============= Undistributed net investment income (loss) $ -- $ 69,633 $ (647,924) ============= ============= =============
See Accompanying Notes to Financial Statements 60 - --------------------------------------------------------------------------------
International SmallCap Growth Fund Emerging Countries Fund - ----------------------------------------------------- ----------------------------------------------------- Year Three Months Year Year Three Months Year Ended Ended Ended Ended Ended Ended June 30, June 30, March 31, June 30, June 30, March 31, 2000 1999 1999 2000 1999 1999 - --------------- --------------- --------------- --------------- --------------- --------------- $ (4,264,398) $ (217,461) $ (725,193) $ (2,952,138) $ (30,573) $ (444,466) 58,803,599 5,331,912 8,225,524 39,495,656 11,238,884 (83,823,307) 73,844,281 11,694,205 14,357,916 (3,851,223) 51,126,351 10,517,870 - --------------- --------------- --------------- --------------- --------------- --------------- 128,383,482 16,808,656 21,858,247 32,692,295 62,334,662 (73,749,903) - --------------- --------------- --------------- --------------- --------------- --------------- -- -- -- -- -- (105,494) -- -- (76,552) -- -- (676,244) (11,843,967) -- (2,163,953) -- -- (685,405) (5,303,370) -- (1,836,179) -- -- (431,659) - --------------- --------------- --------------- --------------- --------------- --------------- (17,147,337) -- (4,076,684) -- -- (1,898,802) - --------------- --------------- --------------- --------------- --------------- --------------- 1,305,859,725 48,190,262 194,823,908 250,385,738 38,136,033 234,887,012 15,848,417 -- 3,425,742 -- -- 1,499,434 (832,581,584) (30,396,046) (142,304,879) (211,768,273) (31,982,656) (160,102,083) n/a (73,163,306) -- n/a (167,510,018) -- - --------------- --------------- --------------- --------------- --------------- --------------- 489,126,558 (55,369,090) 55,944,771 38,617,465 (161,356,641) 76,284,363 - --------------- --------------- --------------- --------------- --------------- --------------- 600,362,703 (38,560,434) 73,726,334 71,309,760 (99,021,979) 635,658 - --------------- --------------- --------------- --------------- --------------- --------------- 118,056,357 156,616,791 82,890,457 183,184,199 282,206,178 281,570,520 - --------------- --------------- --------------- --------------- --------------- --------------- $ 718,419,060 $ 118,056,357 $ 156,616,791 $ 254,493,959 $ 183,184,199 $ 282,206,178 =============== =============== =============== =============== =============== =============== $ -- $ -- $ (1,982,021) $ -- $ -- $ (2,164,624) =============== =============== =============== =============== =============== ===============
61 - ------------- International Equity Funds - ------------- STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- Asia-Pacific Equity Fund ------------------------------ Year Year Ended Ended June 30, June 30, 2000 1999 ------------- ------------- Increase (decrease) in net assets from operations: Net investment loss $ (325,867) $ (83,355) Net realized gain (loss) from investment and foreign currency transactions 7,499,044 (6,670,421) Net change in unrealized appreciation of investments and translation of other assets, liabilities and forward contracts denominated in foreign currencies (5,113,014) 20,223,587 ------------- ------------- Net increase in net assets from operations 2,060,163 13,469,811 ------------- ------------- Distributions to shareholders: From net investment income: Retail class -- -- Advisory and institutional classes n/a n/a From net realized gains: Retail class -- -- Advisory and institutional classes n/a n/a ------------- ------------- Total distributions -- -- ------------- ------------- Capital Share Transactions: Net proceeds from sale of shares 103,757,205 137,827,549 Shares resulting from dividend reinvestments -- -- Cost of shares redeemed (110,675,525) (143,882,119) Redemption of Class I shares n/a n/a ------------- ------------- Net decrease in net assets resulting from capital share transactions (6,918,320) (6,054,570) ------------- ------------- Net increase (decrease) in net assets (4,858,157) 7,415,241 ------------- ------------- Net assets, beginning of period 32,560,537 25,145,296 ------------- ------------- Net assets, end of period $ 27,702,380 $ 32,560,537 ============= ============= Undistributed net investment income (loss) $ -- $ -- ============= ============= See Accompanying Notes to Financial Statements 62 - ------ Income Funds - ------ STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
Government Securities Income Fund Strategic Income Fund ----------------------------------------------- ------------------------------ Year Year Year Three Months Year Ended Ended Ended Ended Ended June 30, June 30, June 30, June 30, March 31, 2000 1999 2000 1999 1999 ------------- ------------- ------------- ------------- ------------- Increase (decrease) in net assets from operations: Net investment income $ 2,938,280 $ 2,202,024 $ 970,594 $ 388,563 $ 1,615,239 Net realized gain (loss) from investment and foreign currency transactions (942,655) (852,058) (764,277) (459,604) 330,860 Net change in unrealized appreciation (depreciation) of investments and translation of other assets, liabilities and forward contracts denominated in foreign currencies 192,297 (887,365) 133,421 (72,404) (372,395) ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets from operations 2,187,922 462,601 339,738 (143,445) 1,573,704 ------------- ------------- ------------- ------------- ------------- Distributions to shareholders: From net investment income: Retail class (2,747,609) (2,211,069) (951,573) (187,766) (621,335) Advisory and institutional classes (51) -- (14,213) (121,982) (934,712) From net realized gains: Retail class -- -- -- -- (151,772) Advisory and institutional classes -- -- -- -- (442,876) ------------- ------------- ------------- ------------- ------------- Total distributions (2,747,660) (2,211,069) (965,786) (309,748) (2,150,695) ------------- ------------- ------------- ------------- ------------- Capital Share Transactions: Net proceeds from sale of shares 92,583,796 54,413,622 17,563,244 24,148,535 30,254,792 Net proceeds from shares issued in merger 81,062,688 n/a n/a n/a 10,271,727 Shares resulting from dividend reinvestmests 1,404,424 1,167,365 496,450 108,053 1,714,149 Cost of shares redeemed (95,368,858) (46,715,437) (22,583,786) (25,920,629) (20,857,342) Redemption of Class I shares n/a n/a n/a (17,917,765) n/a ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions 79,682,050 8,865,550 (4,524,092) (19,581,806) 21,383,326 ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets 79,122,312 7,117,082 (5,150,140) (20,034,999) 20,806,335 ------------- ------------- ------------- ------------- ------------- Net assets, beginning of period 34,242,820 27,125,738 16,530,324 36,565,323 15,758,988 ------------- ------------- ------------- ------------- ------------- Net assets, end of period $ 113,365,132 $ 34,242,820 $ 11,380,184 $ 16,530,324 $ 36,565,323 ============= ============= ============= ============= ============= Undistributed net investment income $ -- $ -- $ 491,239 $ 138,021 $ 59,206 ============= ============= ============= ============= =============
See Accompanying Notes to Financial Statements 63 - ------ Income Funds - ------ STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- High Yield Fund ------------------------------ Year Year Ended Ended June 30, June 30, 2000 1999 ------------- ------------- Increase (decrease) in net assets from operations: Net investment income $ 36,230,377 $ 32,082,228 Net realized loss from investment and foreign currency transactions (25,618,407) (39,880,708) Net change in unrealized appreciation (depreciation) of investments and translation of other assets, liabilities and forward contracts denominated in foreign currencies (31,769,051) (9,008,796) ------------- ------------- Net increase (decrease) in net assets from operations (21,157,081) (16,807,276) ------------- ------------- Distributions to shareholders: From net investment income: Retail class (36,230,374) (33,382,295) Advisory and institutional classes (3) -- Tax return of capital Retail class (2,218,003) (604,370) Advisory and institutional classes -- -- ------------- ------------- Total distributions (38,448,380) (33,986,665) ------------- ------------- Capital Share Transactions: Net proceeds from sale of shares 169,075,396 338,787,788 Net proceeds from shares issued in merger n/a n/a Shares resulting from dividend reinvestments 14,545,896 15,394,375 Cost of shares redeemed (237,672,115) (162,095,950) Redemption of Class I shares n/a n/a ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions (54,050,823) 192,086,213 ------------- ------------- Net increase (decrease) in net assets (113,656,284) 141,292,272 ------------- ------------- Net assets, beginning of period 417,803,960 276,511,688 ------------- ------------- Net assets, end of period $ 304,147,676 $ 417,803,960 ============= ============= Undistributed (overdistributed) net investment income $ -- $ -- ============= =============
High Yield Fund II Money Market Fund ----------------------------------------------------- --------------- Year Three Months Year Period* Ended Ended Ended Ended June 30, June 30, March 31, June 30, 2000 1999 1999 2000 --------------- --------------- --------------- --------------- Increase (decrease) in net assets from operations: Net investment income $ 10,617,663 $ 2,117,917 $ 7,088,233 $ 1,623,290 Net realized loss from investment and foreign currency transactions (5,014,882) (1,651,059) (2,958,000) -- Net change in unrealized appreciation (depreciation) of investments and translation of other assets, liabilities and forward contracts denominated in foreign currencies (2,564,989) 1,222,666 (2,908,667) -- --------------- --------------- --------------- --------------- Net increase (decrease) in net assets from operations 3,037,792 1,689,524 1,221,566 1,623,290 --------------- --------------- --------------- --------------- Distributions to shareholders: From net investment income: Retail class (10,642,507) (1,816,752) (6,010,027) (1,623,290) Advisory and institutional classes (408,689) (243,368) (1,342,628) n/a Tax return of capital Retail class -- -- -- -- Advisory and institutional classes -- -- -- n/a --------------- --------------- --------------- --------------- Total distributions (11,051,196) (2,060,120) (7,352,655) (1,623,290) --------------- --------------- --------------- --------------- Capital Share Transactions: Net proceeds from sale of shares 52,761,331 5,060,774 103,808,906 1,294,364,112 Net proceeds from shares issued in merger 142,232,354 n/a n/a n/a Shares resulting from dividend reinvestments 4,467,190 636,667 3,545,605 661,338 Cost of shares redeemed (72,762,619) (12,563,115) (31,561,090) (1,202,129,120) Redemption of Class I shares n/a (11,636,641) -- n/a --------------- --------------- --------------- --------------- Net increase (decrease) in net assets resulting from capital share transactions 126,698,256 (18,502,315) 75,793,421 92,896,330 --------------- --------------- --------------- --------------- Net increase (decrease) in net assets 118,684,852 (18,872,911) 69,662,332 92,896,330 --------------- --------------- --------------- --------------- Net assets, beginning of period 80,524,199 99,397,110 29,734,778 -- --------------- --------------- --------------- --------------- Net assets, end of period $ 199,209,051 $ 80,524,199 $ 99,397,110 $ 92,896,330 =============== =============== =============== =============== Undistributed (overdistributed) net investment income $ -- $ (193,920) $ (251,717) $ -- =============== =============== =============== ===============
- ---------- * Fund commenced operations on July 12, 1999. See Accompanying Notes to Financial Statements 64 - ------------ Equity & Income Funds - ------------ STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
Balanced Fund ----------------------------------------------- Year Three Months Year Ended Ended Ended June 30, June 30, March 31, 2000 1999 1999 ------------- ------------- ------------- Increase (decrease) in net assets from operations: Net investment income $ 1,744,544 $ 149,349 $ 568,429 Net realized gain from investment and foreign currency transactions 10,481,616 4,490,910 3,763,578 Net change in unrealized appreciation (depreciation) of investments and translation of other assets, liabilities and forward contracts denominated in foreign currencies (17,791,175) (4,167,142) 1,187,390 ------------- ------------- ------------- Net increase (decrease) in net assets from operations (5,565,015) 473,117 5,519,397 ------------- ------------- ------------- Distributions to shareholders: From net investment income: Retail class (788,708) (96,590) (606,434) Advisory and institutional classes (4,652) (798) (29,342) From net realized gains: Retail class (7,318,123) -- (5,988,621) Advisory and institutional classes (37,408) -- (133,020) ------------- ------------- ------------- Total distributions (8,148,891) (97,388) (6,757,417) ------------- ------------- ------------- Capital Share Transactions: Net proceeds from sale of shares 14,115,466 2,993,582 12,882,116 Net proceeds from shares issued in merger 120,445,073 n/a n/a Shares resulting from dividend reinvestments 6,982,714 41,034 5,548,500 Cost of shares redeemed (24,486,297) (2,512,012) (12,665,619) Redemption of Class I shares n/a n/a n/a ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions 117,056,956 522,604 5,764,997 ------------- ------------- ------------- Net increase (decrease) in net assets 103,343,050 898,333 4,526,977 ------------- ------------- ------------- Net assets, beginning of period 38,296,244 37,397,911 32,870,934 ------------- ------------- ------------- Net assets, end of period $ 141,639,294 $ 38,296,244 $ 37,397,911 ============= ============= ============= Undistributed (overdistributed) net investment income $ 1,009,916 $ (16,013) $ (67,974) ============= ============= ============= Convertible Fund ----------------------------------------------- Year Three Months Year Ended Ended Ended June 30, June 30, March 31, 2000 1999 1999 ------------- ------------- ------------- Increase (decrease) in net assets from operations: Net investment income $ 4,826,371 $ 1,054,881 $ 5,162,409 Net realized gain from investment and foreign currency transactions 70,655,086 13,167,798 25,455,864 Net change in unrealized appreciation (depreciation) of investments and translation of other assets, liabilities and forward contracts denominated in foreign currencies 29,680,606 3,889,849 19,262,427 ------------- ------------- ------------- Net increase (decrease) in net assets from operations 105,162,063 18,112,528 49,880,700 ------------- ------------- ------------- Distributions to shareholders: From net investment income: Retail class (2,701,792) (742,927) (2,822,214) Advisory and institutional classes (450,509) (88,744) (2,357,057) From net realized gains: Retail class (38,767,375) -- (3,158,579) Advisory and institutional classes (3,361,906) -- (915,964) ------------- ------------- ------------- Total distributions (45,281,582) (831,671) (9,253,814) ------------- ------------- ------------- Capital Share Transactions: Net proceeds from sale of shares 220,047,461 28,114,039 83,841,725 Net proceeds from shares issued in merger n/a n/a n/a Shares resulting from dividend reinvestments 38,566,753 465,422 6,950,787 Cost of shares redeemed (93,851,800) (13,251,963) (66,351,226) Redemption of Class I shares n/a (91,378,691) -- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from capital share transactions 164,762,414 (76,051,193) 24,441,286 ------------- ------------- ------------- Net increase (decrease) in net assets 224,642,895 (58,770,336) 65,068,172 ------------- ------------- ------------- Net assets, beginning of period 259,037,310 317,807,646 252,739,474 ------------- ------------- ------------- Net assets, end of period $ 483,680,205 $ 259,037,310 $ 317,807,646 ============= ============= ============= Undistributed (overdistributed) net investment income $ 2,762,398 $ 195,337 $ (27,873) ============= ============= =============
See Accompanying Notes to Financial Statements 65 FINANCIAL PILGRIM MAGNACAP FUND HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A ----------------------------------------------- Year Ended June 30, 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 17.69 17.07 15.92 16.69 14.03 Income from investment operations: Net investment income (loss) $ 0.07 0.07 0.04 0.10 0.09 Net realized and unrealized gains on investments $ (0.08) 2.37 3.02 4.16 2.87 Total from investment operations $ (0.01) 2.44 3.06 4.26 2.96 Less distributions from: Net investment income $ 0.05 0.04 0.06 0.12 0.06 Net realized gains on investments $ 1.79 1.78 1.85 4.91 0.24 Net asset value, end of period $ 15.84 17.69 17.07 15.92 16.69 Total Return(2): % (0.36) 15.93 20.53 30.82 21.31 Ratios/Supplemental Data: Net assets, end of period (000's) $ 303,864 368,508 348,759 290,355 235,393 Ratios to average net assets: Expenses(3) % 1.29 1.35 1.37 1.46 1.68 Net investment income (loss)(3) % 0.41 0.41 0.29 0.64 0.54 Portfolio turnover rate % 26 48 53 77 15 Class B ------------------------------------------------------ July 17, 1995(1) to Year Ended June 30, June 30, 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 17.36 16.86 15.81 16.59 14.22 Income from investment operations: Net investment income (loss) $ (0.05) (0.04) (0.04) -- 0.06 Net realized and unrealized gains on investments $ (0.08) 2.32 2.97 4.13 2.61 Total from investment operations $ (0.13) 2.28 2.93 4.13 2.67 Less distributions from: Net investment income $ -- -- 0.03 -- 0.06 Net realized gains on investments $ 1.79 1.78 1.85 4.91 0.24 Net asset value, end of period $ 15.44 17.36 16.86 15.81 16.59 Total Return(2): % (1.11) 15.12 19.76 29.92 18.98 Ratios/Supplemental Data: Net assets, end of period (000's) $ 87,167 116,227 77,787 37,427 10,509 Ratios to average net assets: Expenses(3) % 1.99 2.05 2.07 2.16 2.38 Net investment income (loss)(3) % (0.29) (0.29) (0.41) (0.04) 0.07 Portfolio turnover rate % 26 48 53 77 15 Class C Class M -------------------- --------------------------------------------- Year June 1, July 17, ended 1999(1) to 1995(1) to June 30, June 30, Year ended June 30, June 30, 2000 1999 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 17.37 16.69 17.51 16.95 15.87 16.63 14.22 Income from investment operations: Net investment income (loss) $ (0.10) -- (0.01) (0.01) -- 0.02 0.08 Net realized and unrealized gains on investments $ (0.04) 0.68 (0.06) 2.35 2.98 4.16 2.63 Total from investment operations $ (0.14) 0.68 (0.07) 2.34 2.98 4.18 2.71 Less distributions from: Net investment income $ -- -- 0.01 -- 0.05 0.03 0.06 Net realized gains on investments $ 1.79 -- 1.79 1.78 1.85 4.91 0.24 Net asset value, end of period $ 15.44 17.37 15.64 17.51 16.95 15.87 16.63 Total Return(2): % (1.17) 4.07 (0.71) 15.41 20.00 30.26 19.26 Ratios/Supplemental Data: Net assets, end of period (000's) $ 3,660 601 13,050 16,351 14,675 6,748 1,961 Ratios to average net assets: Expenses(3) % 1.99 1.12 1.74 1.80 1.82 1.91 2.13 Net investment income (loss)(3) % (0.29) 0.42 (0.04) (0.04) (0.16) 0.22 0.32 Portfolio turnover rate % 26 48 26 48 53 77 15
- ---------- (1) Commencement of offering shares. (2) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. See Accompanying Notes to Financial Statements 66 FINANCIAL HIGHLIGHTS PILGRIM LARGECAP LEADERS FUND - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A --------------------------------------------- Sept. 1, 1995 to Year Ended June 30, June 30, 2000 1999 1998(2) 1997 1996(1) ---- ---- ------- ---- ------- Per Share Operating Performance: Net asset value, beginning of period $ 17.35 14.70 14.17 11.77 10.00 Income from investment operations: Net investment income (loss) $ (0.04) -- 0.01 0.06 0.07 Net realized and unrealized gains on investments $ 0.57 3.00 2.30 2.63 1.87 Total from investment operations $ 0.53 3.00 2.31 2.69 1.94 Less distributions from: Net investment income $ -- -- -- 0.05 0.08 Net realized gains on investments $ 2.00 0.35 1.78 0.24 0.09 Net asset value, end of period $ 15.88 17.35 14.70 14.17 11.77 Total Return(4): % 3.05 20.66 17.71 23.24 19.56 Ratios/Supplemental Data: Net assets, end of period (000's) $ 10,024 8,506 7,606 8,961 2,530 Ratios to average net assets: Net expenses after expense reimbursement(5)(6) % 1.75 1.75 1.75 1.75 1.75 Gross expenses prior to expense reimbursement(5) % 1.84 1.98 2.28 2.33 5.44 Net investment income (loss) after expense reimbursement(5)(6) % (0.27) (0.04) 0.03 0.41 0.65 Portfolio turnover rate % 39 87 78 86 59 Class B ---------------------------------------------- Sept. 1, 1995 to Year Ended June 30, June 30, 2000 1999 1998(2) 1997 1996(1) ---- ---- ------- ---- ------- Per Share Operating Performance: Net asset value, beginning of period $ 16.90 14.44 14.04 11.71 10.00 Income from investment operations: Net investment income (loss) $ (0.17) (0.09) (0.10) (0.02) 0.06 Net realized and unrealized gains on investments $ 0.57 2.90 2.28 2.59 1.81 Total from investment operations $ 0.40 2.81 2.18 2.57 1.87 Less distributions from: Net investment income $ -- -- -- -- 0.07 Net realized gains on investments $ 2.00 0.35 1.78 0.24 0.09 Net asset value, end of period $ 15.30 16.90 14.44 14.04 11.71 Total Return(4): % 2.30 19.71 16.91 22.23 18.85 Ratios/Supplemental Data: Net assets, end of period (000's) $ 21,544 24,213 15,605 13,611 1,424 Ratios to average net assets: Net expenses after expense reimbursement(5)(6) % 2.50 2.50 2.50 2.50 2.50 Gross expenses prior to expense reimbursement(5) % 2.59 2.73 3.03 3.08 5.79 Net investment income (loss) after expense reimbursement(5)(6) % (1.02) (0.79) (0.72) (0.35) (0.25) Portfolio turnover rate % 39 87 78 86 59 Class C Class M -------------------- ------------------------------------------ Year June 17, Sept. 1, Ended 1999(3) to 1995 to June 30, June 30, Year Ended June 30, June 30, 2000 1999 2000 1999 1998(2) 1997 1996(1) ---- ---- ---- ---- ------- ---- ------- Per Share Operating Performance: Net asset value, beginning of period $ 16.92 16.54 17.08 14.55 14.10 11.73 10.00 Income from investment operations: Net investment income (loss) $ (0.06) -- (0.14) (0.09) (0.07) -- 0.06 Net realized and unrealized gains on investments $ 0.46 0.38 0.58 2.97 2.30 2.62 1.83 Total from investment operations $ 0.40 0.38 0.44 2.88 2.23 2.62 1.89 Less distributions from: Net investment income $ -- -- -- -- -- 0.01 0.07 Net realized gains on investments $ 2.00 -- 2.00 0.35 1.78 0.24 0.09 Net asset value, end of period $ 15.32 16.92 15.52 17.08 14.55 14.10 11.73 Total Return(4): % 2.30 2.30 2.54 20.04 17.20 22.58 19.06 Ratios/Supplemental Data: Net assets, end of period (000's) $ 1,364 -- 4,677 5,661 5,533 4,719 1,240 Ratios to average net assets: Net expenses after expense reimbursement(5)(6) % 2.50 -- 2.25 2.25 2.25 2.25 2.25 Gross expenses prior to expense reimbursement(5) % 2.59 -- 2.34 2.48 2.78 2.83 5.90 Net investment income (loss) after expense reimbursement(5)(6) % (1.02) -- (0.77) (0.54) (0.47) (0.10) 0.06 Portfolio turnover rate % 39 87 39 87 78 86 59
- ---------- (1) The Fund commenced operations on September 1, 1995. (2) Effective November 1, 1997, Pilgrim Investments, Inc. assumed the portfolio investment responsibilities of the Fund from ARK Asset Management Company, Inc. (3) Commencement of offering shares. (4) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return information for less than one year is not annualized. (5) Annualized for periods less than one year. (6) The Investment Manager has agreed to limit expenses, excluding interest, taxes, brokerage and extraordinary expenses. See Accompanying Notes to Financial Statements 67 FINANCIAL PILGRIM LARGECAP GROWTH FUND HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A ---------------------------------------------- Year Three months Year July 21, Ended ended ended 1997(1) to June 30, June 30, March 31, March 31, 2000 1999(2) 1999 1998 ---- ------- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 28.09 24.94 15.73 12.50 Income from investment operations: Net investment income (loss) $ (0.22) (0.02) (0.08) (0.03) Net realized and unrealized gains on investments $ 15.63 3.17 9.77 3.29 Total from investment operations $ 15.41 3.15 9.69 3.26 Less distributions from: Net investment income $ -- -- -- -- Net realized gains on investments $ 0.38 -- 0.48 0.03 Net asset value, end of period $ 43.12 28.09 24.94 15.73 Total Return(3): % 55.35 12.63 63.06 62.35 Ratios/Supplemental Data: Net assets, end of period (000's) $ 186,261 30,108 12,445 4,742 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 1.36 1.43 1.59 1.60 Gross expenses prior to expense reimbursement(4) % 1.36 1.45 2.24 4.70 Net investment income (loss) after expense reimbursement(4)(5) % (0.87) (0.56) (0.65) (0.87) Portfolio turnover % 139 27 253 306 Class B ---------------------------------------------- Year Three months Year July 21, Ended ended ended 1997(1) to June 30, June 30, March 31, March 31, 2000 1999(2) 1999 1998 ---- ------- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 28.15 25.04 15.64 12.50 Income from investment operations: Net investment income (loss) $ (0.39) (0.05) (0.08) (0.07) Net realized and unrealized gains on investments $ 15.56 3.16 9.71 3.24 Total from investment operations $ 15.17 3.11 9.63 3.17 Less distributions from: Net investment income $ -- -- -- -- Net realized gains on investments $ 0.38 -- 0.23 0.03 Net asset value, end of period $ 42.94 28.15 25.04 15.64 Total Return(3): % 55.37 12.42 62.28 61.08 Ratios/Supplemental Data: Net assets, end of period (000's) $ 333,256 49,057 20,039 3,187 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 2.01 2.08 2.24 2.25 Gross expenses prior to expense reimbursement(4) % 2.01 2.10 2.89 4.78 Net investment income (loss) after expense reimbursement(4)(5) % (1.52) (1.21) (1.28) (1.36) Portfolio turnover % 139 27 253 306 Class C ---------------------------------------------- Year Three months Year July 21, Ended ended ended 1997(1) to June 30, June 30, March 31, March 31, 2000 1999(2) 1999 1998 ---- ------- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 28.07 24.97 15.63 12.50 Income from investment operations: Net investment income (loss) $ (0.35) (0.06) (0.07) (0.05) Net realized and unrealized gains on investments $ 15.48 3.16 9.65 3.24 Total from investment operations $ 15.13 3.10 9.58 3.19 Less distributions from: Net investment income $ -- -- -- -- Net realized gains on investments $ 0.38 -- 0.24 0.06 Net asset value, end of period $ 42.82 28.07 24.97 15.63 Total Return(3): % 54.38 12.41 61.97 61.38 Ratios/Supplemental Data: Net assets, end of period (000's) $ 152,682 17,755 8,004 960 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 2.01 2.08 2.25 2.25 Gross expenses prior to expense reimbursement(4) % 2.01 2.10 2.90 7.79 Net investment income (loss) after expense reimbursement(4)(5) % (1.52) (1.21) (1.26) (1.49) Portfolio turnover % 139 27 253 306
- ---------- (1) The Fund commenced operations on July 21, 1997. (2) Effective May 24, 1999, Pilgrim Investment Inc., became the Investment Manager of the Fund, concurrently Nicholas-Applegate Capital Management was appointed as sub-advisor and the Fund changed its year end to June 30. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses, excluding, interest, taxes, brokerage and extraordinary expenses. See Accompanying Notes to Financial Statements 68 FINANCIAL HIGHLIGHTS PILGRIM MIDCAP VALUE FUND - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A ------------------------------------------- Sept. 1, 1995 to Year Ended June 30, June 30, 2000 1999 1998 1997 1996(1) ---- ---- ---- ---- ------- Per Share Operating Performance: Net asset value, beginning of period $ 15.65 16.79 14.64 11.99 10.00 Income from investment operations: Net investment income (loss) $ (0.09) (0.09) (0.07) (0.02) 0.13 Net realized and unrealized gains on investments $ (1.17) 0.12 2.71 2.85 1.91 Total from investment operations $ (1.26) 0.03 2.64 2.83 2.04 Less distributions from: Net investment income $ -- -- -- 0.07 0.05 Net realized gains on investments $ 0.09 1.17 0.49 0.11 -- Net asset value, end of period $ 14.30 15.65 16.79 14.64 11.99 Total Return(3): % (8.05) 0.95 18.40 23.89 20.48 Ratios/Supplemental Data: Net assets, end of period (000's) $ 8,875 18,621 27,485 16,985 2,389 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 1.75 1.75 1.75 1.75 1.75 Gross expenses prior to expense reimbursement(4) % 1.88 1.79 1.78 1.94 4.91 Net investment income (loss) after expense reimbursement(4)(5) % (0.49) (0.48) (0.53) (0.13) 2.00 Portfolio turnover rate % 122 109 85 86 60 Class B Class C ------------------------------------------------ -------------------- Sept. 1, Year June 2, 1995 to Ended 1999 to Year Ended June 30, June 30, June 30, June 30, 2000 1999 1998 1997 1996(1) 2000 1999(2) ---- ---- ---- ---- -------- ---- ------- Per Share Operating Performance: Net asset value, beginning of period $ 15.21 16.47 14.49 11.94 10.00 15.20 14.84 Income from investment operations: Net investment income (loss) $ (0.23) (0.21) (0.18) (0.05) 0.07 (0.02) (0.02) Net realized and unrealized gains on investments $ (1.11) 0.12 2.65 2.76 1.90 (1.31) 0.38 Total from investment operations $ (1.34) (0.09) 2.47 2.71 1.97 (1.33) 0.36 Less distributions from: Net investment income $ -- -- -- 0.05 0.03 -- -- Net realized gains on investments $ 0.09 1.17 0.49 0.11 -- 0.09 -- Net asset value, end of period $ 13.78 15.21 16.47 14.49 11.94 13.78 15.20 Total Return(3): % (8.81) 0.21 17.40 22.95 19.80 (8.75) 2.43 Ratios/Supplemental Data: Net assets, end of period (000's) $ 15,840 31,223 40,575 23,258 2,123 2,688 47 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 2.50 2.50 2.50 2.50 2.50 2.50 2.50 Gross expenses prior to expense reimbursement(4) % 2.63 2.54 2.53 2.69 5.32 2.63 2.54 Net investment income (loss) after expense reimbursement(4)(5) % (1.24) (1.23) (1.28) (0.90) 1.27 (1.24) (1.23) Portfolio turnover rate % 122 109 85 86 60 122 109 Class M ------------------------------------------------ Sept. 1, 1995 to Year Ended June 30, June 30, 2000 1999 1998 1997 1996(1) ---- ---- ---- ---- -------- Per Share Operating Performance: Net asset value, beginning of period $ 15.30 16.52 14.49 11.93 10.00 Income from investment operations: Net investment income (loss) $ (0.23) (0.17) (0.15) (0.03) 0.06 Net realized and unrealized gains on investments $ (1.07) 0.12 2.67 2.76 1.91 Total from investment operations $ (1.30) (0.05) 2.52 2.73 1.97 Less distributions from: Net investment income $ -- -- -- 0.06 0.04 Net realized gains on investments $ 0.09 1.17 0.49 0.11 -- Net asset value, end of period $ 13.91 15.30 16.52 14.49 11.93 Total Return(3): % (8.49) 0.46 17.76 23.21 19.82 Ratios/Supplemental Data: Net assets, end of period (000's) $ 3,873 10,504 13,232 8,378 1,731 Ratios to average net assets: Net expenses after expense reimbursement:(4)(5) % 2.25 2.25 2.25 2.25 2.25 Gross expenses prior to expense reimbursement:(4) % 2.38 2.29 2.28 2.44 4.72 Net investment income (loss) after expense reimbursement:(4)(5) % (0.99) (0.98) (1.03) (0.63) 1.16 Portfolio turnover rate % 122 109 85 86 60
- ---------- (1) The Fund commenced operations on September 1, 1995. (2) Commencement of offering shares. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses, excluding, interest, taxes, brokerage and extraordinary expenses. See Accompanying Notes to Financial Statements 69 FINANCIAL PILGRIM MIDCAP GROWTH FUND HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A -------------------------------------------------------- Three Year months Ended ended June 30, June 30, Year ended March 31, 2000 1999(1) 1999 1998 1997 1996 ---- ------- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 21.34 19.93 18.63 16.80 18.37 13.61 Income from investment operations: Net investment income (loss) $ (0.22) (0.06) (0.50) (0.14) (0.17) (0.18) Net realized and unrealized gains on investments $ 14.08 1.47 3.17 6.50 0.57 4.94 Total from investment operations $ 13.86 1.41 2.67 6.36 0.40 4.76 Less distributions from: Net investment income $ -- -- -- -- -- -- Net realized gains on investments $ 7.03 -- 1.37 4.53 1.97 -- Net asset value, end of period $ 28.17 21.34 19.93 18.63 16.80 18.37 Total Return(3): % 77.33 7.07 15.36 41.81 1.09 35.07 Ratios/Supplemental Data: Net assets, end of period (000's) $ 155,976 66,586 67,550 90,619 76,108 77,275 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 1.36 1.49 1.56 1.57 1.60 1.58 Gross expenses prior to expense reimbursement(4) % 1.36 1.50 1.64 1.66 1.56 1.56 Net investment income (loss) after expense reimbursement(4)(5) % (1.10) (1.20) (1.04) (1.33) (1.05) (0.91) Portfolio turnover % 148 55 154 200 153 114 Class B --------------------------------------------------------------- Three Year months May 31, Ended ended 1995(2) to June 30, June 30, Year ended March 31, March 31, 2000 1999(1) 1999 1998 1997 1996 ---- ------- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 25.18 23.54 21.55 16.33 16.25 12.50 Income from investment operations: Net investment income (loss) $ (0.41) (0.11) (0.42) (0.25) (0.17) (0.09) Net realized and unrealized gains on investments $ 16.55 1.75 3.42 6.74 0.25 3.84 Total from investment operations $ 16.14 1.64 3.00 6.49 0.08 3.75 Less distributions from: Net investment income $ -- -- -- -- -- -- Net realized gains on investments $ 8.28 -- 1.01 1.27 -- -- Net asset value, end of period $ 33.04 25.18 23.54 21.55 16.33 16.25 Total Return(3): % 76.28 6.97 14.59 40.84 (0.49) 30.00 Ratios/Supplemental Data: Net assets, end of period (000's) $ 116,334 49,335 45,876 46,806 29,002 11,186 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 2.01 2.14 2.22 2.22 2.25 2.22 Gross expenses prior to expense reimbursement(4) % 2.01 2.14 2.29 2.21 2.66 3.39 Net investment income (loss) after expense reimbursement(4)(5) % (1.75) (1.85) (1.69) (1.99) (1.69) (1.61) Portfolio turnover % 148 55 154 200 153 114 Class C ------------------------------------------------------------ Three Year months Ended ended June 30, June 30, Year ended March 31, 2000 1999(1) 1999 1998 1997 1996 ---- ------- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 19.78 18.49 17.15 16.48 18.06 13.45 Income from investment operations: Net investment income (loss) $ (0.38) (0.09) (0.61) (0.28) (0.32) (0.27) Net realized and unrealized gains on investments $ 13.04 1.38 2.97 6.26 0.62 4.88 Total from investment operations $ 12.66 1.29 2.36 5.98 0.30 4.61 Less distributions from: Net investment income $ -- -- -- -- -- -- Net realized gains on investments $ 6.50 -- 1.02 5.31 1.88 -- Net asset value, end of period $ 25.94 19.78 18.49 17.15 16.48 18.06 Total Return(3): % 76.18 6.98 14.60 40.95 0.56 34.28 Ratios/Supplemental Data: Net assets, end of period (000's) $ 249,255 144,832 141,685 166,849 157,501 177,461 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 2.01 2.14 2.23 2.27 2.14 2.14 Gross expenses prior to expense reimbursement(4) % 2.01 2.14 2.30 2.33 2.17 2.14 Net investment income (loss) after expense reimbursement(4)(5) % (1.75) (1.85) (1.70) (2.01) (1.59) (1.47) Portfolio turnover % 148 55 154 200 153 114
- ---------- (1) Effective May 24, 1999, Pilgrim Investment Inc. became the Investment Manager of the Fund, concurrently Nicholas-Applegate Capital Management was appointed as sub-advisor and the Fund changed its year end to June 30. (2) Commencement of offering shares. (3) Total return is calculated assuming reinvestment of dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses, excluding, interest, taxes, brokerage and extraordinary expenses. See Accompanying Notes to Financial Statements 70 FINANCIAL HIGHLIGHTS PILGRIM SMALLCAP GROWTH FUND - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A --------------------------------------------------------------- Three Year months Ended ended June 30, June 30, Year ended March 31, 2000 1999(1) 1999 1998 1997 1996 ---- ------- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 19.08 16.72 19.75 15.15 17.93 13.06 Income from investment operations: Net investment income (loss) $ (0.20) (0.06) (0.85) (0.08) (0.22) (0.20) Net realized and unrealized gains (loss) on investments $ 9.24 2.42 0.69 6.91 (0.66) 5.09 Total from investment operations $ 9.04 2.36 (0.16) 6.83 (0.88) 4.89 Less distributions from: Net investment income $ -- -- -- -- -- -- Net realized gains on investments $ 9.73 -- 2.87 2.23 1.90 0.02 Net asset value, end of period $ 18.39 19.08 16.72 19.75 15.15 17.93 Total Return(3): % 60.66 14.11 0.37 46.32 (6.26) 37.48 Ratios/Supplemental Data: Net assets, end of period (000's) $ 168,239 102,641 94,428 201,943 121,742 138,155 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 1.62 1.70 1.85 1.89 1.72 1.74 Gross expenses prior to expense reimbursement(4) % 1.67 1.74 1.95 1.90 1.72 1.74 Net investment income (loss) after expense reimbursement(4)(5) % (1.31) (1.46) (1.32) (1.85) (1.26) (1.20) Portfolio turnover % 127 32 90 92 113 130 Class B --------------------------------------------------------------- Three Year months May 31, Ended ended 1995(2) to June 30, June 30, Year ended March 31, March 31, 2000 1999(1) 1999 1998 1997 1996 ---- ------- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 24.05 21.12 22.53 15.51 16.69 12.50 Income from investment operations: Net investment income (loss) $ (0.34) (0.12) (0.53) (0.27) (0.21) (0.14) Net realized and unrealized gains (loss) on investments $ 11.56 3.05 0.33 7.29 (0.97) 4.33 Total from investment operations $ 11.22 2.93 (0.20) 7.02 (1.18) 4.19 Less distributions from: Net investment income $ -- -- -- -- -- -- Net realized gains on investments $ 12.24 -- 1.21 -- -- -- Net asset value, end of period $ 23.03 24.05 21.12 22.53 15.51 16.69 Total Return(3): % 59.68 13.87 (0.29) 45.26 (7.07) 33.52 Ratios/Supplemental Data: Net assets, end of period (000's) $ 97,239 49,448 45,140 55,215 28,030 13,626 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 2.27 2.35 2.57 2.62 2.61 2.58 Gross expenses prior to expense reimbursement(4) % 2.32 2.39 2.66 2.63 2.73 3.26 Net investment income (loss) after expense reimbursement(4)(5) % (1.96) (2.11) (2.03) (2.59) (2.13) (2.09) Portfolio turnover % 127 32 90 92 113 130 Class C ----------------------------------------------------------- Three Year months Ended ended June 30, June 30, Year ended March 31, 2000 1999(1) 1999 1998 1997 1996 ---- ------- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 18.81 16.51 18.62 14.69 17.62 12.96 Income from investment operations: Net investment income (loss) $ (0.30) (0.09) (0.84) (0.38) (0.31) (0.29) Net realized and unrealized gains on investments $ 9.07 2.39 0.61 6.84 (0.63) 5.03 Total from investment operations $ 8.77 2.30 (0.23) 6.46 (0.94) 4.74 Less distributions from: Net investment income $ -- -- -- -- -- -- Net realized gains on investments $ 9.57 -- 1.88 2.53 1.99 0.08 Net asset value, end of period $ 18.01 18.81 16.51 18.62 14.69 17.62 Total Return(3): % 59.67 13.93 (0.24) 45.40 (6.81) 37.18 Ratios/Supplemental Data: Net assets, end of period (000's) $ 229,473 153,471 144,597 225,025 182,907 207,332 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 2.27 2.35 2.51 2.57 2.35 2.35 Gross expenses prior to expense reimbursement(4) % 2.32 2.39 2.60 2.59 2.35 2.35 Net investment income (loss) after expense reimbursement(4)(5) % (1.96) (2.11) (1.97) (2.53) (1.89) (1.81) Portfolio turnover % 127 32 90 92 113 130
- ---------- (1) Effective May 24, 1999, Pilgrim Investments Inc., became the Investment Manager of the Fund, concurrently Nicholas-Applegate Capital Management was appointed as sub-advisor and the Fund changed its year end to June 30. (2) Commencement of offering shares. (3) Total return is calculated assuming reinvestment of dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for less periods than one year. (5) The Investment Manager has agreed to limit expenses, excluding, interest, taxes, brokerage and extraordinary expenses. See Accompanying Notes to Financial Statements 71 FINANCIAL PILGRIM BANK AND THRIFT FUND HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A ----------------------------------------------------------------------- Six Year Year months Year Ended ended ended Ended June 30, June 30, June 30, Year ended December 31, June 30, 2000 1999 1998(3) 1997 1996 1995(1) 2000 ---- ---- ------- ---- ---- ------- ---- Per Share Operating Performance: Net asset value, beginning of year $ 24.38 27.52 25.87 17.84 14.83 10.73 24.21 Income (loss) from investment operations: Net investment income $ 0.32 0.29 0.11 0.34 0.32 0.31 0.22 Net realized and unrealized gains (loss) on investments $ (5.30) (2.70) 1.54 10.83 5.18 4.78 (5.32) Total from investment operations $ (4.98) (2.41) 1.65 11.17 5.50 5.09 (5.10) Less distributions from: Net investment income $ 0.25 0.18 -- 0.31 0.35 0.34 0.03 Net realized gains on investments $ 2.73 0.55 -- 2.65 2.14 0.65 2.73 Tax return of capital $ -- -- -- 0.18 -- -- -- Net asset value, end of year $ 16.42 24.38 27.52 25.87 17.84 14.83 16.35 Closing market price, end of year -- -- -- -- 15.75 12.88 -- Total Investment Return At Market Value(4) % -- -- -- -- 43.48 52.81 -- Total Investment Return At Net Asset Value(5) % (22.44) (8.61) 6.38 64.86 41.10 49.69 (23.00) Ratios/Supplemental Data: Net assets, end of year ($millions) $ 210 403 549 383 252 210 148 Ratio to average net assets: Expenses(6) % 1.41 1.39 1.20 1.10 1.01 1.05 2.16 Net investment income(6) % 1.46 1.09 0.94 1.39 1.94 2.37 0.71 Portfolio turnover rate % 10 29 2 22 21 13 10 Class B ---------------------------------- Six Year months Oct. 20, ended ended 1997(2) to June 30, June 30, Dec. 31, 1999 1998(3) 1997 Per Share Operating Performance: Net asset value, beginning of year $ 27.40 25.85 25.25 Income (loss) from investment operations: Net investment income $ 0.08 0.01 0.04 Net realized and unrealized gains (loss) on investments $ (2.66) 1.54 2.92 Total from investment operations $ (2.58) 1.55 2.96 Less distributions from: Net investment income $ 0.06 -- 0.04 Net realized gains on investments $ 0.55 -- 2.04 Tax return of capital $ -- -- 0.28 Net asset value, end of year $ 24.21 27.40 25.85 Closing market price, end of year -- -- -- Total Investment Return At Market Value(4) % -- -- -- Total Investment Return At Net Asset Value(5) % (9.31) 6.00 11.88 Ratios/Supplemental Data: Net assets, end of year ($millions) $ 343 360 76 Ratio to average net assets: Expenses(6) % 2.14 1.95 1.89 Net investment income(6) % 0.34 0.19 0.99 Portfolio turnover rate % 29 2 22
- ---------- (1) Pilgrim Investments, Inc., the Fund's Investment Manager, acquired certain assets of Pilgrim Management Corporation, the Fund's former Investment Manager, in a transaction that closed on April 7, 1995. (2) Commencement of offering shares. (3) Effective June 30, 1998, Bank and Thrift Fund changed its year end to June 30. (4) Total return was calculated at market value without deduction of sales commissions and assuming reinvestment of all dividends and distributions during the period. (5) Total return is calculated at net asset value without deduction of sales commissions and assumes reinvestment of all dividends and distributions during the period. Total investment returns based on net asset value, which can be higher or lower than market value, may result in substantially different returns than total return based on market value. For all periods prior to January 1, 1997, the total returns presented are unaudited. (6) Annualized for periods less than one year. See Accompanying Notes to Financial Statements 72 FINANCIAL HIGHLIGHTS PILGRIM WORLDWIDE GROWTH FUND - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A ---------------------------------------------------------------- Three Year months Ended ended June 30, June 30, Year ended March 31, 2000 1999(1) 1999 1998 1997 1996 ---- ------- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 23.58 21.39 19.33 16.88 16.57 14.29 Income from investment operations: Net investment income (loss) $ (0.15) -- (0.02) 0.04 (0.16) (0.07) Net realized and unrealized gains (loss) on investments $ 9.62 2.19 5.78 5.33 2.20 2.86 Total from investment operations $ 9.47 2.19 5.76 5.37 2.04 2.79 Less distributions from: Net investment income $ -- -- 0.06 -- -- 0.12 Net realized gains on investments $ 3.07 -- 3.64 2.92 1.73 0.39 Net asset value, end of period $ 29.98 23.58 21.39 19.33 16.88 16.57 Total Return(3): % 42.43 10.24 33.56 34.55 12.51 19.79 Ratios/Supplemental Data: Net assets, end of period (000's) $ 235,341 66,245 49,134 38,647 24,022 23,481 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 1.67 1.75 1.86 1.86 1.85 1.85 Gross expenses prior to expense reimbursement(4) % 1.67 1.75 2.02 2.21 2.17 2.17 Net investment income (loss) after expense reimbursement(4)(5) % (0.79) (0.03) (0.62) (0.69) (0.93) (0.35) Portfolio turnover % 169 57 247 202 182 132 Class B --------------------------------------------------------------- Three Year months May 31, Ended ended 1995(2) to June 30, June 30, Year ended March 31, March 31, 2000 1999(1) 1999 1998 1997 1996 ---- ------- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 26.64 24.21 20.10 16.02 14.34 12.50 Income from investment operations: Net investment income (loss) $ (0.28) (0.03) (0.08) (0.17) (0.14) (0.05) Net realized and unrealized gains (loss) on investments $ 10.76 2.46 6.25 5.44 1.82 1.89 Total from investment operations $ 10.48 2.43 6.17 5.27 1.68 1.84 Less distributions from: Net investment income $ -- -- 0.01 -- -- -- Net realized gains on investments $ 3.46 -- 2.05 1.19 -- -- Net asset value, end of period $ 33.66 26.64 24.21 20.10 16.02 14.34 Total Return(3): % 41.54 10.04 32.74 34.03 11.72 14.72 Ratios/Supplemental Data: Net assets, end of period (000's) $ 130,988 27,938 18,556 10,083 5,942 1,972 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 2.32 2.40 2.51 2.51 2.50 2.50 Gross expenses prior to expense reimbursement(4) % 2.32 2.40 2.67 2.70 4.81 9.50 Net investment income (loss) after expense reimbursement(4)(5) % (1.44) (0.68) (1.31) (1.37) (1.62) (1.28) Portfolio turnover % 169 57 247 202 182 132 Class C -------------------------------------------------------- Three Year months Ended ended June 30, June 30, Year ended March 31, 2000 1999(1) 1999 1998 1997 1996 ---- ------- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 23.69 21.52 19.05 16.92 16.76 14.44 Income from investment operations: Net investment income (loss) $ (0.33) (0.04) (0.20) (0.19) (0.28) (0.21) Net realized and unrealized gains (loss) on investments $ 9.65 2.21 5.83 5.41 2.23 2.92 Total from investment operations $ 9.32 2.17 5.63 5.22 1.95 2.71 Less distributions from: Net investment income $ -- -- 0.01 -- -- 0.01 Net realized gains on investments $ 3.09 -- 3.15 3.09 1.79 0.38 Net asset value, end of period $ 29.92 23.69 21.52 19.05 16.92 16.76 Total Return(3): % 41.48 10.08 32.73 33.72 11.81 18.95 Ratios/Supplemental Data: Net assets, end of period (000's) $ 239,432 111,250 98,470 84,292 70,345 71,155 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 2.32 2.40 2.51 2.51 2.50 2.50 Gross expenses prior to expense reimbursement(4) % 2.32 2.40 2.67 2.77 2.61 2.57 Net investment income (loss) after expense reimbursement(4)(5) % (1.44) (0.68) (1.28) (1.34) (1.57) (0.99) Portfolio turnover % 169 57 247 202 182 132
- ---------- (1) Effective May 24, 1999, Pilgrim Investments Inc., became the Investment Manager of the Fund, concurrently Nicholas-Applegate Capital Management was appointed as sub-advisor and the Fund changed its year end to June 30. (2) Commencement of offering shares. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses, excluding, interest, taxes, brokerage and extraordinary expenses. See Accompanying Notes to Financial Statements 73 FINANCIAL PILGRIM INTERNATIONAL CORE GROWTH FUND HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A ------------------------------------------------------- Three Year months February 28, Ended ended 1997(1) to June 30, June 30, Year ended March 31, March 31, 2000 1999(2) 1999 1998 1997 ---- ------- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 18.92 17.71 17.01 12.73 12.50 Income from investment operations: Net investment income (loss) $ (0.17) 0.04 (0.01) (0.02) -- Net realized and unrealized gains on investments $ 6.25 1.17 1.02 4.56 0.23 Total from investment operations $ 6.08 1.21 1.01 4.54 0.23 Less distributions from: Net investment income $ -- -- 0.18 -- -- Net realized gains on investments $ 1.16 -- 0.13 0.26 -- Net asset value, end of period $ 23.84 18.92 17.71 17.01 12.73 Total Return(3): % 32.83 6.83 5.90 36.10 1.76 Ratios/Supplemental Data: Net assets, end of period (000's) $ 23,003 12,409 21,627 12,664 2 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 1.85 1.77 1.89 1.96 1.95 Gross expenses prior to expense reimbursement(4) % 2.16 1.86 2.13 3.02 4,579.78 Net investment income (loss) after expense reimbursement(4)(5) % (0.83) 0.50 (0.51) (0.45) 0.00 Portfolio turnover % 200 67 214 274 76 Class B ------------------------------------------------------- Three Year months February 28, Ended ended 1997(1) to June 30, June 30, Year ended March 31, March 31, 2000 1999(2) 1999 1998 1997 ---- ------- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 19.08 17.89 17.10 12.68 12.50 Income from investment operations: Net investment income (loss) $ (0.30) -- (0.16) (0.11) -- Net realized and unrealized gains on investments $ 6.21 1.19 1.05 4.66 0.18 Total from investment operations $ 5.91 1.19 0.89 4.55 0.18 Less distributions from: Net investment income $ -- -- 0.03 -- -- Net realized gains on investments $ 1.16 -- 0.07 0.13 -- Net asset value, end of period $ 23.83 19.08 17.89 17.10 12.68 Total Return(3): % 31.62 6.65 5.24 35.31 1.44 Ratios/Supplemental Data: Net assets, end of period (000's) $ 21,543 12,034 11,033 7,942 1 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 2.50 2.36 2.53 2.61 2.59 Gross expenses prior to expense reimbursement(4) % 2.81 2.45 2.77 3.04 16,000.25 Net investment income (loss) after expense reimbursement(4)(5) % (1.48) (0.09) (1.13) (1.32) 0.00 Portfolio turnover % 200 67 214 274 76 Class C ------------------------------------------------------- Three Year months February 28, Ended ended 1997(1) to June 30, June 30, Year ended March 31, March 31, 2000 1999(2) 1999 1998 1997 ---- ------- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 19.14 17.94 17.16 12.68 12.50 Income from investment operations: Net investment income (loss) $ (0.27) -- (0.05) (0.07) -- Net realized and unrealized gains on investments $ 6.22 1.20 0.94 4.55 0.18 Total from investment operations $ 5.95 1.20 0.89 4.48 0.18 Less distributions from: Net investment income $ -- -- 0.11 -- -- Net realized gains on investments $ 1.16 -- -- -- -- Net asset value, end of period $ 23.93 19.14 17.94 17.16 12.68 Total Return(3): % 31.73 6.69 5.22 35.25 1.44 Ratios/Supplemental Data: Net assets, end of period (000's) $ 26,734 11,936 10,400 3,517 43 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 2.50 2.36 2.55 2.61 2.41 Gross expenses prior to expense reimbursement(4) % 2.81 2.45 2.79 5.10 25.55 Net investment income (loss) after expense reimbursement(4)(5) % (1.48) (0.09) (1.19) (1.27) (0.07) Portfolio turnover % 200 67 214 274 76
- ---------- (1) The Fund commenced operations on February 28, 1997. (2) Effective May 24, 1999, Pilgrim Investment Inc., became the Investment Manager of the Fund, concurrently Nicholas-Applegate Capital Management was appointed as sub-advisor and the Fund changed its year end to June 30. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses, excluding, interest, taxes, brokerage and extraordinary expenses. See Accompanying Notes to Financial Statements 74 FINANCIAL HIGHLIGHTS PILGRIM INTERNATIONAL SMALLCAP GROWTH FUND - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A ------------------------------------------------------- Three Year months Ended ended June 30, June 30, Year ended March 31, 2000 1999(2) 1999 1998 1997 1996 ---- ------- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 23.80 21.03 19.29 14.92 13.15 11.51 Income from investment operations: Net investment income (loss) $ (0.18) (0.03) 0.02 (0.15) 0.04 (0.02) Net realized and unrealized gains on investments $ 19.38 2.80 3.21 5.36 1.88 1.79 Total from investment operations $ 19.20 2.77 3.23 5.21 1.92 1.77 Less distributions from: Net investment income $ -- -- -- -- 0.01 0.13 Net realized gains on investments $ 2.06 -- 1.49 0.84 0.14 -- Net asset value, end of period $ 40.94 23.80 21.03 19.29 14.92 13.15 Total Return(3): % 82.89 13.17 17.26 36.31 14.67 15.46 Ratios/Supplemental Data: Net assets, end of period (000's) $ 278,480 37,490 25,336 11,183 5,569 1,056 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 1.67 1.84 1.94 1.96 1.95 1.95 Gross expenses prior to expense reimbursement(4) % 1.67 1.86 2.08 2.75 3.76 10.06 Net investment income (loss) after expense reimbursement(4)(5) % (0.76) (0.69) (0.82) (1.56) (1.05) (0.27) Portfolio turnover % 164 44 146 198 206 141 Class B --------------------------------------------------------------- Three Year months May 31, Ended ended 1995(1) to June 30, June 30, Year ended March 31, March 31, 2000 1999(2) 1999 1998 1997 1996 ---- ------- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 25.33 22.43 20.16 15.89 13.96 12.50 Income from investment operations: Net investment income (loss) $ (0.37) (0.07) (0.20) (0.15) (0.15) (0.02) Net realized and unrealized gains on investments $ 20.50 2.97 3.46 5.56 2.09 1.48 Total from investment operations $ 20.13 2.90 3.26 5.41 1.94 1.46 Less distributions from: Net investment income $ -- -- -- -- 0.01 -- Net realized gains on investments $ 2.19 -- 0.99 1.14 -- -- Net asset value, end of period $ 43.27 25.33 22.43 20.16 15.89 13.96 Total Return(3): % 81.63 12.93 16.55 35.73 13.96 11.68 Ratios/Supplemental Data: Net assets, end of period (000's) $ 132,028 19,331 16,158 12,033 5,080 1,487 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 2.32 2.49 2.59 2.61 2.60 2.60 Gross expenses prior to expense reimbursement(4) % 2.32 2.51 2.73 2.98 4.89 16.15 Net investment income (loss) after expense reimbursement(4)(5) % (1.41) (1.34) (1.45) (2.20) (1.66) (0.64) Portfolio turnover % 164 44 146 198 206 141 Class C ------------------------------------------------------ Three Year months Ended ended June 30, June 30, Year ended March 31, 2000 1999(2) 1999 1998 1997 1996 ---- ------- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 23.34 20.60 18.53 14.87 13.05 11.32 Income from investment operations: Net investment income (loss) $ (0.31) (0.06) (0.10) (0.11) (0.16) 0.01 Net realized and unrealized gains on investments $ 18.69 2.80 3.09 5.09 1.98 1.72 Total from investment operations $ 18.38 2.74 2.99 4.98 1.82 1.73 Less distributions from: Net investment income $ -- -- -- -- -- -- Net realized gains on investments $ 2.01 -- 0.92 1.32 -- -- Net asset value, end of period $ 39.71 23.34 20.60 18.53 14.87 13.05 Total Return(3): % 80.89 13.31 16.55 35.63 13.98 15.30 Ratios/Supplemental Data: Net assets, end of period (000's) $ 144,068 18,354 13,226 8,014 3,592 933 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 2.32 2.49 2.59 2.61 2.60 2.60 Gross expenses prior to expense reimbursement(4) % 2.32 2.51 2.73 3.38 3.95 16.15 Net investment income (loss) after expense reimbursement(4)(5) % (1.41) (1.34) (1.45) (2.18) (1.67) (1.02) Portfolio turnover % 164 44 146 198 206 141
- ---------- (1) Commencement of share offerings. (2) Effective May 24, 1999, Pilgrim Investment Inc., became the Investment Manager of the Fund, concurrently Nicholas-Applegate Capital Management was appointed as sub-advisor and the Fund changed its year end to June 30. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses, excluding, interest, taxes, brokerage and extraordinary expenses. See Accompanying Notes to Financial Statements 75 FINANCIAL PILGRIM EMERGING COUNTRIES FUND HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A --------------------------------------------------------- Three Year months Ended ended June 30, June 30, Year Ended March 31, 2000 1999(2) 1999 1998 1997 1996 ---- ------- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 16.74 13.43 17.39 17.20 14.03 11.00 Income from investment operations: Net investment income (loss) $ (0.20) (0.05) (0.06) 0.03 (0.06) (0.04) Net realized and unrealized gains (loss) on investments $ 3.63 3.36 (3.81) 1.22 3.51 3.15 Total from investment operations $ 3.43 3.31 (3.87) 1.25 3.45 3.11 Less distributions from: Net investment income $ -- -- 0.02 -- -- 0.02 Net realized gains on investments $ -- -- 0.07 1.06 0.28 0.06 Net asset value, end of period $ 20.17 16.74 13.43 17.39 17.20 14.03 Total Return(3): % 20.49 24.65 (22.23) 8.06 24.79 28.43 Ratios/Supplemental Data: Net assets, end of period (000's) $ 75,311 53,483 47,180 71,014 38,688 4,718 Ratio to average net assets: Net expenses after expense reimbursement(4)(5) % 2.19 2.13 2.27 2.26 2.25 2.25 Gross expenses prior to expense reimbursement(4) % 2.34 2.66 2.56 2.48 3.08 6.72 Net investment income (loss) after expense reimbursement(4)(5) % (1.15) (1.30) (0.25) 0.55 (1.14) (0.35) Portfolio turnover % 211 67 213 243 176 118 Class B ------------------------------------------------------------ Three Year months May 31, Ended ended 1995(1) to June 30, June 30, Year Ended March 31, March 31, 2000 1999(2) 1999 1998 1997 1996 ---- ------- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 16.98 13.64 17.64 17.29 14.02 12.50 Income from investment operations: Net investment income (loss) $ (0.35) (0.07) (0.22) (0.07) (0.11) (0.04) Net realized and unrealized gains (loss) on investments $ 3.67 3.41 (3.70) 1.26 3.47 1.56 Total from investment operations $ 3.32 3.34 (3.92) 1.19 3.36 1.52 Less distributions from: Net investment income $ -- -- -- -- -- -- Net realized gains on investments $ -- -- 0.08 0.84 0.09 -- Net asset value, end of period $ 20.30 16.98 13.64 17.64 17.29 14.02 Total Return(3): % 19.55 24.49 (22.23) 7.47 24.00 12.16 Ratios/Supplemental Data: Net assets, end of period (000's) $ 30,322 26,342 22,338 38,796 24,558 3,557 Ratio to average net assets: Net expenses after expense reimbursement(4)(5) % 2.84 2.75 2.91 2.91 2.90 2.90 Gross expenses prior to expense reimbursement(4) % 2.99 3.28 3.20 3.06 3.66 7.58 Net investment income (loss) after expense reimbursement(4)(5) % (1.80) (1.92) (0.80) (0.20) (1.77) (1.05) Portfolio turnover % 211 67 213 243 176 118 Class C ----------------------------------------------------------- Three Year months Ended ended June 30, June 30, Year Ended March 31, 2000 1999(2) 1999 1998 1997 1996 ---- ------- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 16.35 13.14 16.98 16.81 13.71 10.79 Income from investment operations: Net investment income (loss) $ (0.32) (0.07) (0.27) (0.12) (0.10) (0.05) Net realized and unrealized gains (loss) on investments $ 3.53 3.28 (3.49) 1.26 3.37 2.97 Total from investment operations $ 3.21 3.21 (3.76) 1.14 3.27 2.92 Less distributions from: Net investment income $ -- -- -- -- -- -- Net realized gains on investments $ -- -- 0.08 0.97 0.17 -- Net asset value, end of period $ 19.56 16.35 13.14 16.98 16.81 13.71 Total Return(3): % 19.63 24.43 (22.21) 7.47 23.94 27.30 Ratios/Supplemental Data: Net assets, end of period (000's) $ 29,610 24,230 19,246 36,986 29,376 4,345 Ratio to average net assets: Net expenses after expense reimbursement(4)(5) % 2.84 2.75 2.90 2.91 2.90 2.90 Gross expenses prior to expense reimbursement(4) % 2.99 3.28 3.19 3.09 3.12 6.23 Net investment income (loss) after expense reimbursement(4)(5) % (1.80) (1.92) (0.77) (0.26) (1.75) (1.06) Portfolio turnover % 211 67 213 243 176 118
- ---------- (1) Commencement of offering shares. (2) Effective May 24, 1999, Pilgrim Investment Inc., became the Investment Manager of the Fund, concurrently Nicholas-Applegate Capital Management was appointed as sub-advisor and the Fund changed its year end to June 30. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses, excluding, interest, taxes, brokerage and extraordinary expenses. 76 FINANCIAL HIGHLIGHTS PILGRIM ASIA-PACIFIC EQUITY FUND - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A -------------------------------------------- Sept. 1, 1995 to Year Ended June 30, June 30, 2000 1999 1998 1997 1996(1) ---- ---- ---- ---- ------- Per Share Operating Performance: Net asset value, beginning of period $ 7.22 4.46 10.93 10.35 10.00 Income from investment operations: Net investment income (loss) $ (0.05) -- 0.03 0.02 0.03 Net realized and unrealized gain (loss) on investments $ 0.06 2.76 (6.50) 0.58 0.34 Total from investment operations $ 0.01 2.76 (6.47) 0.60 0.37 Less distributions from: Net investment income $ -- -- -- -- -- In excess of net investment income $ -- -- -- -- 0.02 Tax return of capital $ -- -- -- 0.02 -- Net asset value, end of period $ 7.23 7.22 4.46 10.93 10.35 Total Return(2): % 0.14 61.88 (59.29) 5.78 3.76 Ratios/Supplemental Data: Net assets, end of period (000's) $ 11,726 14,417 11,796 32,485 18,371 Ratios to average net assets: Net expenses after expense reimbursement(3)(4) % 2.11 2.00 2.00 2.00 2.00 Gross expenses prior to expense reimbursement(3) % 2.55 2.98 2.80 2.54 3.47 Net investment income (loss) after expense reimbursement(3)(4) % (0.56) 0.01 0.38 0.00 0.33 Portfolio turnover rate % 138 111 81 38 15 Class B -------------------------------------------- Sept. 1, 1995 to Year Ended June 30, June 30, 2000 1999 1998 1997 1996(1) ---- ---- ---- ---- ------- Per Share Operating Performance: Net asset value, beginning of period $ 7.02 4.37 10.83 10.31 10.00 Income from investment operations: Net investment income (loss) $ (0.11) (0.04) (0.03) (0.07) (0.01) Net realized and unrealized gain (loss) on investments $ 0.06 2.69 (6.43) 0.59 0.32 Total from investment operations $ (0.05) 2.65 (6.46) 0.52 0.31 Less distributions from: Net investment income $ -- -- -- -- -- In excess of net investment income $ -- -- -- -- -- Tax return of capital $ -- -- -- -- -- Net asset value, end of period $ 6.97 7.02 4.37 10.83 10.31 Total Return(2): % (0.71) 60.64 (59.65) 5.04 3.19 Ratios/Supplemental Data: Net assets, end of period (000's) $ 12,228 12,959 9,084 30,169 17,789 Ratios to average net assets: Net expenses after expense reimbursement(3)(4) % 2.86 2.75 2.75 2.75 2.75 Gross expenses prior to expense reimbursement(3) % 3.30 3.73 3.55 3.29 4.10 Net investment income (loss) after expense reimbursement(3)(4) % (1.31) (0.74) (0.39) (0.79) (0.38) Portfolio turnover rate % 138 111 81 38 15 Class M --------------------------------------------- Sept. 1, Year Ended June 30, 1995 to 2000 1999 1998 1997 June 30, ---- ---- ---- ---- -------- Per Share Operating Performance: Net asset value, beginning of period $ 7.07 4.40 10.86 10.32 10.00 Income from investment operations: Net investment income (loss) $ (0.11) (0.02) -- (0.05) -- Net realized and unrealized gain (loss) on investments $ 0.08 2.69 (6.46) 0.59 0.33 Total from investment operations $ (0.03) 2.67 (6.46) 0.54 0.33 Less distributions from: Net investment income $ -- -- -- -- -- In excess of net investment income $ -- -- -- -- 0.01 Tax return of capital $ -- -- -- -- -- Net asset value, end of period $ 7.04 7.07 4.40 10.86 10.32 Total Return(2): % (0.42) 60.68 (59.48) 5.26 3.32 Ratios/Supplemental Data: Net assets, end of period (000's) $ 3,749 5,184 4,265 11,155 6,476 Ratios to average net assets: Net expenses after expense reimbursement(3)(4) % 2.61 2.50 2.50 2.50 2.50 Gross expenses prior to expense reimbursement(3) % 3.05 3.48 3.30 3.04 3.88 Net investment income (loss) after expense reimbursement(3)(4) % (1.06) (0.49) (0.07) (0.55) (0.16) Portfolio turnover rate % 138 111 81 38 15
- ---------- (1) The Fund commenced operations on September 1, 1995. (2) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return information for less than one year is not annualized. (3) Annualized for periods less than one year. (4) The Investment Manager has agreed to limit expenses, excluding, interest, taxes, brokerage and extraordinary expenses. See Accompanying Notes to Financial Statements 77 FINANCIAL PILGRIM GOVERNMENT SECURITIES INCOME FUND HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A --------------------------------------------------- Year Ended June 30, 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 12.35 12.88 12.71 12.59 12.97 Income (loss) from investment operations: Net investment income $ 0.75 0.76 0.64 0.69 0.75 Net realized and unrealized gain (loss) on investments $ (0.43) (0.52) 0.30 0.20 (0.32) Total from investment operations $ 0.32 0.24 0.94 0.89 0.43 Less distributions from: Net investment income $ 0.74 0.77 0.77 0.73 0.75 Tax return of capital $ -- -- -- 0.04 0.06 Total distributions $ 0.74 0.77 0.77 0.77 0.81 Net asset value, end of period $ 11.93 12.35 12.88 12.71 12.59 Total Return(2): % 2.79 1.89 7.63 7.33 3.34 Ratios/Supplemental Data: Net assets, end of period (000's) $ 54,206 21,060 23,682 29,900 38,753 Ratios to average net assets: Net expenses after expense reimbursement(3)(4) % 1.35 1.40 1.50 1.42 1.51 Gross expenses prior to expense reimbursement(3) % 1.35 1.40 1.58 1.42 1.57 Net investment income after expense reimbursement(3)(4) % 5.87 6.05 5.13 5.78 5.64 Portfolio turnover rate % 44 58 134 172 170 Class B ------------------------------------------------------- July 17, 1995(1) to Year Ended June 30, June 30, 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 12.30 12.84 12.68 12.59 12.95 Income (loss) from investment operations: Net investment income $ 0.67 0.69 0.60 0.67 0.66 Net realized and unrealized gain (loss) on investments $ (0.42) (0.54) 0.24 0.11 (0.37) Total from investment operations $ 0.25 0.15 0.84 0.78 0.29 Less distributions from: Net investment income $ 0.66 0.69 0.68 0.69 0.65 Tax return of capital $ -- -- -- -- -- Total distributions $ 0.66 0.69 0.68 0.69 0.65 Net asset value, end of period $ 11.89 12.30 12.84 12.68 12.59 Total Return(2): % 2.12 1.09 6.78 6.38 2.25 Ratios/Supplemental Data: Net assets, end of period (000's) $ 33,692 12,426 3,220 1,534 73 Ratios to average net assets: Net expenses after expense reimbursement(3)(4) % 2.10 2.15 2.25 2.17 2.26 Gross expenses prior to expense reimbursement(3) % 2.10 2.15 2.29 2.17 2.41 Net investment income after expense reimbursement(3)(4) % 5.12 5.30 4.24 4.92 4.98 Portfolio turnover rate % 44 58 134 172 170 Class C Class T -------------------- ----------- Year June 11, April 5,(1) Ended 1999(1) to to June 30, June 30, June 30, 2000 1999 2000 ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 12.43 12.24 11.80 Income (loss) from investment operations: Net investment income $ 0.68 2.05 0.17 Net realized and unrealized gain (loss) on investments $ (0.44) (1.86) 0.03 Total from investment operations $ 0.24 0.19 0.20 Less distributions from: Net investment income $ 0.66 -- 0.11 Tax return of capital $ -- -- -- Total distributions 0.66 -- 0.11 Net asset value, end of period $ 12.01 12.43 11.89 Total Return(2) % 2.09 1.55 1.24 Ratios/Supplemental Data: Net assets, end of period (000's) $ 2,047 7 22,888 Ratios to average net assets: Net expenses after expense reimbursement(3)(4) % 2.10 2.15 1.75 Gross expenses prior to expense reimbursement(3) % 2.10 2.15 1.75 Net investment income after expense reimbursement(3)(4) % 5.12 5.30 5.47 Portfolio turnover rate % 44 58 44 Class M ----------------------------------------------------- Year July 17, Ended 1995(1) to June 30, Year Ended June 30, June 30, 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 12.34 12.88 12.72 12.59 12.95 Income (loss) from investment operations: Net investment income $ 0.59 0.69 0.64 0.70 0.68 Net realized and unrealized gain (loss) on investments $ (0.32) (0.52) 0.23 0.14 (0.36) Total from investment operations $ 0.27 0.17 0.87 0.84 0.32 Less distributions from: Net investment income $ 0.69 0.71 0.71 0.70 0.68 Tax return of capital $ -- -- -- 0.01 -- Total distributions 0.69 0.71 0.71 0.71 0.68 Net asset value, end of period $ 11.92 12.34 12.88 12.72 12.59 Total Return(2) % 2.28 1.31 7.02 6.88 2.52 Ratios/Supplemental Data: Net assets, end of period (000's) $ 510 751 224 61 24 Ratios to average net assets: Net expenses after expense reimbursement(3)(4) % 1.85 1.90 2.00 1.92 2.01 Gross expenses prior to expense reimbursement(3) % 1.85 1.90 2.05 1.92 2.16 Net investment income after expense reimbursement(3)(4) % 5.37 5.57 4.29 5.25 5.73 Portfolio turnover rate % 44 58 134 172 170
- ---------- (1) Commencement of offering shares. (2) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. (4) The Investment Manager has agreed to limit expenses, excluding, interest, taxes, brokerage and extraordinary expenses. See Accompanying Notes to Financial Statements 78 FINANCIAL HIGHLIGHTS PILGRIM STRATEGIC INCOME FUND - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A Class B --------------------------------- ------------------------------- Three Three Year months July 27, Year months July 27, Ended ended 1998(1) to Ended ended 1998(1) to June 30, June 30, March 31, June 30, June 30, March 31, 2000 1999(2) 1999 2000 1999(2) 1999 ---- ------- ---- ---- ------- ---- Per Share Operating Performance: Net asset value, beginning of period $ 12.59 12.89 13.08 12.33 12.61 12.78 Income from investment operations: Net investment income $ 0.92 0.26 0.53 0.88 0.18 0.45 Net realized and unrealized gains (loss) on investments $ (0.52) (0.42) (0.08) (0.53) (0.33) (0.05) Total from investment operations $ 0.40 (0.16) 0.45 0.35 (0.15) 0.40 Less distributions from: Net investment income $ 0.92 0.14 0.53 0.88 0.13 0.46 Net realized gains on investments $ -- -- 0.11 -- -- 0.11 Net asset value, end of period $ 12.07 12.59 12.89 11.80 12.33 12.61 Total Return(3): % 3.42 (1.23) 5.60 3.00 (1.20) 5.17 Ratios/Supplemental Data: Net assets, end of period (000's) $ 2,726 2,736 5,751 4,460 5,658 6,637 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 0.96 0.90 0.96 1.36 1.29 1.37 Gross expenses prior to expense reimbursement(4) % 2.64 1.56 1.98 3.04 1.95 2.42 Net investment income (loss) after expense reimbursement(4)(5) % 7.69 5.88 5.81 7.29 5.49 5.35 Portfolio turnover % 168 69 274 168 69 274
Class C --------------------------------- Three Year months July 27, Ended ended 1998(1) to Juned 30, June 30, March 31, 2000 1999(2) 1999 ---- ------- ---- Per Share Operating Performance: Net asset value, beginning of period $ 12.81 13.10 13.27 Income from investment operations: Net investment income $ 0.87 0.19 0.48 Net realized and unrealized gains (loss) on investments $ (0.51) (0.35) (0.06) Total from investment operations $ 0.36 (0.16) 0.42 Less distributions from: Net investment income $ 0.87 0.13 0.48 Net realized gains on investments $ -- -- 0.11 Net asset value, end of period $ 12.30 12.81 13.10 Total Return(3): % 3.02 (1.21) 5.19 Ratios/Supplemental Data: Net assets, end of period (000's) $ 3,966 7,965 8,128 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 1.36 1.29 1.36 Gross expenses prior to expense reimbursement(4) % 3.04 1.95 2.41 Net investment income (loss) after expense reimbursement(4)(5) % 7.29 5.49 5.36 Portfolio turnover % 168 69 274 - ---------- (1) The Fund commenced operations on July 27, 1998. (2) Effective May 24, 1999, Pilgrim Investment, Inc., became the Investment Manager of the Fund and the Fund changed its year end to June 30. (3) Total returns are not annualized for periods of less than one year and do not reflect the impact of sales charges. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses, excluding interest, taxes, brokerage and extraordinary expenses. See Accompanying Notes to Financial Statements 79 FINANCIAL HIGHLIGHTS PILGRIM HIGH YIELD FUND - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A ------------------------------------------------------- Year ended June 30, 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 5.93 6.94 6.80 6.36 6.15 Income (loss) from investment operations: Net investment income $ 0.56 0.58 0.61 0.61 0.59 Net realized and unrealized gain (loss) on investments $ (0.85) (0.96) 0.16 0.43 0.16 Total from investment operations $ (0.29) (0.38) 0.77 1.04 0.75 Less distributions from: Net investment income $ 0.57 0.62 0.63 0.60 0.54 Tax return of capital $ 0.03 0.01 -- -- -- Total distributions $ 0.60 0.63 0.63 0.60 0.54 Net asset value, end of period $ 5.04 5.93 6.94 6.80 6.36 Total Return(2): % (5.20) (5.57) 11.71 17.14 12.72 Ratios/Supplemental Data: Net assets, end of period (000's) $ 85,870 131,535 102,424 35,940 18,691 Ratios to average net assets: Net expenses after expense reimbursement(3)(4) % 1.05 1.00 1.00 1.00 1.00 Gross expenses prior to expense reimbursement(3) % 1.17 1.12 1.17 1.42 2.19 Net investment income after expense reimbursement(3)(4) % 10.41 9.32 9.05 9.54 9.46 Portfolio turnover rate % 89 184 209 394 399 Class B ------------------------------------------------------- Year ended June 30, 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 5.92 6.92 6.78 6.36 6.20 Income (loss) from investment operations: Net investment income $ 0.53 0.53 0.58 0.57 0.48 Net realized and unrealized gain (loss) on investments $ (0.86) (0.96) 0.14 0.41 0.14 Total from investment operations $ (0.33) (0.43) 0.72 0.98 0.62 Less distributions from: Net investment income $ 0.53 0.56 0.58 0.56 0.46 Tax return of capital $ 0.03 0.01 -- -- -- Total distributions $ 0.56 Net asset value, end of period $ 5.03 5.92 6.92 6.78 6.36 Total Return(2): % (5.91) (6.23) 10.90 16.04 10.37 Ratios/Supplemental Data: Net assets, end of period (000's) $ 199,618 261,589 154,303 40,225 2,374 Ratios to average net assets: Net expenses after expense reimbursement(3)(4) % 1.80 1.75 1.75 1.75 1.75 Gross expenses prior to expense reimbursement(3) % 1.92 1.87 1.92 2.17 2.94 Net investment income after expense reimbursement(3)(4) % 9.66 8.57 8.30 8.64 9.02 Portfolio turnover rate % 89 184 209 394 339 Class C Class M ---------------------- ------------------------------------------------------ Year May 27, Year July 17, Ended 1999(1) to Ended 1995(1) to June 30, June 30, June 30, Year ended June 30, June 30, 2000 1999 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 5.92 5.91 5.93 6.92 6.78 6.36 6.20 Income (loss) from investment operations: Net investment income $ 0.57 0.05 0.52 0.55 0.59 0.58 0.50 Net realized and unrealized gain (loss) on investments $ (0.90) 0.01 (0.85) (0.95) 0.14 0.41 0.14 Total from investment operations $ (0.33) 0.06 (0.33) (0.40) 0.73 0.99 0.64 Less distributions from: Net investment income $ 0.57 0.05 0.54 0.58 0.59 0.57 0.48 Tax return of capital $ -- -- 0.03 0.01 -- -- -- Total distributions 0.57 0.57 Net asset value, end of period $ 5.02 5.92 5.03 5.93 6.92 6.78 6.36 Total Return(2): % (5.99) 0.34 (5.86) (5.85) 11.16 16.29 10.69 Ratios/Supplemental Data: Net assets, end of period (000's) $ 5,930 551 12,730 24,129 19,785 8,848 1,243 Ratios to average net assets: Net expenses after expense reimbursement(3)(4) % 1.80 1.75 1.55 1.50 1.50 1.50 1.50 Gross expenses prior to expense reimbursement(3) % 1.92 1.87 1.67 1.62 1.67 1.92 2.69 Net investment income after expense reimbursement(3)(4) % 9.66 8.57 9.91 8.82 8.55 8.93 9.41 Portfolio turnover rate % 89 184 89 184 209 394 339
- ---------- (1) Commencement of offering shares. (2) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return information for less than one year is not annualized. (3) Annualized for periods less than one year. (4) The Investment Manager has agreed to limit expenses, excluding, interest, taxes, brokerage and extraordinary expenses. See Accompanying Notes to Financial Statements 80 FINANCIAL HIGHLIGHTS PILGRIM HIGH YIELD FUND II - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A --------------------------------------------- Three Year months Year March 27, ended ended ended 1998 to June 30, June 30, March 31, March 31, 2000 1999(2) 1999 1998(1) ---- ------- ---- ------- Per Share Operating Performance: Net asset value, beginning of period $ 11.57 11.66 12.72 12.70 Income from investment operations: Net investment income $ 1.18 0.28 1.12 0.01 Net realized and unrealized gains (loss) on investments $ (0.75) (0.09) (1.00) 0.01 Total from investment operations $ 0.43 0.19 0.12 0.02 Less distributions from: Net investment income $ 1.20 0.28 1.18 -- Net asset value, end of period $ 10.80 11.57 11.66 12.72 Total Return(3): % 3.96 1.60 1.13 0.16 Ratios/Supplemental Data: Net assets, end of period (000's) $ 34,416 16,795 17,327 4,690 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 1.18 1.10 1.12 1.06 Gross expenses prior to expense reimbursement(4) % 1.37 1.37 1.53 1.06 Net investment income (loss) after expense reimbursement(4)(5) % 10.63 9.68 9.44 7.22 Portfolio turnover % 113 44 242 484 Class B --------------------------------------------- Three Year months Year March 27, ended ended ended 1998 to June 30, June 30, March 31, March 31, 2000 1999(2) 1999 1998(1) ---- ------- ---- ------- Per Share Operating Performance: Net asset value, beginning of period $ 11.58 11.66 12.71 12.69 Income from investment operations: Net investment income $ 1.11 0.27 1.04 0.01 Net realized and unrealized gains (loss) on investments $ (0.75) (0.09) (0.99) 0.01 Total from investment operations $ 0.36 0.18 0.05 0.02 Less distributions from: Net investment income $ 1.13 0.26 1.10 -- Net asset value, end of period $ 10.81 11.58 11.66 12.71 Total Return(3): % 3.28 1.53 0.55 0.16 Ratios/Supplemental Data: Net assets, end of period (000's) $ 103,246 41,882 42,960 8,892 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 1.83 1.75 1.77 1.69 Gross expenses prior to expense reimbursement(4) % 2.02 2.02 2.18 1.69 Net investment income (loss) after expense reimbursement(4)(5) % 9.98 9.03 8.84 6.61 Portfolio turnover % 113 44 242 484 Class C Class T --------------------------------------------- ----------- Three Year months Year March 27, March 31, ended ended ended 1998 to 2000(6) to June 30, June 30, March 31, March 31, June 30, 2000 1999(2) 1999 1998(1) 2000 ---- ------- ---- ------- ---- Per Share Operating Performance: Net asset value, beginning of period $ 11.58 11.66 12.71 12.69 11.07 Income from investment operations: Net investment income (loss) $ 1.10 0.27 1.04 0.01 0.29 Net realized and unrealized gains (loss) on investments $ (0.74) (0.09) (0.99) 0.01 (0.25) Total from investment operations $ 0.36 0.18 0.05 0.02 0.04 Less distributions from: Net investment income $ 1.13 0.26 1.10 -- 0.30 Net asset value, end of period $ 10.81 11.58 11.66 12.71 10.81 Total Return(3): % 3.28 1.53 0.55 0.16 (0.49) Ratios/Supplemental Data: Net assets, end of period (000's) $ 23,324 18,618 21,290 4,815 31,342 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 1.83 1.75 1.77 1.66 1.48 Gross expenses prior to expense reimbursement(4) % 2.02 2.02 2.18 1.66 1.67 Net investment income (loss) after expense reimbursement(4)(5) % 9.98 9.03 8.79 6.91 10.33 Portfolio turnover % 113 44 242 484 113
- ---------- (1) The Fund commenced operations on March 27, 1998. (2) Effective May 24, 1999, Pilgrim Investment Inc., became the Investment Manager of the Fund and the Fund changed its year end to June 30. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) The Investment Manager has voluntarily agreed to limit expenses, excluding, interest, taxes, brokerage and extraordinary expenses. (6) Commencement of offering of shares. See Accompanying Notes to Financial Statements 81 FINANCIAL PILGRIM MONEY MARKET FUND HIGHLIGHTS - --------------------------------------------------------------------------------
Class A Class B Class C ------- ------- ------- Period Period Period ended ended ended June 30, June 30, June 30, 2000(1) 2000(2) 2000(2) ------- ------- ------- Per Share Operating Performance: Net asset value, beginning of period $ 1.00 1.00 1.00 Income from investment operations: Net investment income $ 0.02 0.03 0.02 Net realized and unrealized gains (loss) on investments $ -- -- -- Total from investment operations $ 0.02 0.03 0.02 Less distributions from: Net investment income $ 0.02 0.03 0.02 Net realized gains on investments $ -- -- -- Net asset value, end of period $ 1.00 1.00 1.00 Total Return(3): % 3.58 3.60 3.58 Ratios/Supplemental Data: Net assets, end of period (000's) $ 75,430 12,035 5,431 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 0.85 1.60 1.60 Gross expenses prior to expense reimbursement(4) % 2.28 3.03 3.03 Net investment income (loss) after expense reimbursement(4)(5) % 5.18 3.96 3.96
- ---------- (1) Commenced operations on November 24, 1999. (2) Commenced operations on July 12, 1999. (3) Total returns are not annualized for periods of less than one year and do not reflect the impact of sales charges. (4) Annualized for periods less than one year. (5) The investment manager has agreed to limit expenses, excluding, interest, taxes, brokerage and extraordinary expenses. See Accompanying Notes to Financial Statements 82 FINANCIAL HIGHLIGHTS PILGRIM BALANCED FUND - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A -------------------------------------------------------- Three Year months ended ended June 30, June 30, Year ended March 31, 2000 1999(2) 1999 1998 1997 1996 ---- ------- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 19.23 19.03 19.53 15.54 16.16 13.74 Income from investment operations: Net investment income $ 0.51 0.10 0.36 0.26 0.32 0.34 Net realized and unrealized gains on investments $ (0.60) 0.17 2.58 5.70 0.84 2.42 Total from investment operations $ (0.09) 0.27 2.94 5.96 1.16 2.76 Less distributions from: Net investment income $ 0.39 0.07 0.43 0.27 0.32 0.34 Net realized gains on investments $ 3.71 -- 3.01 1.70 1.46 -- Net asset value, end of period $ 15.04 19.23 19.03 19.53 15.54 16.16 Total Return(3): % (1.01) 1.42 17.10 39.34 6.74 20.16 Ratio/Supplemental Data: Net assets, end of period (in thousands) $ 63,592 9,619 9,519 6,675 4,898 5,902 Ratio to average net assets: Net expenses after expense reimbursement(4)(5) % 1.40 1.49 1.59 1.61 1.60 1.60 Gross expenses prior to expense reimbursement(4) % 1.61 1.75 1.97 2.56 3.00 3.30 Net investment income (loss) after expense reimbursement(4)(5) % 3.26 2.06 2.08 3.58 1.87 2.16 Portfolio turnover % 173 63 165 260 213 197 Class B ---------------------------------------------------------------- Three Year months May 31, ended ended 1995(1) to June 30, June 30, Year ended March 31, March 31, 2000 1999(2) 1999 1998 1997 1996 ---- ------- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 20.59 20.38 20.07 14.88 14.18 12.50 Income from investment operations: Net investment income $ 0.44 0.07 0.28 0.15 0.17 0.12 Net realized and unrealized gains on investments $ (0.64) 0.18 2.74 5.58 0.70 1.68 Total from investment operations $ (0.20) 0.25 3.02 5.73 0.87 1.80 Less distributions from: Net investment income $ 0.33 0.04 0.31 0.15 0.17 0.12 Net realized gains on investments $ 3.97 -- 2.40 0.39 -- -- Net asset value, end of period $ 16.09 20.59 20.38 20.07 14.88 14.18 Total Return(3): % (1.58) 1.24 16.49 38.79 6.10 14.45 Ratio/Supplemental Data: Net assets, end of period (in thousands) $ 41,026 7,157 6,048 4,254 2,133 673 Ratio to average net assets: Net expenses after expense reimbursement(4)(5) % 2.05 2.14 2.24 2.26 2.25 2.25 Gross expenses prior to expense reimbursement(4) % 2.26 2.40 2.62 2.71 6.44 13.05 Net investment income (loss) after expense reimbursement(4)(5) % 2.61 1.41 1.43 2.99 1.25 1.38 Portfolio turnover % 173 63 165 260 213 197 Class C Class T ------------------------------------------------------ ---------- Three Year months March 31, ended ended 2000(1) to June 30, June 30, Year ended March 31, June 30, 2000 1999(2) 1999 1998 1997 1996 2000 ---- ------- ---- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 18.53 18.35 19.90 15.59 16.20 13.76 16.83 Income from investment operations: Net investment income $ 0.45 0.06 0.26 0.15 0.21 0.24 0.09 Net realized and unrealized gains on investments $ (0.62) 0.16 2.52 5.71 0.85 2.44 (0.82) Total from investment operations $ (0.17) 0.22 2.78 5.86 1.06 2.68 (0.73) Less distributions from: Net investment income $ 0.34 0.04 0.28 0.15 0.21 0.24 -- Net realized gains on investments $ 3.57 -- 4.05 1.40 1.46 -- -- Net asset value, end of period $ 14.45 18.53 18.35 19.90 15.59 16.20 16.10 Total Return(3): % (1.53) 1.21 16.34 38.35 6.05 19.58 (4.34) Ratio/Supplemental Data: Net assets, end of period (in thousands) $ 25,838 21,331 21,655 20,784 16,990 16,586 10,953 Ratio to average net assets: Net expenses after expense reimbursement(4)(5) % 2.05 2.14 2.23 2.26 2.25 2.25 1.70 Gross expenses prior to expense reimbursement(4) % 2.26 2.40 2.61 2.68 2.83 3.01 1.91 Net investment income (loss) after expense reimbursement(4)(5) % 2.61 1.41 1.43 2.93 1.23 1.53 2.96 Portfolio turnover % 173 63 165 260 213 197 173
- ---------- (1) Commencement of offering of shares. (2) Effective May 24, 1999, Pilgrim Investment Inc., became the Investment Manager of the Fund and the Fund changed its year end to June 30. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses, excluding, interest, taxes, brokerage and extraordinary expenses. See Accompanying Notes to Financial Statements 83 FINANCIAL PILGRIM CONVERTIBLE FUND HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A --------------------------------------------------------------- Three Year months ended ended June 30, June 30, Year ended March 31, 2000 1999(1) 1999 1998 1997 1996 ---- ------- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 23.27 21.92 19.12 16.59 15.68 12.86 Income from investment operations: Net investment income (loss) $ 0.42 0.10 0.40 0.44 0.47 0.48 Net realized and unrealized gains (loss) on investments $ 8.02 1.35 3.17 4.49 1.64 2.82 Total from investment operations $ 8.44 1.45 3.57 4.93 2.11 3.30 Less distributions from: Net investment income $ 0.32 0.10 0.41 0.44 0.48 0.48 Net realized gains on investments $ 3.69 -- 0.36 1.96 0.72 -- Net asset value, end of period $ 27.70 23.27 21.92 19.12 16.59 15.68 Total Return(3): % 39.88 6.62 19.17 31.04 13.73 26.00 Ratios/Supplemental Data: Net assets, end of period (in thousands) $ 131,218 73,133 65,742 47,290 32,082 31,712 Ratio to average net assets: Net expenses after expense reimbursement(4)(5) % 1.35 1.45 1.53 1.57 1.60 1.60 Gross expenses prior to expense reimbursement(4) % 1.35 2.10 1.65 1.74 1.75 1.76 Net investment income (loss) after expense reimbursement(4)(5) % 1.78 1.82 2.08 5.64 2.83 3.29 Portfolio turnover % 129 28 138 160 167 145 Class B ------------------------------------------------------------------- Three Year months May 31, ended ended 1995(2) to June 30, June 30, Year ended March 31, March 31, 2000 1999(1) 1999 1998 1997 1996 ---- ------- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 25.34 23.86 20.56 16.60 14.96 12.50 Income from investment operations: Net investment income (loss) $ 0.29 0.07 0.29 0.32 0.31 0.24 Net realized and unrealized gains (loss) on investments $ 8.77 1.47 3.47 4.65 1.64 2.46 Total from investment operations $ 9.06 1.54 3.76 4.97 1.95 2.70 Less distributions from: Net investment income $ 0.19 0.06 0.27 0.32 0.31 0.24 Net realized gains on investments $ 4.01 -- 0.19 0.69 -- -- Net asset value, end of period $ 30.20 25.34 23.86 20.56 16.60 14.96 Total Return(3): % 39.21 6.47 18.52 30.51 13.01 21.72 Ratios/Supplemental Data: Net assets, end of period (in thousands) $ 139,704 68,091 58,736 36,725 12,740 2,125 Ratio to average net assets: Net expenses after expense reimbursement(4)(5) % 2.00 2.10 2.18 2.22 2.25 2.25 Gross expenses prior to expense reimbursement(4) % 2.00 2.10 2.30 2.33 3.19 7.08 Net investment income (loss) after expense reimbursement(4)(5) % 1.13 1.17 1.44 5.04 2.29 2.59 Portfolio turnover % 129 28 138 160 167 145 Class C ----------------------------------------------------------------- Three Year months ended ended June 30, June 30, Year ended March 31, 2000 1999(1) 1999 1998 1997 1996 ---- ------- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 23.78 22.40 19.55 17.05 15.89 13.03 Income from investment operations: Net investment income (loss) $ 0.28 0.07 0.28 0.34 0.37 0.40 Net realized and unrealized gains (loss) on investments $ 8.22 1.37 3.25 4.60 1.66 2.86 Total from investment operations $ 8.50 1.44 3.53 4.94 2.03 3.26 Less distributions from: Net investment income $ 0.19 0.06 0.25 0.34 0.37 0.40 Net realized gains on investments $ 3.76 -- 0.43 2.10 0.50 -- Net asset value, end of period $ 28.33 23.78 22.40 19.55 17.05 15.89 Total Return(3): % 39.24 6.45 18.45 30.22 12.91 25.24 Ratios/Supplemental Data: Net assets, end of period (in thousands) $ 156,592 100,276 95,998 81,561 62,143 58,997 Ratio to average net assets: Net expenses after expense reimbursement(4)(5) % 2.00 2.10 2.18 2.22 2.25 2.25 Gross expenses prior to expense reimbursement(4) % 2.00 2.10 2.30 2.31 2.29 2.28 Net investment income (loss) after expense reimbursement(4)(5) % 1.13 1.17 1.44 4.99 2.18 2.64 Portfolio turnover % 129 28 138 160 167 145
- ---------- (1) Effective May 24, 1999, Pilgrim Investment Inc., became the Investment Manager of the Fund, concurrently Nicholas-Applegate Capital Management was appointed as sub-advisor and the Fund changed its year end to June 30. (2) Commencement of offering shares. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses, excluding, interest, taxes, brokerage and extraordinary expenses. See Accompanying Notes to Financial Statements 84 - ------- Pilgrim Funds - ------- NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 - -------------------------------------------------------------------------------- NOTE 1 -- ORGANIZATION Organization. The Pilgrim Funds are comprised of Pilgrim Mutual Funds ("PMF"), Pilgrim Bank and Thrift Fund, Inc. ("Bank and Thrift Fund"), Pilgrim Investment Funds, Inc. ("PIF"), Pilgrim Advisory Funds, Inc. ("PAF") and Pilgrim Government Securities Income Fund ("Government Securities Income Fund") which are each open-end investment management companies registered under the Investment Company Act of 1940, as amended. PMF is a Delaware business trust organized in 1992 with twelve separate series (Portfolios). The "Funds" are Pilgrim LargeCap Growth Fund, Pilgrim MidCap Growth Fund, Pilgrim SmallCap Growth Fund, Pilgrim Worldwide Growth Fund, Pilgrim International Core Growth Fund, Pilgrim International SmallCap Growth Fund, Pilgrim Emerging Countries Fund, Pilgrim Strategic Income Fund (formerly High Quality Bond Fund), Pilgrim High Yield Fund II, Pilgrim Money Market Fund, Pilgrim Balanced Fund and Pilgrim Convertible Fund. Bank and Thrift Fund was organized as a Maryland Corporation in 1986. PIF, a Maryland Corporation organized in 1969, consists of Pilgrim MagnaCap Fund and Pilgrim High Yield Fund. PAF, a Maryland Corporation organized in 1995, consists of Pilgrim MidCap Value Fund, Pilgrim LargeCap Leaders Fund and Pilgrim Asia-Pacific Equity Fund. Government Securities Income Fund, a California Corporation organized in 1984, is the single series of Government Securities Income Fund. The investment objective of each Fund is described in each Fund's prospectus. The Money Market Fund seeks to achieve its investment objective by investing all its assets in Class A shares of the Primary Reserve Institutional Fund, a series of Reserve Institutional Trust, a registered open end investment company. The Primary Reserve Institutional Fund declares dividends of its net investment income daily, which the Money Market Fund records as dividend income. In addition, the Money Market Fund incurs its own expenses. The financial statements of the Primary Reserve Institutional Fund are included in this report and should be read in conjunction with the financial statements of the Money Market Fund. Each Fund offers at least two of the following classes of shares: Class A, Class B, Class C, Class M, Class Q and Class T. The separate classes of shares differ principally in the applicable sales charges (if any), distribution fees, shareholder servicing fees and transfer agency fees. Shareholders of each class also bear certain expenses that pertain to that particular class. All shareholders bear the common expenses of the Fund and earn income from the portfolio pro rata based on the average daily net assets of each class, without distinction between share classes. Dividends are determined separately for each class based on income and expenses allocable to each class. Realized gains are allocated to each class pro rata based on the net assets of each class on the date of distribution. No class has preferential dividend rights. Differences in per share dividend rates generally result from the relative weighting of pro rata income and realized gain allocations and from differences in separate class expenses, including distribution, and shareholder servicing fees. Class B shares, along with their pro rata reinvested dividend shares, automatically convert to Class A shares approximately eight years after purchase. Reorganizations. Before a shareholder approved reorganization effective July 24, 1998, the funds comprising PMF invested all of their assets in corresponding portfolios of Nicholas-Applegate Investment Trust, an arrangement known as a "master/feeder" structure. Upon the reorganization, the Institutional Portfolio series of the Trust were renamed Funds and were authorized to issue multiple classes of shares, and their outstanding shares were classified as Class I shares. At the same time, the A, B, C and Advisory Portfolios of the Trust transferred their assets to the corresponding Funds, and their shareholders received Class A, B, C and Q shares of the Funds on a tax-free basis. Effective May 7, 1999 and concurrent with the change in investment adviser, from Nicholas Applegate Capital Management to Pilgrim Investments, Inc. the Institutional Classes of PMF were transferred in a tax free reorganization to new funds being managed by Nicholas-Applegate Capital Management. 85 - ------- Pilgrim Funds - ------- NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- On November 16, 1999 the Boards of Trustees and Directors of the following funds approved a plan of reorganization for the transfer of assets and liabilities of the following: * Pilgrim Government Securities Fund into the Pilgrim Government Securities Income Fund * Pilgrim High Yield III Fund into the Pilgrim High Yield II Fund, and * Pilgrim Income & Growth Fund and Pilgrim Balance Sheet Opportunities Fund into the Pilgrim Balanced Fund This plan of reorganization was subsequently approved by shareholders on March 20, 2000 and effective on March 31, 2000 the transfer of all assets and liabilites between the respective Funds was accomplished through a tax free exchange of shares. NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES The following significant accounting policies are consistently followed by the Funds in the preparation of their financial statements, and such policies are in conformity with generally accepted accounting principles for investment companies. A. Security Valuation. Investments in equity securities traded on a national securities exchange or included on the NASDAQ National Market System are valued at the last reported sale price. Securities traded on an exchange or NASDAQ for which there has been no sale and securities traded in the over-the-counter-market are valued at the mean between the last reported bid and ask prices. All investments quoted in foreign currencies will be valued daily in U.S. dollars on the basis of the foreign currency exchange rates prevailing at the time such valuation is determined by each Fund's custodian. Debt securities in Pilgrim Strategic Income Fund, Pilgrim Balanced Fund and Pilgrim High Yield Fund II are valued at bid prices, (Pilgrim High Yield Fund, including securities sold short, is valued at the mean between the bid and ask prices) obtained from independent services or from one or more dealers making markets in the securities. U.S. Government obligations are valued by using market quotations or independent pricing services which uses prices provided by market-makers or estimates of market values obtained from yield data relating to instruments or securities with similar characteristics. Securities for which market quotations are not readily available are valued at their respective fair values as determined in good faith and in accordance with policies set by the Board of Directors. Investments in securities maturing in less than 60 days are valued at cost, which, when combined with accrued interest, approximates market value. B. Security Transactions and Revenue Recognition. Securities transactions are accounted for on the trade date. Realized gains and losses are reported on the basis of identified cost of securities delivered. Interest income is recorded on an accrual basis. Dividend income is recorded on the ex-dividend date, or for certain foreign securities, when the information becomes available to the funds. Premium amortization and discount accretion are determined by the effective yield method. C. Foreign Currency Translation. The books and records of the funds are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis: (1) Market value of investment securities, other assets and liabilities -- at the exchange rates prevailing at the end of the day. (2) Purchases and sales of investment securities, income and expenses -- at the rates of exchange prevailing on the respective dates of such transactions. Although the net assets and the market values are presented at the foreign exchange rates at the end of the day, the Funds do not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gains or losses from investments. For securities which are subject to foreign withholding tax upon disposition, liabilities 86 - ------- Pilgrim Funds - ------- NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- are recorded on the statement of assets and liabilities for the estimated tax withholding based on the securities current market value. Upon disposition, realized gains or losses on such securities are recorded net of foreign withholding tax. Reported net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate. Foreign security and currency transactions may involve certain considerations and risks not typically associated with investing in U.S. companies and the U.S. Government. These risks include but are not limited to re-evaluation of currencies and future adverse political and economic developments which could cause securities and their markets to be less liquid and prices more volatile than those of comparable U.S. companies and the U.S. Government. D. Foreign Currency Transactions. Certain funds may enter into foreign currency exchange transactions to convert to and from different foreign currencies and to and from the U.S. dollar in connection with the planned purchases or sales of securities. The Funds either enter into these transactions on a spot basis at the spot rate prevailing in the foreign currency exchange market or use forward foreign currency contracts to purchase or sell foreign currencies. When the contract is fulfilled or closed, gains or losses are realized. Until then, the gain or loss is included in unrealized appreciation or depreciation. Risks may arise upon entering into forward contracts from the potential inability of counterparties to meet the terms of their forward contracts and from the potential inability of counterparties to meet the terms of their forward contracts and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. Each Fund may enter into futures contracts involving foreign currency, interest rates, securities and securities indices, for hedging purposes only. A futures contract obligates the seller of the contract to deliver and the purchaser of the contract to take delivery of the type of foreign currency, financial instrument or security called for in the contract at a specified future time for a specified price. Upon entering into such a contract, a Fund is required to deposit and maintain as collateral such initial margin as required by the exchange on which the contract is traded. Pursuant to the contract, a Fund agrees to receive from or pay to the broker an amount equal to the daily fluctuations in the value of the contract. Such receipts or payments are known as variation margins and are recorded as unrealized gains or losses by the Fund. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. There were no open futures contracts at June 30, 2000. E. Distributions to Shareholders. The Funds record distributions to their shareholders on ex-date. Each Fund pays dividends, if any, as follows: Annually Semi-Annually Quarterly Monthly -------- ------------- --------- ------- LargeCap MagnaCap Balanced Strategic Leaders Convertible Income LargeCap Government Growth Securities MidCap Income Value High Yield MidCap High Growth Yield II SmallCap Money Growth Market Bank and Thrift International Core Growth Worldwide Growth Asia-Pacific Equity International SmallCap Growth Emerging Countries 87 - ------- Pilgrim Funds - ------- NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Pilgrim High Yield II and Pilgrim Money Market declare and go ex-dividend daily and pay dividends monthly. Each Fund distributes capital gains, to the extent available, annually. The amount of distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. Key differences are the treatment of short-term capital gains, foreign currency transactions, organization costs and other temporary differences. To the extent that these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassifications. Distributions which exceed net investment income and net realized capital gains for financial reporting purposes but not for tax purposes, are reported as distributions in excess of net investment income and/or net realized capital gains. To the extent they exceed net investment income and/or net realized capital gains for tax purposes, they are reported as distributions of paid-in capital. Accordingly, amounts as of June 30, 2000 have been increased (decreased) through reclassification as follows: Accumlated net realized gains (losses) Undistributed on investments (overdistributed) and foreign Paid-in net investment currency capital income transactions ------- ------ ------------ MagnaCap $ -- $ 308,205 $ (308,205) LargeCap Leaders (46,906) 315,614 (268,708) LargeCap Growth 5,093,695 5,317,970 (10,411,665) MidCap Value (387,792) 387,792 -- MidCap Growth 2,153,292 6,452,374 (8,605,666) SmallCap Growth (21,573,410) 7,259,094 14,314,316 Bank and Thrift 268,616 593,939 (862,555) Worldwide Growth 3,300,453 5,140,001 (8,440,454) International Core Growth 3,074,027 734,948 (3,808,975) International SmallCap Growth 1,618,970 4,264,398 (5,883,368) Emerging Countries (19,687,342) 2,952,138 16,735,204 Asia-Pacific Equity (382,312) 325,059 57,253 Government Securities Income (4,350) (190,620) 194,970 Strategic Income (214,691) 348,410 (133,719) High Yield (2,218,003) 2,218,003 -- High Yield II (187,248) 282,299 (95,051) Balanced (162,033) (13,137) 175,170 Convertible (1,570,609) 892,991 677,618 F. Federal Income Taxes. It is the policy of the Funds, to comply with the requirements of the Internal Revenue Code that are applicable to regulated investment companies and to distribute substantially all of their net investment income and any net realized capital gains to their shareholders. Therefore, a federal income tax or excise tax provision is not required. In addition, by distributing during each calendar year substantially all of its net investment income and net realized capital gains, each Fund intends not to be subject to any federal excise tax. The Board of Directors intends to offset any net capital gains with any available capital loss carryforward until each carryforward has been fully utilized or expires. In addition, no capital gain distribution shall be made until the capital loss carryforward has been fully utilized or expires. Capital loss carryforwards were as follows at June 30, 2000: Amount Expiration Dates ------ ---------------- Emerging Countries $37,330,830 2006 Asia-Pacific Equity 23,348,395 2007 Government Securities Income 7,375,294 2000 to 2007 Strategic Income 812,559 2006 to 2007 High Yield 50,313,971 2001 to 2008 High Yield II 9,557,114 2006 to 2008 G. Use of Estimates. Management of the Funds has made certain estimates and assumptions relating to the reporting of assets, liabilities, income, and expenses to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from these estimates. H. Repurchase Agreements. Each Fund may invest in repurchase agreements only with government securities dealers recognized by the Board of Governors of the Federal Reserve System or with member banks of the Federal Reserve System. Under such agreements, the seller of the security agrees to repurchase it at a mutually agreed upon time and price. The resale price is in excess of the purchase 88 - ------- Pilgrim Funds - ------- NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- price and reflects an agreed upon interest rate for the period of time the agreement is outstanding. The period of the repurchase agreements is usually short, from overnight to one week, while the underlying securities generally have longer maturities. Each Fund will always receive as collateral securities acceptable to it whose market value is equal to at least 100% of the amount being invested by the Fund. If the seller defaults, a Fund might incur a loss or delay in the realization of proceeds if the value of the collateral securing the repurchase agreement declines, and it might incur disposition costs in liquidating the collateral. I. Deferred Organization Expenses. Expenses incurred in connection with the organization and registration of the LargeCap Leaders Fund, MidCap Value Fund and Asia-Pacific Equity Fund under the Investment Company Act of 1940 and the Securities Act of 1933 are being amortized by each Fund equally over a period of five years from the date of commencement of its operations. Certain registration costs incurred in the organization of Pilgrim Money Market Fund were capitalized and are being amortized over a period of one year. J. Securities Lending. Each Fund had the option to temporarily loan 33 1/3% of its total assets to brokers, dealers or other financial institutions in exchange for a negotiated lender's fee. The borrower is required to fully collateralize the loans with cash, letters of credit or U.S. Government securities. NOTE 3 -- INVESTMENT TRANSACTIONS For the year ended June 30, 2000, the cost of purchases and proceeds from the sales of securities, excluding short-term securities, were as follows: Purchases Sales --------- ----- MagnaCap Fund $ 112,268,474 $160,191,540 LargeCap Leaders Fund 14,013,272 15,181,906 LargeCap Growth Fund 974,359,094 541,278,929 MidCap Value Fund 47,166,393 69,863,247 MidCap Growth 649,865,512 593,010,815 SmallCap Growth Fund 515,442,043 511,413,629 Bank and Thrift Fund 50,180,900 280,638,858 Worldwide Growth Fund 1,010,948,365 698,234,369 Purchases Sales --------- ----- International Core Growth Fund 155,980,822 131,692,882 International SmallCap Growth Fund 1,038,731,310 641,090,983 Emerging Countries Fund 481,141,840 446,788,856 Asia-Pacific Equity Fund 43,034,483 47,833,797 Government Securities Income Fund 21,100,781 21,382,264 Strategic Income Fund 20,800,382 24,567,555 High Yield Fund 308,052,953 370,094,465 High Yield Fund II 109,070,769 132,645,553 Balanced Fund 100,067,105 113,315,133 Convertible Fund 542,878,886 433,560,409 NOTE 4 -- INVESTMENTS IN AFFILIATES Affiliated companies, as defined in Section 2(a)(3) of the Investment Company Act of 1940, are companies 5% or more of whose outstanding voting shares are held by a fund. At June 30, 2000, Bank and Thrift Fund has the following holdings in affiliated companies: Acquisition Shares Market % of Date Held Cost Value Net Assets ---- ---- ---- ----- ---------- 21st Century November 177,000 1,330,875 885,000 0.25% Holding 5, 1998 Company International November 375,000 3,281,089 2,039,062 0.57% Aircraft 5, 1997 to Investors April 15, 1999 Southwest March 16, 200,000 4,875,938 3,225,000 0.90% Bancorp. 1999 to March 17, 1999 During the year ended June 30, 2000 the Fund received $22,000 in dividend income from Southwest Bancorp. There was no other dividend income from affiliates during the period. NOTE 5 -- INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES Each of the Funds has entered into an Investment Management Agreement with Pilgrim Investments, Inc. ("the Manager"), a wholly-owned subsidiary of Pilgrim Group, Inc. ("PGI"). The investment management agreements compensate the Manager with a fee, computed daily and payable monthly, based on the average daily net assets of each Fund, at the following annual rates: For Emerging Countries and Asia-Pacific Equity -- 1.25%; for LargeCap Leaders, MidCap Value and SmallCap Growth -- 1.00%; for Worldwide Growth, 89 - ------- Pilgrim Funds - ------- NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- International Core Growth and International SmallCap Growth -- 1.00% for the first $500 million, 0.90% of the next $500 million and 0.85% in excess of $1.0 billion; for LargeCap Growth, MidCap Growth, Balanced and Convertible -- 0.75% for the first $500 million, 0.675% of the next $500 million and 0.65% in excess of $1.0 billion; for High Yield and High Yield II -- 0.60%; for Strategic Income - -- 0.45% for the first $500 million, 0.40% of the next $250 million and 0.35% in excess of $750 million; for MagnaCap -- 1.00% for the first $30 million, 0.75% of the next $220 million, 0.625% of the next $250 million and 0.50% in excess of $500 million; for Bank and Thrift -- 1.00% for the first $30 million, 0.75% of the next $95 million and 0.70% in excess of $125 million; for Government Securities Income -- 0.50% for the first $500 million, 0.45% of the next $500 million and 0.40% in excess of $1.0 billion. The manager does not charge a management fee for Money Market Fund since the Fund invests solely in another open-end regulated investment company. However, the Fund pays the manager an administrative fee of 0.25% computed daily and payable monthly based on average daily net assets. NOTE 6 -- DISTRIBUTION FEES Each share class of the Funds has adopted a Plan pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plans"), whereby Pilgrim Securities, Inc. (the "Distributor") is reimbursed or compensated (depending on the class of shares) by the Funds for expenses incurred in the distribution of each Funds' shares. Pursuant to the 12b-1 Plans, the Distributor is entitled to payment each month for actual expenses incurred in the distribution and promotion of each Fund's shares, including the printing of prospectuses and reports used for sales purposes, expenses of preparation and printing of sales literature and other such distribution related expenses, including any distribution or service fees paid to securities dealers who have executed a distribution agreement with the Distributor. Under the 12b-1 Plans, each class of shares of the Fund pays the Distributor the following annual fees:
Class A Class B Class C Class M Class Q Class T ------- ------- ------- ------- ------- ------- MagnaCap 0.30% 1.00% 1.00% 0.75% 0.25% N/A LargeCap Leaders 0.25 1.00 1.00 0.75 0.25 N/A LargeCap Growth 0.35 1.00 1.00 N/A 0.25 N/A MidCap Value 0.25 1.00 1.00 0.75 0.25 N/A MidCap Growth 0.35 1.00 1.00 N/A 0.25 N/A SmallCap Growth 0.35 1.00 1.00 N/A 0.25 N/A Bank and Thrift 0.25 1.00 N/A N/A N/A N/A Worldwide Growth 0.35 1.00 1.00 N/A 0.25 N/A International Core Growth 0.35 1.00 1.00 N/A 0.25 N/A International SmallCap Growth 0.35 1.00 1.00 N/A 0.25 N/A Emerging Countries 0.35 1.00 1.00 N/A 0.25 N/A Asia-Pacific Equity 0.25 1.00 N/A 0.75 N/A N/A Government Securities Income 0.25 1.00 1.00 0.75 0.25 0.65% Strategic Income 0.35 0.75 0.75 N/A 0.25 N/A High Yield 0.25 1.00 1.00 0.75 0.25 N/A High Yield II 0.35 1.00 1.00 N/A 0.25 0.65 Money Market 0.25 1.00 1.00 N/A N/A N/A Balanced 0.35 1.00 1.00 N/A 0.25 0.75 Convertible 0.35 1.00 1.00 N/A 0.25 N/A
For the year ended June 30, 2000 the Funds paid the following distribution fees by class to the Distributor.
Class A Class B Class C Class M Class Q Class T ------- ------- ------- ------- ------- ------- MagnaCap $994,817 $1,030,869 $ 26,458 108,690 $ 14,864 N/A LargeCap Leaders 22,870 230,542 7,964 38,910 79 N/A LargeCap Growth 375,756 1,990,735 824,123 N/A 38,960 N/A MidCap Value 29,081 210,118 4,057 48,713 137 N/A MidCap Growth 389,998 822,217 2,056,051 N/A 40,692 N/A SmallCap Growth 488,534 727,465 1,977,269 N/A 26,579 N/A Bank and Thrift 688,835 2,204,968 N/A N/A N/A N/A Worldwide Growth 515,322 770,751 1,751,460 N/A 94,045 N/A International Core Growth 65,630 173,309 194,645 N/A 35,869 N/A International SmallCap Growth 559,207 796,853 798,961 N/A 293,086 N/A Emerging Countries 226,595 295,635 276,850 N/A 249,693 N/A Asia-Pacific Equity 34,682 138,885 N/A 39,665 N/A N/A Government Securities Income 69,487 173,703 8,927 4,908 5 38,778 Strategic Income 10,355 37,680 38,579 N/A 444 N/A High Yield 272,149 2,354,893 42,730 140,963 -- N/A High Yield II 60,360 570,886 193,491 N/A 9,563 53,509 Money Market 57,425 78,467 28,963 N/A N/A N/A Balanced 81,266 162,089 210,792 N/A 495 21,291 Convertible 317,132 1,028,519 1,267,593 N/A 83,759 N/A
For the year ended June 30, 2000, the Distributor has retained $1,608,367 as sales charges from the proceeds of Class A Shares sold, $405,740 from the proceeds of Class C Shares redeemed, and $11,385 from the proceeds of Class M Shares sold. 90 - ------- Pilgrim Funds - ------- NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- NOTE 7 -- SHAREHOLDER SERVICING FEES Each of the Funds has entered into a Service Agreement with PGI whereby PGI will act as Shareholder Service Agent for each Fund. The agreement provides that PGI will be compensated for incoming and outgoing shareholder telephone calls and letters, and all reasonable out-of-pocket expenses incurred in connection with the performance of such services. Fees accrued during the year ended June 30, 2000 are shown in the accompanying Statements of Operations. NOTE 8 -- EXPENSE WAIVERS For the following Funds, the Investment Manager has voluntarily agreed to limit expenses, excluding interest, taxes, brokerage and extraordinary expenses to the levels listed below:
Class A Class B Class C Class M Class Q Class T ------- ------- ------- ------- ------- ------- LargeCap Leaders 1.75% 2.50% 2.50% 2.25% 1.75% N/A LargeCap Growth 1.60 2.25 2.25 N/A 1.25 N/A MidCap Value 1.75 2.50 2.50 2.25 1.75 N/A MidCap Growth 1.60 2.25 2.25 N/A 1.25 N/A SmallCap Growth 1.95 2.60 2.60 N/A 1.50 N/A Worldwide Growth 1.85 2.50 2.50 N/A 1.60 N/A International Core Growth 1.95 2.60 2.60 N/A 1.65 N/A International SmallCap Growth 1.95 2.60 2.60 N/A 1.65 N/A Emerging Countries 2.25 2.90 2.90 N/A 1.90 N/A Asia-Pacific Equity 2.00 2.75 N/A 2.50 N/A N/A Government Securities Income (1) (1) (1) (1) (1) (1) Strategic Income 0.95 1.35 1.35 N/A 0.85 N/A High Yield 1.10 1.85 1.85 1.60 1.10 N/A High Yield II 1.10 1.75 1.75 N/A 1.00 1.40% Money Market 1.50 2.25 2.25 N/A N/A N/A Balanced 1.60 2.25 2.25 N/A 1.25 1.75 Convertible 1.60 2.25 2.25 N/A 1.25 N/A
- ---------- (1) The Investment Manager has agreed to reimburse the Government Securities Income Fund for all gross operating expenses and costs of the Fund, excluding any interest, taxes, brokerage commissions, amortization of organizational expenses, extraordinary expenses, and distribution fees in excess of 0.25% which exceed 1.50% of the Fund's daily average net assets on the first $40 million of net assets and 1.00% of average daily net assets in excess of $40 million for any one fiscal year. The expense limitations cannot be changed without shareholder approval. NOTE 9 -- CREDIT FACILITY The Funds have a $75 million credit facility available to fund temporary or emergency borrowings which expires on August 31, 2000. Each Fund pays its pro rata share of an annual commitment fee plus interest on its specific borrowings. As of June 30, 2000 there was no balance outstanding under the credit facility. 91 - ------- Pilgrim Funds - ------- NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- NOTE 10 -- CAPITAL SHARES Transactions in capital shares and dollars were as follows:
Class A Shares Class B Shares ------------------------------ ---------------------------- Year Ended June 30, Year Ended June 30, ------------------------------ ---------------------------- 2000 1999 2000 1999 ------------- ------------- ------------ ------------ MagnaCap Fund (Number of Shares) Shares sold 8,302,663 13,502,711 1,126,639 2,873,334 Shares issued as reinvestments of dividends 2,042,086 1,828,625 670,172 516,048 Shares redeemed (11,985,501) (14,934,578) (2,847,837) (1,307,942) ------------- ------------- ------------ ------------ Net increase (decrease) in shares outstanding (1,640,752) 396,758 (1,051,026) 2,081,440 ============= ============= ============ ============ MagnaCap Fund ($) Shares sold $ 134,588,976 $ 222,180,950 $ 18,234,831 $ 46,072,779 Shares issued as reinvestments of dividends 33,390,241 28,388,968 10,716,050 7,888,183 Shares redeemed (193,866,999) (246,413,983) (44,525,122) (20,667,305) ------------- ------------- ------------ ------------ Net increase (decrease) in shares outstanding $ (25,887,782) $ 4,155,935 $(15,574,241) $ 33,293,657 ============= ============= ============ ============ Class C Shares Class M Shares Class Q Shares ----------------------------- ----------------------------- -------------- Year June 1, 1999 Year Ended June 30, Nov. 22, 1999 Ended to ----------------------------- to June 30, 2000 June 30, 1999 2000 1999 June 30, 2000 ------------- ------------- ----------- ----------- -------------- MagnaCap Fund (Number of Shares) Shares sold 355,043 34,608 71,735 210,689 627,893 Shares issued as reinvestments of dividends 13,431 -- 94,820 95,725 -- Shares redeemed (166,071) -- (265,773) (238,673) (1,149) ----------- -------- ----------- ----------- ----------- Net increase (decrease) in shares outstanding 202,403 34,608 (99,218) 67,741 626,744 =========== ======== =========== =========== =========== MagnaCap Fund ($) Shares sold $ 5,649,398 $588,611 $ 1,164,803 $ 3,356,295 $10,206,194 Shares issued as reinvestments of dividends 214,760 -- 1,532,001 1,471,188 -- Shares redeemed (2,597,664) -- (4,228,665) (3,784,141) (18,412) ----------- -------- ----------- ----------- ----------- Net increase (decrease) in shares outstanding $ 3,266,494 $588,611 $(1,531,861) $ 1,043,342 $10,187,782 =========== ======== =========== =========== =========== Class A Shares Class B Shares ---------------------------- ------------------------------ Year Ended June 30, Year Ended June 30, ---------------------------- ------------------------------ 2000 1999 2000 1999 ----------- ----------- ------------ ------------ LargeCap Leaders Fund (Number of Shares) Shares sold 301,942 251,465 559,630 735,637 Shares issued as reinvestment of dividends 58,405 9,173 160,941 24,514 Shares redeemed (219,637) (287,552) (745,133) (408,748) ----------- ----------- ------------ ------------ Net increase (decrease) in shares outstanding 140,710 (26,914) (24,562) 351,403 =========== =========== ============ ============ LargeCap Leaders Fund ($) Shares sold $ 4,943,290 $ 3,946,541 $ 8,870,343 $ 11,541,367 Shares issued as reinvestment of dividends 929,814 146,637 2,481,716 384,368 Shares redeemed (3,554,645) (4,313,891) (11,733,890) (6,043,904) ----------- ----------- ------------ ------------ Net increase (decrease) in shares outstanding $ 2,318,459 $ (220,713) $ (381,831) $ 5,881,831 =========== =========== ============ ============ Class C Shares Class M Shares ----------------------------- ------------------------------ Year June 17, 1999 Year Ended June 30, Ended to ------------------------------ June 30, 2000 June 30, 1999 2000 1999 ------------- ------------- ------------ ------------ LargeCap Leaders Fund (Number of Shares) Shares sold 226,352 2 47,521 32,969 Shares issued as reinvestment of dividends 664 -- 38,024 7,380 Shares redeemed (138,012) -- (115,601) (89,184) ----------- ----------- ------------ ------------ Net increase (decrease) in shares outstanding 89,004 2 (30,056) (48,835) =========== =========== ============ ============ LargeCap Leaders Fund ($) Shares sold $ 3,583,768 $ 30 $ 764,132 $ 521,236 Shares issued as reinvestment of dividends 10,256 -- 593,167 116,160 Shares redeemed (2,131,218) -- (1,833,459) (1,317,582) ----------- ----------- ------------ ------------ Net increase (decrease) in shares outstanding $ 1,462,806 $ 30 $ (476,160) $ (680,186) =========== =========== ============ ============
92 - ------- Pilgrim Funds - ------- NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Class Q Shares -------------- Year Ended June 30, 2000 ------------- LargeCap Leaders Fund (Number of Shares) Shares sold 13,049 Shares issued as reinvestments of dividends -- Shares redeemed (515) --------- Net increase in shares outstanding 12,534 ========= LargeCap Leaders Fund ($) Shares sold $ 212,892 Shares issued as reinvestment of dividends -- Shares redeemed (8,154) --------- Net increase in shares outstanding $ 204,738 =========
Class A Shares Class B Shares ------------------------------------------------ ------------------------------------------------ Year 3 Months Year Year 3 Months Year Ended Ended Ended Ended Ended Ended June 30, June 30, March 31, June 30, June 30, March 31, 2000 1999 1999 2000 1999 1999 ------------- ------------ ----------- ------------- ------------ ------------ LargeCap Growth Fund (Number of Shares) Shares sold 4,427,459 601,704 387,443 6,775,370 1,006,149 722,166 Shares issued as reinvestments of dividends 21,754 -- 9,412 38,999 -- 4,145 Shares redeemed (1,201,487) (28,795) (199,495) (796,940) (63,827) (129,658) ------------- ------------ ----------- ------------- ------------ ------------ Net increase in shares outstanding 3,247,726 572,909 197,360 6,017,429 942,322 596,653 ============= ============ =========== ============= ============ ============ LargeCap Growth Fund ($) Shares sold $ 159,716,404 $ 16,107,475 $ 7,119,334 $ 236,388,229 $ 27,013,724 $ 13,914,112 Shares issued as reinvestments of dividends 708,311 -- 159,721 1,276,968 -- 70,921 Shares redeemed (45,373,374) (769,089) (3,328,040) (30,088,529) (1,716,619) (2,523,553) ------------- ------------ ----------- ------------- ------------ ------------ Net increase in shares outstanding $ 115,051,341 $ 15,338,386 $ 3,951,015 $ 207,576,668 $ 25,297,105 $ 11,461,480 ============= ============ =========== ============= ============ ============ Class C Shares Class Q Shares ------------------------------------------------ ------------------------------------------------ Year 3 Months Year Year 3 Months Year Ended Ended Ended Ended Ended Ended June 30, June 30, March 31, June 30, June 30, March 31, 2000 1999 1999 2000 1999 1999 ------------- ------------ ----------- ------------- ------------ ------------ LargeCap Growth Fund (Number of Shares) Shares sold 3,308,222 322,341 293,854 424,166 27,961 176,779 Shares issued as reinvestments of dividends 13,490 -- 1,216 2,730 -- 1,139 Shares redeemed (388,728) (10,496) (35,900) (71,210) (9,901) (34,429) ------------- ------------ ----------- ------------- ------------ ------------ Net increase in shares outstanding 2,932,984 311,845 259,170 355,686 18,060 143,489 ============= ============ =========== ============= ============ ============ LargeCap Growth Fund ($) Shares sold $ 120,907,907 $ 8,625,780 $ 5,792,910 $ 15,522,480 $ 753,086 $ 3,396,063 Shares issued as reinvestments of dividends 443,449 -- 20,875 93,151 -- 19,518 Shares redeemed (15,356,494) (279,527) (642,955) (2,818,083) (263,465) (600,590) ------------- ------------ ----------- ------------- ------------ ------------ Net increase in shares outstanding $ 105,994,862 $ 8,346,253 $ 5,170,830 $ 12,797,548 $ 489,621 $ 2,814,991 ============= ============ =========== ============= ============ ============
93 - ------- Pilgrim Funds - ------- NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued) - --------------------------------------------------------------------------------
Class A Shares Class B Shares Class C Shares ---------------------------- ----------------------------- ---------------------------- Year Ended June 30, Year Ended June 30, Year June 2, 1999 ---------------------------- ----------------------------- Ended to 2000 1999 2000 1999 June 30, 2000 June 30, 1999 ----------- ------------ ------------ ------------ ------------- ------------- MidCap Value Fund (Number of Shares) Shares sold 162,042 289,831 196,849 418,549 197,031 3,437 Shares issued as reinvestment of dividends 5,045 97,756 10,124 163,266 50 -- Shares redeemed (736,267) (834,562) (1,110,013) (992,708) (5,154) (336) ----------- ------------ ------------ ------------ ----------- -------- Net increase (decrease) in shares outstanding (569,180) (446,975) 903,040 (410,893) 191,927 3,101 =========== ============ ============ ============ =========== ======== MidCap Value Fund ($) Shares sold $ 2,287,701 $ 4,389,745 $ 2,617,803 $ 6,191,601 $ 2,726,555 $ 51,058 Shares issued as reinvestment of dividends 69,464 1,381,287 135,051 2,251,448 671 -- Shares redeemed (9,944,036) (12,572,823) (14,482,052) (14,198,024) (67,227) (5,064) ----------- ------------ ------------ ------------ ----------- -------- Net increase (decrease) in shares outstanding $(7,586,871) $ (6,801,791) $(11,729,198) $ (5,754,975) $ 2,659,999 $ 45,994 =========== ============ ============ ============ =========== ========
Class M Shares Class Q -------------------------- ---------- Year Ended June 30, Year Ended -------------------------- June 30, 2000 1999 2000 ----------- ----------- ---------- MidCap Value Fund (Number of Shares) Shares sold 65,235 162,221 9,749 Shares issued as reinvestment of dividends 3,293 60,558 -- Shares redeemed (476,778) (336,945) -- ----------- ----------- ------- Net increase (decrease) in shares outstanding (408,250) (114,166) 9,749 =========== =========== ======= MidCap Value Fund ($) Shares sold $ 881,691 $ 2,398,495 133,810 Shares issued as reinvestment of dividends 44,230 838,728 -- Shares redeemed (6,344,036) (4,910,700) -- ----------- ----------- ------- Net increase (decrease) in shares outstanding $(5,418,115) $(1,673,477) 133,810 =========== =========== ======= 94 - ------- Pilgrim Funds - ------- NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued) - --------------------------------------------------------------------------------
Class A Shares Class B Shares ---------------------------------------------- ------------------------------------------- Year 3 Months Year Year 3 Months Year Ended Ended Ended Ended Ended Ended June 30, June 30, March 31, June 30, June 30, March 31, 2000 1999 1999 2000 1999 1999 ------------- ----------- ------------- ------------ ----------- ------------ MidCap Growth Fund (Number of Shares) Shares sold 9,111,415 170,704 5,215,189 1,509,894 124,529 549,516 Shares issued as reinvestments of dividends 974,160 -- 130,197 643,222 -- 69,791 Shares redeemed (7,669,485) (440,581) (6,820,248) (591,401) (113,758) (842,979) ------------- ----------- ------------- ------------ ----------- ------------ Net increase (decrease) in shares outstanding 2,416,090 (269,877) (1,474,862) 1,561,715 10,771 (223,672) ============= =========== ============= ============ =========== ============ MidCap Growth Fund ($) Shares sold $ 250,678,628 $ 3,480,826 $ 93,222,436 $ 49,598,444 $ 3,003,625 $ 11,154,074 Shares issued as reinvestments of dividends 19,950,802 -- 2,271,935 15,501,828 -- 1,444,672 Shares redeemed (210,070,998) (9,018,100) (120,721,071) (18,149,395) (2,758,710) (16,826,911) ------------- ----------- ------------- ------------ ----------- ------------ Net increase (decrease) in shares outstanding $ 60,558,432 $(5,537,274) $ (25,226,700) $ 46,950,877 $ 244,915 $ (4,228,165) ============= =========== ============= ============ =========== ============ Class C Shares Class Q Shares ---------------------------------------------- ------------------------------------------- Year 3 Months Year Year 3 Months Year Ended Ended Ended Ended Ended Ended June 30, June 30, March 31, June 30, June 30, March 31, 2000 1999 1999 2000 1999 1999 ------------- ----------- ------------- ------------ ----------- ------------ MidCap Growth Fund (Number of Shares) Shares sold 1,413,615 127,317 1,185,161 428,283 201,861 194,537 Shares issued as reinvestments of dividends 2,159,370 -- 121,764 102,573 -- 37,715 Shares redeemed (1,287,410) (465,369) (3,371,242) (695,575) (52,773) (185,074) ------------- ----------- ------------- ------------ ----------- ------------ Net increase (decrease) in shares outstanding 2,285,575 (338,052) (2,064,317) (164,719) 149,088 47,178 ============= =========== ============= ============ =========== ============ MidCap Growth Fund ($) Shares sold $ 37,423,320 $ 2,416,875 $ 19,063,447 $ 16,105,660 $ 5,261,515 $ 4,134,744 Shares issued as reinvestments of dividends 40,876,879 -- 1,981,095 2,657,668 -- 828,224 Shares redeemed (31,578,669) (8,876,675) (52,212,207) (21,963,880) (1,337,840) (3,718,156) ------------- ----------- ------------- ------------ ----------- ------------ Net increase (decrease) in shares outstanding $ 46,721,530 $(6,459,800) $ (31,167,665) $ (3,200,552) $ 3,923,675 $ 1,244,812 ============= =========== ============= ============ =========== ============
95 - ------- Pilgrim Funds - ------- NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued) - --------------------------------------------------------------------------------
Class A Shares Class B Shares ---------------------------------------------- ------------------------------------------- Year 3 Months Year Year 3 Months Year Ended Ended Ended Ended Ended Ended June 30, June 30, March 31, June 30, June 30, March 31, 2000 1999 1999 2000 1999 1999 ------------- ------------ ------------- ------------ ----------- ------------ SmallCap Growth Fund (Number of Shares) Shares sold 15,288,354 384,655 44,256,415 1,419,656 62,154 1,030,266 Shares issued as reinvestments of dividends 3,070,550 -- 919,060 1,314,209 -- 121,247 Shares redeemed (14,588,761) (652,027) (49,753,506) (566,759) (144,208) (1,464,484) ------------- ------------ ------------- ------------ ----------- ------------ Net increase (decrease) in shares outstanding 3,770,143 (267,372) (4,578,031) 2,167,106 (82,054) (312,971) ============= ============ ============= ============ =========== ============ SmallCap Growth Fund ($) Shares sold $ 278,913,445 $ 6,777,887 $ 815,912,790 $ 34,348,864 $ 1,379,964 $ 19,580,720 Shares issued as reinvestments of dividends 44,737,909 -- 14,800,215 23,529,097 -- 2,371,732 Shares redeemed (268,674,614) (11,423,224) (917,280,292) (13,214,538) (3,209,533) (28,084,966) ------------- ------------ ------------- ------------ ----------- ------------ Net increase (decrease) in shares outstanding $ 54,976,740 $ (4,645,337) $ (86,567,287) $ 44,663,423 $ 1,829,569 $ (6,132,514) ============= ============ ============= ============ =========== ============ Class C Shares Class Q Shares ---------------------------------------------- ------------------------------------------- Year 3 Months Year Year 3 Months Year Ended Ended Ended Ended Ended Ended June 30, June 30, March 31, June 30, June 30, March 31, 2000 1999 1999 2000 1999 1999 ------------- ------------ ------------- ------------ ----------- ------------ SmallCap Growth Fund (Number of Shares) Shares sold 1,763,791 82,725 1,806,596 752,728 421,173 793,286 Shares issued as reinvestments of dividends 4,523,712 -- 926,112 226,472 -- 18,226 Shares redeemed (1,707,156) (680,850) (6,061,729) (884,884) (392,013) (970,001) ------------- ------------ ------------- ------------ ----------- ------------ Net increase (decrease) in shares outstanding 4,580,347 (598,125) (3,329,021) 94,316 29,160 (158,489) ============= ============ ============= ============ =========== ============ SmallCap Growth Fund ($) Shares sold $ 33,117,558 $ 1,433,335 $ 29,105,010 $ 17,630,422 $ 8,340,785 $ 12,725,287 Shares issued as reinvestments of dividends 64,870,028 -- 14,800,873 3,668,843 -- 292,442 Shares redeemed (30,746,993) (11,755,815) (93,185,013) (18,817,763) (7,387,773) (15,962,787) ------------- ------------ ------------- ------------ ----------- ------------ Net increase (decrease) in shares outstanding $ 67,240,594 $(10,322,480) $ (49,279,130) 2,481,502 $ 953,012 $ (2,945,058) ============= ============ ============= ============ =========== ============
96 - ------- Pilgrim Funds - ------- NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued) - --------------------------------------------------------------------------------
Class A Shares Class B Shares ------------------------------- ------------------------------- Year Ended June 30, Year Ended June 30, ------------------------------- ------------------------------- 2000 1999 2000 1999 ------------- ------------- ------------- ------------- Bank and Thrift Fund (Number of Shares) Shares sold 1,975,881 6,842,658 1,559,910 5,775,191 Shares issued as reinvestment of dividends 1,461,633 387,793 1,522,102 277,033 Shares redeemed (7,193,492) (10,663,118) (8,173,159) (5,028,917) ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (3,755,978) (3,432,667) (5,091,147) 1,023,307 ============= ============= ============= ============= Bank and Thrift Fund ($) Shares sold $ 35,003,161 $ 167,184,964 $ 28,449,395 $ 139,440,683 Shares issued as reinvestment of dividends 28,604,164 9,012,306 29,787,547 6,421,621 Shares redeemed (135,339,454) (257,239,846) (150,620,693) (117,566,243) ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding $ (71,732,129) $ (81,042,576) $ (92,383,751) $ 28,296,061 ============= ============= ============= =============
Class A Shares Class B Shares ---------------------------------------------- -------------------------------------------- Year 3 Months Year Year 3 Months Year Ended Ended Ended Ended Ended Ended June 30, June 30, March 31, June 30, June 30, March 31, 2000 1999 1999 2000 1999 1999 ------------- ------------ ------------- ------------ ------------ ------------ Worldwide Growth Fund (Number of Shares) Shares sold 14,001,807 1,172,285 5,575,910 2,987,911 353,077 544,757 Shares issued as reinvestments of dividends 422,437 86 96,384 192,099 -- 39,170 Shares redeemed (9,384,459) (660,100) (5,374,372) (336,704) (70,889) (319,228) ------------- ------------ ------------- ------------ ------------ ------------ Net increase in shares outstanding 5,039,785 512,271 297,922 2,843,306 282,188 264,699 ============= ============ ============= ============ ============ ============ Worldwide Growth Fund ($) Shares sold $ 404,667,268 $ 26,425,907 $ 110,310,826 $ 95,993,252 $ 9,019,106 $ 11,616,885 Shares issued as reinvestments of dividends 10,797,545 -- 1,739,418 5,534,613 -- 799,305 Shares redeemed (273,872,546) 14,957,153 (107,031,318) (10,888,095) (1,811,055) (6,778,733) ------------- ------------ ------------- ------------ ------------ ------------ Net increase in shares outstanding $ 141,592,267 $ 11,468,754 $ 5,018,926 $ 90,639,770 $ 7,208,051 $ 5,637,457 ============= ============ ============= ============ ============ ============ Class C Shares Class Q Shares ---------------------------------------------- -------------------------------------------- Year 3 Months Year Year 3 Months Year Ended Ended Ended Ended Ended Ended June 30, June 30, March 31, June 30, June 30, March 31, 2000 1999 1999 2000 1999 1999 ------------- ------------ ------------- ------------ ------------ ------------ Worldwide Growth Fund (Number of Shares) Shares sold 3,546,660 316,937 1,258,419 1,816,105 430,631 350,299 Shares issued as reinvestments of dividends 554,745 -- 117,737 85,463 -- 4,352 Shares redeemed (797,116) (195,915) (1,224,596) (873,920) (180,058) (89,828) ------------- ------------ ------------- ------------ ------------ ------------ Net increase in shares outstanding 3,304,289 121,022 151,560 1,027,648 250,573 264,823 ============= ============ ============= ============ ============ ============ Worldwide Growth Fund ($) Shares sold $ 103,794,801 $ 7,199,228 $ 23,846,842 $ 60,334,275 $ 11,187,418 $ 7,773,616 Shares issued as reinvestments of dividends 14,207,022 -- 2,145,255 2,513,469 -- 89,521 Shares redeemed (22,853,219) (4,443,951) (22,854,997) (30,258,824) (4,610,453) (1,884,358) ------------- ------------ ------------- ------------ ------------ ------------ Net increase in shares outstanding $ 95,148,604 $ 2,755,277 $ 3,137,100 $ 32,588,920 $ 6,576,965 $ 5,978,779 ============= ============ ============= ============ ============ ============
97 - ------- Pilgrim Funds - ------- NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued) - --------------------------------------------------------------------------------
Class A Shares Class B Shares ---------------------------------------------- ------------------------------------------- Year 3 Months Year Year 3 Months Year Ended Ended Ended Ended Ended Ended June 30, June 30, March 31, June 30, June 30, March 31, 2000 1999 1999 2000 1999 1999 ------------- ------------ ------------ ------------ ----------- ------------ International Core Growth Fund (Number of Shares) Shares sold 5,045,863 1,699,541 4,111,884 458,137 47,812 317,938 Shares issued as reinvestments of dividends 33,304 -- 5,819 30,801 -- 2,484 Shares redeemed (4,770,319) (2,264,636) (3,641,067) (215,896) (33,706) (168,120) ------------- ------------ ------------ ------------ ----------- ------------ Net increase (decrease) in shares outstanding 308,848 (565,095) 476,636 273,042 14,106 152,302 ============= ============ ============ ============ =========== ============ International Core Growth Fund ($) Shares sold $ 121,096,575 $ 30,866,314 $ 72,899,494 $ 11,335,788 $ 888,899 $ 5,553,372 Shares issued as reinvestments of dividends 740,357 -- 109,877 689,313 -- 47,437 Shares redeemed (114,696,068) (41,080,307) (65,603,216) (5,138,991) (610,199) (2,893,130) ------------- ------------ ------------ ------------ ----------- ------------ Net increase (decrease) in shares outstanding $ 7,140,864 $(10,213,993) $ 7,406,155 $ 6,886,110 $ 278,700 $ 2,707,679 ============= ============ ============ ============ =========== ============ Class C Shares Class Q Shares ---------------------------------------------- ------------------------------------------- Year 3 Months Year Year 3 Months Year Ended Ended Ended Ended Ended Ended June 30, June 30, March 31, June 30, June 30, March 31, 2000 1999 1999 2000 1999 1999 ------------- ------------ ------------ ------------ ----------- ------------ International Core Growth Fund (Number of Shares) Shares sold 1,618,402 113,784 455,651 780,577 93,649 581,442 Shares issued as reinvestments of dividends 33,214 -- 1,471 24,738 -- 1,463 Shares redeemed (1,158,306) (69,740) (82,349) (615,038) (228,977) (67,954) ------------- ------------ ------------ ------------ ----------- ------------ Net increase (decrease) in shares outstanding 493,310 44,044 374,773 190,277 (135,328) 514,951 ============= ============ ============ ============ =========== ============ International Core Growth Fund ($) Shares sold $ 39,015,970 $ 2,117,597 $ 7,964,267 $ 20,639,997 $ 1,771,267 $ 10,297,873 Shares issued as reinvestments of dividends 745,659 -- 28,148 572,187 -- 31,169 Shares redeemed (27,691,220) (1,298,517) (1,412,367) (16,620,923) (4,253,651) (1,185,061) ------------- ------------ ------------ ------------ ----------- ------------ Net increase (decrease) in shares outstanding $ 12,070,409 $ 819,080 $ 6,580,048 $ 4,591,261 $(2,482,384) $ 9,143,981 ============= ============ ============ ============ =========== ============
98 - ------- Pilgrim Funds - ------- NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued) - --------------------------------------------------------------------------------
Class A Shares Class B Shares ---------------------------------------------- --------------------------------------------- Year 3 Months Year Year 3 Months Year Ended Ended Ended Ended Ended Ended June 30, June 30, March 31, June 30, June 30, March 31, 2000 1999 1999 2000 1999 1999 ------------- ------------ ------------- ------------- ------------ ------------ International SmallCap Growth Fund (Number of Shares) Shares sold 18,367,774 1,367,921 4,953,991 2,668,131 98,528 574,326 Shares issued as reinvestments of dividends 169,910 -- 41,096 85,395 -- 21,611 Shares redeemed (13,311,135) (997,179) (4,370,199) (465,407) (55,682) (472,298) ------------- ------------ ------------- ------------- ------------ ------------ Net increase in shares outstanding 5,226,549 370,742 624,888 2,288,119 42,846 123,639 ============= ============ ============= ============= ============ ============ International SmallCap Growth Fund ($) Shares sold $ 753,445,372 $ 30,182,958 $ 101,529,799 $ 110,600,703 $ 2,333,350 $ 12,177,504 Shares issued as reinvestments of dividends 5,544,302 -- 811,876 2,953,812 -- 452,596 Shares redeemed (552,362,495) (22,024,759) (90,418,518) (20,315,971) (1,302,925) (9,959,007) ------------- ------------ ------------- ------------- ------------ ------------ Net increase in shares outstanding $ 206,627,179 $ 8,158,199 $ 11,923,157 $ 93,238,544 $ 1,030,425 $ 2,671,093 ============= ============ ============= ============= ============ ============ Class C Shares Class Q Shares ---------------------------------------------- --------------------------------------------- Year 3 Months Year Year 3 Months Year Ended Ended Ended Ended Ended Ended June 30, June 30, March 31, June 30, June 30, March 31, 2000 1999 1999 2000 1999 1999 ------------- ------------ ------------- ------------- ------------ ------------ International SmallCap Growth Fund (Number of Shares) Shares sold 4,361,314 146,271 660,257 6,375,425 529,877 1,567,046 Shares issued as reinvestments of dividends 80,888 -- 13,435 154,058 -- 12,918 Shares redeemed (1,600,661) (34,123) (464,252) (4,450,408) (269,090) (563,058) ------------- ------------ ------------- ------------- ------------ ------------ Net increase in shares outstanding 2,841,541 112,148 209,440 2,079,075 260,787 1,016,906 ============= ============ ============= ============= ============ ============ International SmallCap Growth Fund ($) Shares sold $ 174,228,168 $ 3,168,229 $ 12,933,840 $ 267,585,482 $ 12,505,725 $ 32,536,160 Shares issued as reinvestments of dividends 2,568,991 -- 258,146 4,781,312 -- 249,737 Shares redeemed (63,584,070) (740,072) (9,055,952) (196,319,048) (6,328,290) (11,408,948) ------------- ------------ ------------- ------------- ------------ ------------ Net increase in shares outstanding $ 113,213,089 $ 2,428,157 $ 4,136,034 $ 76,047,746 $ 6,177,435 $ 21,376,949 ============= ============ ============= ============= ============ ============
99 - ------- Pilgrim Funds - ------- NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued) - --------------------------------------------------------------------------------
Class A Shares Class B Shares --------------------------------------------- -------------------------------------------- Year 3 Months Year Year 3 Months Year Ended Ended Ended Ended Ended Ended June 30, June 30, March 31, June 30, June 30, March 31, 2000 1999 1999 2000 1999 1999 ------------- ------------ ------------ ------------ ------------ ------------ Emerging Countries Fund (Number of Shares) Shares sold 7,123,710 1,064,600 3,262,352 261,876 82,535 382,174 Shares issued as reinvestments of dividends -- -- 17,479 -- -- 7,286 Shares redeemed (6,583,130) (1,382,928) (3,852,081) (320,122) (168,473) (951,609) ------------- ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding 540,580 (318,328) (572,250) (58,246) (85,938) (562,149) ============= ============ ============ ============ ============ ============ Emerging Countries Fund ($) Shares sold $ 142,495,750 $ 16,015,629 $ 45,426,994 $ 5,287,628 $ 1,322,669 $ 5,698,657 Shares issued as reinvestments of dividends -- -- 277,913 -- -- 118,138 Shares redeemed (131,430,829) (20,693,691) (51,942,286) (6,237,718) (2,572,889) (12,756,398) ------------- ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding $ 11,064,921 $ (4,678,062) $ (6,237,379) $ (950,090) $ (1,250,220) $ (6,939,603) ============= ============ ============ ============ ============ ============ Class C Shares Class Q Shares --------------------------------------------- -------------------------------------------- Year 3 Months Year Year 3 Months Year Ended Ended Ended Ended Ended Ended June 30, June 30, March 31, June 30, June 30, March 31, 2000 1999 1999 2000 1999 1999 ------------- ------------ ------------ ------------ ------------ ------------ Emerging Countries Fund (Number of Shares) Shares sold 395,139 116,572 521,678 4,383,749 1,208,239 4,616,946 Shares issued as reinvestments of dividends -- -- 5,264 -- -- 36,438 Shares redeemed (363,300) (99,525) (1,239,995) (3,235,471) (459,541) (3,431,547) ------------- ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding 31,839 17,047 (713,053) 1,148,278 748,698 1,221,837 ============= ============ ============ ============ ============ ============ Emerging Countries Fund ($) Shares sold $ 7,854,682 $ 1,744,612 $ 7,326,720 $ 94,747,678 $ 19,053,123 $ 65,385,070 Shares issued as reinvestments of dividends -- -- 82,205 -- -- 593,577 Shares redeemed (6,755,539) (1,481,896) (16,381,157) (67,344,187) (7,234,180) (45,346,860) ------------- ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding $ 1,099,143 $ 262,716 $ (8,972,232) $ 27,403,491 $(11,818,943) $ 20,631,787 ============= ============ ============ ============ ============ ============
100 - ------- Pilgrim Funds - ------- NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued) - --------------------------------------------------------------------------------
Class A Shares Class B Shares Class M Shares ----------------------------- ---------------------------- --------------------------- Year Ended June 30, Year Ended June 30, Year Ended June 30, ----------------------------- ---------------------------- --------------------------- 2000 1999 2000 1999 2000 1999 ------------ ------------- ------------ ------------ ------------ ----------- Asia-Pacific Equity Fund (Number of Shares) Shares sold 9,625,972 25,333,718 2,243,981 2,652,841 2,025,542 692,204 Shares issued as reinvestment of dividends -- -- -- -- -- -- Shares redeemed (10,000,540) (25,985,521) (2,335,887) (2,886,015) (2,226,145) (927,629) ------------ ------------- ------------ ------------ ------------ ----------- Net decrease in shares outstanding (374,568) (651,803) (91,906) (233,174) (200,603) (235,425) ============ ============= ============ ============ ============ =========== Asia-Pacific Equity Fund ($) Shares sold $ 71,934,635 $ 120,602,739 $ 16,295,675 $ 13,490,585 $ 15,526,895 $ 3,734,225 Shares issued as reinvestment of dividends -- -- -- -- -- -- Shares redeemed (75,845,503) (124,586,962) (17,125,978) (14,427,377) (17,704,044) (4,867,780) ------------ ------------- ------------ ------------ ------------ ----------- Net decrease in shares outstanding $ (3,910,868) $ (3,984,223) $ (830,303) $ (936,792) $ (2,177,149) $(1,133,555) ============ ============= ============ ============ ============ =========== Class A Shares Class B Shares ---------------------------- ---------------------------- Year Ended June 30, Year Ended June 30, ---------------------------- ---------------------------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ Government Securities Income Fund (Number of Shares) Shares sold 6,308,160 1,780,718 776,377 2,303,127 Shares issued in merger 2,562,644 -- 1,997,672 -- Shares issued as reinvestment of dividends 64,916 63,214 33,839 26,259 Shares redeemed (6,095,948) (1,977,689) (983,135) (1,570,331) ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding 2,839,772 (133,757) 1,824,753 759,055 ============ ============ ============ ============ Government Securities Income Fund ($) Shares sold $ 74,777,810 $ 22,807,064 $ 9,254,431 $ 29,433,691 Shares issued in merger 30,325,611 -- 23,574,822 -- Shares issued as reinvestment of dividends 773,501 802,923 401,442 332,080 Shares redeemed (72,308,346) (25,148,449) (11,700,469) (19,941,959) ------------ ------------ ------------ ------------ Net decrease in shares outstanding $ 33,568,576 $ (1,538,462) $ 21,530,226 $ 9,823,812 ============ ============ ============ ============ Class C Class M --------------------------- ------------------------ Year Ended June 1, 1999 Year Ended June 30, June 30, to ------------------------ 2000 June 30, 1999 2000 1999 ----------- ------------- --------- ----------- Government Securities Income Fund (Number of Shares) Shares sold 674,348 34,375 28,709 136,108 Shares issued in merger 135,166 -- -- -- Shares issued as reinvestment of dividends 2,322 -- 1,916 2,551 Shares redeemed (641,939) (33,817) (48,662) (95,188) ----------- --------- --------- ----------- Net increase (decrease) in shares outstanding 169,897 558 (18,037) 43,471 =========== ========= ========= =========== Government Securities Income Fund ($) Shares sold $ 8,182,795 $ 421,428 $ 345,778 $ 1,751,439 Shares issued in merger 1,611,381 -- -- -- Shares issued as reinvestment of dividends 27,745 -- 22,982 32,362 Shares redeemed (7,762,416) (414,258) (581,080) (1,210,771) ----------- --------- --------- ----------- Net decrease in shares outstanding $ 2,059,505 $ 7,170 $(212,320) $ 573,030 =========== ========= ========= ===========
Class T Shares Class Q Shares -------------- -------------- Year Ended Year Ended June 30, June 30, 2000 2000 -------------- -------------- Government Securities Income Fund (Number of Shares) Shares sold 116 1,851 Shares issued in merger 2,165,118 -- Shares issued as reinvestment of dividends 15,202 4 Shares redeemed (255,997) (36) ------------ -------- Net increase in shares outstanding 1,924,439 1,819 ============ ======== Government Securities Income Fund ($) Shares sold $ 1,046 $ 21,936 Shares issued in merger 25,550,874 -- Shares issued as reinvestment of dividends 178,704 50 Shares redeemed (3,016,129) (418) ------------ -------- Net increase in shares outstanding $ 22,714,495 $ 21,568 ============ ======== 101 - ------- Pilgrim Funds - ------- NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued) - --------------------------------------------------------------------------------
Class A Shares Class B Shares ------------------------------------------ ------------------------------------------- Year 3 Months Year Year 3 Months Year Ended Ended Ended Ended Ended Ended June 30, June 30, March 31, June 30, June 30, March 31, 2000 1999 1999(1) 2000 1999 1999(1) ----------- ------------ ----------- ----------- ----------- ----------- Strategic Income Fund (Number of Shares) Shares sold 604,669 1,744,498 646,153 235,490 65,960 595,169 Shares issued in merger -- -- 175,454 -- -- 259,694 Shares issued as reinvestment of dividends 11,483 1,712 5,664 16,764 3,737 12,860 Shares redeemed (607,655) (1,797,320) (381,014) (333,238) (137,015) (341,358) ------------ ------------ ----------- ----------- ----------- ----------- Net increase (decrease) in shares outstanding 8,497 (51,110) 446,257 (80,984) (67,318) 526,365 ============ ============ =========== =========== =========== =========== Strategic Income Fund ($) Shares sold $ 7,329,922 $ 22,358,564 $ 8,383,952 $ 2,807,321 $ 827,887 $ 7,617,290 Shares issued in merger -- -- 2,260,055 -- -- 3,265,737 Shares issued as reinvestment of dividends 139,358 21,991 73,691 199,456 47,004 163,532 Shares redeemed (7,363,256) (23,052,137) (4,961,848) (3,971,439) (1,710,716) (4,353,363) ------------ ------------ ----------- ----------- ----------- ----------- Net increase (decrease) in shares outstanding $ 106,024 $ (671,582) $ 5,755,850 $ (964,662) $ (835,825) $ 6,693,196 ============ ============ =========== =========== =========== =========== Class C Shares Class Q Shares ------------------------------------------ ------------------------------------------- Year 3 Months Year Year 3 Months Year Ended Ended Ended Ended Ended Ended June 30, June 30, March 31, June 30, June 30, March 31, 2000 1999 1999(1) 2000 1999 1999(1) ----------- ------------ ----------- ----------- ----------- ----------- Strategic Income Fund (Number of Shares) Shares sold 594,925 72,888 533,457 5,652 816 1,004 Shares issued in merger -- -- 342,089 -- -- 23,390 Shares issued as reinvestment of dividends 11,584 2,829 7,510 1,233 168 1,220 Shares redeemed (905,931) (77,064) (262,520) (1,293) (12,262) (36) ------------ ------------ ----------- ----------- ----------- ----------- Net increase (decrease) in shares outstanding (299,422) (1,347) 620,536 5,592 (11,278) 25,578 ============ ============ =========== =========== =========== =========== Strategic Income Fund ($) Shares sold $ 7,361,851 $ 952,054 $ 7,079,809 $ 64,150 $ 10,030 $ 12,500 Shares issued in merger -- -- 4,459,907 -- -- 286,028 Shares issued as reinvestment of dividends 143,424 37,021 99,886 14,212 2,037 15,045 Shares redeemed (11,234,101) (1,006,028) (3,482,921) (14,990) (151,748) (399) ------------ ------------ ----------- ----------- ----------- ----------- Net increase (decrease) in shares outstanding $ (3,728,826) $ (16,953) $ 8,156,681 $ 63,372 $ (139,681) $ 313,174 ============ ============ =========== =========== =========== ===========
- ---------- (1) Classes commenced operations on 7/27/98.
Class A Shares Class B Shares ------------------------------ ----------------------------- Year Ended June 30, Year Ended June 30, ------------------------------ ----------------------------- 2000 1999 2000 1999 ------------- ------------- ------------ ------------- High Yield Fund (Number of Shares) Shares sold 18,403,831 23,077,399 10,007,643 28,533,861 Shares issued as reinvestment of dividends 992,628 1,012,788 1,441,815 1,285,173 Shares redeemed (24,529,807) (16,689,544) (15,933,643) (7,951,333) ------------- ------------- ------------ ------------- Net increase (decrease) in shares outstanding (5,133,348) 7,400,643 (4,484,185) 21,867,701 ============= ============= ============ ============= High Yield Fund ($) Shares sold $ 97,912,317 $ 146,786,361 $ 55,282,605 $ 177,876,596 Shares issued as reinvestment of dividends 5,460,638 6,265,752 7,894,426 7,911,056 Shares redeemed (131,398,105) (106,793,532) (86,943,865) (48,182,705) ------------- ------------- ------------ ------------- Net increase (decrease) in shares outstanding $ (28,025,160) $ 46,258,581 $(23,766,834) $ 137,604,947 ============= ============= ============ ============= Class C Shares Class M Shares ----------------------------- ----------------------------- Year Ended June 1, 1999 Year Ended June 30, June 30, to ----------------------------- 2000 June 30, 1999 2000 1999 ------------- -------------- ------------- ------------ High Yield Fund (Number of Shares) Shares sold 2,837,111 93,124 127,747 2,189,902 Shares issued as reinvestment of dividends 28,522 -- 188,400 196,691 Shares redeemed (1,778,397) -- (1,858,983) (1,173,862) ------------ -------- ------------ ------------ Net increase (decrease) in shares outstanding 1,087,236 93,124 (1,542,836) 1,212,731 ============ ======== ============ ============ High Yield Fund ($) Shares sold $ 15,174,843 $549,513 $ 705,631 $ 13,575,288 Shares issued as reinvestment of dividends 153,864 58 1,036,966 1,217,509 Shares redeemed (9,243,746) -- (10,086,399) (7,119,713) ------------ -------- ------------ ------------ Net increase (decrease) in shares outstanding $ 6,084,961 $549,571 $ (8,343,802) $ 7,673,084 ============ ======== ============ ============
102 - ------- Pilgrim Funds - ------- NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Class Q Shares ---------------------------- Year Ended June 17, 1999 June 30, to 2000 June 30, 1999 ---------- ------------- High Yield Fund (Number of Shares) Shares sold -- 30 Shares issued as reinvestment of dividends -- -- Shares redeemed -- -- ---- Net increase in shares outstanding -- 30 === ==== High Yield Fund ($) Shares sold -- $ 5 Shares issued as reinvestment of dividends 2 -- Shares redeemed -- -- --- ---- Net increase in shares outstanding 2 $ 5 === ====
Class A Shares Class B Shares -------------------------------------------- ------------------------------------------- Year 3 Months Year Year 3 Months Year Ended Ended Ended Ended Ended Ended June 30, June 30, March 31, June 30, June 30, March 31, 2000 1999 1999 2000 1999 1999 ------------ ----------- ------------ ------------ ----------- ------------ High Yield Fund II (Number of Shares) Shares sold 2,024,176 126,155 2,218,475 696,890 191,304 3,516,788 Shares issued in merger 1,920,197 -- -- 6,815,662 -- -- Shares issued as reinvestments of dividends 85,848 13,470 68,528 173,796 20,903 90,997 Shares redeemed (2,296,078) (175,029) (1,169,064) (1,757,346) (279,006) (622,273) ------------ ----------- ------------ ------------ ----------- ------------ Net increase (decrease) in shares outstanding 1,734,143 (35,404) 1,117,939 5,929,002 (66,799) 2,985,512 ============ =========== ============ ============ =========== ============ High Yield Fund II ($) Shares sold $ 22,289,353 $ 1,487,541 $ 27,084,111 $ 7,778,149 $ 2,244,780 $ 42,704,286 Shares issued in merger 21,258,924 -- -- 75,437,662 -- -- Shares issued as reinvestments of dividends 948,687 158,555 807,769 1,923,761 246,357 1,044,170 Shares redeemed (25,459,352) (2,045,836) (14,038,415) (19,459,549) (3,269,300) (7,281,798) ------------ ----------- ------------ ------------ ----------- ------------ Net increase (decrease) in shares outstanding $ 19,037,612 $ (399,740) $ 13,853,465 $ 65,680,023 $ (778,163) $ 36,466,658 ============ =========== ============ ============ =========== ============
103 - ------- Pilgrim Funds - ------- NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued) - --------------------------------------------------------------------------------
Class C Shares Class Q Shares -------------------------------------------- ------------------------------------------ Year 3 Months Year Year 3 Months Year Ended Ended Ended Ended Ended Ended June 30, June 30, March 31, June 30, June 30, March 31, 2000 1999 1999 2000 1999 1999 ------------ ----------- ------------ ------------ ----------- ----------- High Yield Fund II (Number of Shares) Shares sold 835,807 91,597 1,848,332 1,176,601 21,272 668,988 Shares issued in merger 876,081 -- -- -- -- -- Shares issued as reinvestments of dividends 60,087 11,731 67,635 38,331 7,915 23,106 Shares redeemed (1,223,652) (310,405) (468,704) (857,666) (307,466) (179,780) ------------ ----------- ------------ ------------ ----------- ----------- Net increase (decrease) in shares outstanding 548,323 (207,077) 1,447,263 357,266 (278,279) 512,314 ============ =========== ============ ============ =========== =========== High Yield Fund II ($) Shares sold $ 9,284,852 $ 1,078,810 $ 22,778,726 $ 12,941,570 $ 249,643 $ 7,770,126 Shares issued in merger 9,698,640 -- -- -- -- -- Shares issued as reinvestments of dividends 667,948 138,399 775,897 431,200 93,356 271,659 Shares redeemed (13,540,976) (3,633,914) (5,466,380) (9,622,674) (3,614,065) (2,101,039) ------------ ----------- ------------ ------------ ----------- ----------- Net increase (decrease) in shares outstanding $ 6,110,464 $(2,416,705) $ 18,088,243 $ 3,750,096 $(3,271,066) $ 5,940,746 ============ =========== ============ ============ =========== ===========
Class T Shares -------------- Period Ended June 30, 2000 -------------- High Yield Fund II (Number of Shares) Shares sold 42,193 Shares issued in merger 3,237,823 Shares issued as reinvestments of dividends 45,794 Shares redeemed (426,380) --------- Net increase in shares outstanding 2,899,430 ========= High Yield Fund II ($) Shares sold $ 467,407 Shares issued in merger 35,837,128 Shares issued as reinvestment of dividends 495,594 Shares redeemed (4,680,068) ------------ Net increase in shares outstanding $ 32,120,061 ============
Class A Shares Class B Shares Class C Shares ---------------- --------------- --------------- Period Ended Period Ended June 30, June 30, 2000(1) 2000(2) ---------------- --------------------------------- Money Market Fund (Number of Shares) Shares sold 1,169,128,592 61,428,458 63,807,062 Shares issued as reinvestment of dividends 401,613 197,336 62,389 Shares redeemed (1,094,099,819) (49,590,590) (58,438,711) --------------- ------------ ------------ Net increase in shares outstanding 75,430,386 12,035,204 5,430,740 =============== ============ ============ Money Market Fund ($) Shares sold $ 1,169,128,592 $ 61,428,458 $ 63,807,062 Shares issued as reinvestment of dividends 401,613 197,336 62,389 Shares redeemed (1,094,099,819) (49,590,590) (58,438,711) --------------- ------------ ------------ Net increase in shares outstanding $ 75,430,386 $ 12,035,204 $ 5,430,740 =============== ============ ============
- ---------- (1) Commenced operations on November 24, 1999. (2) Commenced operations on July 12, 1999. 104 - ------- Pilgrim Funds - ------- NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued) - --------------------------------------------------------------------------------
Class A Shares Class B Shares ------------------------------------------ ------------------------------------------ Year 3 Months Year Year 3 Months Year Ended Ended Ended Ended Ended Ended June 30, June 30, March 31, June 30, June 30, March 31, 2000 1999 1999 2000 1999 1999 ------------ ----------- ----------- ------------ ----------- ----------- Balanced Fund (Number of Shares) Shares sold 462,023 69,501 371,709 236,780 62,785 128,292 Shares issued in merger 3,669,160 -- -- 2,263,054 -- -- Shares issued as reinvestments of dividends 120,353 1,015 68,457 87,982 554 29,941 Shares redeemed (523,820) (70,425) (281,697) (386,298) (12,468) (73,515) ------------ ----------- ----------- ------------ ----------- ----------- Net increase in shares outstanding 3,727,716 91 158,469 2,201,518 50,871 84,718 ============ =========== =========== ============ =========== =========== Balanced Fund ($) Shares sold $ 7,288,215 $ 1,354,890 $ 7,068,981 $ 4,171,242 $ 1,288,434 $ 2,447,844 Shares issued in merger 57,648,201 -- -- 38,096,820 -- -- Shares issued as reinvestments of dividends 1,895,528 19,370 1,216,578 1,483,448 11,321 566,865 Shares redeemed (8,162,726) (1,361,704) (5,289,069) (6,483,178) (256,849) (1,364,447) ------------ ----------- ----------- ------------ ----------- ----------- Net increase in shares outstanding $ 58,669,218 $ 12,556 $ 2,996,490 $ 37,268,332 $ 1,042,906 $ 1,650,262 ============ =========== =========== ============ =========== =========== Class C Shares Class Q Shares ------------------------------------------ ------------------------------------------ Year 3 Months Year Year 3 Months Year Ended Ended Ended Ended Ended Ended June 30, June 30, March 31, June 30, June 30, March 31, 2000 1999 1999 2000 1999 1999 ------------ ----------- ----------- ------------ ----------- ----------- Balanced Fund (Number of Shares) Shares sold 168,630 17,557 184,748 4,284 1,351 1,105 Shares issued in merger 813,022 -- -- -- -- -- Shares issued as reinvestments of dividends 235,394 519 210,474 2,693 42 1,173 Shares redeemed (579,424) (47,391) (259,419) (1,565) (781) (1,882) ------------ ----------- ----------- ------------ ----------- ----------- Net increase (decrease) in shares outstanding 637,622 (29,315) 135,803 5,412 612 396 ============ =========== =========== ============ =========== =========== Balanced Fund ($) Shares sold $ 2,578,680 $ 324,318 $ 3,201,753 $ 66,184 $ 25,940 $ 19,907 Shares issued in merger 12,280,463 -- -- -- -- -- Shares issued as reinvestments of dividends 3,561,673 9,545 3,603,550 42,058 798 20,611 Shares redeemed (8,869,902) (878,533) (4,681,019) (24,419) (14,926) (34,726) ------------ ----------- ----------- ------------ ----------- ----------- Net increase (decrease) in shares outstanding $ 9,550,914 $ (544,670) $ 2,124,284 $ 83,823 $ 11,812 $ 5,792 ============ =========== =========== ============ =========== ===========
105 - ------- Pilgrim Funds - ------- NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Class T Shares -------------- Period Ended June 30, 2000 -------------- Balanced Fund (Number of Shares) Shares sold 1,889 Shares issued in merger 737,757 Shares issued as reinvestments of dividends -- Shares redeemed (59,256) ----------- Net increase in shares outstanding 680,390 =========== Balanced Fund ($) Shares sold $ 11,145 Shares issued in merger 12,419,589 Shares issued as reinvestment of dividends 7 Shares redeemed (946,072) ----------- Net increase in shares outstanding $11,484,669 ===========
Class A Shares Class B Shares ------------------------------------------- ------------------------------------------- Year 3 Months Year Year 3 Months Year Ended Ended Ended Ended Ended Ended June 30, June 30, March 31, June 30, June 30, March 31, 2000 1999 1999 2000 1999 1999 ------------ ----------- ------------ ------------ ----------- ------------ Convertible Fund (Number of Shares) Shares sold 2,765,285 240,854 1,235,038 2,212,800 377,405 1,107,458 Shares issued as reinvestments of dividends 432,032 8,766 84,764 446,940 4,334 36,617 Shares redeemed (1,602,580) (106,071) (795,095) (721,161) (155,682) (468,699) ------------ ----------- ------------ ------------ ----------- ------------ Net increase in shares outstanding 1,594,737 143,549 524,707 1,938,579 226,057 675,376 ============ =========== ============ ============ =========== ============ Convertible Fund ($) Shares sold $ 74,411,486 $ 5,446,752 $ 22,826,352 $ 62,613,451 $ 9,316,686 $ 22,988,795 Shares issued as reinvestments of dividends 10,028,609 201,806 1,677,136 11,247,841 108,485 774,835 Shares redeemed (41,141,454) (2,398,688) (14,627,285) (20,328,894) (3,833,777) (9,912,927) ------------ ----------- ------------ ------------ ----------- ------------ Net increase in shares outstanding $ 43,298,641 $ 3,249,870 $ 9,876,203 $ 53,532,398 $ 5,591,394 $ 13,850,703 ============ =========== ============ ============ =========== ============ Class C Shares Class Q Shares ------------------------------------------- ------------------------------------------- Year 3 Months Year Year 3 Months Year Ended Ended Ended Ended Ended Ended June 30, June 30, March 31, June 30, June 30, March 31, 2000 1999 1999 2000 1999 1999 ------------ ----------- ------------ ------------ ----------- ------------ Convertible Fund (Number of Shares) Shares sold 1,543,879 204,264 84,820 1,566,620 393,267 423,276 Shares issued as reinvestments of dividends 594,205 3,236 110,911 144,983 3,568 16,065 Shares redeemed (827,109) (276,138) (881,082) (398,796) (29,839) (410,737) ------------ ----------- ------------ ------------ ----------- ------------ Net increase (decrease) in shares outstanding 1,310,975 (68,638) 114,649 1,312,807 366,996 28,604 ============ =========== ============ ============ =========== ============ Convertible Fund ($) Shares sold $ 41,908,144 $ 4,732,365 $ 17,299,957 $ 41,114,380 $ 8,618,236 $ 8,043,910 Shares issued as reinvestments of dividends 14,012,886 75,700 2,256,244 3,277,417 79,431 304,178 Shares redeemed (22,139,549) (6,363,756) (17,113,435) (10,241,903) (655,742) (7,680,884) ------------ ----------- ------------ ------------ ----------- ------------ Net increase (decrease) in shares outstanding $ 33,781,481 $(1,555,691) $ 2,442,766 $ 34,149,894 $ 8,041,925 $ 667,204 ============ =========== ============ ============ =========== ============
106 - ------- Pilgrim Funds - ------- NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- NOTE 11 -- CUSTODIAL AGREEMENT State Street Kansas City ("SSKC") (formerly Investors Fiduciary Trust Company) and State Street Boston ("SSB") serve as the Funds' custodian and recordkeeper. Custody fees paid to SSKC or SSB are reduced by an earnings credit based on the cash balances held by SSKC or SSB for each of the Funds. NOTE 12 -- SUBSEQUENT EVENTS On May 1, 2000, ReliaStar Financial Corp. (NYSE:RLR), the indirect parent company of Pilgrim Investments, Inc., Adviser to the Funds, and Pilgrim Securities, Inc., Distributor to the Funds, entered into an agreement under which it will be acquired by ING Groep N.V. (NYSE:ING). ING Groep N.V. is a global financial institution active in the field of insurance, banking, and asset management in more than 60 countries, with almost 90,000 employees. Completion of the acquisition is contingent upon, among other things, approval by the Directors/Trustees of the Pilgrim Funds and certain shareholder and regulatory approvals. The closing of the acquisition is expected to occur during the third quarter of 2000. On July 31, 2000 Pilgrim Investments, Inc. notified Nicholas-Applegate Capital Management ("NACM") of its intention to terminate NACM as sub-advisor to the Convertible Fund, LargeCap Growth Fund, Worldwide Growth Fund, International Core Growth Fund and Emerging Countries Fund effective September 30, 2000. Beginning October 1, 2000, Pilgrim Investments, Inc. will advise the Funds directly. Subsequent to June 30, 2000, the following funds declared dividends from net investment income of: Per Share Amount Payable Date Record Date ------ ------------ ----------- MagnaCap Fund Class A $ 0.0415 August 3, 2000 July 31, 2000 Class B 0.0041 August 3, 2000 July 31, 2000 Class C 0.0041 August 3, 2000 July 31, 2000 Class M 0.0055 August 3, 2000 July 31, 2000 Class Q 0.0434 August 3, 2000 July 31, 2000 Government Securities Income Fund Class A $ 0.0615 July 6, 2000 June 30, 2000 Class B 0.0542 July 6, 2000 June 30, 2000 Class C 0.0542 July 6, 2000 June 30, 2000 Class M 0.0564 July 6, 2000 June 30, 2000 Class Q 0.0615 July 6, 2000 June 30, 2000 Class T 0.0564 July 6, 2000 June 30, 2000 Class A 0.0600 August 3, 2000 July 31, 2000 Class B 0.0540 August 3, 2000 July 31, 2000 Class C 0.0540 August 3, 2000 July 31, 2000 Class M 0.0560 August 3, 2000 July 31, 2000 Class Q 0.0610 August 3, 2000 July 31, 2000 Class T 0.0570 August 3, 2000 July 31, 2000 Strategic Income Fund Class A 0.0717 July 6, 2000 June 30, 2000 Class B 0.0679 July 6, 2000 June 30, 2000 Class C 0.0676 July 6, 2000 June 30, 2000 Class Q 0.0729 July 6, 2000 June 30, 2000 Class A 0.0715 August 3, 2000 July 31, 2000 Class B 0.0693 August 3, 2000 July 31, 2000 Class C 0.0687 August 3, 2000 July 31, 2000 Class Q 0.0731 August 3, 2000 July 31, 2000 High Yield Fund Class A 0.0500 July 6, 2000 June 30, 2000 Class B 0.0470 July 6, 2000 June 30, 2000 Class C 0.0470 July 6, 2000 June 30, 2000 Class M 0.0480 July 6, 2000 June 30, 2000 Class Q 0.0510 July 6, 2000 June 30, 2000 Class A 0.0500 August 3, 2000 July 31, 2000 Class B 0.0470 August 3, 2000 July 31, 2000 Class C 0.0470 August 3, 2000 July 31, 2000 Class M 0.0480 August 3, 2000 July 31, 2000 Class Q 0.0510 August 3, 2000 July 31, 2000 High Yield Fund II (*) Class A 0.1020 July 3, 2000 Daily Class B 0.0960 July 3, 2000 Daily Class C 0.0960 July 3, 2000 Daily Class Q 0.1030 July 3, 2000 Daily Class T 0.0990 July 3, 2000 Daily Class A 0.1050 August 1, 2000 Daily Class B 0.0990 August 1, 2000 Daily Class C 0.0990 August 1, 2000 Daily Class Q 0.1060 August 1, 2000 Daily Class T 0.1020 August 1, 2000 Daily 107 - ------- Pilgrim Funds - ------- NOTES TO FINANCIAL STATEMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Per Share Amount Payable Date Record Date ------ ------------ ----------- Money Market Fund (*) Class A $ 0.0043 July 3, 2000 Daily Class B 0.0037 July 3, 2000 Daily Class C 0.0037 July 3, 2000 Daily Class A 0.0042 August 1, 2000 Daily Class B 0.0036 August 1, 2000 Daily Class C 0.0036 August 1, 2000 Daily Balanced Fund Class A 0.1279 July 6, 2000 June 30, 2000 Class B 0.0932 July 6, 2000 June 30, 2000 Class C 0.0808 July 6, 2000 June 30, 2000 Class Q 0.1239 July 6, 2000 June 30, 2000 Class T 0.1105 July 6, 2000 June 30, 2000 Convertible Fund Class A $ 0.1266 July 6, 2000 June 30, 2000 Class B 0.0788 July 6, 2000 June 30, 2000 Class C 0.0822 July 6, 2000 June 30, 2000 Class Q 0.1335 July 6, 2000 June 30, 2000 - ---------- (*) Per Share Amount Indicates Monthly Cumulative Income. 108 Pilgrim MagnaCap Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 - -------------------------------------------------------------------------------- Market Shares Value - ------ ---------- COMMON STOCKS: 97.44% Banks: 5.82% 50,000 Bank of America Corp. $2,150,000 35,000 Bank of New York Co., Inc. 1,627,500 90,000 Chase Manhattan Corp. 4,145,625 99,200 Comerica, Inc. 4,451,600 40,000 Fifth Third Bancorp 2,530,000 100,000 Fleet Boston Financial Corp. 3,400,000 125,000 UnionBanCal Corp. 2,320,312 95,000 Wells Fargo & Co. 3,681,250 ---------- 24,306,287 ---------- Beverages: 3.81% 100,000 Anheuser-Busch Companies, Inc. 7,468,750 190,000 PepsiCo, Inc. 8,443,125 ---------- 15,911,875 ---------- Chemicals: 2.21% 70,030 Du Pont (E.I.) de Nemours & Co. 3,063,813 165,100 Praxair, Inc. 6,180,931 ---------- 9,244,744 ---------- Commercial Services: 1.29% 205,000 Equifax, Inc. 5,381,250 ---------- Computers: 7.49% 100,000 @ Cisco Systems, Inc. 6,356,250 180,000 Compaq Computer Corp. 4,601,250 97,000 @ Computer Sciences Corp. 7,244,688 49,500 Hewlett-Packard Co. 6,181,312 76,000 @ Sun Microsystems, Inc. 6,911,250 ---------- 31,294,750 ---------- Diversified Financial Services: 4.54% 150,000 Alliance Capital Management Holdings 7,115,625 97,500 Citigroup, Inc. 5,874,375 60,000 Fannie Mae 3,131,250 70,000 Freddie Mac 2,835,000 ---------- 18,956,250 ---------- Electric: 2.46% 120,000 Duke Energy Co. 6,765,000 150,000 Southern Co. 3,496,875 ---------- 10,261,875 ---------- Electronics: 2.90% 18,879 @ Agilent Technologies, Inc. $1,392,326 105,000 Parker Hannifin Corp. 3,596,250 170,000 @ Solectron Corp. 7,118,750 ---------- 12,107,326 ---------- Food: 2.20% 100,000 Heinz (H.J.) Co 4,375,000 250,000 Sara Lee Corp. 4,828,125 ---------- 9,203,125 ---------- Healthcare-Products: 4.99% 137,000 Baxter Int'l, Inc. 9,632,812 27,400 @ Edwards Lifesciences Corp. 506,900 105,000 Johnson & Johnson 10,696,875 ---------- 20,836,587 ---------- Household Products/Wares: 1.58% 98,500 Avery-Dennison Corp. 6,611,813 ---------- Insurance: 6.88% 250,000 Aflac, Inc. 11,484,375 65,000 American General Corp. 3,965,000 69,687 American Int'l Group 8,188,223 48,800 Marsh & McLennan Cos. 5,096,550 ---------- 28,734,148 ---------- Leisure Time: 0.72% 155,000 Carnival Corp. 3,022,500 ---------- Machinery-Diversified: 1.16% 120,000 Dover Corp. 4,867,500 ---------- Media: 2.33% 70,000 New York Times Co. 2,765,000 180,000 Walt Disney Co. 6,986,250 ---------- 9,751,250 ---------- Mining: 0.48% 70,000 Alcoa, Inc. 2,030,000 ---------- Miscellaneous Manufacturing: 5.48% 184,200 General Electric Co. 9,762,600 153,750 Honeywell Int'l, Inc. 5,179,453 167,500 @@ Tyco Int'l, Ltd. 7,935,313 ---------- 22,877,366 ---------- Oil & Gas Producers: 4.91% 94,000 Chevron Corp. $7,972,375 191,413 Conoco, Inc. 4,701,582 101,933 @@ Total Fina Elf SA ADR 7,829,728 ---------- 20,503,685 ---------- Oil & Gas Services: 2.65% 69,700 Halliburton Co. 3,288,969 104,000 Schlumberger Ltd. 7,761,000 ---------- 11,049,969 ---------- Pharmaceuticals: 4.07% 132,000 Abbott Laboratories 5,882,250 72,600 Merck & Co., Inc. 5,562,975 110,000 Schering-Plough Corp. 5,555,000 ---------- 17,000,225 ---------- Retail: 8.91% 100,000 @ Best Buy Co., Inc. 6,325,000 65,500 Home Depot, Inc. 3,270,906 63,000 Lowe's Cos. 2,586,938 300,000 McDonald's Corp. 9,881,250 52,000 Target Corp. 3,016,000 190,000 TJX Companies, Inc. 3,562,500 145,000 @ Tricon Global Restaurants, Inc. 4,096,250 77,500 Wal-Mart Stores, Inc. 4,465,937 ---------- 37,204,781 ---------- Savings & Loans: 2.84% 242,865 Charter One Financial, Inc. 5,585,895 69,200 Golden West Financial Corp. 2,824,225 120,000 Washington Mutual, Inc. 3,465,000 ---------- 11,875,120 ---------- Semiconductors: 2.77% 30,000 @ Altera Corp. 3,058,125 63,550 Intel Corp. 8,495,841 ---------- 11,553,966 ---------- Software: 2.57% 166,000 Automatic Data Processing 8,891,375 50,000 @ BMC Software, Inc. 1,824,219 ---------- 10,715,594 ---------- See Accompanying Notes to Financial Statements 109 - -------- Pilgrim MagnaCap Fund - -------- PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Market Shares Value - ------ ----------- Telecommunications: 11.17% 65,000 Alltel Corp. $ 4,025,937 130,000 AT&T Corp. 4,111,250 90,000 Bell Atlantic Corp. 4,573,125 30,000 GTE Corp. 1,867,500 160,000 @@ Nokia OYJ ADR 7,990,000 145,500 SBC Communications, Inc. 6,292,875 142,500 @ Tellabs, Inc. 9,752,344 175,000 @ Worldcom, Inc. 8,028,125 ----------- 46,641,156 ----------- Tobacco: 1.21% 190,000 Philip Morris Companies, Inc. 5,046,875 ----------- Total Long-Term Investments (Cost $306,619,953) 406,990,017 ----------- SHORT-TERM INVESTMENTS: 3.23% Commercial Paper: 3.23% $13,471,000 General Electric, 6.800%, due 07/03/00 $ 13,465,911 ------------- Total Short-Term Investments (Cost $13,465,911) 13,465,911 ------------- Total Investments in Securities (Cost $320,085,864)* 100.67% $ 420,455,928 Other Assets and Liabilities-Net -0.67% (2,787,944) ------ ------------- Net Assets 100.00% $ 417,667,984 ====== ============= - ---------- @ Non-income producing security @@ Foreign Issuer ADR American Depository Receipt * Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 122,768,881 Gross Unrealized Depreciation (22,398,817) ------------- Net Unrealized Appreciation $ 100,370,064 ============= See Accompanying Notes to Financial Statements 110 Pilgrim LargeCap Leaders Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 - -------------------------------------------------------------------------------- Market Shares Value - ------ ---------- COMMON STOCKS: 97.15% Auto Manufacturers: 1.20% 10,600 Ford Motor Co. $ 455,800 ---------- Auto Parts & Equipment: 0.04% 1,388 @ Visteon Corp. 16,828 ---------- Banks: 1.58% 12,950 Chase Manhattan Corp. 596,509 ---------- Beverages: 4.78% 7,300 Anheuser-Busch Cos., Inc. 545,219 10,300 Coca-Cola Co. 591,606 15,100 PepsiCo, Inc. 671,006 ---------- 1,807,831 ---------- Chemicals: 1.16% 9,994 Du Pont (E.I.) de Nemours & Co. 437,238 ---------- Computers: 8.86% 8,900 @ Cisco Systems, Inc. 565,706 22,400 Compaq Computer Corp. 572,600 12,100 @ Dell Computer Corp. 596,681 4,000 Hewlett Packard Co. 499,500 4,800 International Business Machines 525,900 6,500 @ Sun Microsystems, Inc. 591,094 ---------- 3,351,481 ---------- Cosmetics/Pesonal Care: 1.66% 10,500 Colgate-Palmolive Co. 628,688 ---------- Diversified Financial Services: 7.45% 11,700 American Express Co. 609,863 8,150 Citigroup, Inc. 491,038 9,000 Fannie Mae 469,688 10,900 Freddie Mac 441,450 7,000 Merrill Lynch & Co., Inc. 804,425 ---------- 2,816,464 ---------- Electric: 2.85% 10,500 Duke Energy Co. 591,938 20,900 Southern Co. 487,231 ---------- 1,079,169 ---------- Electronics: 1.94% 1,526 @ Agilent Technologies, Inc. 112,493 14,800 @ Solectron Corp. 619,750 ---------- 732,243 ---------- Food: 1.71% 14,300 @ Safeway, Inc. 645,288 ---------- Forest Products & Paper: 1.19% 15,100 Int'l Paper Co. 450,169 ---------- Healthcare-Products: 1.70% 6,300 Johnson & Johnson 641,813 ---------- Home Furnishings: 1.22% 4,900 @@ Sony Corp. ADR 462,131 ---------- Insurance: 4.62% 5,025 American Int'l Group 590,437 16,800 AXA Financial, Inc. 571,200 5,600 Marsh & McLennan Cos. 584,850 ---------- 1,746,487 ---------- Internet: 1.24% 8,900 @ America Online, Inc. 469,475 ---------- Leisure Time: 1.20% 23,200 Carnival Corp. 452,400 ---------- Machinery-Diversified: 1.32% 13,500 Deere & Co. 499,500 ---------- Media: 3.88% 12,100 @ Comcast Corp. 490,050 7,700 Gannett Co., Inc. 460,556 6,800 Time Warner, Inc. 516,800 ---------- 1,467,406 ---------- Mining: 1.20% 15,600 Alcoa, Inc. 452,400 ---------- Miscellaneous Manufacturing: 3.44% 12,300 General Electric Co. 651,900 13,700 @@ Tyco Int'l Ltd. 649,038 ---------- 1,300,938 ---------- Oil & Gas Producers: 7.05% 11,000 Anadarko Petroleum Corp. 542,437 13,000 Burlington Resources Inc. 497,250 6,900 Chevron Corp. 585,206 6,600 Exxon Mobil Corp. 518,100 8,500 @@ Royal Dutch Petroleum Co. ADR 523,281 ---------- 2,666,274 ---------- Oil & Gas Services: 1.58% 8,000 Schlumberger Ltd. 597,000 ---------- Pharmaceuticals: 6.49% 14,900 Abbott Laboratories 663,981 8,100 Merck & Co., Inc. 620,663 13,600 @@ Novartis AG ADR 544,000 13,000 Pfizer, Inc. 624,000 ---------- 2,452,644 ---------- Pipelines: 1.52% 8,900 Enron Corp. 574,050 ---------- Retail: 9.97% 8,500 @ Best Buy Co., Inc. 537,625 4,200 Gap, Inc. 131,250 9,500 Home Depot, Inc. 474,406 14,400 McDonald's Corp. 474,300 17,100 Sears, Roebuck And Co. 557,887 8,300 Target Corp. 481,400 19,700 Walgreen Co. 634,094 8,300 Wal-Mart Stores, Inc. 478,287 ---------- 3,769,249 ---------- Savings & Loans: 1.34% 17,500 Washington Mutual, Inc. 505,312 ---------- Semiconductors: 2.99% 4,550 Intel Corp. 608,278 7,600 Texas Instruments, Inc. 522,025 ---------- 1,130,303 ---------- Software: 1.40% 6,600 @ Microsoft Corp. 528,000 ---------- Telecommunications: 7.61% 14,043 AT&T Corp. 444,110 8,720 Bell Atlantic Corp. 443,085 8,600 Lucent Technologies, Inc. 509,550 9,900 @@ Nokia OYJ ADR 494,381 11,600 SBC Communications, Inc. 501,700 10,600 @ Worldcom, Inc. 486,275 ---------- 2,879,101 ---------- Tobacco: 1.60% 22,800 Philip Morris Cos., Inc. 605,625 ---------- Transportation: 1.36% 13,500 @ FedEx Corp. 513,000 ---------- Total Common Stock (Cost $32,068,401) 36,730,816 ---------- Total Long-Term Investments (Cost $32,068,401) 36,730,816 ---------- See Accompanying Notes to Financial Statements 111 Pilgrim LargeCap Leaders Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Principal Market Amount Value - ------ ----------- SHORT-TERM INVESTMENTS: 5.59% Repurchase Agreement: 5.59% 2,114,000 State Street Bank & Trust Repurchase Agreement 6.200% Due 07/03/2000 (Collateralized by U.S. Treasury Bills, 12.500% Due 08/15/14, Market Value $2,160,875) $ 2,114,000 ----------- Total Short-Term Investments (Cost $2,114,000) 2,114,000 ----------- Total Investments in Securities (Cost $ 34,182,401)* 102.74% $38,844,816 Other Assets and Liabilities-Net -2.74% (1,036,830) ------ ----------- Net Assets 100.00% $37,807,986 ====== =========== - ---------- @ Non-income producing security @@ Foreign Issuer ADR American Depository Receipt * Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 6,797,394 Gross Unrealized Depreciation (2,134,979) ----------- Net Unrealized Appreciation $ 4,662,415 =========== See Accompanying Notes to Financial Statements 112 Pilgrim LargeCap Growth Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 - -------------------------------------------------------------------------------- Market Shares Value - ------ ----------- COMMON STOCKS: 99.28% Biotechnology: 5.21% 249,100 @ Amgen, Inc. $17,499,275 109,500 @ Genentech, Inc. 18,834,000 ----------- 36,333,275 ----------- Cellular Telecommunications: 3.14% 357,800 @ Nextel Communications, Inc. 21,892,888 ----------- Computers: 16.39% 363,900 @ Cisco Systems 23,130,394 411,000 @ Dell Computer Corp. 20,267,437 307,900 @ Oracle Corp. 25,882,844 274,100 @ Sun Microsystems 24,925,969 177,250 @ Veritas Software Corp. 20,032,020 ----------- 114,238,664 ----------- Diversified Financial Services: 3.43% 396,400 Citigroup, Inc. 23,883,100 ----------- Fiber Optics: 12.09% 168,900 @ Ciena Corp. 28,153,518 109,300 Corning, Inc. 29,497,337 222,300 @ JDS Uniphase Corp. 26,648,213 ----------- 84,299,068 ----------- Insurance: 2.75% 298,300 Aetna, Inc. 19,147,131 ----------- Lodging: 4.18% 907,300 MGM Grand, Inc. 29,147,013 ----------- Media: 10.73% 831,024 @ AT&T-Liberty Media Corp. 20,152,331 284,600 @ Cablevision Systems -- Class A 19,317,225 407,600 @ Infinity Broadcasting Corp. 14,851,925 299,400 @ Viacom, Inc. -- Class B 20,471,475 ----------- 74,792,956 ----------- Oil & Gas Producers: 2.34% 467,500 Santa Fe Int'l Corp. 16,333,281 ----------- Oil & Gas Services: 3.14% 549,300 @ Weatherford Int'l, Inc. 21,869,006 ----------- Pipelines: 3.29% 355,100 Enron 22,903,950 ----------- Retail: 3.66% 442,400 Wal-Mart Stores, Inc. 25,493,300 ----------- Satellite Telecommunications: 2.89% 229,500 @ General Motors Corp. -- Class H 20,138,625 ----------- Semiconductor: 10.43% 273,100 @ Applied Materials, Inc. 24,749,687 219,700 Intel Corp. 29,371,144 270,500 Texas Instruments, Inc. 18,579,969 ----------- 72,700,800 ----------- Software: 2.35% 92,903 @ VeriSign, Inc. 16,397,291 ----------- Telecommunication Services: 2.95% 413,700 @ Qwest Communications Int'l 20,555,719 ----------- Telecommunication Equipment: 6.80% 422,500 @@ Nokia Corp. ADR 21,098,595 385,700 Nortel Networks Corp. 26,324,025 ----------- 47,422,620 ----------- Wireless Equipment: 3.51% 119,300 @ Aether Systems, Inc. 24,456,500 ----------- Total Common Stocks (Cost $528,923,735) 692,005,187 ----------- Total Long-Term Investments (Cost $528,923,735) 692,005,187 ----------- Principal Amount Value - ------ ------------- SHORT-TERM INVESTMENTS: 2.21% Repurchase Agreement: 2.21% $15,448,000 State Street Bank & Trust Repurchase Agreement, 6.200% due 07/03/00 (Collaterized by $10,760,000 U.S. Treasury Notes, 12.500% Due 08/15/14, Market Value $15,763,400) $ 15,448,000 ------------- Total Short-Term Investments (Cost $15,448,000) 15,448,000 ------------- Total Investments in Securities (Cost $ 544,371,735)* 101.49% $ 707,453,187 Other Assets and Liabilities-Net -1.49% (10,415,435) ------ ------------- Net Assets 100.00% $ 697,037,752 ====== ============= - ---------- @ Non-income producing security @@ Foreign Issuer ADR American Depository Receipt * Cost for federal income tax purposes is $544,405,561. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 165,434,558 Gross Unrealized Depreciation (2,386,932) ------------- Net Unrealized Appreciation $ 163,047,626 ============= See Accompanying Notes to Financial Statements 113 Pilgrim MidCap Value Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 - -------------------------------------------------------------------------------- Market Shares Value - ------ ----------- COMMON STOCKS: 93.55% Banks: 3.53% 13,650 Commerce Bancshares, Inc. $ 406,087 32,000 North Fork Bancorp 484,000 11,900 UnionBanCal Corp. 220,894 ----------- 1,110,981 ----------- Beverages: 1.93% 10,000 Coors (Adolph) 605,000 ----------- Chemicals: 3.17% 13,000 Rohm & Haas Co. 448,500 18,700 Sigma-Aldrich Corp. 546,975 ----------- 995,475 ----------- Commercial Services: 5.67% 15,500 @ Convergys Corp. 804,062 20,000 Equifax, Inc. 525,000 14,000 H & R Block, Inc. 453,250 ----------- 1,782,312 ----------- Distribution/Wholesale: 3.02% 9,600 Fastenal Co. 486,000 15,000 Grainger (W.W.), Inc. 462,187 ----------- 948,187 ----------- Electric: 1.78% 22,000 Cinergy Corp. 559,625 ----------- Electrical Components & Equipment: 2.30% 17,700 @ American Power Conversion 722,381 ----------- Electronics: 4.51% 9,000 Johnson Controls, Inc. 461,813 10,800 @ Lernout & Hauspie Speech Products 475,875 14,000 Parker Hannifin Corp. 479,500 ----------- 1,417,188 ----------- Environmental Control: 2.48% 48,700 @ Republic Services, Inc. 779,200 ----------- Forest Products & Paper: 2.67% 15,900 Mead Corp. 401,475 16,000 Willamette Industries 436,000 ----------- 837,475 ----------- Hand/Machine Tools: 1.63% 19,200 Snap-On, Inc. 511,200 ----------- Healthcare-Products: 4.98% 9,000 Bausch & Lomb, Inc. 696,375 20,000 Mallinckrodt, Inc. 868,750 ----------- 1,565,125 ----------- Healthcare-Services: 1.87% 8,100 @ Wellpoint Health Network 586,744 ----------- Home Furnishings: 1.53% 13,000 Maytag Corp. 479,375 ----------- Household Products/Wares: 2.50% 29,000 Dial Corp. 300,875 21,000 Fortune Brands, Inc. 484,312 ----------- 785,187 ----------- Insurance: 1.57% 15,000 Nationwide Financial Services, Inc. 493,125 ----------- Leisure Time: 1.18% 20,000 Royal Caribbean Cruises, Ltd. 370,000 ----------- Lodging: 2.03% 19,600 Starwood Hotels & Resorts Worldwide 638,225 ----------- Media: 2.88% 13,000 @ Hispanic Broadcasting Corp. 430,625 12,000 New York Times Co. 474,000 ----------- 904,625 ----------- Miscellaneous Manufacturing: 3.47% 19,000 Applied Power, Inc. -- Class A 636,500 23,000 Donaldson Co., Inc. 454,250 ----------- 1,090,750 ----------- Oil & Gas Producers: 7.50% 7,500 Amerada Hess Corp. 463,125 7,500 Apache Corp. 441,094 8,500 Devon Energy Corp. 477,594 13,500 Helmerich & Payne, Inc. 504,563 13,500 Santa Fe Int'l Corp. 471,656 ----------- 2,358,032 ----------- Pharmaceuticals: 2.00% 69,300 Omnicare, Inc. 628,031 ----------- Pipelines: 1.44% 8,900 El Paso Energy Corp. 453,344 ----------- Retail: 6.94% 17,000 @ B.J's Wholesale Club, Inc. 561,000 30,400 Blockbuster, Inc. 294,500 29,000 Ross Stores 494,813 22,700 @ Shopko Stores, Inc. 349,013 17,000 @ Tricon Global Restaurants 480,250 ----------- 2,179,576 ----------- Savings & Loans: 2.89% 30,000 Charter One Financial, Inc. 690,000 31,000 Sovereign Bancorp, Inc. 217,969 ----------- 907,969 ----------- Semiconductors: 3.35% 8,000 @ Lattice Semiconductor Corp. 553,000 8,800 @ National Semiconductor Corp. 499,400 ----------- 1,052,400 ----------- Telecommunications: 14.73% 20,000 @ ADC Telecommunications, Inc. 1,677,500 19,000 @ Andrew Corp. 637,687 16,000 @ Broadwing, Inc. 415,000 13,000 Centurytel, Inc. 373,750 17,500 @ Crown Castle Int'l Corp. 638,750 10,896 Motorola, Inc. 316,665 13,000 @ PanAmSat Corp. 567,938 ----------- 4,627,290 ----------- Total Common Stocks (Cost $28,747,624) 29,388,822 ----------- Total Long-Term Investments (Cost $28,747,624) 29,388,822 ----------- See Accompanying Notes to Financial Statements 114 Pilgrim MidCap Value Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - ------ ----------- SHORT-TERM INVESTMENTS: 10.29% Repurchase Agreement: 10.29% $3,232,000 State Stree Repurchase Agreement, 6.200% due 07/03/00 (Collateralized by $2,255,000 U.S. Treasury Bonds, 12.500% Due 08/15/14 Market Value $3,303,575) $ 3,232,000 ----------- Total Short-Term Investments (Cost $3,232,000) 3,232,000 ----------- Total Investments in Securities (Cost $ 31,979,624)* 103.84% $32,620,822 Other Assets and Liabilities-Net -3.84% (1,205,352) ------ ----------- Net Assets 100.00% $31,415,470 ====== =========== - ---------- @ Non-income producing security @@ Foreign Issuer * Cost for federal income tax purposes is $32,057,995. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 5,365,026 Gross Unrealized Depreciation (4,802,199) ----------- Net Unrealized Appreciation $ 562,827 =========== See Accompanying Notes to Financial Statements 115 Pilgrim MidCap Growth Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 - -------------------------------------------------------------------------------- Market Shares Value - ------ ---------- COMMON STOCKS: 99.82% Biotechnology: 6.57% 49,400 @ Diacrin, Inc. $ 389,025 64,200 @ Enzon, Inc. 2,728,500 46,100 @ Genentech, Inc. 7,929,200 55,400 @ Idec Pharmaceuticals Corp. 6,499,113 51,800 @ Millennium Pharmaceuticals 5,795,125 74,000 @ PE Corp.-Celera Genomics 6,919,000 32,300 @ Protein Design Labs, Inc. 5,330,828 ---------- 35,590,791 ---------- Commercial Services: 1.36% 44,500 @ Quanta Services, Inc. 2,447,500 171,600 @ Robert Half Int'l, Inc. 4,890,600 ---------- 7,338,100 ---------- Computers: 6.70% 44,700 @ Brocade Communication Systems 8,201,752 37,900 @ Extreme Networks, Inc. 3,998,450 40,600 @ Sandisk Corp. 2,484,213 33,600 @ Silicon Storage Technology 2,967,300 29,500 @ Stratos Lightwave, Inc. 822,312 157,575 @ Veritas Software Corp. 17,808,437 ---------- 36,282,464 ---------- Electric: 3.16% 133,400 @ AES Corp. 6,086,375 83,300 @ Calpine Corp. 5,476,975 127,900 Cinergy Corp. 3,253,456 123,100 Nisource, Inc. 2,292,738 ---------- 17,109,544 ---------- Electrical Components & Equipment: 0.83% 39,600 @ Power-One, Inc. 4,511,925 ---------- Electronics: 6.84% 94,000 @ Amphenol Corp. 6,221,625 106,600 @ Credence Systems Corp. 5,882,988 51,900 Millipore Corp. 3,911,962 103,500 Pe Corp.-PE Biosystems Group 6,818,062 66,500 Tektronix, Inc. 4,921,000 74,400 @ Waters Corp. 9,286,050 ---------- 37,041,687 ---------- Food: 0.50% 72,500 Keebler Foods Co. $2,691,563 ---------- Gas: 0.85% 150,300 Keyspan Corp. 4,621,725 ---------- Healthcare Services: 1.52% 215,200 @ Community Health Systems 3,483,550 65,900 @ Quest Diagnostics 4,715,969 ---------- 8,199,519 ---------- Media: 1.07% 61,800 @ Hispanic Broadcasting Corp. 2,047,125 36,100 @ Univision Communications 3,736,350 ---------- 5,783,475 ---------- Oil & Gas Producers: 9.45% 94,900 Anadarko Petroleum Corp. 4,679,756 140,900 Apache 8,286,681 137,000 Devon Energy Corp. 7,697,688 241,400 Ensco Int'l, Inc. 8,645,136 183,400 EOG Resources, Inc. 6,143,900 192,600 @ Global Marine, Inc. 5,428,913 122,100 @ Nabors Industries, Inc. 5,074,781 171,100 @ Rowan Co. 5,197,163 ---------- 51,154,018 ---------- Oil & Gas Services: 4.90% 140,000 Baker Hughes, Inc. 4,480,000 105,900 @ BJ Services Co. 6,618,750 166,100 @ Grant Prideco, Inc. 4,152,500 77,400 @ Smith Int'l, Inc. 5,635,688 141,000 @ Weatherford Int'l, Inc. 5,613,562 ---------- 26,500,500 ---------- Pharmaceuticals: 7.09% 113,000 @ Celgene Corp. 6,652,875 51,600 @ Cephalon, Inc. 3,089,550 77,400 @ COR Therapeutics, Inc. 6,603,187 65,600 @ Forest Laboratories - Class A 6,625,600 61,900 @ King Pharmaceuticals, Inc. 2,715,863 81,400 @ Sepracor, Inc. 9,818,875 27,200 @ Vertex Pharmaceuticals, Inc. 2,866,200 ---------- 38,372,150 ---------- Pipelines: 2.74% 111,400 El Paso Energy Corp. 5,674,438 75,700 Equitable Resources, Inc. 3,652,525 158,700 Kinder Morgan, Inc. 5,485,068 ---------- 14,812,031 ---------- Retail: 4.72% 131,400 @ Dollar Tree Stores, Inc. 5,198,512 81,600 @ Kohls Corp. 4,539,000 13,500 @ Linens 'N Things, Inc. 366,188 93,600 Nordstrom, Inc. 2,258,100 130,300 @ Starbucks Corp. 4,975,831 71,700 Talbots, Inc. 3,939,019 228,700 TJX Cos., Inc. 4,288,125 ---------- 25,564,775 ---------- Semiconductors: 15.31% 145,400 @ Analog Devices 11,050,400 76,600 @ Applied Micro Circuits Corp. 7,564,250 44,700 @ Broadcom Corp. 9,786,506 65,300 @ Conexant Systems, Inc. 3,175,212 108,800 @ Integrated Device Technology, Inc. 6,514,400 146,500 @ Lam Research Group 5,493,750 165,000 @ LSI Logic, Inc. 8,930,625 86,600 @ Maxim Integrated Products 5,883,388 48,500 @ PMC-Sierra, Inc. 8,617,842 @@ 52,800 @ Qlogic Corp. 3,488,100 85,800 @ Teradyne, Inc. 6,306,300 22,300 @ Triquint Semiconductor, Inc. 2,133,831 47,800 @ Xilinx, Inc. 3,946,488 ---------- 82,891,092 ---------- Software: 14.62% 30,400 @ Alteon Websystems, Inc. 3,041,900 92,400 @ Broadvision, Inc. 4,695,075 47,900 @ Clarent Corp. 3,424,850 76,300 @ Macromedia, Inc. 7,377,256 84,500 @ Mercury Interactive Corp. 8,175,375 57,000 @ Micromuse, Inc. 9,432,609 67,200 @ Siebel Systems, Inc. 10,991,400 63,400 @ Universal Access, Inc. 1,553,300 140,683 @ Verisign, Inc. 24,830,440 72,400 @ Vignette Corp. 3,765,931 30,500 @ Vitria Technology, Inc. 1,864,312 ---------- 79,152,448 ---------- See Accompanying Notes to Financial Statements 116 Pilgrim MidCap Growth Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Market Shares Value - ------ ----------- Telecommunications: 11.59% 55,800 @ Comverse Technology, Inc. $ 5,189,400 154,200 @ Crown Castle Int'l Corp. 5,628,300 46,700 @ Digital Lightwave, Inc. 4,693,350 79,800 @ Echostar Communications 2,642,128 138,000 @ JDS Uniphase Corp. 16,542,750 197,100 @ Mcleod USA, Inc. 4,077,506 155,400 @ Metromedia Fiber Networks, Inc. 6,167,438 179,200 @ Nextel Communications, Inc. 10,964,800 88,800 @ Nextlink Communications 3,368,850 54,100 @ Time Warner Telecom -- Class A 3,482,687 ----------- 62,757,209 ----------- Total Common Stocks (Cost $355,479,830) 540,375,016 ----------- Total Long-Term Investments (Cost $355,479,830) 540,375,016 ----------- Principal Amount Value - ------ ------------ SHORT-TERM INVESTMENTS: 1.00% Repurchase Agreement: 1.00% $5,417,000 State Street Bank & Trust Repurchase Agreement, 6.200%, Due 07/03/00 (Collaterized by $3,775,000 U.S. Treasury Bonds 12.500%, Due 08/15/14, Market Value $5,530,375) $ 5,417,000 ------------ Total Short-Term Investments (Cost $5,417,000) 5,417,000 ------------ Total Investments in Securities (Cost $360,896,830)* 100.82% $545,792,016 Other Assets and Liabilities-Net -0.82% (4,435,423) ------ ------------ Net Assets 100.00% $541,356,593 ====== ============ - ---------- @ Non-income producing security @@ Foreign Issuer * Cost for federal income tax purposes is $361,548,419. Net unrealized appreciation consists of: Gross Unrealized Appreciation $189,757,372 Gross Unrealized Depreciation (5,513,775) ------------ Net Unrealized Appreciation $184,243,597 ============ See Accompanying Notes to Financial Statements 117 Pilgrim SmallCap Growth Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 - -------------------------------------------------------------------------------- Market Shares Value - ------ ---------- COMMON STOCKS: 98.68% Advertising: 0.30% 40,600 @ Getty Images, Inc. $1,504,738 ---------- Airlines: 0.10% 14,200 Skywest, Inc. 526,288 ---------- Apparel: 0.74% 70,900 Russell Corp. 1,418,000 32,800 @ Timberland Co. 2,322,650 ---------- 3,740,650 ---------- Biotechnology: 6.95% 39,500 @ Aclara BioSciences, Inc. 2,012,031 86,000 @ Charles River Laboratories Int'l 1,908,125 45,600 @ Diacrin, Inc. 359,100 33,400 @ Genome Therapeutics Corp. 1,016,613 58,900 @ Incyte Genomics, Inc. 4,840,844 40,200 @ Invitrogen Corp. 3,023,166 38,700 @ Maxygen 2,196,830 45,700 @ Millennium Pharmaceuticals 5,112,688 900 @ Myriad Genetics, Inc. 133,270 18,500 @ Orchid BioSciences, Inc. 702,422 33,300 @ Protein Design Labs, Inc. 5,492,939 34,400 @ Sequenom, Inc. 1,560,900 245,400 @ Texas Biotech Corp. 4,662,600 49,650 @ Visible Genetics, Inc. 2,240,456 @@ ---------- 35,261,984 ---------- Chemicals: 0.12% 16,700 Spartech Corp. 450,900 3,600 @ Symyx Technologies 153,394 ---------- 604,294 ---------- Commercial Services: 3.56% 71,200 @ Aurora Biosciences Corp. 4,854,950 54,200 @ First Health Group Corp. 1,778,438 19,750 @ Forrester Research, Inc. 1,438,047 107,700 @ Heidrick & Struggles, Inc. 6,798,563 43,600 @ Korn/Ferry Int'l 1,381,575 36,600 @ On Assignment, Inc. 1,116,300 22,800 @ Teletech Holdings, Inc. 708,225 ---------- 18,076,098 ---------- Computer Data Security: 1.26% 64,800 @ ISS Group, Inc. 6,397,988 ---------- Computers: 1.96% 35,200 @ Affiliated Computer Services, Inc. 1,163,800 117,800 @ Manhattan Associates, Inc. 2,945,000 25,100 @ M-Systems Flash Disk Pioneers 1,954,663 @@ 27,800 @ Silicon Storage Technology, Inc. 2,455,087 26,800 @ Stratos Lightwave, Inc. 747,050 32,300 @ Technology Solutions Co. 199,855 2,800 @ Turnstone Systems, Inc. 463,881 ---------- 9,929,336 ---------- Diversified Financial Services: 0.76% 31,200 Dain Rauscher Corp. 2,059,200 35,600 @@ London Pacific Group, Ltd. 462,800 53,250 Metris Co., Inc. 1,337,906 ---------- 3,859,906 ---------- Electric: 0.90% 132,700 Kansas City Power & Light 2,985,750 87,300 @ NRG Energy, Inc. 1,593,225 ---------- 4,578,975 ---------- Electrical Components & Equipment: 1.06% 6,200 @ Capstone Turbine Corp. 279,387 44,550 @ Power-One, Inc. 5,075,916 ---------- 5,355,303 ---------- Electronics: 5.16% 37,400 @ Amphenol Corp. 2,475,413 51,000 @ Credence Systems Corp. 2,814,562 49,400 @ DSP Group, Inc. 2,766,400 57,800 @ Electro Scientific Industries, Inc. 2,545,006 29,624 @ Flextronics Int'l Ltd. 2,034,799 @@ 46,800 @ Kent Electronics Corp. 1,395,224 36,700 @ Microchip Technology, Inc. 2,138,348 32,900 @ Molecular Devices Corp. 2,276,269 79,300 @ Packard Biosciences 1,348,100 13,700 @ Photon Dynamics, Inc. 1,023,219 151,300 @ Therma-Wave, Inc. 3,375,881 42,900 @ Varian, Inc. 1,978,763 ---------- 26,171,984 ---------- Engineering & Construction: 0.32% 35,025 @ Dycom Industries, Inc. 1,611,150 ---------- Entertainment: 1.09% 86,600 @ Macrovision Corp. 5,535,634 ---------- Enterprise Software Service: 2.31% 56,050 @ Business Objects SA 4,939,406 @@ 87,700 @ Manugistics Group, Inc. 4,099,975 49,800 @ Symantec Corp. 2,686,088 ---------- 11,725,469 ---------- Environmental Control: 0.02% 5,700 @ Waste Connections, Inc. 112,575 ---------- Food: 0.21% 29,800 @ Hain Celestial Group, Inc. 1,093,288 ---------- Healthcare-Products: 1.01% 144,400 @ Edwards Lifesciences Corp. 2,671,400 81,500 @ Kensey Nash Corp. 906,688 39,600 @ Resmed, Inc. 1,059,300 10,000 @ Zoll Medical Corp. 490,000 ---------- 5,127,388 ---------- Healthcare Services: 7.01% 194,600 @ Community Health Systems, Inc. 3,150,088 65,300 @ Coventry Health Care, Inc. 870,327 63,000 @ Laboratory Corp. of America Holdings 4,858,875 185,800 @ LifePoint Hospitals, Inc. 4,134,050 103,100 @ Oxford Health Plans 2,455,069 127,900 @ Province Healthcare Co. 4,620,387 69,800 @ Quest Diagnostics, Inc. 4,995,063 237,300 @ Triad Hospitals, Inc. 5,739,694 92,100 @ Trigon Healthcare, Inc. 4,748,906 ---------- 35,572,459 ---------- Insurance: 0.90% 21,400 @@ PartnerRe, Ltd. 758,363 73,400 Radian Group, Inc. 3,798,450 ---------- 4,556,813 ---------- Internet: 0.46% 2,800 @ Digital Insight Corp. 95,200 50,400 @ Navisite, Inc. 2,107,350 6,800 @ Vicinity Corp. 133,450 ---------- 2,336,000 ---------- See Accompanying Notes to Financial Statements 118 Pilgrim SmallCap Growth Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Market Shares Value - ------ ---------- Investment Companies: 0.10% 21,100 American Capital Strategies Ltd. $ 503,763 ---------- Machinery-Diversified: 2.48% 34,000 @ Advanced Energy Industries 2,003,875 35,600 @ Asyst Technologies, Inc. 1,219,300 16,400 @ Brooks Automation, Inc. 1,048,575 22,400 @ Gasonics Int'l Corp. 883,400 45,100 @ Kulicke & Soffa Industries 2,677,813 39,800 @ PRI Automation, Inc. 2,602,547 18,000 @ Semitool, Inc. 311,625 120,900 Stewart & Stevenson Services 1,821,056 ---------- 12,568,191 ---------- Media: 1.37% 57,000 @ Emmis Communications Corp. 2,358,375 69,200 @ Pegasus Communications Corp. 3,395,125 53,870 @ Saga Communications, Inc. 1,185,140 ---------- 6,938,640 ---------- Metal Fabricate/Hardware: 0.05% 8,612 @ Maverick Tube Corp. 250,825 ---------- Oil Field Machinery & Equipment: 2.00% 88,600 @ Drill-Quip 4,142,050 69,500 @ National-Oilwell, Inc. 2,284,813 20,900 @ Smith Int'l, Inc. 1,521,781 66,200 @ Universal Compression Holdings 2,217,700 ---------- 10,166,344 ---------- Oil & Gas Producers: 8.60% 88,100 @ Atwood Oceanics $3,909,438 78,700 @ BJ Services Co. 4,918,750 219,600 Cross Timbers Oil Co. 4,858,650 126,400 @ Global Industries, Ltd. 2,385,800 91,700 @ HS Resources, Inc. 2,751,000 285,000 @ Key Energy Group 2,743,125 45,000 @ Louis Dreyfus Natural Gas 1,409,062 125,600 @ Marine Drilling Co., Inc. 3,516,800 36,647 @ Nabors Industries, Inc. 1,523,141 56,600 @ Newfield Exploration Co. 2,214,475 121,200 @@@ Precision Drilling Corp. 4,681,350 153,150 @ Pride Int'l, Inc. 3,790,462 90,300 @ Spinnaker Exploration Co. 2,313,938 31,600 @ Stone Energy Corp. 1,888,100 18,600 @ UTI Energy Corp. 746,325 ---------- 43,650,416 ---------- Pharmaceuticals: 8.91% 19,200 @ Abgenix, Inc. 2,301,300 68,400 @ Alkermes, Inc. 3,223,350 48,700 Alpharma, Inc. 3,031,575 65,950 @ Cephalon, Inc. 3,948,756 49,600 @ COR Therapeutics, Inc. 4,231,500 59,800 @ Cubist Pharmaceuticals, Inc. 2,945,150 17,900 @ ImClone Systems 1,368,231 41,600 @ Intrabiotics Pharmaceuticals, Inc. 1,110,200 134,825 Jones Pharma, Inc. 5,384,573 23,700 @ Pharmacopeia, Inc. 1,099,088 74,400 @ Syncor Int'l Corp. 5,356,800 63,700 @ Trimeris, Inc. 4,455,019 37,900 @ United Therapeutics Corp. 4,107,412 25,000 @ Vertex Pharmaceuticals, Inc. 2,634,375 ---------- 45,197,329 ---------- Pipelines: 0.11% 27,500 Western Gas Resources, Inc. 577,500 ---------- REITS: 0.56% 53,000 @ Pinnacle Holdings, Inc. 2,862,000 ---------- Retail: 5.57% 35,500 @ AnnTaylor Stores Corp. 1,175,938 21,200 @ CDW Computer Centers, Inc. 1,325,000 64,900 @ Factory 2-U Stores, Inc. 2,454,031 37,525 @ Insight Enterprises, Inc. 2,225,702 37,900 @ Jack in the Box, Inc. 933,288 26,800 @ Krispy Kreme Doughnuts, Inc. 1,969,800 4,200 @ Linens 'N Things, Inc. 113,925 109,900 @ Michaels Stores, Inc. 5,034,794 226,300 @ MSC Industrial Direct Co. 4,738,156 123,800 @ Pacific Sunwear of California 2,321,250 66,800 Talbots, Inc. 3,669,825 90,400 @ Too, Inc. 2,299,550 ---------- 28,261,259 ---------- Semiconductors: 12.93% 75,600 @ Alpha Industries 3,331,125 83,900 @ ATMI, Inc. 3,901,350 77,800 @ Cypress Semiconductor Corp. 3,287,050 66,500 @ Exar Corp. 5,797,969 24,900 @ Fairchild Semiconductor Int'l 1,008,450 35,100 @ Globespan, Inc. 4,284,942 16,800 Helix Technology Corp. 655,200 44,100 @ Integrated Device Technology Industries 2,640,488 40,300 @ International Rectifier Corp. 2,256,799 60,200 @ Kopin Corp. 4,168,850 96,200 @ Lam Research Corp. 3,607,500 120,200 @ Micrel, Inc. 5,221,187 60,500 @ Qlogic Corp. 3,996,781 3,600 @ Quantum Effect Devices, Inc. 205,200 93,700 @ Quicklogic Corp. 2,084,825 17,900 @ Rudolph Technologies, Inc. 693,625 28,600 @ Semtech Corp. 2,187,453 34,100 @ Three-Five Systems, Inc. 2,011,900 61,500 @ Transwitch Corp. 4,747,031 18,800 @ Triquint Semiconductor, Inc. 1,798,925 69,000 @ Varian Semiconductor Equipment 4,334,062 57,200 @ Virata Corp. 3,410,550 ---------- 65,631,262 ---------- See Accompanying Notes to Financial Statements 119 Pilgrim SmallCap Growth Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Market Shares Value - ------ ----------- Software: 11.30% 30,800 @ AppNet, Inc. $ 1,108,800 13,100 @ Art Technology Group, Inc. 1,322,281 32,500 @ Caminus Corp. 796,250 28,400 @ Clarent Corp. 2,030,600 50,000 @ Documentum, Inc. 4,468,750 33,000 @ Exchange Applications, Inc. 878,624 65,800 @ Extensity, Inc. 2,253,650 31,600 @ Globix Corp. 926,275 9,800 @ Keynote Systems, Inc. 691,512 32,950 @ Macromedia, Inc. 3,185,853 118,200 @ Mercury Interactive Corp. 11,435,850 6,900 @ Metasolv Software, Inc. 303,600 13,300 @ Micromuse, Inc. 2,200,942 33,900 @ Netopia, Inc. 1,364,475 48,300 @ Numerical Technologies, Inc. 2,348,588 127,700 @ Open Market, Inc. 1,763,856 91,200 @ OTG Software, Inc. 2,604,900 71,900 @ PC-Tel, Inc. 2,732,200 4,400 @ Quest Software, Inc. 243,650 7,300 @ Retek, Inc. 233,600 53,300 Reynolds & Reynolds Co. 972,725 4,600 @ Scient Corp. 202,975 121,000 @ Serena Software, Inc. 5,494,155 53,300 @ SmartForce Plc ADR 2,558,400 @@ 17,650 @ Software.Com, Inc. 2,292,294 29,300 @ Universal Access, Inc. 717,850 14,200 @ Webmethods, Inc. 2,232,062 ----------- 57,364,717 ----------- Telecommunication: 7.84% 23,263 @ ADC Telecommunications, Inc. $ 1,951,184 37,400 @ Advanced Fibre Communication 1,694,687 2,200 @ Airgate PCS, Inc. 115,637 7,700 @ Airnet Communications Corp. 201,163 4,500 @ Alamosa PCS Holdings, Inc. 93,938 51,700 @ American Tower Corp. 2,155,243 81,100 @ Aspect Communications Corp. 3,188,244 9,100 @ Choice One Communications, Inc. 371,394 49,500 @@@ Clearnet Communications, Inc. 1,374,398 76,700 @ Digital Lightwave, Inc. 7,708,350 8,500 @ Digital Microwave Corp. 324,063 32,800 @ Ditech Communications Corp. 3,101,650 24,700 @ Inet Technologies, Inc. 1,339,975 16,100 @ Leap Wireless Int'l, Inc 756,700 11,700 @ Natural Microsystems Corp. 1,315,519 46,711 @ Nextlink Communications 1,772,092 11,250 @ Pac-West Telecomm, Inc. 225,000 20,700 @ SDL, Inc. 5,903,380 141,100 @ I3 Mobile, Inc. 2,592,713 20,200 @ Proxim, Inc. 1,999,169 8,800 @ Viasat, Inc. 477,400 21,000 @ Western Wireless 1,144,500 ----------- 39,806,399 ----------- Transportation: 0.66% 22,950 @ Forward Air Corp. 918,000 41,800 Expeditors Int'l Washington 1,985,500 31,700 @ Swift Transportation Co., Inc. 443,800 ----------- 3,347,300 ----------- Total Common Stocks (Cost $314,463,131) 500,804,265 ----------- Total Long-Term Investments (Cost $314,463,131) 500,804,265 ----------- SHORT-TERM INVESTMENTS: 2.68% Repurchase Agreement: 2.68% $13,629,000 State Street Bank & Trust Repurchase Agreement 6.200% due 07/03/04 (Collateraized by $9,490,000 U.S. Treasury Bonds, 12.500% Due 08/15/14, Market Value $13,902,850) $ 13,629,000 ------------ Total Short-Term Investments (Cost $13,629,000) 13,629,000 ------------ Total Investments in Securities (Cost $ 328,092,131)* 101.36% $514,433,265 Other Assets and Liabilities - Net -1.36% (6,914,010) ------ ------------ Net Assets 100.00% $507,519,255 ====== ============ - ---------- @ Non-income producing security @@ Foreign issuer ADR American Depository Receipt * Cost for federal income tax purposes is $329,821,029. Net unrealized appreciation consists of: Gross Unrealized Appreciation $192,503,082 Gross Unrealized Depreciation (7,890,846) ------------ Net Unrealized Appreciation $184,612,236 ============ See Accompanying Notes to Financial Statements 120 Pilgrim Bank and Thrift Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 - -------------------------------------------------------------------------------- Market Shares Value - ------ ----------- COMMON STOCKS: 98.73% Automotive: 1.08% 556,300 @ Keystone Automotive Industries, Inc. $ 3,859,332 ----------- Banks: 51.16% 180,200 Alabama National Bancorp (AL) 3,570,213 165,300 Bank Of The Ozarks (AR) 2,706,788 1,150,200 Banknorth Group, Inc. (ME) 17,612,438 96,500 Bay Bancshares, Inc. (TX) 1,495,750 355,475 BSB Bancorp Inc. (NY) 7,131,717 53,000 CCBT Financial Companies, Inc. (MA) 833,094 108,600 CNBT Bankshares, Inc. (TX) 1,452,525 30,000 Columbia Bancorp (MD) 270,000 520,500 Comerica, Inc. (MI) 23,357,438 122,749 Commerce Bancshares, Inc. (MO) 3,651,783 188,700 Community Bank Systems, Inc. (NY) 4,186,781 192,824 Community First Bankshares, Inc. (ND) 3,145,441 187,500 Financial Institutions, Inc. (NY) 2,625,000 491,360 Fleet Boston Financial Group, Inc. (MA) 16,706,240 322,647 Hudson United Bancorp (NJ) 7,239,392 163,604 Independent Bank Corp. (MI) 2,218,879 525,800 KeyCorp (OH) 9,267,225 200,000 Lamar Capital Corp. (MS) 1,637,500 209,100 National City Bancorp (MN) 3,031,950 771,400 National City Corp. (OH) 13,162,012 90,134 North Dallas Bank & Trust Co. (TX) 2,625,153 305,600 North Fork Bancorp (NY) 4,622,200 84,300 North Valley Bancorp (CA) 885,150 7,000 @ Northern Empire Bancshares (CA) 103,906 44,000 Oak Hill Financial, Inc. (OH) 616,000 887,900 Pacific Century Financial Corp. (HI) 12,985,537 240,000 Prosperity Bancshares, Inc. (TX) 3,870,000 20,400 @ Six Rivers National Bank (CA) 272,850 200,000 - Southwest Bancorp (OK) 3,225,000 125,300 Summit Bancorp (NJ) 3,085,512 166,900 Summit Bancshares Inc (TX) 2,879,025 62,500 Three Rivers Bancorp, Inc. (PA) 410,156 38,000 Trico Bancshares (CA) 627,000 306,500 UCBH Holdings, Inc. (CA) 8,179,719 721,700 UnionBanCal Corp. (CA) 13,396,556 ----------- 183,085,930 ----------- Construction: 2.80% 655,375 D.R. Horton, Inc. 8,888,523 342,500 @ Schuff Steel Co. 1,113,125 ----------- 10,001,648 ----------- Finance: 5.00% 375,000 @- Int'l Aircraft Investors 2,039,062 360,900 Liberty Financial Group 7,917,244 47,600 @ National Discount Broker 1,517,250 304,550 Sea Containers, Ltd. 6,433,619 ----------- 17,907,175 ----------- Insurance: 0.59% 177,000 @- 21st Century Holding Co. 885,000 156,500 @ American Safety Insurance Group 655,344 756,500 Reliance Group Holdings 567,375 ----------- 2,107,719 ----------- Retail: 4.17% 323,106 @ Consolidated Stores Corp. 3,877,272 108,000 @ Jo-Ann Stores, Inc. Class A 756,000 79,600 @ Jo-Ann Stores, Inc. Class B 606,950 223,500 Ross Stores, Inc. 3,813,469 522,000 @ Ugly Duckling Corp. 3,686,625 240,900 @ United Auto Group, Inc. 2,198,212 ----------- 14,938,528 ----------- Securities Related Business: 4.53% 124,440 Alliance Capital Management $ 5,903,123 573,400 Tucker Anthony Sutro Corp. 10,321,200 ----------- 16,224,323 ----------- Thrifts: 29.40% 236,500 Astoria Financial Corp. (NY) 6,089,875 1,564,257 Charter One Financial, Inc. (OH) 35,977,911 1,014,737 Commercial Federal Corp. (NE) 15,791,845 144,100 First Mutual Bancshares, Inc. (WA) 1,441,000 280,000 Golden West Financial Corp. (CA) 11,427,500 198,000 Highland Bancorp, Inc. (CA) 4,826,250 48,700 Seacoast Financial Services Corp. (MA) 4,631,250 152,500 Timberland Bancorp (WA) 1,648,906 810,650 Washington Mutual, Inc. (WA) 23,407,519 ----------- 105,242,056 ----------- Total Common Stocks (Cost $411,395,142) 353,366,711 ----------- Total Long-Term Investments (cost $411,395,142) 353,366,711 See Accompanying Notes to Financial Statements 121 Pilgrim Bank and Thrift Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - ------ ------------ Repurchase Agreement: 0.99% $3,552,000 State Street Repurchase Agreement, 6.200% due 07/03/00 (Collateralized by $2,475,000 U.S. Treasury Notes, 12.500% Due 08/15/14, Market Value $3,625,875) $ 3,552,000 Total Short-Term Investments (Cost $3,552,000) 3,552,000 ------------ Total Investments in Securities (Cost $ 414,947,142)* 99.72% $356,918,711 Other Assets and Liabilites-Net 0.28% 1,011,110 ------ ------------ Net Assets 100.00% $357,929,821 ====== ============ - ---------- @ Non-income producing security - - Company in which there is any direct or indirect ownership of 5% or more of the outstanding voting securities. * Cost for federal income tax purposes is $414,956,568. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 45,658,725 Gross Unrealized Depreciation (103,696,582) ------------- Net Unrealized Depreciation $ (58,037,857) ============= See Accompanying Notes to Financial Statements 122 Pilgrim Worldwide Growth Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 - -------------------------------------------------------------------------------- Market Shares Value - ------ ---------- COMMON STOCKS: 96.55% AUSTRALIA: 0.34% 41,700 News Corp., LTD. ADR $2,272,650 ---------- Total Australia 2,272,650 ---------- BELGIUM: 0.47% 58,900 Fortis (B) 1,713,946 32,000 @ Lernout & Hauspie Speech Products 1,410,000 ---------- Total Belgium 3,123,946 ---------- BRAZIL: 0.77% 65,800 Petroleo Brasileiro SA ADR 1,987,917 60,211 Tele Norte Leste Participacoes ADR 1,422,485 17,000 Telecomunicacoes Brasileiras SA ADR 1,651,125 ---------- Total Brazil 5,061,527 ---------- CANADA: 5.72% 167,200 Abitibi-Consolidated, Inc. 1,567,500 138,800 @ Anderson Exploration, Ltd. 2,522,784 21,000 @ Ballard Power Systems, Inc. 1,886,062 42,600 @ Biovail Corp. 2,361,637 68,700 Bombardier, Inc. 1,866,041 19,400 @ C-Mac Industries, Inc. 917,568 33,000 Magna Int'l, Inc. 1,550,777 278,300 Nortel Networks Corp. 18,993,975 73,500 @ Precision Drilling Corp. 2,838,937 42,000 @ QLT, Inc. 3,247,125 ---------- Total Canada 37,752,406 ---------- CHINA: 0.27% 5,000 @ PetroChina Co., Ltd. ADR 104,687 8,000,000 @ PetroChina Co., Ltd. 1,662,498 ---------- Total China 1,767,185 ---------- DENMARK: 0.35% 34,600 Tele Danmark AS 2,328,595 ---------- Total Denmark 2,328,595 ---------- FINLAND: 3.17% 43,200 Helsingin Puhelin OYJ 4,231,536 283,800 Nokia OYJ ADR 14,172,262 55,000 Sonera Group OYJ 2,507,281 ---------- Total Finland 20,911,079 ---------- FRANCE: 5.98% 48,300 Accor SA 1,979,589 82,600 Alcatel SA 5,417,560 61,700 Alstom 1,667,600 44,100 Aventis SA 3,218,718 16,500 Axa 2,599,171 3,626 @ Bouygues SA 2,423,220 17,300 Groupe Danone 2,295,767 40,000 Lagardere S.C.A. 3,055,040 83,800 Rhodia SA 1,408,068 74,000 Societe Television Francaise 1 5,157,289 63,800 ST Microelectronics NV 4,095,162 26,770 Total Fina Elf SA 4,104,505 23,600 Vivendi (EX-Generale des Eaux) 2,082,984 ---------- Total France 39,504,673 ---------- GERMANY: 2.43% 69,900 Deutsche Lufthansa AG 1,631,635 71,500 Dresdner Bank AG 2,894,268 45,800 EM.TV & Merchandising AG 2,710,966 41,700 @ Infineon Technologies AG 3,399,859 7,400 @ Intershop Communications AG 3,384,030 13,500 Siemens AG 2,020,909 ---------- Total Germany 16,041,667 ---------- HONG KONG: 0.45% 107,800 Hutchison Whampoa 1,355,192 830,000 @ Pacific Century CyberWorks, Ltd. 1,639,664 ---------- Total Hong Kong 2,994,856 ---------- ISRAEL: 0.68% 80,500 Teva Pharmaceutical ADR 4,462,719 ---------- Total Israel 4,462,719 ---------- ITALY: 1.18% 279,600 Alleanza Assicurazioni SPA 3,723,731 298,400 ENI SPA 1,723,539 1,706,000 @ Finmeccanica SPA 2,345,354 ---------- Total Italy 7,792,624 ---------- JAPAN: 8.58% 90,000 Daikin Industries, Ltd. $2,090,853 35,000 Fanuc, Ltd. 3,559,210 118,000 Fujitsu, Ltd. 4,081,429 518,000 Japan Airlines Co., Ltd. 1,967,429 7,100 Kyocera Corp. 1,203,798 371,000 Mitsubishi Electric Corp. 4,014,024 185,000 Mitsui Fudosan Co., Ltd. 2,005,089 88,000 NEC Corp. 2,761,793 185,000 Nippon Sheet Glass Co., Ltd. 2,570,001 250 Nippon Telegraph & Telephone Co., Ltd. 3,322,181 74,000 Nomura Securities Co., Ltd. 1,809,811 170 NTT Docomo, Inc. 4,598,275 104,000 Pioneer Corp. 4,048,066 19,200 Promise Co., Ltd. 1,516,385 19,900 Softbank Corp. 2,700,721 22,500 Sony Corp. 2,099,336 376,000 Toshiba Corp. 4,241,761 38,000 Toyoda Gosei Co., Ltd. 2,410,254 37,000 Toyota Motor Corp. 1,684,275 11,000 @ Trend Micro, Inc. 1,814,241 87,000 Yamato Transport Co., Ltd. 2,160,549 ---------- Total Japan 56,659,481 ---------- NETHERLANDS: 3.48% 130,800 @ ASM Lithography Holding NV 5,771,550 48,500 Heineken NV 2,951,813 35,800 Koninklijke Ahold NV 1,053,716 116,200 Koninklijke Philips Electronics NV 5,519,500 9,200 @ Qiagen NV 1,624,899 36,500 Randstad Holdings NV 1,350,304 70,600 Royal KPN NV 3,157,775 29,200 VNU NV 1,508,159 ---------- Total Netherlands 22,937,716 ---------- RUSSIA: 0.15% 19,400 Lukoll-Holding ADR 991,728 ---------- Total Russia 991,728 ---------- SINGAPORE: 0.65% 43,900 @ Flextronics Int'l, Ltd. 3,015,381 127,000 Singapore Airlines, Ltd. 1,257,499 ---------- Total Singapore 4,272,880 ---------- See Accompanying Notes to Financial Statements 123 Pilgrim Worldwide Growth Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Market Shares Value - ------ ------------ SOUTH KOREA: 0.73% 64,720 Korea Electric Power Corp. $ 2,008,307 8,410 Samsung Electronics 2,783,157 ------------ Total South Korea 4,791,464 ------------ SPAIN: 1.57% 274,400 Altadis SA 4,215,092 145,700 Endesa SA 2,822,335 501 @ Telefonica SA ADR 32,095 154,500 @ Telefonica SA 3,318,776 ------------ Total Spain 10,388,298 ------------ SWEDEN: 3.34% 107,200 Europolitan Holdings AB 1,330,884 38,200 @ NetCom AB 2, 2,819,524 303,900 Nordic Baltic Holding AB 2,291,310 163,400 Skandia Forsakrings AB 4,316,576 176,000 Svenska Handelsbanken AB 2,554,195 326,700 Telefonaktiebolaget LM Ericsson AB ADR 6,534,000 235,400 @ Telia AB 2,215,215 ------------ Total Sweden 22,061,704 ------------ SWITZERLAND: 0.76% 800 Nestle SA 1,601,177 23,400 UBS AG 3,428,309 ------------ Total Switzerland 5,029,486 ------------ UNITED KINGDOM: 8.29% 133,800 @ ARM Holdings PLC ADR 4,398,675 55,800 AstraZeneca PLC 2,605,540 395,143 BAE Systems PLC 2,461,815 422,600 BG Group PLC 2,723,998 558,500 Billiton PLC 2,256,327 444,600 British Airways PLC 2,558,034 144,600 Cable & Wireless PLC 2,454,872 949,400 Centrica PLC 3,146,016 60,600 @ Colt Telecom Group PLC 2,012,680 51,000 @ Energis PLC 1,901,422 670,200 Invensys PLC 2,512,382 135,000 Logica PLC 3,231,528 329,400 Marconi PLC 4,278,894 58,600 Pearson PLC 1,839,854 29,700 Reuters Group PLC ADR 2,968,144 618,171 Rolls-Royce PLC 2,209,775 148,000 Royal Bank of Scotland Group PLC 2,467,805 292,600 Sainsbury (J) PLC 1,323,772 481,600 Shell Transport & Trading Co. 4,051,622 815,731 Vodafone AirTouch PLC 3,307,877 ------------ Total United Kingdom 54,711,032 UNITED STATES: 47.19% 55,600 @ Aether Systems, Inc. $ 11,398,000 138,400 Aetna, Inc. 8,883,550 64,300 @ Amdocs, Ltd. 4,935,025 114,700 @ Amgen, Inc. 8,057,675 128,000 @ Applied Materials, Inc. 11,600,000 436,780 @ AT&T - Liberty Media Group 10,591,915 105,900 @ Cablevision Systems Corp. 7,187,962 79,200 @ Ciena Corp. 13,201,650 167,900 @ Cisco Systems, Inc. 10,672,144 185,300 Citigroup, Inc. 11,164,325 49,800 Corning, Inc. 13,439,775 187,900 @ Dell Computer Corp. 9,265,819 166,000 Enron Corp. 10,707,000 50,200 @ Genentech, Inc 8,634,400 106,800 @ Hughes Electronics Corp. 9,371,700 189,100 @ Infinity Broadcasting Corp. 6,890,331 102,400 Intel Corp. 13,689,600 103,500 @ JDS Uniphase Corp. 12,407,062 395,300 MGM Grand, Inc. 12,699,012 178,400 @ Nextel Communications, Inc. 10,915,850 142,900 @ Oracle Corp. 12,012,531 188,400 @ Qwest Communications Int'l 9,361,125 257,700 Santa Fe Int'l Corp. 9,461,075 38,700 Schlumberger, Ltd. 2,887,987 129,300 @ Sun Microsystems, Inc. 11,758,219 126,600 Texas Instruments, Inc. 8,695,838 53,875 @ VeriSign, Inc. 9,508,938 82,200 @ Veritas Software Corp. 9,289,884 139,500 @ Viacom, Inc. 9,538,313 206,500 Wal-Mart Stores, Inc. 11,899,563 287,000 @ Weatherford Int'l, Inc. 11,426,188 ------------ Total United States 311,552,456 ------------ Total Common Stocks (Cost $513,051,880) 637,410,172 ------------ PREFERRED STOCKS: 0.26% BRAZIL: 0.26% 193,648 Banco Bradesco SA $ 1,685,761 ------------ Total Brazil 1,685,761 ------------ Total Preferred Stocks (Cost $1,558,209) 1,685,761 ------------ Total Long-Term Investments (Cost $514,610,089) $639,095,933 ------------ SHORT-TERM INVESTMENTS: 4.13% Repurchase Agreements: 4.13% $27,281,000 State Street Repurchase Agreement, 6.20% due 07/03/00 (Collateralized by $22,220,000 U.S. Treasury Bonds, 8.125% Market Value $27,830,550, Due 08/15/21) $ 27,281,000 ------------- Total Short-Term Investments (Cost $27,281,000) 27,281,000 ------------- Total Investments in Securities (Cost $ 541,891,089)* 100.94% $ 666,376,933 Other Assets and Liabilities-Net -0.94% (6,197,663) ------ ------------- Net Assets 100.00% $ 660,179,270 ====== ============= - ---------- @ Non-income producing security ADR American Depository Receipt * Cost for federal income tax purposes is $543,295,122. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 135,547,277 Gross Unrealized Depreciation (12,465,466) ------------- Net Unrealized Appreciation $ 123,081,811 ------------- See Accompanying Notes to Financial Statements 124 Pilgrim Worldwide Growth Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Percentage of Industry Net Assets - -------- ---------- Aerospace/Defense 1.06% Airlines 1.12 Auto Manufacturers 0.26 Auto Parts & Equipment 0.60 Banks 2.32 Biotechnology 2.77 Beverages 0.45 Building Materials 0.71 Cellular Telecommunication 3.05 Chemicals 0.21 Commercial Services 0.52 Computers 10.01 Diversified Financial Services 2.45 Electric 0.73 Electrical 1.67 Components & Equipment Electronics 2.79 Energy-Alternate Sources 0.29 Engineering & Construction 0.37 Fiber Optics 5.91 Food 0.95 Forest & Paper 0.24 Gas 0.89 Holding Companies-Diversified 0.67 Home Furnishing 0.93 Insurance 2.96 Internet 0.41 Lodging 2.22 Machinery-Diversified 0.25 Media 7.68 Mining 0.34 Miscellaneous Manufacturing 0.97 Oil & Gas Producers 4.46 Oil & Gas Services 2.17 Pharmaceuticals 2.41 Pipelines 1.62 Real Estate 0.30 Retail 1.80 Satellite Telecommunications 1.42 Semiconductors 6.95 Software 2.48 Telecommunications Equipment 7.48 Telecommunications Services 4.27 Telephone-Integrated 2.73 Telephone-Local 0.22 Tobacco 0.64 Transportation 0.33 Wireless Equipment 1.73 Short-Term Investments 4.13 Other Assets and Liabilities, Net -0.94 ------ NET ASSETS 100.00% ====== The Worldwide Growth Fund had the following outstanding forward foreign currency exchange contracts as of June 30, 2000: Settlement Currency to Currency to Unrealized Appreciation/ Date Receive Deliver (Depreciation) ---- ------- ------- -------------- 7/3/00 720,007 $686,527 $ 864 (EUR) (USD) 7/3/00 $693,804 463,618 (7,696) (USD) (GBP) 7/5/00 $224,961 150,224 (2,344) (USD) (GBP) ------- $(9,176) ======= See Accompanying Notes to Financial Statements 125 Pilgrim International Core Growth Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 - -------------------------------------------------------------------------------- Market Shares Value - ------ ---------- COMMON STOCKS: 94.36% AUSTRALIA: 0.53% 8,600 News Corp., Ltd. ADR $ 468,700 ---------- Total Australia 468,700 ---------- BELGIUM: 0.95% 15,500 Fortis (B) 451,038 8,800 @ Lernout & Hauspie Speech Products 387,750 ---------- Total Belgium 838,788 ---------- BRAZIL: 1.54% 17,400 Petroleo Brasileiro SA ADR 525,680 16,868 Tele Norte Leste Participacoes ADR 398,507 4,400 Telecomunicacoes Brasileiras SA ADR 427,350 ---------- Total Brazil 1,351,537 ---------- CANADA: 6.93% 43,100 Abitibi-Consolidated, Inc. 404,062 31,200 @ Anderson Exploration, Ltd. 567,081 5,600 @ Ballard Power Systems, Inc. 502,950 12,100 @ Biovail Corp. 670,794 5,100 @ C-Mac Industries, Inc. 241,216 8,900 Magna Int'l, Inc. 418,240 24,400 Nortel Networks Corp. 1,665,300 19,500 @ Precision Drilling Corp. 753,188 11,200 @ QLT, Inc. 865,900 ---------- Total Canada 6,088,731 ---------- CHINA: 0.52% 2,180,000 @ PetroChina Co., Ltd. 453,031 ---------- Total China 453,031 ---------- DENMARK: 0.84% 11,000 Tele Danmark AS 740,305 ---------- Total Denmark 740,305 ---------- FINLAND: 3.44% 9,500 Helsingin Puhelin OYJ 930,546 28,000 Nokia OYJ ADR 1,398,250 15,200 Sonera OYJ 692,921 ---------- Total Finland 3,021,717 ---------- FRANCE: 12.26% 13,000 Accor SA 532,808 21,500 Alcatel SA 1,410,140 16,900 Alstom 456,766 11,700 Aventis SA 853,946 4,700 Axa 740,370 853 @ Bouygues SA 570,051 4,600 Groupe Danone 610,435 10,500 Lagardere S.C.A. 801,948 27,400 Rhodia SA 460,394 20,000 Societe Television Francaise 1 1,393,862 16,600 ST Microelectronics NV 1,065,513 7,074 Total Fina Elf SA 1,084,620 8,900 Vivendi (EX-Generale des Eaux) 785,532 ---------- Total France 10,766,385 ---------- GERMANY: 5.43% 18,500 Deutsche Lufthansa AG 431,835 18,400 Dresdner Bank AG 744,819 10,400 EM.TV & Merchandising AG 615,591 6,600 @ Epcos AG 669,168 11,200 @ Infineon Technologies AG 913,152 1,900 @ Intershop Communications AG 868,872 3,500 Siemens AG 523,939 ---------- Total Germany 4,767,376 ---------- HONG KONG: 0.93% 30,800 Hutchison Whampoa 387,198 218,000 @ Pacific Century CyberWorks, Ltd. 430,659 ---------- Total Hong Kong 817,857 ---------- ISRAEL: 1.41% 22,300 Teva Pharmaceutical ADR 1,236,256 ---------- Total Israel 1,236,256 ---------- ITALY: 2.63% 75,000 Alleanza Assicurazioni SPA 998,855 79,000 ENI SPA 456,299 619,600 @ Finmeccanica SPA 851,806 ---------- Total Italy 2,306,960 ---------- JAPAN: 18.20% 29,000 Daikin Industries, Ltd. 673,719 9,600 Fanuc, Ltd. 976,241 32,000 Fujitsu, Ltd. 1,106,828 135,000 Japan Airlines Co., Ltd. 512,747 1,900 Kyocera Corp. 322,143 100,000 Mitsubishi Electric Corp. 1,081,947 48,000 Mitsui Fudosan Co., Ltd. 520,239 34,000 NEC Corp. 1,067,056 71,000 @ Nippon Sheet Glass Co., Ltd. 986,325 66 @ Nippon Telegraph & Telephone Corp. 877,056 20,000 Nomura Securities Co., Ltd. 489,138 45 @ NTT Docomo, Inc. 1,217,191 28,000 Pioneer Corp. 1,089,864 5,000 Promise Co., Ltd. 394,892 5,400 Softbank Corp. 732,859 2,700 Sony Corp. ADR 254,644 3,500 Sony Corp. 326,563 101,000 @ Toshiba Corp. 1,139,409 11,000 Toyoda Gosei Co, Ltd. 697,705 10,000 Toyota Motor Corp. 455,209 3,000 @ Trend Micro, Inc. 494,793 23,000 Yamato Transport Co., Ltd. 571,180 ---------- Total Japan 15,987,748 ---------- NETHERLANDS: 6.63% 29,400 @ ASM Lithography Holding NV 1,297,275 12,800 Heineken NV 779,035 9,500 Koninklijke Ahold NV 279,617 31,300 Koninklijke Philips Electronics 1,486,750 2,400 @ Qiagen NV 423,887 10,000 Randstad Holdings NV 369,946 18,400 Royal KPN NV 822,990 7,100 VNU NV 366,710 ---------- Total Netherlands 5,826,210 ---------- RUSSIA: 0.35% 6,000 Lukoil-Holding ADR 306,720 ---------- Total Russia 306,720 ---------- See Accompanying Notes to Financial Statements 126 Pilgrim International Core Growth Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 - -------------------------------------------------------------------------------- Market Shares Value - ------ ---------- SINGAPORE: 1.10% 9,300 @ Flextronics Int'l, Ltd. $ 638,794 33,000 Singapore Airlines, Ltd. 326,751 ---------- Total Singapore 965,545 ---------- SOUTH KOREA: 1.45% 17,720 Korea Electric Power Corp. 549,864 2,200 Samsung Electronics 728,055 ---------- Total South Korea 1,277,919 ---------- SPAIN: 3.13% 73,900 Altadis SA 1,135,187 38,300 Endesa SA 741,904 40,400 Telefonica SA 867,822 ---------- Total Spain 2,744,913 ---------- SWEDEN: 6.29% 28,000 Europolitan Holdings AB 347,619 8,100 @ NetCom AB 597,857 83,700 Nordic Baltic Holding AB 631,071 36,400 Skandia Forsakrings AB 961,587 47,700 Svenska Handelsbanken AB 692,245 85,800 Telefonaktiebolaget LM Ericsson AB ADR 1,716,000 61,600 @ Telia AB 579,683 ---------- Total Sweden 5,526,062 ---------- SWITZERLAND: 1.52% 200 Nestle SA 400,294 6,400 UBS AG 937,657 ---------- Total Switzerland 1,337,951 ---------- UNITED KINGDOM: 15.92% 90,500 @ ARM Holdings PLC $ 964,711 14,800 AstraZeneca PLC 691,075 87,698 BAE Systems PLC 546,377 96,900 BG Group PLC 624,599 113,300 Billiton PLC 457,729 117,700 British Airways PLC 677,194 37,900 Cable & Wireless PLC 643,428 270,800 Centrica PLC 897,347 15,300 @ Colt Telecom Group PLC 508,152 13,400 @# Energis PLC 499,589 189,200 Invensys PLC 709,255 29,700 Logica PLC 710,936 85,500 Marconi PLC 1,110,642 16,100 Pearson PLC 505,489 8,700 Reuters Group PLC ADR 869,456 167,104 Rolls-Royce PLC 597,347 40,400 Royal Bank of Scotland Group PLC 673,644 80,500 Sainsbury (J) PLC 364,196 127,500 Shell Transport & Trading Co. 1,072,637 213,115 Vodafone AirTouch PLC 864,204 ---------- Total United Kingdom 13,988,007 ---------- UNITED STATES: 2.36% 11,800 @ Amdocs, Ltd. 905,650 14,100 Santa Fe Int'l Corp. 492,619 9,000 Schlumberger, Ltd. 671,625 ---------- Total United States 2,069,894 ---------- Total Common Stocks (Cost $70,576,905) 82,888,612 ---------- PREFERRED STOCKS: 0.50% BRAZIL: 0.50% 50,903,100 Banco Bradesco SA 440,305 ---------- Total Brazil 440,305 ---------- Total Preferred Stocks (Cost $411,032) 440,305 ---------- Total Long-Term Investments (Cost $70,987,937) 83,328,917 ---------- Principal Amount Value - ------ ----------- SHORT-TERM INVESTMENTS: 4.60% Repurchase Agreement: 4.60% $4,042,000 State Street Repurchase Agreement, 6.20% due 07/03/00 (Collateralized by $3,625,000 U.S. Treasury Bonds, 7.500% Due 11/15/16, Market Value $4,127,969) $ 4,042,000 ----------- Total Short-Term Investments (Cost $4,042,000) 4,042,000 ----------- Total Investments in Securities (Cost $ 75,029,937)* 99.46% $87,370,917 Other Assets and Liabilities-Net 0.54% 475,861 ------ ----------- Net Assets 100.00% $87,846,778 ====== =========== - ---------- @ Non-income producing security ADR American Depository Receipt # Securities with purchases pursuant to Rule 144A, under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. * Cost for federal income tax purposes is $75,442,633. Net unrealized appreciation consists of: Gross Unrealized Appreciation $15,006,650 Gross Unrealized Depreciation (3,078,366) ----------- Net Unrealized Appreciation $11,928,284 =========== See Accompanying Notes to Financial Statements 127 Pilgrim International Core Growth Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 - -------------------------------------------------------------------------------- Percentage of Industry Net Assets - -------- ---------- Aerospace/Defense 2.27% Airlines 2.22 Auto Manufacturers 0.52 Auto Parts & Equipment 1.27 Banks 4.69 Beverages 0.89 Biotechnology 0.48 Building Materials 1.77 Chemicals 0.53 Commercial Services 1.32 Computers 3.55 Diversified Financial Services 1.52 Electric 1.47 Electrical Components & Equipment 3.36 Electronics 6.59 Energy-Alternate Sources 0.57 Engineering & Construction 0.77 Food 1.88 Forest Products & Paper 0.46 Gas 1.73 Holding Companies-Diversified 1.35 Home Furnishings 1.90 Insurance 3.07 Internet 0.83 Lodging 0.61 Machinery 0.52 Media 4.80 Mining 0.52 Miscellaneous Manufacturing 1.41 Oil & Gas Producers 6.50 Oil & Gas Services 0.77 Pharmaceuticals 4.92 Real Estate 0.59 Semiconductors 3.35 Software 2.04 Telecommunications 21.88 Tobacco 1.29 Transportation 0.65 Short-Term Investments 4.60 Other Assets and Liabilities, Net 0.54 ------ NET ASSETS 100.00% ====== The International Core Growth Fund had the following outstanding forward foreign currency exchange contracts as of June 30, 2000: Settlement Currency to Currency to Unrealized Appreciation/ Date Receive Deliver (Depreciation) ---- ------- ------- -------------- 7/3/00 439,143 $418,503 $ 747 (EUR) (USD) 7/3/00 $190,042 126,991 (2,108) (USD) (GBP) 7/5/00 $ 62,320 41,616 (649) (USD) (GBP) ------- $(2,010) ======= See Accompanying Notes to Financial Statements 128 Pilgrim International SmallCap Growth Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 - -------------------------------------------------------------------------------- Market Shares Value - ------ ----------- COMMON STOCKS: 88.02% AUSTRALIA: 0.12% 277,500 @ Protel Int'l, Ltd. $ 829,794 ----------- Total Australia 829,794 ----------- AUSTRIA: 0.48% 45,400 @ Austria Technologie & Systemtec 3,424,127 ----------- Total Austria 3,424,127 ----------- CANADA: 7.51% 409,200 @ Anderson Exploration, Ltd. 7,437,486 82,100 @ Canadian Hunter Exploration, Ltd 1,744,625 75,400 @ Certicom Corp. 2,567,675 50,886 @ Certicom Corp. 3,484,896 162,600 @ C-Mac Industries, Inc. 7,690,540 211,800 @ Cognos, Inc. 8,763,225 563,700 Petro-Canada, Ltd. 10,531,287 89,200 @ QLT, Inc. 6,896,275 95,100 @ RIO Alto Exploration, Ltd. 1,741,358 69,100 @ Visible Genetics, Inc. 3,118,138 ----------- Total Canada 53,975,505 ----------- DENMARK: 1.95% 63,800 @ ISS A/S 4,857,019 249,600 Vestas Wind Systems AS 9,165,551 ----------- Total Denmark 14,022,570 ----------- FINLAND: 1.00% 226,000 Perlos OYJ 7,141,729 ----------- Total Finland 7,141,729 ----------- FRANCE: 7.92% 326,200 @ Air France 5,636,759 23,500 Altran Technologies SA 4,601,511 8,426 @ Bouygues SA 5,631,012 53,000 @ Business Objects SA ADR 4,670,625 37,600 Coflexip Stena Offshore 4,558,883 17,600 @ Devoteam SA 1,779,408 45,600 Galeries Lafayette 9,251,043 24,500 Hermes Int'l 3,309,706 91,493 @ Integra SA 814,087 133,000 M6-Metropole Television 8,075,616 175,100 Rhodia SA 2,942,156 50,900 @ Wavecom SA ADR 5,599,000 ----------- Total France 56,869,806 ----------- GERMANY: 12.62% 12,700 @ ADVA AG Optical Networking 7,165,692 96,600 Aixtron 13,086,588 39,000 CE Consumer Electronic AG 5,249,895 56,700 DePfa Deutsche Pfandbriefbank A 5,765,004 113,000 EM.TV & Merchandising AG 6,688,628 744,000 FAG Kugelfischer Georg Schaefer AG 5,483,491 10,700 @ Intershop Communications AG 4,893,124 25,900 @ Intertainment AG 1,743,234 176,480 Kamps AG 5,610,566 374,000 @ Senator Entertainment AG 7,480,361 82,700 SGL Carbon 5,487,281 160,200 Singulus Technologies 9,757,760 35,000 Software AG 3,191,085 81,800 @ Suess Microtec 3,061,303 59,100 @ Telegate AG 5,980,814 ----------- Total Germany 90,644,826 ----------- HONG KONG: 0.64% 3,044,000 Giordano Int'l, Ltd. 4,627,208 ----------- Total Hong Kong 4,627,208 ----------- INDONESIA: 0.00% 500 PT Jaya Real Property 43 ----------- Total Indonesia 43 ----------- IRELAND: 0.43% 1,086,500 @ Parthus Technologies 3,066,029 ----------- Total Ireland 3,066,029 ----------- ISRAEL: 1.73% 87,400 @ Batm Advanced Communications, Ltd. 7,627,227 62,400 @ Nice Systems, Ltd. ADR 4,816,500 ----------- Total Israel 12,443,727 ----------- ITALY: 3.03% 371,400 ACEA SPA 5,917,867 515,500 Class Editori SPA 7,549,548 1,400,900 Saipem SPA 8,292,123 ----------- Total Italy 21,759,538 ----------- JAPAN: 20.64% 1,211,000 @ All Nippon Airways Co., Ltd. 3,401,140 391,000 Alps Electric Co., Ltd. 7,259,507 444,000 Asahi Breweries, Ltd. 5,310,174 804,000 Citizen Watch Co., Ltd. 7,759,258 171,000 Credit Saison Co., Ltd. 3,964,563 355,000 Daiichi Pharmaceutical Co., Ltd. 9,000,047 948,000 Fujikura, Ltd. 6,298,855 337,000 Fukuyama Transporting Co., Ltd. 2,112,106 53,000 Hirose Electric Co., Ltd. 8,246,831 707,000 Hitachi Cable, Ltd. 7,815,947 1,322,000 Komatsu, Ltd. 9,294,680 1,384,000 Kubota Corp. 5,021,818 151,400 Meitec Corp. 5,992,932 1,040,000 Mitsukoshi, Ltd. 4,606,758 775,000 NGK Insulators, Ltd. 9,597,569 333,000 Nippon Electric Glass Co., Ltd. 7,689,082 132,000 Nitto Denko Corp. 5,088,168 1,006,000 OKI Electric Industry Co., Ltd. 7,821,969 83,000 Ono Pharmaceutical Co., Ltd. 3,559,210 574,000 Sapporo Breweries, Ltd. 2,342,416 1,599,000 Sumitomo Osaka Cement Co., Ltd. 9,463,946 373,000 The Bank of Fukuoka, Ltd. 2,538,109 718,000 The Bank of Yokohama, Ltd. 3,214,269 808,000 The Toyo Trust & Banking Co., Ltd. 2,726,205 172,000 Ushio, Inc. 4,733,425 284,000 Yaskawa Electric Corp. 3,391,245 ----------- Total Japan 148,250,229 ----------- MEXICO: 0.20% 370,922 @ Corp Interamericana de Entretenmiento SA 1,450,386 ----------- Total Mexico 1,450,386 ----------- NETHERLANDS: 3.04% 233,200 @ ASM Int'l NV 6,179,800 207,100 @ BE Semiconductor Industries NV 3,232,695 42,600 @ Meta4 NV 351,797 216,300 Unique Int'l NV 5,183,191 164,600 @ VersaTel Telecom Int'l NV 6,914,319 ----------- Total Netherlands 21,861,802 ----------- See Accompanying Notes to Financial Statements 129 Pilgrim International SmallCap Growth Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Market Shares Value - ------ ------------- NORWAY: 2.89% 453,400 @ Frontline, Ltd. $ 5,548,278 196,400 @ Petroleum Geo-Services ASA 3,353,254 320,400 Schibsted ASA 5,937,137 224,300 Tomra Systems ASA 5,947,002 ------------ Total Norway 20,785,671 ------------ SINGAPORE: 0.59% 480,376 Datacraft Asia, Ltd. 4,227,309 ------------ Total Singapore 4,227,309 ------------ SOUTH KOREA: 0.65% 366,520 Hyundai Motor Co. 4,700,555 ------------ Total South Korea 4,700,555 ------------ SPAIN: 0.57% 108,100 Acciona SA 4,117,802 ------------ Total Spain 4,117,802 ------------ SWEDEN: 3.06% 817,500 Enea Data AB 5,561,224 173,200 @ Modern Times Group AB 8,247,619 187,200 Nobel Biocare AB 4,138,776 72,100 @ Ortivus AB 241,151 72,400 @# Pyrosequencing AB 837,279 402,000 @ Telelogic AB 2,962,585 ------------ Total Sweden 21,988,634 ------------ SWITZERLAND: 6.21% 1,000 Ascom Holding AG 3,218,292 18,000 Gretag Imaging Group 3,464,721 569 @ Kudelski SA 7,157,408 5,180 Logitech Int'l SA 3,686,618 8,800 SEZ Holding AG 8,053,945 3,900 Straumann Holding AG 5,857,292 3,120 Synthes-Stratec, Inc. 1,422,963 6,100 Tecan Group AG 5,837,124 21,700 Unaxis Holding AG 5,892,908 ------------ Total Switzerland 44,591,271 ------------ TAIWAN: 0.52% 147,271 Macronix Int'l ADR 3,764,620 ------------ Total Taiwan 3,764,620 ------------ UNITED KINGDOM: 11.53% 63,500 @ ARM Holdings PLC ADR 2,087,562 302,500 @ ARM Holdings PLC 3,224,586 40,700 @ Autonomy Corporation PLC 4,924,700 455,000 @ Baltimore Technologies PLC 3,476,725 923,800 Barratt Developments PLC 3,655,252 122,500 @ Capital Radio PLC 2,859,097 594,700 @ Celltech Group PLC 11,490,964 1,641,100 Cookson Group PLC 5,475,342 189,400 Dialog Semiconductor, Ltd. 9,945,110 630,500 @ Eidos PLC 4,579,246 24,600 @ Future Network PLC (The) 292,195 444,200 Hanson PLC 3,162,320 305,900 Matalan PLC 2,383,715 530,600 Pace Micro Technology PLC 7,667,226 415,500 @ Psion PLC 4,001,631 1,015,500 Safeway PLC 3,948,941 278,000 Smiths Industries PLC 3,598,591 922,600 Spirent PLC 6,037,640 ------------ Total United Kingdom 82,810,843 ------------ UNITED STATES: 0.69% 110,900 @ OpenTV Corp. 4,976,638 ------------ Total United States 4,976,638 ------------ Total Common Stocks (Cost $533,160,361) 632,330,662 ------------ PREFERRED STOCKS: 1.79% GERMANY: 1.79% 26,000 Marschollek Lautenschlaeger 12,895,133 ------------ Total Preferred Stocks (Cost $10,731,362) 12,895,133 ------------ RIGHTS: 0.00% GERMANY: 0.00% 25,900 @ Intertainment AG 1,484 ------------ Total Rights (Cost $0) 1,484 ------------ Total Long-Term Investments (Cost $543,891,723) 645,227,279 ------------ Principal Amount Value - --------- ------------- SHORT-TERM INVESTMENTS: 9.32% Repurchase Agreements: 9.32% $66,960,000 State Street Repurchase Agreement, 6.200% due 07/03/00 (Collateralized by $53,100,000 U.S. Treasury Bonds, 8.500% Due 02/15/20, Market Value $68,299,875) $ 66,960,000 ------------ Total Short-Term Investments (Cost $66,960,000) 66,960,000 ------------ Total Investments in Securities (Cost $610,851,723)* 99.13% $712,187,279 Other Assets and Liabilities-Net 0.87% 6,231,781 ------ ------------ Net Assets 100.00% $718,419,060 ====== ============ @ Non-income producing security ADR American Depository Receipt # Securities with purchases pursuant to Rule 144A, under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. * Cost for federal income tax purposes is $611,757,668. Net unrealized appreciation consists of: Gross Unrealized Appreciation $133,278,996 Gross Unrealized Depreciation (32,849,385) ------------ Net Unrealized Appreciation $100,429,611 ============ See Accompanying Notes to Financial Statements 130 Pilgrim International SmallCap Growth Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Percentage of Industry Net Assets - -------- ---------- Airlines 1.26% Apparel 0.46 Auto Manufacturers 0.66 Banks 1.98 Beverages 1.06 Biotechnology 0.43 Building Materials 1.76 Chemicals 1.17 Commercial Services 1.65 Computers 5.18 Diversified Financial Services 2.35 Electrical Components & Equipment 4.97 Electrics 0.82 Electronics 9.25 Engineering & Construction 2.51 Entertainment 0.20 Environmental Control 0.83 Food 1.33 Healthcare Products 2.55 Machinery-Construction & Mining 1.29 Machinery-Diversified 2.48 Media 6.80 Miscellaneous Manufacturing 2.51 Oil & Gas Producers 2.99 Oil & Gas Services 2.26 Pharmaceuticals 4.31 Retail 3.98 Semiconductors 8.75 Software 5.59 Telecommunications 7.36 Transportation 1.07 Short-Term Investments 9.32 Other Assets and Liabilities, Net 0.87 ------ NET ASSETS 100.00% ====== The International SmallCap Growth Fund had the following outstanding forward foreign currency exchange contracts as of June 30, 2000: Settlement Currency to Currency to Unrealized Appreciation/ Date Receive Deliver (Depreciation) ---- ------- ------- -------------- 7/3/00 $ 189,824 199,185 $ (339) (USD) (EUR) 7/31/00 $ 515,855 545,994 (5,405) (USD) (EUR) 7/31/00 $ 491,185 519,882 (5,147) (USD) (EUR) 7/3/00 $ 526,613 347,512 (209) (USD) (GBP) 7/3/00 162,609 $ 245,946 98 (GBP) (USD) 7/5/00 279,690 $ 418,835 (4,363) (GBP) (USD) 7/5/00 1,626,504 $ 2,462,202 1,139 (GBP) (USD) 7/3/00 $ 154,377 16,309,924 662 (USD) (JPY) 7/5/00 $ 165,903 1,745,298 1,415 (USD) (JPY) --------- $ (12,149) ========= See Accompanying Notes to Financial Statements 131 Pilgrim Emerging Countries Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 - -------------------------------------------------------------------------------- Market Shares Value - ------ ------------ COMMON STOCKS: 93.97% BRAZIL: 6.77% 41,300 Companhia Brasileira de Distribuicao Grupo Pao de Acucar ADR $ 1,326,762 199,600 Embratel Participacoes SA ADR 4,715,550 43,600 Globo Cabo SA ADR 604,950 29,200 Tele Celular Sul Participacoes ADR 1,321,300 113,610 Tele Norte Leste Participacoes ADR 2,684,028 26,600 Telecomunicacoes Brasileiras SA ADR 2,583,525 47,500 Telesp Celular Participacoes SA ADR 2,131,563 65,100 Unibanco - Uniao de Bancos Brasilieros GDR 1,871,625 ------------ Total Brazil 17,239,303 ------------ CHINA: 1.87% 17,377,000 @ PetroChina Co., Ltd. 3,611,153 5,801,000 Yizheng Chemical Fibre Co. 1,153,428 ------------ Total China 4,764,581 ------------ CZECH REPUBLIC: 1.40% 115,800 @ Cesky Telecom AS GDR 1,945,440 36,480 @# Ceske Radiokomunikace GDR 1,623,360 ------------ Total Czech Republic 3,568,800 ------------ EGYPT: 0.73% 45,500 # Al-Ahram Beverages Co. GDR 786,272 33,200 @ Mobinil-Eqyptian Mobile Services 1,080,464 ------------ Total Egypt 1,866,736 ------------ HONG KONG: 5.20% 1,043,400 @ China Mobile (Hong Kong), Ltd. 9,201,943 73,000 @ China Unicom ADR 1,551,250 1,036,000 Giordano Int'l, Ltd. 1,574,832 936,000 Legend Holdings, Ltd. 906,523 ------------ Total Hong Kong 13,234,548 ------------ HUNGARY: 1.11% 23,300 EGIS Rt. 974,842 53,900 Matav Rt. ADR 1,856,181 ------------ Total Hungary 2,831,023 ------------ INDIA: 6.69% 40,400 Himachal Futuristic Communications, Ltd. 1,284,747 34,180 @ Infosys Technologies, Ltd. 6,368,159 54,900 NIIT, Ltd. 2,717,765 485,000 @ Reliance Industries, Ltd. 3,702,945 44,300 Satyam Computer Services, Ltd. 2,958,922 ------------ Total India 17,032,538 ------------ ISRAEL: 6.28% 671,900 Bank Hapoalim, Ltd. 1,948,395 24,100 @ Check Point Software Technologies, Ltd. 5,103,175 16,300 @ Gilat Satellite Networks, Ltd. 1,130,812 25,200 @ M-Systems Flash Disk Pioneers, Ltd. 1,962,450 31,300 @ Orckit Communications, Ltd. 942,913 88,400 Teva Pharmaceutical ADR 4,900,675 ------------ Total Israel 15,988,420 ------------ MALAYSIA: 3.87% 502,000 AMMB Holdings Berhad 1,677,737 612,000 Malayan Banking Berhad 2,480,211 1,743,000 Tenaga Nasional Berhad 5,687,684 ------------ Total Malaysia 9,845,632 ------------ MEXICO: 15.70% 128,700 Coca-Cola Femsa SA ADR 2,429,213 1,494,430 @ Corp. Interamericana de Entretenmiento SA 5,843,546 28,100 Fomento Economico Mexicano SA ADR de CV 1,210,056 1,178,000 @ Grupo Financiero Banamex Accival SA de CV 4,953,199 127,200 Grupo Radio Centro SA ADR de CV 1,446,900 44,700 Grupo Televisa SA GDR 3,081,506 234,931 Telefonos de Mexico SA ADR 13,420,433 325,000 TV Azteca SA de CV ADR 4,285,938 526,000 TV Azteca SA de CV 430,587 1,212,000 @ Wal-Mart De Mexico SA de CV 2,843,510 ------------ Total Mexico 39,944,888 ------------ POLAND: 0.96% 21,200 Prokom Software SA 1,110,050 25,500 Softbank SA GDR 1,323,353 ------------ Total Poland 2,433,403 ------------ RUSSIA: 2.56% 26,000 @ Golden Telecom, Inc. 773,500 68,700 Lukoil-Holding ADR 3,511,944 157,800 Surgutneftegaz ADR 2,102,685 6,000 @ Vimpelcom ADR 132,750 ------------ Total Russia 6,520,879 ------------ SINGAPORE: 4.43% 37,600 @ Chartered Semiconductor Manufacturing, Ltd. ADR 3,384,000 897,624 Datacraft Asia, Ltd. 7,899,091 ------------ Total Singapore 11,283,091 ------------ SOUTH AFRICA: 2.78% 376,565 Dimension Data Holdings, Ltd. 3,113,530 75,500 Impala Platinum Holdings, Ltd. 2,806,352 240,300 M-Cell, Ltd. 1,163,427 ------------ Total South Africa 7,083,309 ------------ SOUTH KOREA: 16.51% 249,720 Korea Electric Power Corp. 7,748,985 58,780 Korea Telecom Corp. 5,176,741 23,610 @ Korea Telecom Freetel 1,573,259 123,000 Pohang Iron & Steel Co. ADR 2,952,000 52,981 Samsung Electronics 17,533,229 21,450 SK Telecom Co., Ltd. 7,021,591 ------------ Total South Korea 42,005,805 ------------ TAIWAN: 11.55% 435,600 Hon Hai Precision Industry 3,941,312 764 Macronix Int'l ADR 19,517 896,090 @ Macronix Int'l 2,245,693 672,600 @ Systex Corp. 2,364,225 2,138,120 Taiwan Semiconductor Manufacturing Co. 10,159,985 3,313,600 United Microelectronics Corp., Ltd. 9,220,922 70,000 @ Via Technologies, Inc. 1,082,181 11,946 @# Winbond Electronics Corp. GDR 345,204 ------------ Total Taiwan 29,379,039 ------------ See Accompanying Notes to Financial Statements 132 Pilgrim Emerging Countries Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Market Shares Value - ---------- ------------ TURKEY: 4.01% 2,737,200 Arcelik AS $ 1,345,625 12,776,820 @ Dogan Yayin Holding AS 2,162,369 13,022,170 Hurriyet Gazetecilik ve Matbaaccilik AS 1,259,367 7,472,500 Tofas Turk Otomobil Fabrikasi AS 1,294,768 22,872,269 Turkiye Garanti Bankasi AS 2,764,956 455,400 @ Vestel Elektronik Sanayi ve Ticaret AS 1,376,297 ------------ Total Turkey 10,203,382 ------------ UNITED STATES: 1.55% 17,100 @ Amdocs, Ltd. 1,312,425 ------------ 171,600 @ Tricom SA ADR 2,627,625 Total United States 3,940,050 ------------ Total Common Stocks (Cost $203,519,435) 239,165,427 ------------ PREFERRED STOCKS: 4.95% BRAZIL: 4.95% 250,663 Banco Bradesco SA 2,182,097 50,700 Companhia Vale do Rio Doce 1,430,901 62,599 Electropaulo Metropolitana 4,408,125 151,074 Petroleo Brasileiro SA 4,565,308 ------------ Total Brazil 12,586,431 ------------ Total Preferred Stocks (Cost $8,295,911) 12,586,431 ------------ Total Long-Term Investments (Cost $211,815,346) 251,751,858 ------------ Principal Amount Value - --------- ------------ SHORT-TERM INVESTMENTS: 0.48% Repurchase Agreements: 0.48% $1,218,000 State Street Repurchase Agreement, 6.20% due 07/03/00 (Collateralized by $1,120,000 U.S. Treasury Bonds, 8.50% Due 05/15/16, Market Value $1,247,400) $ 1,218,000 ------------ Total Short-Term Investments (Cost $1,218,000) 1,218,000 ------------ Total Investments in Securities (Cost $ 213,033,346)* 99.40% $252,969,858 Other Assets and Liabilities-Net 0.60% 1,524,101 ------ ------------ Net Assets 100.00% $254,493,959 ====== ============ @ Non-income producing security # Securities with purchases pursuant to Rule 144A, under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. ADR American Depository Receipt GDR Global Depository Receipt * Cost for federal income tax purposes is $214,075,987. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 48,878,486 Gross Unrealized Depreciation (9,984,615) ------------ Net Unrealized Appreciation $ 38,893,871 ============ See Accompanying Notes to Financial Statements 133 Pilgrim Emerging Countries Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Percentage of Industry Net Assets - -------- ---------- Appliances 0.53% Auto Manufacturers 0.51 Banks 5.08 Beverages 1.26 Cellular Telecom 5.91 Chemicals 1.91 Computers 5.28 Diversified Financial Service 1.95 Electric 7.01 Electrical Components & Equipment 6.89 Electronics 1.55 Entertainment 2.30 Food 0.52 Holding Companies-Diversified 0.47 Home Furnishings 0.54 Iron/Steel 1.16 Media 5.21 Mining 1.66 Oil & Gas Producers 5.42 Pharmaceuticals 2.31 Retail 1.74 Semiconductors 10.40 Software 5.69 Telecommunication Equipment 3.98 Telecommunication Services 8.64 Telecommunications 0.44 Telephone-Integrated 7.66 Telephone-Local 1.05 Telephone-Long Distance 1.85 Short-Term Investments 0.48 Other Assets and Liabilities, Net 0.60 ------ NET ASSETS 100.00% ====== The Emerging Countries Fund had the following outstanding forward foreign currency exchange contracts as of June 30, 2000: Settlement Currency to Currency to Unrealized Appreciation/ Date Receive Deliver (Depreciation) ---- ------- ------- -------------- 7/3/00 $1,298,806 10,125,230 $ (50) (USD) (HKD) See Accompanying Notes to Financial Statements 134 Pilgrim Asia-Pacific Equity Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 - -------------------------------------------------------------------------------- Market Shares Value - ---------- ------------ COMMON STOCKS: 98.66% CHINA: 1.00% 400,000 Great Wall Technology Co. $ 277,083 ------------ Total China 277,083 ------------ HONG KONG: 31.30% 100,000 ASM Pacific Technology 374,575 150,000 Bank of East Asia Hkd 350,202 420,000 Cable & Wireless Hong Kong Telecom, Ltd. 923,995 120,000 Cheung Kong Holdings 1,327,689 2,500,000 China National Aviation 455,391 150,000 @ China Telecom 1,322,878 140,000 Citic Pacific, Ltd. 732,730 70,000 Dao Heng Bank Group 309,794 95,700 Hutchison Whampoa 1,203,079 750,000 JCG Holdings, Ltd. 375,216 750,000 NG Fung Hong, Ltd. 401,674 250,000 @ Pacific Century Cyberworks, Ltd. 493,875 60,000 Television Broadcasts, Ltd. 400,231 ------------ Total Hong Kong 8,671,329 ------------ INDONESIA: 0.77% 781,428 Matahari Putra Prima 66,961 90,000 PT Gudang Garam 145,501 ------------ Total Indonesia 212,462 ------------ MALAYSIA: 5.69% 80,000 Genting Berhad 294,737 85,000 Malayan Bank Berhad 344,473 103,000 Resorts World Berhad 281,895 90,000 Telekom Malaysia Berhad 310,263 106,000 Tenaga Nasional Berhad 345,895 ------------ Total Malaysia 1,577,263 ------------ PHILIPPINES: 0.26% 40,000 Bank of Philippine Islands 72,139 ------------ Total Philippines 72,139 ------------ SINGAPORE: 12.08% 33,000 @ Chartered Semiconductor 288,535 100,035 DBS Group Holdings, Ltd. 1,285,916 52,000 @ Pacific Century Regoinal Developments, Ltd. 710,596 60,000 Singapore Airlines, Ltd. 594,094 200,000 Singapore Telecommunication 292,994 68,000 @ ST Assembly Test Service 174,823 ------------ Total Singapore 3,346,958 ------------ SOUTH KOREA: 20.17% 25,000 H&CB 585,189 15,000 @ Hyundai Electronics 295,957 25,000 Korea Electric Power 775,767 20,000 Korea Telecom Corp. 967,500 3,000 Pohang Iron & Steel 254,524 7,200 Samsung Electronics Co. 2,382,727 1,000 SK Telecom Co., Ltd. 327,347 ------------ Total South Korea 5,589,011 ------------ TAIWAN: 25.03% 58,934 Acer Inc. GDR 552,506 85,490 Asustek Computer, Inc. GDR 784,367 21,415 China Steel Corp. GDR 291,779 25,360 @ Far Eastern Textile GDR 318,268 30,890 @ Hon Hai Precision Industry Co., Ltd. GDR 772,250 30,327 Ritek Corp. GDR 241,100 53,100 @ Siliconware Precision ADR 491,175 22,390 Synnex Technolgoy 481,385 61,478 @ Taiwan Semiconductor ADR 2,382,288 21,550 @ Winbond Electronic Corp GDR 619,563 ------------ Total Taiwan 6,934,681 ------------ THAILAND: 2.35% 27,500 @ Advanced Information Services 342,565 7,500 @ Siam Cement Public Co. 140,906 200,000 @ Thai Farmers Bank 168,475 ------------ Total Thailand 651,946 ------------ Total Common Stocks (Cost $24,195,851) 27,332,872 ------------ PREFERRED STOCK: 0.76% THAILAND: 0.76% 410,000 Siam Commercial Bank 209,317 ------------ Total Thailand 209,317 ------------ Total Preferred Stocks (Cost $332,368) 209,317 ------------ Number of Warrants Value - ---------- ------------ WARRANTS: 0.12% THAILAND: 0.12% 274,000 @ Siam Commercial Bank $ 32,174 ------------ Total Warrants (Cost $0) 32,174 ------------ Total Investments in Securities (Cost $24,528,219)* 99.54% $ 27,574,363 Other Assets and Liabilities-Net 0.46% 128,017 ------ ------------ Net Assets 100.00% $ 27,702,380 ====== ============ @ Non-income producing security ADR American Depository Receipt GDR Global Depository Receipt * Cost for federal income tax purposes is $24,898,181. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 4,358,985 Gross Unrealized Depreciation (1,682,803) ------------ Net Unrealized Appreciation $ 2,676,182 ============ See Accompanying Notes to Financial Statements 135 Pilgrim Asia-Pacific Equity Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 - -------------------------------------------------------------------------------- Percentage of Industry Net Assets - -------- ---------- Airlines 2.15% Apparel 1.15 Banks 11.79 Building Materials 0.51 Computers 4.73 Diversified Financial Services 2.80 Electric 13.34 Electronics 2.83 Food 1.78 Hand/Machine Tools 1.35 Holding Companies-Diversified 8.06 Iron/Steel 5.30 Leisure Time 2.08 Media 1.45 Real Estate 6.76 Retail 1.45 Semiconductors 15.64 Software 3.44 Telecommunications 10.82 Tobacco 2.11 Other Assets and Liabilities, Net 0.46 ------ NET ASSETS 100.00% ====== The Asia Pacific Fund had the following outstanding forward foreign currency exchange contracts as of June 30, 2000: Settlement Currency to Currency to Unrealized Appreciation/ Date Receive Deliver (Depreciation) ---- ------- ------- -------------- 7/5/00 $ 11,967 104,953,345 $ (24) (USD) Indonesian Rupiah (IDR) 7/6/00 $ 47,513 416,724,314 (99) (USD) Indonesian Rupiah (IDR) 7/3/00 $203,530 353,735 (1,296) (USD) Singapore Dollar (SGD) -------- $ (1,419) ======== See Accompanying Notes to Financial Statements 136 Pilgrim Government Securities Income Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 - -------------------------------------------------------------------------------- Principal Market Amount Rate Maturity Value - ------ ---- -------- ------------ U.S. GOVERNMENT SECURITIES: 94.55% Federal Home Loan Mortgage Corporation: 37.52% $ 19,983,920 FHLMC 6.500% 2016- $ 19,184,255 2019 5,824,121 FHLMC 7.000% 2014- 5,687,559 2029 3,000,000 FHLMC 7.375% 2003 3,028,710 10,354,045 FHLMC 7.500% 2014- 10,281,068 2030 3,443,717 FHLMC 8.000% 2030 3,463,071 133,372 FHLMC 8.500% 2017 135,539 164,797 FHLMC 9.000% 2006- 168,625 2021 502,705 FHLMC 9.500% 2005- 520,915 2014 59,686 FHLMC 9.905% 2020 62,677 ------------ 42,532,419 ------------ Federal National Mortgage Association: 34.98% $ 3,595,896 FNMA 6.000% 2014 3,397,007 3,952,656 FNMA 6.160% 2006 3,748,229 3,698,976 FNMA 6.350% 2004 3,600,144 17,253,256 FNMA 6.500% 2014- 16,395,822 2028 2,087,149 FNMA 7.500% 2028 2,059,118 236,339 FNMA 8.000% 2023 239,244 5,023,507 FNMA 8.500% 2009- 5,096,030 2021 2,997,329 FNMA 9.000% 2007- 3,041,829 2017 280,301 FNMA 9.250% 2009- 290,369 2016 94,025 FNMA 9.750% 2008 97,193 575,158 FNMA 10.000% 2017- 605,788 2020 271,728 FNMA 11.000% 2017 282,979 398,536 FNMA 11.500% 2019 435,899 35,015 FNMA 12.000% 2007 36,541 69,535 FNMA 12.500% 2017 74,218 236,781 FNMA 13.500% 2017 260,914 ------------ 39,661,324 ------------ Government National Mortgage Association: 20.31% 10,925,175 GNMA 6.500% 2026- $ 10,343,989 2029 3,823,531 GNMA 7.000% 2016- 3,731,252 2026 7,275,843 GNMA 7.500% 2023- 7,229,249 2028 658,520 GNMA 8.000% 2023- 667,004 2024 599,988 GNMA 9.000% 2013- 626,025 2022 347,097 GNMA 9.250% 2016- 360,991 2021 56,495 GNMA 13.000% 2014 63,588 ------------ 23,022,098 ------------ Total U.S. Government Securities (Cost $106,969,038) 105,215,841 ------------ COLLATERALIZED MORTGAGE OBLIGATIONS: Mortgage -- Commercial: 1.74% 1,985,494 Small Business Investment Cos., 8.017%, due 02/10/10 $ 1,970,913 ------------ Total CMO's (Cost $1,985,494) 1,970,913 ------------ Total Long-Term Investments (Cost $108,954,532) 107,186,754 ------------ Principal Amount Value - ------------- ------------ SHORT-TERM INVESTMENTS: 4.11% Repurchase Agreement: 4.11% $4,658,000 State Street Bank & Trust 6.200% due 07/03/00 (Collateralized by $4,695,000 U.S. Treasury Notes, 5.500% Due 07/31/01 Market Value $4,753,688) $ 4,658,000 ------------ Total Short-Term Investments (Cost $4,658,000) 4,658,000 ------------ Total Investments in Securities (Cost $ 113,612,532)* 98.66% $111,844,754 Other Assets and Liabilities-Net 1.34% 1,520,378 ------ ------------ Net Assets 100.00% $113,365,132 ====== ============ * Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 204,097 Gross Unrealized Depreciation (1,971,875) ------------ Net Unrealized Depreciation $ (1,767,778) ============ See Accompanying Notes to Financial Statements 137 Pilgrim Strategic Income Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 - -------------------------------------------------------------------------------- Market Principal Value - ---------- ------------ CORPORATE BONDS: 36.93% Banks: 3.02% $ 200,000 Wachovia Corp., 6.605%, due 10/01/25 $ 195,400 155,000 @@ Banco Santander-Chile, 6.500%, due 11/01/05 148,105 ------------ 343,505 ------------ Broadcasting, Radio & Television: 1.11% 220,000 + CD Radio, Inc., 0/15.000% due 12/01/2007 126,500 ------------ Cable And DBS: 5.00% 1,000,000 + Charter Communications Holdings, 0/11.750%, due 01/15/10 568,750 ------------ Communications - Internet: 4.23% 250,000 Exodus Communications, 11.625%, due 7/15/10 250,625 250,000 # Psinet Inc., 11.000%, due 8/01/09 231,250 ------------ 481,875 ------------ Communications - Wireless: 4.10% 375,000 + Crown Castle Int'l Corp. 0/11.250%, due 8/01/11 234,375 500,000 + Winstar Communications Inc., 0/14.750%, due 04/15/10 232,500 ------------ 466,875 ------------ Communications - Wireline: 10.14% 500,000 + Pinnacle Holdings, Inc., 0/10.000%, due 03/15/08 345,000 500,000 + ICG Services, Inc., 0/10.000%, due 02/15/2008 260,000 250,000 # Globenet Communications Group, Ltd., 13.000%, due 07/15/07 252,188 450,000 #+ United Pan-Europe Communications, 0/12.500%, due 08/01/09 226,125 100,000 Global Telesystems Group, Inc., 9.875%, due 02/15/05 71,000 ------------ 1,154,313 ------------ Financial - Other Services: 0.46% 60,000 # Cerro Negro Finance, Ltd., 7.330%, due 12/01/09 51,937 ------------ Retail - Discount: 2.58% 300,000 Wal-Mart Stores, 6.875%, due 08/10/09 293,358 ------------ Semiconductor/Electronic Components: 1.69% 200,000 Motorola, Inc., 6.500%, due 09/01/25 192,849 ------------ Telecom Services: 1.55% 200,000 Lucent Technologies, 6.450%, due 03/15/29 176,642 ------------ Transportation (Air, Bus, Rail): 2.10% $ 250,000 Atlas Air, Inc., 9.250%, due 04/15/08 238,750 ------------ Utilities: 0.95% 100,000 # East Coast Power LLC, 7.536%, due 06/30/17 89,500 20,000 Enersis S.A., 6.600%, due 12/01/26 19,020 ------------ 108,520 ------------ Total Corporate Bonds (Cost $4,405,371) 4,203,874 ------------ U.S. TREASURY OBLIGATIONS: 24.23% 900,000 U.S. Treasury Bond, 6.000%, due 08/15/04 891,558 400,000 U.S. Treasury Bond, 6.000%, due 08/15/09 396,812 800,000 U.S. Treasury Note, 6.125%, due 08/15/29 808,000 600,000 U.S. Treasury Note, 7.250%, due 05/15/16 661,314 ------------ 2,757,684 ------------ Total U.S. Treasury Obligations (Cost $2,728,924) 2,757,684 ------------ U.S. GOVERNMENT AGENCY OBLIGATIONS: 19.49% Federal Home Loan Mortgage Corporation: 6.98% 184,617 5.500%, due 1/1/14 171,635 95,821 5.500%, due 2/1/14 89,083 471,883 7.000%, due 6/1/29 456,986 15,614 9.000%, due 6/1/06 16,234 40,848 9.500%, due 11/1/05 42,750 16,417 10.000%, due 10/1/03 17,212 ------------ 793,900 ------------ Federal National Mortgage Association: 12.47% 87,931 6.500%, due 2/1/09 85,183 750,000 7.125%, due 2/15/05 750,375 500,000 7.250%, due 1/15/10 503,700 20,974 9.500%, due 5/1/07 21,950 18,460 9.500%, due 6/1/05 19,320 18,018 9.500%, due 7/1/06 18,857 18,399 10.000%, due 10/1/05 19,870 ------------ 1,418,755 ------------ Government National Mortgage Association: 0.04% 3,606 8.500%, due 2/15/21 3,729 678 11.500%, due 7/15/13 752 422 11.500%, due 2/15/13 438 ------------ 4,919 ------------ Total U.S. Government Agency Obligations (Cost $2,244,844) 2,217,574 ------------ COLLATERALIZED MORTGAGE OBLIGATIONS AND ASSET-BACKED SECURITIES: 7.68% Mortgage -- Commercial: 4.25% 288,304 GMCC 1999 C-3 A1A 6.974%, due 5/15/08 283,790 210,000 Allied Capital Commercial Mortgage, 1998 1 C, 6.710%, due 12/25/04 199,974 ------------ 483,764 ------------ Mortgage -- Residential: 3.43% 300,000 Emergent Home Equity Loan Trust 7.080%, due 12/15/28 292,477 100,000 Saxon Asset Securities Trust 1999 1 AF3, 6.170%, due 08/25/21 97,399 ------------ 389,876 ------------ Total CMO's and Asset Backed Securities (Cost $885,971) 873,640 ------------ See Accompanying Notes to Financial Statements 138 Pilgrim Strategic Income Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Market Shares Value - ---------- ------------ PREFERRED STOCK: 2.48% Communications -- Internet: 2.48% 2,853 @ Nextlink Communications 13.500%, due 06/01/10 $ 282,150 ------------ Total Preferred Stock (Cost $240,842) 282,150 ------------ MUTUAL FUNDS: 5.03% Investment Companies: 5.03% 64,500 ++ Pilgrim Prime Rate Trust $ 572,438 ------------ Total Mutual Funds (Cost $610,654) 572,438 ------------ Total Long-Term Investments: (Cost $11,116,606) 10,907,360 ------------ Principal Amount Value - ---------- ------------ SHORT-TERM INVESTMENTS: 2.54% Repurchase Agreements: 2.54% $ 289,000 State Street Repurchase Agreement, 6.200% Due 07/03/00 (Collateralized by $205,000 U.S. Treasury Notes, 12.500% Due 08/15/14, Market Value $300,325) $ 289,000 ------------ Total Short-Term Investments (Cost $289,000) 289,000 ------------ Total Investments in Securities (Cost $ 11,405,606)* 98.38% $ 11,196,360 Other Assets and Liabilities-Net 1.62% 183,824 ------ ------------ Net Assets 100.00% $ 11,380,184 ====== ============ - ---------- ++ Related party. # Securities with purchases pursuant to Rule 144A, under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. + Step-up basis bonds. Interest rates shown reflect current and future coupon rates. @@ Foreign Issuer * Cost for federal income tax purposes is $11,419,727. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 114,810 Gross Unrealized Depreciation (338,177) ------------ Net Unrealized Depreciation $ (223,367) ============ See Accompanying Notes to Financial Statements 139 Pilgrim High Yield Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 - -------------------------------------------------------------------------------- Market Principal Value - ---------- ------------ CORPORATE BONDS: 92.92% Automotive: 2.94% $5,000,000 Holly Performance, 12.250%, due 09/15/07 $ 3,800,000 7,000,000 JH Heafner Co., 10.000%, due 05/15/08 5,145,000 ------------ 8,945,000 ------------ Broadcasting: 0.61% 2,000,000 CD Radio, Inc., 14.500%, due 05/15/09 1,850,000 ------------ Business Services: 3.91% 6,250,000 Allied Waste North America, 10.000%, due 08/01/09 5,250,000 6,000,000 Primark Corp., 9.250%, due 12/15/08 6,630,000 ------------ 11,880,000 ------------ Cable & DBS: 8.54% 4,000,000 Charter Communications Holdings, 8.625%, due 04/01/09 3,535,000 6,000,000 Coaxial Communications, 10.000%, due08/15/06 5,715,000 2,000,000 Echostar DBS Corp., 9.375%, due 02/01/09 1,930,000 5,000,000 Pegasus Communications Corp., 9.750%, due 12/01/06 4,837,500 6,000,000 @@ Star Choice Communications, 13.000%, due 12/15/05 6,187,500 4,250,000 # Xm Satellite Radio Inc., 14.000%, 03/15/10 3,761,250 ------------ 25,966,250 ------------ Communications -- Internet: 7.55% $3,000,000 # Colo.com, 13.875%, due 03/15/10 3,240,000 3,000,000 # Exodus Communications, 11.250%, due 07/01/08 3,022,500 3,000,000 Exodus Communications, 11.625%, due 07/15/10 2,985,000 4,000,000 Globix Corp., 12.500%, due 02/01/10 3,300,000 7,000,000 Northpoint Communications Group, Inc., 12.875%, due 02/15/09 5,075,000 2,500,000 PSI, Inc., 11.000%, due 08/01/09 2,325,000 4,250,000 Rhythms Netconnection, 12.750%, due 04/15/09 3,017,500 ------------ 22,965,000 ------------ Communications -- Wireless: 1.89% 6,000,000 Nextel Communications, 9.375%, due 11/15/09 5,760,000 ------------ Communications -- Wireline: 22.05% $5,000,000 @@# Flag Telecom Holding, Ltd., 11.625%, due 03/30/10 4,875,000 7,000,000 @@ Global Crossing Holding, Ltd., 9.500%, due 11/15/09 6,790,000 8,000,000 @@ Globenet Communications Group, Ltd., 13.000%, due 07/15/07 8,110,000 7,000,000 Hyperion Telecom, 12.000%, due 11/01/07 6,615,000 7,000,000 Level 3 Communications, 9.125%, due 05/01/08 6,317,500 7,000,000 # Madison River, 13.250%, due 03/01/10 6,335,000 7,000,000 Metromedia Fiber Network, 10.000%, due 11/15/08 6,930,000 6,000,000 # MGC Communications, Inc., 13.000%, due 04/01/10 5,670,000 6,000,000 Nextlink Communications, 10.750%, due 11/15/08 5,940,000 5,790,000 Northeast Optic Network, 12.750%, due 08/15/08 5,558,400 4,000,000 Williams Communication Group, Inc., 10.875%, due 10/01/08 3,930,000 ------------ 67,070,900 ------------ Consumer Product: 2.74% 4,000,000 Bell Sports, Inc., 11.000%, due 08/15/08 4,000,000 6,000,000 Drypers Corp., 10.250%, due 06/15/07 3,900,000 4,000,000 Styling Technology Corp., 10.875%, due 07/01/08 420,000 ------------ 8,320,000 ------------ Containers, Packaging, Glass: 1.51% 7,000,000 Russell - Stanley, 10.875%, due 02/15/09 4,585,000 ------------ Electronics: 1.09% 6,000,000 Merisel, Inc., 12.500%, due 12/31/04 3,330,000 ------------ See Accompanying Notes to Financial Statements 140 Pilgrim High Yield Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Market Principal Value - ---------- ------------ Entertainment & Leisure: 5.35% $5,000,000 Epic Resorts, LLC/Cap.,13.000%, due 6/15/05 $ 2,275,000 5,000,000 Hollywood Entertainment, 10.625%, due 08/15/04 4,312,500 5,000,000 @@ Intrawest Corp., 10.500%, due 02/01/10 5,125,000 5,000,000 Bally Total Fitness Holdings, 9.875%, due 10/15/07 4,550,000 ------------ 16,262,500 ------------ Equipment Rental: 1.60% 5,000,000 Penhall Int'l, 12.000%, due 08/01/06 4,875,000 ------------ Finance, Insurance, Banking: 1.55% 5,000,000 MFN Financial Corp., 10.000%, due 03/23/01 4,725,000 ------------ Food, Beverage, Tobacco: 3.41% 3,000,000 Imperial Holly Corp., 9.750%, due 12/15/07 510,000 5,000,000 Luigino's, Inc., 10.000%, due 02/01/06 4,025,000 7,000,000 Packaged Ice, Inc., 9.750%, due 02/01/05 5,845,000 ------------ 10,380,000 ------------ Gaming & Lottery: 1.49% 2,500,000 # Park Place Entertainment, 9.375%, due 02/15/07 2,512,500 2,000,000 # Station Casinos, 9.875%, due 07/01/10 2,015,000 ------------ 4,527,500 ------------ Health Care: 0.68% 5,650,000 Global Health Sciences, 11.000%, due 05/01/08 2,076,375 ------------ Homebuilding, Building Materials: 3.27% 5,000,000 # Dayton Superior Corp., 13.000%, due 06/15/09 4,950,000 6,000,000 Juno Lighting, Inc., 11.875%, due 07/01/09 5,010,000 ------------ 9,960,000 ------------ Machinery: 0.75% $4,000,000 Aqua Chem, Inc., 11.250%, due 07/01/08 2,270,000 ------------ Manufacturing: 1.41% 5,000,000 Transportation Manufacturing Operations, 11.250%, due 05/01/09 4,281,250 ------------ Restaurants: 0.49% 3,000,000 Avado Brands, Inc., 11.750%, due 06/15/09 1,500,000 ------------ Retail: 10.81% 6,000,000 Advance Stores Co., 10.250%, due 04/15/08 4,980,000 5,000,000 Ames Department Stores, 10.000%, due 04/15/06 3,050,000 6,000,000 Big 5 Corp., 10.875%, due 11/15/07 5,542,500 8,000,000 CSK Auto, Inc., 11.000%, due 11/01/06 7,160,000 3,000,000 Jo-Ann Stores, 10.375%, due 05/01/07 2,700,000 4,088,000 Tuesday Morning, 11.000%, due 12/15/07 4,077,780 6,000,000 Sonic Automotive, Inc., 11.000%, due 08/01/08 5,355,000 ------------ 32,865,280 ------------ Steel: 0.24% 500,000 GS Technologies, 12.000%, due 09/01/04 178,125 1,500,000 GS Technologies, 12.250%, due 10/01/05 534,375 ------------ 712,500 ------------ Textile and Apparel: 1.48% 5,000,000 Norton McNaughton, Inc., 12.500%, due 06/01/05 4,500,000 ------------ Transportation (Air, Bus, Rail): 7.56% $7,000,000 Amtran, Inc., 10.500%, due 08/01/04 6,492,500 5,000,000 Atlas Air, Inc., 9.250%, due 04/15/08 4,775,000 4,000,000 Budget Group, Inc., 9.125%, due 04/01/06 2,580,000 6,000,000 Railworks Corp., 11.500%, due 04/15/09 5,670,000 5,000,000 Worldwide Flight Service, 12.25%, due 08/15/07 3,475,000 ------------ 22,992,500 ------------ Total Corporate Bonds (Cost $326,385,636) 282,600,055 ------------ Market Shares Value - ---------- ------------ COMMON STOCK: 1.01% 48,250 Cable & DBS: 0.25% Canadian Satellite Communications 766,131 ------------ 77,440 Communications -- Internet: 0.75% Globix Corp. 2,269,960 ------------ 600 Communications -- Wireline: 0.01% MGC Communications, Inc. 35,963 ------------ Total Common Stock (Cost $404,369) 3,072,054 ------------ Number of Market Warrants Value - ---------- ------------ WARRANTS: 0.00% Entertainment & Leisure: 0.00% 5,000 @ Epic Resorts 50 ------------ Transportation (Air, Bus, Rail): 0.00% 5,000 @ Worldwide Flight 50 ------------ Total Warrants (Cost $20) 100 ------------ Total Long -- Term Investments (Cost $326,790,025) 285,672,209 ------------ See Accompanying Notes to Financial Statements 141 Pilgrim High Yield Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Principal Amount Value - ---------- ------------ SHORT-TERM INVESTMENTS: 4.40% Commercial Paper: 4.40% $13,402,935 General Electric, 6.800%, due 07/03/00 $ 13,402,935 Total Short-Term Investments (Cost $13,402,935) 13,402,935 ------------ Total Investments in Securities (Cost $ 340,192,960)* 98.33% $299,075,144 Securities Sold Short Globix Corp., (4000 Shares) (0.04)% (117,250) Other Assets and Liabilities-Net 1.71% 5,189,782 ------ ------------ Net Assets 100.00% $304,147,676 ====== ============ - ---------- @ Non-income producing security # Securities with purchases pursuant to Rule 144A, under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. @@ Foreign Issuer * Cost for federal income tax purposes is $340,795,460. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 4,179,924 Gross Unrealized Depreciation (45,900,240) ------------ Net Unrealized Depreciation $(41,720,316) ============ See Accompanying Notes to Financial Statements 142 Pilgrim High Yield Fund II PORTFOLIO OF INVESTMENTS as of June 30, 2000 - -------------------------------------------------------------------------------- Principal Market Amount Value - ---------- ------------ CORPORATE BONDS: 85.20% Broadcasting, Radio, and Television: 5.36% 5,240,000 + CD Radio, Inc., 15.000%, due 12/01/07 $ 3,013,000 2,900,000 Capstar Broadcasting Partners, 9.250%, due 07/01/07 2,972,500 1,000,000 Chancellor Media Corp., 8.125%, due 12/15/07 1,011,250 2,800,000 Sinclair Broadcasting Group, Inc., 8.750%, due 12/15/07 2,478,000 1,250,000 Sinclair Broadcasting Group, Inc., 10.000%, due 09/30/05 1,200,000 ------------ 10,674,750 ------------ Business Services: 1.90% 4,500,000 Allied Waste North America, Inc., 10.000%, 08/01/09 3,780,000 ------------ Cable & DBS: 11.23% 3,000,000 + Charter Communications Holdings, 0/9.920%%, due 04/01/11 1,710,000 8,000,000 + Charter Communications Holdings, 0/11.750%, due 01/15/10 4,590,000 4,500,000 Echostar DBS Corp., 9.250%, due 02/01/06 4,398,750 5,500,000 + NTL, Inc., 0/9.750%, due 04/01/08 3,451,250 1,110,000 Pegasus Communications Corp., 9.625%, due 10/15/05 1,076,700 1,000,000 @@ Star Choice Communications, 13.000%, due 12/15/05 1,031,250 1,340,000 United Int'l Holdings, Inc., 10.750%, due 02/15/08 944,700 2,600,000 @@+ United Pan Europe Communications, 0/12.500%, due 08/01/09 1,319,500 2,500,000 @@ United Pan Europe Communications, 13.750%, due 02/01/10 1,187,500 3,000,000 # XM Satellite Radio, Inc., 14.000%, due 03/15/10 2,655,000 ------------ 22,364,650 ------------ Communications -- Internet: 7.87% 3,000,000 # Colo.com, 13.875%, due 03/15/10 3,240,000 4,000,000 # Exodus Communications, Inc., 11.625%, due 07/15/10 4,000,000 5,000,000 Globix Corp., 12.500%, due 02/01/10 4,125,000 3,000,000 Northpoint Communications Group, Inc., 12.875%, due 02/15/10 2,175,000 1,000,000 PSI Net, Inc., 11.000%, due 08/01/09 930,000 3,000,000 Rhythms Netconnections, Inc., 1.000%, due 05/15/08 1,200,000 ------------ 15,670,000 ------------ Communications -- Wireless: 9.00% 8,000,000 + Alamosa Holdings, Inc., 0/12.975%, due 2/15/10 4,200,000 2,250,000 + Crown Castle Int'l Corp., 0/11.250%, due 08/01/11 1,417,500 7,500,000 + Nextel Communications, Inc., 0/9.950%, due 02/15/08 5,531,250 3,000,000 + Pinnacle Holdings, Inc., 0/10.000%, due 03/15/08 2,085,000 1,600,000 #+ Ubiquitel Operating Co., 0/14.000%, due 04/15/10 934,000 7,998,000 #+ Winstar Communications, Inc., 0/14.750%, due 04/15/10 3,759,060 ------------ 17,926,810 ------------ Communications -- Wireline: 17.43% 5,500,000 @@+ Call Net Enterprises, Inc., 0/12.975%, due 08/15/08 2,145,000 4,000,000 Century Communications Corp., 0.000%, due 01/15/08 1,660,000 1,780,000 @@+ Completel Europe NV, 0/14.000%, due 02/15/09 898,900 3,500,000 @@ Global Crossing Holdings, Ltd., 9.500%, due 11/15/09 3,395,000 1,535,000 Global Telesystems, Inc., 9.875%, due 02/15/05 1,097,525 2,000,000 @@ Globenet Communications Group, 13.000%, due 07/15/07 2,027,500 9,000,000 ICG Services, Inc., 10.000%, due 02/15/08 4,725,000 6,500,000 # Level 3 Communications, Inc., 12.875%, due 03/15/10 3,591,250 2,000,000 # MGC Communications, Inc., 13.000%, due 04/01/10 1,890,000 5,000,000 + Nextlink Communications, Inc., 0/12.250%, due 06/01/09 3,100,000 5,000,000 @@ Versatel Telecommunications Int'l NV, 11.875%, due 07/15/09 4,950,000 3,000,000 + Viatel, Inc., 0/12.500%, due 04/15/08 1,365,000 2,500,000 Viatel, Inc., 11.500%, due 03/15/09 1,912,500 2,000,000 Williams Communications Group, 10.875%, due 10/01/09 1,965,000 ------------ 34,722,675 ------------ Consumer Products: 2.29% 5,000,000 Simmons Co., 10.250%, due 03/15/09 4,462,500 1,000,000 Styling Technology Corp., 10.875%, due 07/01/08 105,000 ------------ 4,567,500 ------------ See Accompanying Notes to Financial Statements 143 Pilgrim High Yield Fund II PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Principal Market Amount Value - ---------- ------------ Entertainment & Leisure: 2.75% 4,600,000 + Ascent Entertainment Group, Inc., 0/11.875%, due 12/15/04 $ 3,749,000 2,000,000 Hollywood Entertainment Corp., 10.625%, due 08/15/04 1,725,000 ------------ 5,474,000 ------------ Finance, Insurance, Banking: 2.86% 2,000,000 Americo Life, Inc., 9.250%, due 06/01/05 1,890,000 3,750,000 MFN Financial Corp., 10.000%, due 03/23/01 3,543,750 500,000 @@# Westways Funding II, Ltd., 22.125%, due 01/31/03 266,250 ------------ 5,700,000 ------------ Food, Beverage, Tobacco: 6.81% 5,550,000 @@ Fage Dairy Industries SA, 9.000%, due 02/01/07 4,467,750 4,250,000 North Atlantic Trading, Inc., 11.000% due 06/15/04 3,856,875 1,950,000 Packaged Ice, Inc., 9.750%, due 02/01/05 1,628,250 4,500,000 Standard Commercial Corp., 8.875%, due 08/01/05 3,622,500 ------------ 13,575,375 ------------ Gaming & Lottery: 5.19% 2,000,000 Autotote Corp., 10.875%, due 08/01/04 2,090,000 2,500,000 Coast Hotels & Casinos, Inc., 9.500%, due 04/01/09 2,387,500 1,500,000 # Park Place Entertainment Corp., 9.375%, due 02/15/07 1,507,500 4,000,000 Penn National Gaming, Inc., 10.625%, due 12/15/04 4,360,000 ------------ 10,345,000 ------------ Health Care: 1.68% 650,000 Global Health Sciences, Inc., 11.000%, due 05/01/08 238,875 2,300,000 Health Insurance Plan of Greater NY, 11.250%, due 07/01/10 1,426,000 5,941,463 @X Intracel, 1.000%, due 03/20/10 1,425,951 300,000 @X Intracel, 1.000%, due 03/20/10 72,000 184,074 @X Intracel, 11.500%, due 03/25/10 184,074 ------------ 3,346,900 ------------ Hotels, Motels, and Inns: 0.99% 2,000,000 Courtyard Marriott II, Ltd. Partnership, 10.750%, due 02/01/08 1,965,000 ------------ Oil & Gas: 1.41% 4,500,000 @@ Northern Offshore ASA, 10.000%, due 05/15/05 2,812,500 ------------ Paper & Forest Products: 0.88% 2,250,000 @@ Doman Industries, Ltd., 8.750%, due 03/15/04 1,755,000 ------------ Restaurants: 0.75% 2,500,000 Romacorp, Inc., 12.000%, due 07/01/06 1,500,000 ------------ Shipping: 0.37% 3,750,000 @@ Equimar Shipholdings, Ltd., 9.875%, due 07/01/07 738,000 ------------ Steel: 0.81% 4,500,000 GS Technologies Operations, Inc., 12.250%, due 10/01/05 1,603,125 ------------ Supermarket: 2.79% 5,000,000 Fleming Companies, Inc., 10.500%, due 12/01/04 4,500,000 4,250,000 Richmont Marketing Specialists, 10.125%, due 12/15/07 1,062,500 ------------ 5,562,500 ------------ Transportation (Air, Bus, Rail): 2.83% 3,000,000 Amtran, Inc., 10.500%, due 08/01/04 2,782,500 2,000,000 Atlas Air, Inc., 9.250%, due 04/15/08 1,910,000 1,000,000 Railworks Corp., 11.500%, due 04/15/09 945,000 ------------ 5,637,500 ------------ Total Corporate Bonds (Cost $195,348,379) 169,721,285 ------------ Market Shares Value - ---------- ------------ COMMON STOCK: 3.07% Communications - Internet: 0.28% 19,008 @ Globix Corp. $ 557,172 ------------ Communications - Wireline: 2.79% 89,000 @@@ Completel Europe NV 907,800 10,500 @ Global Crossing, Ltd. 2,337,563 23,340 @ Nextlink Communications, Inc. 2,301,908 ------------ 5,547,271 ------------ Health Care: 0.00% 16,926 @X Intracel Corp. 4,232 ------------ Total Common Stock (Cost $5,478,954) 6,108,675 ------------ PREFERRED STOCK: 1.87% Communications - Wireline: 1.87% 41,287 Adelphia Business Solutions $ 3,726,195 ------------ Finance, Insurance, Banking: 0.00% 19,000 @ Superior National Capital Trust I 190 ------------ Total Preferred Stock (Cost $5,600,000) 3,726,385 ------------ See Accompanying Notes to Financial Statements 144 Pilgrim High Yield Fund II PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Warrants Value - ---------- ------------ WARRANTS: 0.00% Communications -- Internet: 0.00% 1,000 @ Unifi Communications, Inc. $ -- ------------ Oil & Gas: 0.00% 1,500,000 @ Mexico (UTD Mex ST) -- ------------ Retail: 0.00% 4,999 @ Dairy Mart Convenience Stores 2,998 100 @ Electronic Retailing Systems Int'l -- ------------ 2,998 ------------ Total Warrants (Cost $0) 2,998 ------------ Total Long-Term Investments (Cost $206,427,333) 179,559,343 ------------ Principal Amount Value - ---------- ------------ SHORT-TERM INVESTMENTS: 10.79% Repurchase Agreement: 10.79% $21,501,000 State Street Repurchase Agreement, 6.200% due 07/03/00 (Collateralized by $4,605,000 U.S. Treasury Notes, 6.375% Due 11/15/04 Market Value $4,735,552) $ 21,501,000 ------------ Total Short-Term Investments (Cost $4,639,000) 21,501,000 ------------ Total Investments in Securities (Cost $ 227,928,333)* 100.93% $201,060,343 Other Assets and Liabilities-Net -0.93% (1,851,292) ------ ------------ Net Assets 100.00% $199,209,051 ====== ============= - ---------- @ Non-income producing security # Securities with purchases pursuant to Rule 144A, under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. @@ Foreign Issuer + Step-up basis bonds. Interest rates shown reflect current and future coupon rates. X Market value determined by Pilgrim Valuation Committee appointed by the Funds Board of Directors. * Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 2,880,170 Gross Unrealized Depreciation (29,748,160) ------------ Net Unrealized Depreciation $(26,867,990) ============ See Accompanying Notes to Financial Statements 145 Pilgrim Balanced Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 - -------------------------------------------------------------------------------- Market Shares Value - ---------- ------------ COMMON STOCKS: 48.63% Auto Manufacturers: 0.55% 18,200 Ford Motor Co. $ 782,600 ------------ Auto Parts & Equipment: 0.01% 1,440 @ Visteon Corp 17,463 ------------ Banks: 0.91% 27,900 Chase Manhattan Corp. 1,285,144 ------------ Beverages: 1.96% 10,200 Anheuser-Busch Cos., Inc. 761,813 20,300 Coca-Cola Co. 1,165,981 18,900 PepsiCo, Inc. 839,869 ------------ 2,767,663 ------------ Chemicals: 0.54% 17,459 Du Pont (E.I.) de Nemours & Co. 763,831 ------------ Computers: 4.68% 14,000 @ Cisco Systems, Inc. 889,875 28,700 Compaq Computer Corp. 733,644 16,700 @ Dell Computer Corp. 823,519 22,400 @ EMC Corp. 1,723,400 6,600 Hewlett-Packard Co. 824,175 7,500 International Business Machines 821,719 9,000 @ Sun Microsystems, Inc. 818,437 ------------ 6,634,769 ------------ Cosmetics/Personal Care: 0.64% 15,755 Kimberly-Clark Corp. 903,943 ------------ Diversified Financial Service: 3.36% 15,000 American Express Co. 781,875 13,700 Citigroup, Inc. 825,425 14,500 Fannie Mae 756,719 19,600 Freddie Mac 793,800 7,500 J.P. Morgan & Co. 825,937 6,750 Merrill Lynch & Co. 776,250 ------------ 4,760,006 ------------ Electric: 1.67% 12,200 @ Calpine Corp. 802,150 14,300 Duke Energy Corp. 806,162 32,700 Southern Co. 762,319 ------------ 2,370,631 ------------ Electronics: 0.69% 2,021 @ Agilent Technologies Inc 149,049 19,900 @ Solectron Corp. 833,312 ------------ 982,361 ------------ Engineering & Construction: 0.00% 3,500 @ Kaiser Group Int'l, Inc. 137 ------------ Food: 0.58% 18,200 @ Safeway, Inc. 821,275 ------------ Forest Products & Paper: 0.56% 26,600 International Paper Co. 793,012 ------------ Healthcare-Products: 0.59% 14,814 @X Intracel Corp. 3,704 8,100 Johnson & Johnson 825,187 ------------ 828,891 ------------ Home Furnishings: 0.71% 10,600 Sony Corp. 999,713 ------------ Insurance: 1.61% 6,707 American Int'l Group 788,072 21,100 AXA Financial, Inc. 717,400 7,400 Marsh & McLennan Cos. 772,838 ------------ 2,278,310 ------------ Leisure Time: 0.56% 41,000 Carnival Corp. 799,500 ------------ Machinery-Diversified: 0.71% 27,100 Deere & Co. 1,002,700 ------------ Media: 2.96% 11,346 @ Clear Channel Communications 850,950 20,000 @ Comcast Corp. 810,000 13,300 Gannett Co., Inc. 795,506 11,600 Time Warner, Inc. 881,600 12,500 @ Viacom, Inc. 852,344 ------------ 4,190,400 ------------ Mining: 0.57% 27,700 Alcoa, Inc. 803,300 ------------ Miscellaneous Manufacturing: 1.34% 20,500 General Electric Co. 1,086,500 17,100 Tyco Int'l, Ltd. 810,113 ------------ 1,896,613 ------------ Oil & Gas Producers: 3.00% 19,000 Anadarko Petroleum Corp. 936,937 25,000 Burlington Resources, Inc. 956,250 9,900 Chevron Corp. 839,644 9,162 Exxon Mobil Corp. 719,217 13,000 Royal Dutch Petroleum Co. 800,312 ------------ 4,252,360 ------------ Oil & Gas Services: 0.57% 10,900 Schlumberger, Ltd. 813,412 ------------ Pharmaceuticals: 1.82% 18,700 Abbott Laboratories 833,319 11,100 Merck & Co., Inc. 850,537 18,675 Pfizer, Inc. 896,400 ------------ 2,580,256 ------------ Pipelines: 1.18% 17,000 EL Paso Energy Corp. 865,937 12,500 Enron Corp. 806,250 ------------ 1,672,187 ------------ Retail: 4.04% 18,000 @ Best Buy Co., Inc. 1,138,500 16,700 Home Depot, Inc. 833,956 11,150 @X International Fast Food Corp. 4,571 10,900 McDonald's Corp. 359,019 23,300 Sears, Roebuck And Co. 760,163 15,800 Target Corp. 916,400 27,100 Walgreen Co. 872,281 14,500 Wal-Mart Stores, Inc. 835,563 ------------ 5,720,453 ------------ Savings & Loans: 0.64% 31,500 Washington Mutual, Inc. 909,562 ------------ Semiconductors: 2.91% 9,300 Intel Corp. 1,243,294 16,600 @ LSI Logic Corp. 898,475 30,839 @ Taiwan Semiconductor Manufacturing 1,195,011 11,400 Texas Instruments, Inc. 783,038 ------------ 4,119,818 ------------ See Accompanying Notes to Financial Statements 146 Pilgrim Balanced Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Market Shares Value - ---------- ------------ Software: 1.76% 15,400 @ America Online, Inc. $ 812,350 17,300 First Data Corp. 858,513 10,300 @ Microsoft Corp. 824,000 ------------ 2,494,863 ------------ Telecommunications: 6.38% 24,407 AT&T Corp. 771,871 20,100 Bellsouth Corp. 856,763 14,474 Canadian Satellite Communications 234,713 31,525 @ Global Crossing, Ltd. 829,501 13,400 GTE Corp. 834,150 14,500 Lucent Technologies, Inc. 859,125 16,600 Nokia OYJ 828,963 17,300 @ Qwest Communications Int'l 859,594 22,912 @ RCN Corp. 581,392 17,772 SBC Communications, Inc. 768,639 15,100 @ Verizon Communications 767,269 18,300 @ Worldcom, Inc. 839,514 ------------ 9,031,493 ------------ Tobacco: 0.57% 30,400 Philip Morris Cos., Inc. 807,500 ------------ Transportation: 0.56% 20,900 @ FedEx Corp. 794,200 ------------ Total Common Stock (Cost $59,369,986) 68,878,366 ------------ Market Principal Value - ---------- ------------ CORPORATE BONDS: 18.25% Airlines: 0.80% $ 250,000 Atlas Air, Inc., 9.250%, due 04/15/08 238,750 974,862 Continental Airlines, 6.545%, due 02/02/19 887,821 ------------ 1,126,571 ------------ Banks: 1.29% 1,095,000 @@ Banco Santander Chile, 6.500%, due 11/01/05 1,047,674 800,000 Wachovia Corp., 6.605%, due 10/01/25 782,715 ------------ 1,830,389 ------------ Beverages: 0.28% 500,000 @@ Fage Dairy Industries SA,9.000%, due 02/01/07 402,500 ------------ Building Materials: 1.04% 750,000 # Dayton Superior Corp., 13.000%, due 06/15/09 738,750 750,000 Penhall Int'l Corp., 12.000%, due 08/01/06 731,250 ------------ 1,470,000 ------------ Computers: 0.58% 750,000 Globix Corp., 12.500%, due 02/01/10 618,750 500,000 + Rhythms Netconnections, Inc., 0/13.500%, due 05/15/08 200,000 ------------ 818,750 ------------ Diversified Financial Service: 2.84% 160,000 @@ Amvescap PLC, 6.375%, due 05/15/03 152,698 100,000 #@@ Cerro Negro Financial, Ltd., 7.330%, due 12/01/09 86,728 2,600,000 Fleet Financial Group, Inc., 7.190%, due 10/02/12 2,429,968 1,000,000 Ford Motor Credit Co., 7.875%, due 06/15/10 999,820 500,000 + Pinnacle Holdings, Inc., 0/10.000%, due 03/15/08 347,500 ------------ 4,016,714 ------------ Entertainment: 0.20% 350,000 + Ascent Entertainment Group, Inc., 0/11.875%, due 12/15/04 285,250 ------------ Environmental Control: 0.30% 500,000 Allied Waste North America, Inc., 10.000%, due 08/01/09 420,000 ------------ Healthcare-Products: 0.08% 300,000 Global Health Sciences, Inc., 11.000%, due 05/01/08 110,250 ------------ Lodging: 0.53% 750,000 Park Place Entertainment Corp., 9.375%, due 02/15/07 753,750 ------------ Media: 1.30% 220,000 + CD Radio, Inc., 0/15.000%, due 12/01/07 126,500 500,000 Charter Communication Holdings LLC, 8.625%, due 04/01/09 441,875 1,000,000 + Charter Communications Holdings LLC, 0/11.750%, due 01/15/10 573,750 450,000 @@+ United Pan Europe Communications NV, 0/12.500%, due 08/01/09 228,375 1,000,000 @@+ United Pan Europe Communications NV, 0/13.750%, due 02/01/10 475,000 ------------ 1,845,500 ------------ Oil & Gas Producers: 1.21% 200,000 Deeptech Int'l, 12.00%, due 12/15/00 200,051 541,673 #@@ Hurricane Hydrocarbons, 16.000%, due 12/31/01 516,620 1,000,000 Occidental Petroleum Corp., 7.650%, due 12/15/06 995,490 ------------ 1,712,161 ------------ Pharmaceuticals: 1.23% 1,700,000 American Home Products Corp., 7.900%, due 02/15/05 1,748,736 ------------ See Accompanying Notes to Financial Statements 147 Pilgrim Balanced Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Market Principal Value - ---------- ------------ Retail: 0.64% $ 250,000 Hollywood Entertainment Corp., 10.625%, due 08/15/04 $ 215,625 700,000 Wal Mart Stores, Inc., 6.875%, due 08/10/09 686,252 ------------ 901,877 ------------ Semiconductors: 0.57% 840,000 Motorola, Inc., 6.500%, due 09/01/25 811,009 ------------ Software: 1.02% 750,000 Exodus Communications, Inc., 11.625%, due 07/15/10 750,000 250,000 PSI Net, Inc., 11.000%, due 08/01/09 232,500 500,000 PSI Net, Inc., 10.000%, due 02/15/05 462,500 ------------ 1,445,000 ------------ Telecommunications: 4.20% 500,000 Alamosa Holdings, Inc., 0/12.875%, due 02/15/10 262,500 1,000,000 @@ Call Net Enterprises, Inc., 0/8.940%, due 08/15/08 390,000 750,000 # Colo. Com, 13.875%, due 03/15/10 810,000 375,000 Crown Castle Int'l Corp., 0/11.250%, due 08/01/11 236,250 750,000 @@ Global Crossing Holdings, Ltd., 9.500%, due 11/15/09 727,500 50,000 Global Telesystems, Inc., 9.875%, due 02/15/05 35,750 250,000 @@ Globenet Communications Group, 13.000%, due 07/15/07 252,500 500,000 ICG Services, Inc., 0/10.000%, due 02/15/08 262,500 800,000 Lucent Technologies, Inc., 6.450%, due 03/15/29 708,707 500,000 Nextel Communications, 9.375%, due 11/15/09 480,000 2,000,000 # SA Telecommunications, Inc., 10.000%, due 08/15/06 0 1,500,000 @@ Star Choice Communications, 13.000%, due 12/15/05 1,546,875 500,000 # Winstar Communications, Inc., 0/14.750%, due 04/15/10 235,000 ------------ 5,947,582 ------------ Transportation: 0.14% 1,000,000 @@ Equimar Shipholdings, Ltd., 9.875%, due 07/01/07 196,800 ------------ Total Corporate Bonds (Cost $29,285,396) 25,842,839 ------------ U.S. GOVERNMENT AGENCY OBLIGATIONS: 8.54% Federal Home Loan Mortgage Corporation: 2.60% 2,000,000 5.125%, due 10/15/08 1,744,336 1,054,955 5.500%, due 01/01/14 979,124 528,995 6.000%, due 04/01/14 501,223 471,883 7.000%, due 06/01/29 456,250 ------------ 3,680,933 ------------ Federal National Mortgage Corporation: 5.94% 2,482,938 6.350%, due 01/01/04 2,416,597 1,779,054 6.500%, due 06/01/14 1,714,563 2,250,000 7.125%, due 02/15/05 2,259,135 2,000,000 7.250%, due 01/15/10 2,019,766 ------------ 8,410,061 ------------ Total U.S. Government Agency Obligations (Cost $12,443,852) 12,090,994 ------------ U.S. TREASURY OBLIGATIONS: 13.79% U.S. Treasury Bonds: 6.99% 4,900,000 6.125%, due 08/15/29 4,949,000 4,500,000 7.250%, due 05/15/16 4,959,855 ------------ 9,908,855 ------------ U.S. Treasury Notes: 6.80% 7,100,000 6.000%, due 08/15/09 7,043,413 2,500,000 6.500%, due 02/15/10 2,585,938 ------------ 9,629,351 ------------ Total U.S. Treasury Obligations (Cost $19,399,830) 19,538,206 ------------ COLLATERALIZED MORTGAGE OBLIGATIONS: 1.80% Mortgage - Commercial: 1.16% 530,608 # Criimi Mae CMBS Corp., 1998-1 A1, 5.697%, due 10/20/01 503,937 1,153,214 GMAC Commercial Mortgage Securities, Inc., 1999-C3 A1A, 6.974%, due 05/15/08 1,135,160 ------------ 1,639,097 ------------ See Accompanying Notes to Financial Statements 148 Pilgrim Balanced Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Market Principal Value - ---------- ------------ Mortgage - Residential: 0.64% $700,000 Emergent Home Equity Loan Trust, 1997-4 A5, 7.080%, due 12/15/28 $ 682,447 240,000 Saxon Asset Securities Trust, 1999-2 AF4, 6.445%, due 08/25/26 227,267 ------------ 909,714 ------------ Total Collateralized Mortgage Obligations (Cost $2,579,548) 2,548,811 ------------ Market Shares Value - ---------- ------------ PREFERRED STOCK: 1.17% Food: 0.01% 13,251 @X International Fastfood Corp., 0/3.000% 20,009 ------------ Media: 0.96% 13,610 & Paxson Communications Corp., 12.500% 1,364,403 ------------ Telecommunications: 0.20% 2,850 Nextlink Communications Series B, 13.500% 281,081 ------------ Total Preferred Stock (Cost $2,846,954) 1,665,493 ------------ MUTUAL FUNDS: 2.68% Investment Companies: 2.68% 428,000 ++ Pilgrim Prime Rate Trust (Cost $3,810,826) 3,798,500 ------------ Market Contracts Value - ---------- ------------ WARRANTS: 0.00% Miscellaneous Manufacturing: 0.01% 500 Packaged Ice, Inc. $ 17,625 ------------ Telecommunications: 0.00% 500 Iridium World Communications 5 1,000 Unifi Communications, Inc. 0 ------------ 5 ------------ Total Warrants (Cost $50,508) 17,630 ------------ Total Long-term Investments (Cost $129,786,900) 134,380,839 ------------ Principal Amount Value - ---------- ------------ SHORT-TERM INVESTMENTS: 4.68% Repurchase Agreements: 4.68% $6,624,000 State Street Bank & Trust Repurchase Agreement, 6.200% due 07/03/00 (Collateralized by $6,325,000 U.S. Treasury Notes, 7.875% Due 11/15/04, Market Value $6,759,844) $ 6,624,000 ------------ Total Short-Term Investments (Cost $6,624,000) 6,624,000 ------------ Total Investments in Securities (Cost $ 136,410,900)* 99.55% $141,004,839 Other Assets and Liabilities-Net 0.45% 634,455 ------ ------------ Net Assets 100.00% $141,639,294 ====== ============= - ---------- @ Non-income producing security # Securities with purchases pursuant to Rule 144A, under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. + Step-up basis bonds. Interest rates shown reflect current and future coupon rates. ++ Related party & Payment in-kind security @@ Foreign Issuer X Market value determined by Pilgrim Valuation Committee appointed by the Funds Board of Directors. * Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 13,788,468 Gross Unrealized Depreciation (9,194,529) ------------ Net Unrealized Appreciation $ 4,593,939 ============ See Accompanying Notes to Financial Statements 149 Pilgrim Convertible Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 - -------------------------------------------------------------------------------- Market Shares Value - ---------- ------------ CONVERTIBLE PREFERRED STOCKS: 22.55% Diversified Financial Services: 2.22% 205,491 Decs Trust V, 7.250%, due 08/15/02 $ 6,716,987 26,845 Morgan Stanley Group, Inc., 6.000%, due 07/31/00, (CSCO) 4,041,850 ------------ 10,758,837 ------------ Electric: 5.40% 212,462 AES Trust VII, 6.000%, due 05/15/08 12,455,585 77,260 Calpine Capital Trust, 5.750%, due 11/01/04 9,242,228 60,895 Calpine Capital Trust II, 5.500%, due 02/01/05 4,414,888 ------------ 26,112,701 ------------ Insurance: 1.55% 108,750 Metlife Capital Trust I, 8.000%, due 05/15/05 7,503,750 ------------ Media: 1.36% 35,211 Emmis Communication Corp., A 6.250% 2,042,238 15,099 United Global Communications, 7.000% 932,363 80,397 United Global Communications, Series D 7.000% 3,577,667 ------------ 6,552,268 ------------ Oil & Gas Services: 1.68% 175,461 Weatherford Int'l, Inc., 5.000%, due 11/01/27 8,115,071 ------------ Oil & Gas Producers: 1.52% 52,546 Coastal Corp., 5.580%, due 08/16/02 1,674,904 161,774 Coastal Corp., 6.625%, due 08/16/02 5,662,090 ------------ 7,336,994 ------------ Packaging & Containers: 0.72% 69,242 Sealed Air Corp., A 2.000%, due 04/01/18 3,505,376 ------------ Pharmaceuticals: 1.79% 3,239 Cephalon, Inc., 7.250% 549,011 47,913 Cephalon, Inc., 7.250% 8,121,254 ------------ 8,670,265 ------------ Software: 0.61% 55,987 # Psinet, Inc., 7.000% 1,910,556 21,270 Psinet, Inc., Series C 6.750% 1,039,571 ------------ 2,950,127 ------------ Telecommunications: 5.70% 11,291 @@# Global Crossing, Ltd., 6.375% 2,482,627 154 @@ Global Crossing, Ltd., 6.375%, due 04/15/02 12,031 38,883 @@ Global Crossing, Ltd., 6.750% 3,037,734 11,516 Mcleodusa, Inc., 6.750% 6,352,514 88,194 # Qwest Trends Trust, 5.750%, due 11/17/03 7,066,544 23,645 Voicestream Wireless, 7.000% 4,031,473 75,077 Winstar Communications, Inc., Series D 7.000% 4,209,042 6,718 & Winstar Communications, Inc., Series A 6.000% 362,772 ------------ 27,554,737 ------------ Total Convertible Preferred Stock (Cost $85,962,543) 109,060,126 ------------ Principal Market Amount Value - ---------- ------------ CONVERTIBLE CORPORATE BONDS: 71.69% Advertising: 3.49% $3,074,000 # Interpublic Group, Inc. 1.870%, due 06/01/06 $ 2,974,095 3,992,000 Interpublic Group, Inc. 1.870%, due 06/01/06 3,862,260 3,113,000 Lamar Advertising Co., 5.250%, due 09/15/06 3,502,125 3,545,000 Omnicom Group, Inc., 2.250%, due 01/06/13 6,513,937 ------------ 16,852,417 ------------ Biotechnology: 2.92% 8,015,000 Affymetrix, Inc., 4.750%, due 02/15/07 6,161,531 2,566,000 Millennium Pharmaceutical, 5.500%, due 01/15/07 3,832,963 2,765,000 Millennium Pharmaceutical, 5.500%, due 01/15/07 4,130,219 ------------ 14,124,713 ------------ Computers: 8.64% 1,828,000 Comverse Technology, Inc., 4.500%, due 07/01/05 7,878,680 194,000 Comverse Technology, Inc., 4.500%, due 07/01/05 836,140 10,247,000 @ Hewlett-Packard Co., 0.000%, due 10/14/17 9,683,415 7,853,000 Juniper Networks, Inc., 4.750%, due 03/15/07 8,589,218 3,829,000 # Redback Networks, 5.000%, due 04/01/07 4,264,549 963,000 Veritas Software Corp., 1.856%, due 08/13/2006 3,218,226 617,000 Veritas Software Corp., 5.250%, due 11/01/2004 7,303,738 ------------ 41,773,966 ------------ Commercial Services: 0.94% 1,747,000 Mail-Well, Inc., 5.000%, due 11/01/02 1,434,724 2,889,000 Quebecor World, Inc., 6.000%, due 10/01/07 3,098,453 ------------ 4,533,177 ------------ See Accompanying Notes to Financial Statements 150 Pilgrim Convertible Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Principal Market Amount Value - ---------- ------------ Diversified Financial Services: 2.08% $7,379,000 @@ Elan Finance Corp., Ltd., 0.000%, due 12/14/18 $ 5,386,670 1,494,000 @ Morgan Stanley Dean Witter, 0.000%, due 07/29/05 4,653,766 ------------ 10,040,436 ------------ Electronics: 6.33% 4,438,000 Credence Systems Corp., 5.250%, due 09/15/02 6,099,263 3,898,000 Cymer, Inc., 3.500%, due 08/06/04 4,419,358 1,499,000 Oak Industries, 4.875%, due 03/01/08 8,544,300 3,320,000 Sanmina Corp., 4.250%, due 05/01/04 6,640,000 572,000 Sanmina Corp., 4.250%, due 05/01/04 1,144,000 5,063,000 @ Solectron Corp., 0.000%, due 01/27/19 3,215,005 3,000 @ Solectron Corp., 0.000%, due 01/27/19 2,036 833,000 @ Solectron Corp., 0.000%, due 01/27/20 565,399 ------------ 30,629,361 ------------ Healthcare -- Products: 0.67% $4,084,000 @ Alza Corp, 0.000%, due 07/14/14 3,256,990 ------------ Healthcare Services: 0.86% 8,757,000 # Universal Health Svcs, 0.426%, due 06/23/20 4,137,682 ------------ Media: 5.18% 2,151,000 AT&T Corp. -- Liberty Media, 4.000%, due 11/15/29 3,108,195 3,101,000 # AT&T Corp. -- Liberty Media, 4.000%, due 11/15/29 4,480,945 3,650,000 Clear Channel Communications, 1.500%, due 12/01/02 3,581,563 5,446,000 Clear Channel Communications, 2.625%, due 04/01/03 7,045,763 6,181,000 News America Holdings, 0.000%, due 03/11/13 6,853,184 ------------ 25,069,650 ------------ Oil & Gas Producers: 5.64% 10,578,000 @ Anadarko Petroleum Corp., 0.000%, due 03/07/20 6,955,035 3,565,000 Devon Energy Corp., 4.900%, due 08/15/08 3,449,137 2,665,000 Diamond Offshore Drilling, 3.750%, due 02/15/07 1,255,881 6,267,000 # Diamond Offshore Drilling, 0.000%, due 06/06/20 6,564,683 5,551,000 Kerr-Mcgee Corp., 5.250%, due 02/15/10 6,418,344 4,354,000 @ Transocean Sedco Forex, 0.000%, due 05/24/20 2,612,400 ------------ 27,255,480 ------------ Pharmaceuticals: 3.72% 5,296,000 Alpharma, Inc., 3.000%, due 06/01/06 10,181,560 8,671,000 Roche Holdings, Inc., 0.000%, due 01/19/15 7,825,577 ------------ 18,007,137 ------------ Retail: 1.14% 9,566,000 @# Kohls Corp., 0.000%, due 06/12/20 5,512,407 ------------ Semiconductors: 10.52% 3,197,000 Amkor Technologies, Inc., 5.000%, due 03/15/07 2,881,296 5,150,000 @@ ASM Lithography Holding, 4.250%, due 11/30/04 6,991,125 4,969,000 @ Atmel Corp., 0.000%, due 04/21/18 5,403,787 612,000 @ Atmel Corp., 0.000%, due 04/21/18 665,550 347,000 Conexant Systems, Inc., 4.000%, due 02/01/07 272,829 5,946,000 Conexant Systems, Inc., 4.000%, due 02/01/07 4,675,043 6,229,000 Cypress Semiconductor, 4.000%, due 02/01/05 7,171,136 4,203,000 Lam Research Corp., 5.000%, due 09/01/02 5,710,826 8,704,000 LSI Logic Corp., A 4.000%, due 02/15/05 9,258,880 2,531,000 @@ ST Microelectronics NV, 0.000%, due 09/22/09 4,277,390 1,050,000 @@ ST Microelectronics NV, 0.000%, due 06/10/08 3,580,500 ------------ 50,888,362 ------------ See Accompanying Notes to Financial Statements 151 Pilgrim Convertible Fund PORTFOLIO OF INVESTMENTS as of June 30, 2000 (Continued) - -------------------------------------------------------------------------------- Principal Market Amount Value - ---------- ------------ Software: 12.04% $21,688,000 @ America Online Inc., 0.000%, due 12/06/19 $ 10,925,330 4,274,000 @ Automatic Data Processing, 0.000%, due 02/20/12 6,020,997 17,000 Bea Systems, Inc., 4.000%, due 12/15/2006 26,499 4,288,000 Bea Systems, Inc., 4.000%, due 12/15/2006 6,683,920 121,000 Exodus Communications, 4.750%, due 07/15/08 173,030 3,395,000 Exodus Communications, 4.750%, due 07/15/08 4,854,850 4,438,000 I2 Technologies, Inc., 5.250%, due 12/15/06 6,795,688 4,887,000 # Mercury Interactive Corp., 4.750%, due 07/01/07 5,271,851 4,664,000 # Rational Software Corp., 5.000%, due 02/01/07 6,955,190 37,000 Siebel Systems, Inc., 5.500%, due 09/15/06 133,154 2,892,000 # Siebel Systems, Inc., 5.500%, due 09/15/06 10,407,585 ------------ 58,248,094 ------------ Telecommunications: 7.53% $ 7,026,000 American Tower Corp., 5.000%, due 02/15/10 7,148,954 3,678,000 Commscope, Inc., 4.000%, due 12/15/06 4,195,218 575,000 Commscope, Inc., 4.000%, due 12/15/06 655,859 5,557,000 Echostar Communications, 4.875%, due 01/01/07 5,279,150 4,931,000 Efficient Networks, Inc., 5.000%, due 03/15/05 3,581,139 40,000 Nextel Communications, 5.250%, due 01/15/10 41,650 9,961,000 Nextel Communications, 5.250%, due 01/15/10 10,371,890 6,546,000 # NTL, Inc., 5.750%, due 12/15/09 5,171,340 ------------ 36,445,200 ------------ Total Convertible Corporate Bonds (Cost $293,391,542) 346,775,072 ------------ COMMON STOCK: 1.51% Telecommunications: 1.51% 104,634 DECS Trust VI 7,292,330 ------------ Total Commom Stock (Cost $4,200,068) 7,292,330 ------------ Total Long-Term Investments (Cost $383,554,153) 463,127,528 ------------ Principal Amount Value - ---------- ------------ SHORT-TERM INVESTMENTS: 4.76% Repurchase Agreement: 4.76% $23,043,000 State Stree Repurchase Agreement, 6.200% due 07/03/00 (Collateralized by $16,045,000 U.S. Treasury Bonds, 12.500%, Due 08/15/2014 Market Value $23,505,925) $ 23,043,000 ------------ Total Short-Term Investments (Cost $23,043,000) 23,043,000 ------------ Total Investments in Securities (Cost $ 406,597,153)* 100.51% $486,170,528 Other Assets and Liabilities-Net -0.51% (2,490,323) ------ ------------ Net Assets 100.00% $483,680,205 ====== ============ - ---------- @ Non-income producing security # Securities with purchases pursuant to Rule 144A, under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. @@ Foreign Issuer & Payment-in-kind Security * Cost for federal income tax purposes is $407,379,916. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 95,691,648 Gross Unrealized Depreciation (16,901,036) ------------ Net Unrealized Appreciation $ 78,790,612 ============ See Accompanying Notes to Financial Statements 152 SHAREHOLDER MEETINGS - -------------------------------------------------------------------------------- On March 24, 2000, a special meeting of the shareholders of the Pilgrim Government Securities Fund (formerly Northstar Government Securities Fund) was held. The shareholders approved the proposal to approve an Agreement and Plan of Reorganization of the Pilgrim Government Securities Fund into Pilgrim Government Securities Income Fund, Inc. The results of the vote are outlined below: Shares Voted Shares Voted For Against or Withheld Broker Non-Vote Shares Abstained - ---------------- ------------------- --------------- ---------------- 7,259,987 279,187 -- 459,314 On March 24, 2000, a special meeting of the shareholders of the Pilgrim Government Securities Income Fund, Inc. was held. The shareholders approved the proposal to approve an Agreement and Plan of Reorganization of the Pilgrim Government Securities Fund (formerly Northstar Government Securities Fund) into Pilgrim Government Securities Income Fund, Inc. The results of the vote are outlined below: Shares Voted Shares Voted For Against or Withheld Broker Non-Vote Shares Abstained - ---------------- ------------------- --------------- ---------------- 1,402,805 26,247 -- 81,770 On March 24, 2000, a special meeting of the shareholders of the Pilgrim High Yield Fund III (formerly Northstar High Yield Fund) was held. The shareholders approved the proposal to approve an Agreement and Plan of Reorganization of Pilgrim High Yield Fund III into the Pilgrim High Yield Fund II, a series of Pilgrim Mutual Funds. The results of the vote are outlined below: Shares Voted Shares Voted For Against or Withheld Broker Non-Vote Shares Abstained - ---------------- ------------------- --------------- ---------------- 12,977,413 171,887 -- 622,921 On March 24, 2000, a special meeting of the shareholders of the Pilgrim Income & Growth Fund, a series of Pilgrim Mayflower Trust (formerly Northstar Income & Growth Fund, a series of Northstar Trust) was held. The shareholders approved the proposal to approve an Agreement and Plan of Reorganization of the Pilgrim Income & Growth Fund into the Pilgrim Balanced Fund, a series of Pilgrim Mutual Funds. The results of the vote are outlined below: Shares Voted Shares Voted For Against or Withheld Broker Non-Vote Shares Abstained - ---------------- ------------------- --------------- ---------------- 5,116,669 60,104 -- 363,424 On March 24, 2000, a special meeting of the shareholders of the Pilgrim Balance Sheet Opportunities Fund (formerly Northstar Balance Sheet Opportunities Fund) was held. The shareholders approved the proposal to approve an Agreement and Plan of Reorganization of the Pilgrim Balance Sheet Opportunities Fund into the Pilgrim Balanced Fund, a series of Pilgrim Mutual Funds. The results of the vote are outlined below: Shares Voted Shares Voted For Against or Withheld Broker Non-Vote Shares Abstained - ---------------- ------------------- --------------- ---------------- 1,822,915 51,350 -- 98,749 See Accompanying Notes to Financial Statements 153 - ------- Pilgrim Funds - ------- TAX INFORMATION (Unaudited) - -------------------------------------------------------------------------------- Dividends paid during the fiscal year ended June 30, 2000 were as follows: Type Per Share Amount ---- ---------------- MagnaCap Fund Class A NII $ 0.0510 Class M NII $ 0.0138 All Classes LTCG $ 1.7885 MidCap Value Fund All Classes LTCG $ 0.0873 LargeCap Leaders Fund All Classes STCG $ 0.7001 All Classes LTCG $ 1.3036 Asia-Pacific Equity Fund None International Core Growth Fund Class Q NII $ 0.0032 All Classes STCG $ 1.1551 International SmallCap Growth Fund Class A STCG $ 0.9133 Class B STCG $ 0.9683 Class C STCG $ 0.8891 Class Q STCG $ 0.9645 Class A LTCG $ 1.1490 Class B LTCG $ 1.2182 Class C LTCG $ 1.1185 Class Q LTCG $ 1.2134 LargeCap Growth Fund All Classes STCG $ 1.4129 All Classes LTCG $ 0.0646 MidCap Growth Fund Class A STCG $ 2.8055 Class B STCG $ 3.3023 Class C STCG $ 2.5937 Class Q STCG $ 3.5497 Class A LTCG $ 4.2258 Class B LTCG $ 4.9741 Class C LTCG $ 3.9068 Class Q LTCG $ 5.3467 Bank & Thrift Fund Class A NII $ 0.2531 Class B NII $ 0.0291 All Classes STCG $ 0.0194 All Classes LTCG $ 2.7078 Emerging Countries Fund None SmallCap Growth Fund Class A STCG $ 4.5879 Class B STCG $ 5.7726 Class C STCG $ 4.5145 Class Q STCG $ 5.0988 Class A LTCG $ 5.1421 Class B LTCG $ 6.4699 Class C LTCG $ 5.0599 Class Q LTCG $ 5.7147 Worldwide Growth Fund Class A STCG $ 2.2311 Class B STCG $ 2.5147 Class C STCG $ 2.2355 Class Q STCG $ 2.5673 Class A LTCG $ 0.8414 Class B LTCG $ 0.9484 Class C LTCG $ 0.8431 Class Q LTCG $ 0.9682 High Yield Fund Class A NII $ 0.6000 Class B NII $ 0.5590 Class C NII $ 0.5650 Class M NII $ 0.5720 Class Q NII $ 0.5992 Government Securities Income Fund Class A NII $ 0.7440 Class B NII $ 0.6555 Class C NII $ 0.6647 Class M NII $ 0.6855 Class Q NII $ 0.1230 Class T NII $ 0.1124 High Yield Fund II Class A NII $ 1.2005 Class B NII $ 1.1262 Class C NII $ 1.1262 Class Q NII $ 1.2078 Class T NII $ 0.3010 154 - ------- Pilgrim Funds - ------- TAX INFORMATION (Unaudited) (Continued) - -------------------------------------------------------------------------------- Type Per Share Amount ---- ---------------- Strategic Income Fund Class A NII $ 0.9246 Class B NII $ 0.8755 Class C NII $ 0.8725 Class Q NII $ 0.9366 Balanced Growth Fund Class A NII $ 0.3942 Class B NII $ 0.3322 Class C NII $ 0.3390 Class Q NII $ 0.4030 Class A STCG $ 1.4110 Class B STCG $ 1.5108 Class C STCG $ 1.3586 Class Q STCG $ 1.3971 Class A LTCG $ 2.2953 Class B LTCG $ 2.4577 Class C LTCG $ 2.2100 Class Q LTCG $ 2.2726 Convertible Fund Class A NII $ 0.3240 Class B NII $ 0.1883 Class C NII $ 0.1915 Class Q NII $ 0.3470 Class A STCG $ 0.3502 Class B STCG $ 0.3811 Class C STCG $ 0.3575 Class Q STCG $ 0.3388 Class A LTCG $ 3.3374 Class B LTCG $ 3.6313 Class C LTCG $ 3.4071 Class Q LTCG $ 3.2288 NII -- Net investment income STCG -- Short-term capital gain taxable as ordinary income LTCG -- Long-term capital gain Corporate shareholders are generally entitled to take the dividend received deduction on the portion of a Funds' dividend distribution that qualifies under tax law. The percentage of fiscal year 2000 net investment income dividends that qualify for the corporate dividend received deduction is 100%, 100%, 7% and 88%, respectively, for the MagnaCap, Bank and Thrift, Strategic Income and Convertible Funds. Shareholders are strongly advised to consult their own tax advisers with respect to the tax consequences of their investments in the Funds. In January 2001, shareholders, excluding corporate shareholders, will receive an IRS Form 1099 DIV regarding the federal tax status of the dividends and distributions received by you in calendar 2000. 155 RESERVE INSTITUTIONAL TRUST PRIMARY INSTITUTIONAL FUND STATEMENT OF NET ASSETS -- JUNE 30, 2000 (Unaudited) - -------------------------------------------------------------------------------- Principal Amount Value - -------------- ------------ NEGOTIABLE BANK CERTIFICATES OF DEPOSIT: Domestic: 28.56% $20,000,000 Harris Trust & Savings Bank, 6.59%, 7/3/00 $ 20,000,000 20,000,000 South Trust Bank, NA, 6.58%, 7/10/00 20,000,000 20,000,000 Wilmington Trust Co., 6.59%, 7/11/00 20,000,000 20,000,000 Comerica Bank, Detroit, 6.61%, 6/19/01 19,996,079 20,000,000 State Street Bank & Trust Co., Boston, 6.72%, 9/7/00 20,000,000 20,000,000 First Union National Bank, Charlotte, 6.69%, 9/19/00 20,000,000 ------------ 119,996,079 ------------ Yankee: 52.37% 20,000,000 Dresdner Bank, 6.85%, 7/5/00 20,000,000 20,000,000 Credit Suisse First Boston, 6.57%, 7/10/00 20,000,027 20,000,000 Svenska Handelsbaken STO, 6.60%, 7/13/00 20,000,044 20,000,000 Societe Generale, Paris, 6.25%, 7/17/00 20,000,000 15,000,000 National Westminster Bank, 6.60%, 11/22/00 14,996,052 25,000,000 Deutsche Bank, AG, 6.75%, 8/23/00 25,000,000 25,000,000 Dexia Bank, 6.75%, 8/24/00 25,000,000 20,000,000 Commerzbank, AG, Frankfurt, 6.69%, 9/22/00 20,000,000 25,000,000 Rabobank, Nederland, NV, 6.52%, 1/24/01 24,994,713 30,000,000 Canadian INP Bank of Commerce, 6.65%, 2/12/01 29,991,342 ------------ 219,982,178 ------------ Total Negotiable Bank Certificates of Deposit (Cost $339,978,257) 339,978,257 ------------ REPURCHASE AGREEMENTS: 15.95% $67,000,000 Bear, Stearns & Co. Inc., 6.82%, 7/3/00 (collateralized by GNMA 6.375% due 2/20/23 valued at $5,205,874, FGLMC 7% due 9/15/29 valued at $33,762,240, FGLMC 7% due 12/1/26 valued at $ 33,153,084) Total Repurchase Agreements (Cost $ 67,000,000) $ 67,000,000 ------------ Total Investments (Cost $406,978,257) 96.88% 406,978,257 ------ ------------ Assets, Less Other Liabilities 3.12% 13,106,917 ------ ------------ Net Assets 100.00% $420,085,174 ====== ============ Net asset value, offering and redemption price per share of each class based on shares of beneficial interest $ .001 par value outstanding and equivalent to the Net Assets of each Class: 275,498,735 shares Class A $ 1.00 ============ 9,158,259 shares Class B $ 1.00 ============ 41,063,616 shares Class C $ 1.00 ============ 94,364,564 shares Treasurer's Trust $ 1.00 ============ See Accompanying Notes to Financial Statements 156 RESERVE INSTITUTIONAL TRUST PRIMARY INSTITUTIONAL FUND STATEMENT OF NET ASSETS -- MAY 31, 2000 - -------------------------------------------------------------------------------- Principal Amount Value - -------------- ------------ NEGOTIABLE BANK CERTIFICATES OF DEPOSIT: 77.0% Domestic: 18.1% $20,000,000 Harris Trust & Savings Bank, 6.59%, 7/3/00 $ 20,000,000 20,000,000 Southtrust Bank, NA, 6.58%, 7/10/00 20,000,000 20,000,000 U.S. Bank, NA, 6.27%, 6/5/00 20,000,000 20,000,000 Wilmington Trust Co., 6.59%, 7/11/00 20,000,000 ------------ 80,000,000 ------------ Yankee: 58.9% 20,000,000 Banque Nationale de Paris, 6.31%, 6/6/00 20,000,000 20,000,000 Bayerische Hypo-und Vereinbank, AG, 6.15%, 6/19/00 20,000,000 30,000,000 Canadian Imperial Bank of Commerce, 6.70%, 2/12/01 29,990,017 25,000,000 Commerzbank, AG, 6.15%, 6/15/00 25,000,000 15,000,000 Den Danske Bank, 6.46%, 6/14/00 15,000,000 25,000,000 Deutsche Bank, AG, 6.75%, 8/23/00 25,000,000 25,000,000 Dexia Bank, 6.75%, 8/24/00 25,000,000 35,000,000 National Westminster Bank, PLC, 6.30% -- 6.55%, 6/5/00 -- 11/22/00 34,995,094 25,000,000 Rabobank Nederland NV, 6.52%, 1/24/01 24,993,828 20,000,000 Societe Generale, 6.25%, 7/17/00 20,000,000 20,000,000 Toronto Dominion Bank, 6.14%, 6/15/00 20,000,000 ------------ 259,978,939 ------------ Total Negotiable Bank Certificates of Deposit (Cost $339,978,939) 339,978,939 ------------ Euro Time Deposits: 9.1% 20,000,000 Chase Manhattan Bank, 6.81%, 6/1/00 20,000,000 20,000,000 Bank One, NA, 6.81%, 6/1/00 20,000,000 ------------ Total Euro Time Deposits (Cost $ 40,000,000) 40,000,000 ------------ Repurchase Agreements: 17.9% 79,000,000 Bear, Stearns & Co. Inc., 6.55%, 6/1/00, (collateralized by FNMA 0% due 12/20/27 valued at $4,983,308, FGRA 0% due 2/15/24 to 5/15/29 valued at $60,275,057, GNMA 6.6875% to 7.50% due 9/16/27 to 4/15/30 valued at $ 16,657,243) 79,000,000 ------------ Total Repurchase Agreements (Cost $ 79,000,000) $ 79,000,000 ------------ Total Investments (Cost $458,978,939) 104% 458,978,939 Liabilities, Less Other Assets (4.0) (17,758,103) ----- ------------ Net Assets 100.0% $441,220,836 ===== ============ Net asset value, offering and redemption price per share of each Class based on shares of beneficial interest, $.001 par value outstanding and equivalent to the Net Assets of each Class: 305,591,348 shares Class A $ 1.00 ============ 9,212,885 shares Class B $ 1.00 ============ 62,390,175 shares Treasurer's Trust $ 1.00 ============ 64,026,428 shares Class C $ 1.00 ============ Glossary FNMA -- Federal National Mortgage Association GNMA -- Government National Mortgage Association FGRA -- Federal National Mortgage Association ("FNMA") Adjustable Rate Gold REMIC REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and the Board of Trustees of Reserve Institutional Trust: In our opinion, the accompanying statement of net assets and the related statements of operations and of changes in net assets and financial highlights present fairly, in all material respects, the financial position of Primary Institutional Fund (one of the funds comprising Reserve Institutional Trust) (the "Fund") at May 31, 2000, and the results of its operations for the year then ended and the changes in its net assets and the financial highlights for the periods presented, in conformity with accounting principles generally accepted in the United States. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's managment; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at May 31, 2000 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP New York, New York July 15, 2000 See Accompanying Notes to Financial Statements 157 RESERVE INSTITUTIONAL TRUST PRIMARY INSTITUTIONAL FUND STATEMENT OF OPERATIONS - -------------------------------------------------------------------------------- Year Ended May 31, 2000 ----------- Interest Income (Note 1) $24,679,782 ----------- Expenses (Note 2) Comprehensive fee 1,073,925 12b-1 fees (Class C) 152,058 Shareholder services fees: Class B 22,568 Class C 152,058 Treasurer's Trust 671,456 Other operating expenses 674 ----------- Total Expenses before waivers 2,072,739 Less: expenses waived -- ----------- Net Expenses 2,072,739 ----------- Net Investment Income, representing Net Increase in Net Assets from Investment Operations $22,607,043 =========== See Accompanying Notes to Financial Statements 158 RESERVE INSTITUTIONAL TRUST PRIMARY INSTITUTIONAL FUND STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
Year Ended May 31, ---------------------------------- 2000 1999 --------------- --------------- Increase in Net Assets From Investment Operations: Net investment income $ 22,607,043 $ 8,723,962 --------------- --------------- Distributions to Shareholders From Net Investment Income (Note 1): Class A (9,444,752) (1,858,597) Class B (599,849) (206,486) Class C (9,577,370) (6,520,952) Treasurer's Trust (2,985,072) (137,927) --------------- --------------- Total Dividends to Shareholders (22,607,043) (8,723,962) --------------- --------------- From Capital Share Transactions (at net asset value of $1.00 per share): Net proceeds from sale of shares 3,866,941,138 1,544,713,374 Dividends reinvested 22,607,043 8,723,962 Cost of shares redeemed (3,740,872,518) (1,447,380,639) --------------- --------------- Net increase derived from capital share transactions and from investment operations 148,675,663 106,056,697 Net Assets: Beginning of period 292,545,173 186,488,476 --------------- --------------- End of period $ 441,220,836 $ 292,545,173 =============== ===============
See Accompanying Notes to Financial Statements 159 RESERVE INSTITUTIONAL TRUST PRIMARY INSTITUTIONAL FUND NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (1) Significant Accounting Policies: The Primary Institutional Fund (the "Fund") which is a part of the Reserve Institutional Trust (the "Trust") is registered under the Investment Company Act of 1940 as a non diversified, open end investment company. The policies summarized below are consistently followed in the preparation of its financial statements in conformity with generally accepted accounting principles. A. The Trust's authorized shares of beneficial interest are unlimited, and currently are divided into four series (funds): Primary Institutional, which is included in this report, U.S. Government Institutional, U.S. Treasury Institutional and Interstate Tax Exempt Institutional Funds (collectively the "Funds"). Additionally, each Fund is divided into five classes of shares with similar investment objectives, but with different expense ratios. B. Securities are valued at amortized cost, which approximates market value. The amortized cost method values a security at cost at the time of purchase, and thereafter assumes a constant amortization to maturity of any discount or premium, irrespective of intervening changes in interest rates or market values. The maturity of floating or variable rate instruments in which the Fund may invest will be deemed to be, for floating rate instruments (1) the notice period required before the Fund is entitled to receive payment of the principal amount of the instrument; and for variable rate instruments the longer of (1) above or (2) the period remaining until the instrument's next interest rate adjustment, for purposes of Rule 2a-7 and for computing the portfolio's average weighted life to maturity. C. It is the policy of each Fund within the Trust to comply with Subchapter M of the Internal Revenue Code and to distribute all of its taxable income to its shareholders. Accordingly, no Federal income tax provision is required. D. Security transactions are recorded on a trade date basis; interest income is accrued daily and security premium or discount is amortized or accreted daily. Net investment income is distributed to shareholders daily and automatically reinvested in additional Fund shares. E. Expenses are allocated based on the Fund's net assets and/or number of shareholder accounts. Those expenses recognized as directly attributable to a specific Fund within the Trust are charged to that Fund directly. F. The Funds within the Trust may enter into repurchase agreements with financial institutions and securities dealers who are deemed credit worthy pursuant to guidelines established by the Fund's Board of Trustees. The Fund's Investment Adviser will follow procedures intended to provide that all repurchase agreements are at least 100% collateralized as to principal and interest. The Fund custodian holds the underlying securities subject to repurchase agreements. (2) Management Fee and Other Transactions With Affiliates: Pursuant to an Investment Management Agreement (the "Agreement") between Reserve Management Company, Inc. ("RMCI") and the Fund, RMCI serves as the Fund's Investment Adviser subject to the policies adopted by the Board of Trustees. Under the Agreement, RMCI will furnish continuous investment advisory and management services to the Funds. RMCI receives a fee of 0.25% per year of the average daily net assets of the Fund. RMCI pays all employee and customary operating expenses of the Fund. Excluded from the definition of customary operating expenses are interest, taxes, brokerage fees, extraordinary legal and accounting fees and expenses, and the fees of the disinterested Trustees, for which the Fund pays its direct or allocated share. The Fund's operating expenses are limited to an annual rate of .25% for Class A, .45% for Class B and .60% for Treasurer's Trust of each Class' average daily net assets. Distribution Assistance and Shareholder Services: Pursuant to a Plan of Distribution, the Fund makes payments to firms for distribution assistance and administrative services provided to shareholders of Class C and D at an annual rate of .25% and .50%, respectively. To date, no payments have been made by Class D since it has yet to begin operations. In addition, under the Plan, shareholders of Class B, C, D and Treasurer's Trust may make payments to firms (including RMCI) providing shareholder services, 160 RESERVE INSTITUTIONAL TRUST PRIMARY INSTITUTIONAL FUND NOTES TO FINANCIAL STATEMENTS (Continued) - -------------------------------------------------------------------------------- including maintaining shareholder accounts, responding to shareholder inquiries and providing certain other services, at an annual rate of .20%, .25%, .25% and .25%, respectively. (3) Management's Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements and the reported amounts of income and expenses during the reporting periods. Actual results could differ from those estimates. (4) Composition of Net Assets: At May 31, 2000, the composition of the Fund's net assets was as follows: Par Value $ 441,221 Paid-in-Capital 440,779,615 ------------- Net Assets $ 441,220,836 ============= (5) Capital Share Transactions: For the year ended May 31, 2000 and May 31, 1999, the capital share transactions of the Fund were as follows:
Year ended May 31, 2000: -------------------------------------------------------------------- Treasurer's Class A Class B Trust Class C -------------- -------------- -------------- -------------- Sold 1,943,164,267 27,677,033 1,566,404,143 329,695,695 Reinvested 9,444,752 599,849 9,577,370 2,985,072 Redeemed (1,722,819,032) (23,287,360) (1,667,671,186) (327,094,940) -------------- -------------- -------------- -------------- Net Increase (Decrease) 229,789,987 4,989,522 (91,689,673) 5,585,827 ============== ============== ============== ============== Year ended May 31, 1999: -------------------------------------------------------------------- Treasurer's Class A Class B Trust Class C -------------- -------------- -------------- -------------- Sold 591,162,085 10,331,062 876,047,357 67,172,870 Reinvested 1,858,597 206,486 6,520,952 137,928 Redeemed (521,631,338) (16,690,430) (900,188,675) (8,870,196) -------------- -------------- -------------- -------------- Net Increase (Decrease) 71,389,344 (6,152,882) (17,620,366) 58,440,602 ============== ============== ============== ==============
161 RESERVE INSTITUTIONAL TRUST PRIMARY INSTITUTIONAL FUND NOTES TO FINANCIAL STATEMENTS (Continued) - -------------------------------------------------------------------------------- (6) Financial Highlights: Contained below is per share operating performance data for a share of beneficial interest outstanding for the periods as indicated.
Class A Class B ------------------------------ ---------------------------------------- Fiscal Year Fiscal Year Ended May 31, Ended May 31, ------- ------- ------- ------- ------- ------- ------- 2000 1999 1998(a) 2000 1999 1998 1997(b) ------- ------- ------- ------- ------- ------- ------- Net asset value at beginning of period $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 Net investment income from investment operations .0572 .0509 .0332 .0549 .0488 .0529 .0179 Less dividends from net investment income (.0572) (.0509) (.0332) (.0549) (.0488) (.0529) (.0179) ------- ------- ------- ------- ------- ------- ------- Net asset value at end of period $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 ======= ======= ======= ======= ======= ======= ======= Total Return 5.72% 5.09% 5.49%(d) 5.49% 4.88% 5.29% 4.95%(d) RATIOS/SUPPLEMENTAL DATA Net assets end of period (millions) $ 305.6 $ 75.8 $ 4.4 $ 9.2 $ 4.2 $ 10.4 $ 2.0 Ratio of expenses to average net assets .25% .25% .25%(d) .48% .45% .45% .50%(d)(e) Ratio of net investment income to average net assets 5.69% 4.79% 5.35%(d) 5.29% 4.79% 5.16% 4.81%(d)(e) Treasurer's Trust Class C ---------------------------------------- ------------------------- Fiscal Year Fiscal Year Ended Ended May 31, May 31, ---------------------------------------- ------------------------- 2000 1999 1998(c) 2000 1999(f) ---------- ----------- ----------- ---------- ----------- Net asset value at beginning of period $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 Net investment income from investment operations .0532 .0470 .0322 .0516 .0036 Less dividends from net investment income (.0532) (.0470) (.0322) (.0516) (.0036) ---------- ----------- ----------- ---------- ----------- Net asset value at end of period $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 ========== =========== =========== ========== =========== Total Return 5.32% 4.70% 5.13%(d) 5.16% 4.11%(d) RATIOS/SUPPLEMENTAL DATA Net assets end of period (millions) $ 62.4 $ 154.1 $ 171.7 $ 64.0 $ 58.4 Ratio of expenses to average net assets .60% .60% .60%(d) .75% .75%(d) Ratio of net investment income to average net assets 4.99% 4.59% 5.00%(d) 4.91% 4.12%(d)
- ---------- (a) From October 23, 1997 (Commencement of Operations) to May 31, 1998. (b) From January 21, 1997 (Commencement of Operations) to May 31, 1997. (c) From October 15, 1997 (Commencement of Operations) to May 31, 1998. (d) Annualized. (e) Due to the voluntary waiver of certain expenses by RMCI, the net expense ratio and net investment income amounted to 48% and 4.83%, respectively, for the period ended May 31, 1997. (f) From April 30, 1999 (Commencement of Operations) to May 31, 1999. 162 Investment Manager Pilgrim Investments, Inc. 40 North Central Avenue, Suite 1200 Phoenix, Arizona 85004-4408 Administrator Pilgrim Group, Inc. 40 North Central Avenue, Suite 1200 Phoenix, Arizona 85004-4408 Transfer Agent DST Systems, Inc. P.O. Box 419368 Kansas City, Missouri 64141-6368 Custodians State Street Kansas City 801 Pennsylvania Kansas City, Missouri 64105 State Street One Heritage Drive Noah Quincy, Massachusetts 02171 Brown Brothers Harriman 40 Water Street Boston, Massachusetts 02109-3661 Legal Counsel Dechert Price & Rhoads 1775 Eye Street, N.W. Washington, D.C. 20006 Independent Auditors KPMG LLP 355 South Grand Avenue Los Angeles, California 90071 Prospectus containing more complete information regarding the Funds, including charges and expenses, may be obtained by calling Pilgrim Securities, Inc. Distributor at 1-800-334-3444. Please read the prospectus carefully before you invest or send money. PFANN063000 -----END PRIVACY-ENHANCED MESSAGE-----