-----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, Hb1HU5dY5cDGPbebiCtu5NOZx3JXN9gMFBoHXHTEStwoB2hxxnz3/0Xa5LyRJQZ8 SQCvNZnoA1sscV7X6xg7QA== /in/edgar/work/20000804/0000950147-00-001152/0000950147-00-001152.txt : 20000921 0000950147-00-001152.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950147-00-001152 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20000804 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PILGRIM MAYFLOWER TRUST CENTRAL INDEX KEY: 0000911294 STANDARD INDUSTRIAL CLASSIFICATION: [0000 ] STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 497 SEC ACT: SEC FILE NUMBER: 033-67852 FILM NUMBER: 686807 BUSINESS ADDRESS: STREET 1: 40 NORTH CENTRAL AVENUE STREET 2: STE 1200 CITY: PHOENIX STATE: AZ ZIP: 85004 BUSINESS PHONE: 2036027881 MAIL ADDRESS: STREET 1: 40 NORTH CENTRAL AVENUE STREET 2: SUITE 1200 CITY: PHOENIX STATE: AZ ZIP: 85004 FORMER COMPANY: FORMER CONFORMED NAME: NORTHSTAR TRUST DATE OF NAME CHANGE: 19981209 FORMER COMPANY: FORMER CONFORMED NAME: NORTHSTAR ADVANTAGE TRUST DATE OF NAME CHANGE: 19950620 FORMER COMPANY: FORMER CONFORMED NAME: NWNL NORTHSTAR SERIES TRUST DATE OF NAME CHANGE: 19931108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEXINGTON WORLDWIDE EMERGING MARKETS FUND INC CENTRAL INDEX KEY: 0000059139 STANDARD INDUSTRIAL CLASSIFICATION: [0000 ] IRS NUMBER: 221868144 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 497 SEC ACT: SEC FILE NUMBER: 002-32488 FILM NUMBER: 686808 BUSINESS ADDRESS: STREET 1: LEXINGTON GROUP OF MUTUAL FUNDS STREET 2: PARK 80 WEST PLAZA TWO CITY: SADDLE BROOK STATE: NJ ZIP: 07662 BUSINESS PHONE: 2018457300 MAIL ADDRESS: STREET 1: LEXINGTON GROUP OF MUTUAL FUNDS STREET 2: PARK 80 WEST PLAZA TWO CITY: SADDLE BROOK STATE: NJ ZIP: 07662 FORMER COMPANY: FORMER CONFORMED NAME: LEXINGTON GROWTH FUND INC DATE OF NAME CHANGE: 19910711 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEXINGTON GOLDFUND INC CENTRAL INDEX KEY: 0000277512 STANDARD INDUSTRIAL CLASSIFICATION: [0000 ] IRS NUMBER: 132855309 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 497 SEC ACT: SEC FILE NUMBER: 002-72428 FILM NUMBER: 686809 BUSINESS ADDRESS: STREET 1: LEXINGTON GROUP OF MUTUAL FUNDS STREET 2: PARK 80 WEST PLAZA TWO CITY: SADDLE BROOK STATE: NJ ZIP: 07662 BUSINESS PHONE: 2018457300 MAIL ADDRESS: STREET 1: LEXINGTON GROUP OF MUTUAL FUNDS STREET 2: PARK 80 WEST PLAZA TWO CITY: SADDLE BROOK STATE: NJ ZIP: 07662 FORMER COMPANY: FORMER CONFORMED NAME: GOLDFUND INC DATE OF NAME CHANGE: 19811115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEXINGTON SILVER FUND INC CENTRAL INDEX KEY: 0000753311 STANDARD INDUSTRIAL CLASSIFICATION: [0000 ] IRS NUMBER: 751981568 STATE OF INCORPORATION: MD FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 497 SEC ACT: SEC FILE NUMBER: 002-93307 FILM NUMBER: 686810 BUSINESS ADDRESS: STREET 1: LEXINGTON GROUP OF MUTUAL FUNDS STREET 2: PARK 80 WEST PLAZA TWO CITY: SADDLE BROOK STATE: NJ ZIP: 07662 BUSINESS PHONE: 201-845-7300 MAIL ADDRESS: STREET 1: LEXINGTON GROUP OF MUTUAL FUNDS STREET 2: PARK 80 WEST PLAZA TWO CITY: SADDLE BROOK STATE: NJ ZIP: 07662 FORMER COMPANY: FORMER CONFORMED NAME: LEXINGTON STRATEGIC SILVER FUND INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: STRATEGIC SILVER FUND INC DATE OF NAME CHANGE: 19920412 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEXINGTON GLOBAL CORP LEADERS FUND INC CENTRAL INDEX KEY: 0000812576 STANDARD INDUSTRIAL CLASSIFICATION: [0000 ] STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 497 SEC ACT: SEC FILE NUMBER: 033-13436 FILM NUMBER: 686811 BUSINESS ADDRESS: STREET 1: LEXINGTON GROUP OF MUTUAL FUNDS STREET 2: PARK 80 WEST PLAZA TWO CITY: SADDLE BROOK STATE: NJ ZIP: 07662 BUSINESS PHONE: 2018457300 MAIL ADDRESS: STREET 1: LEXINGTON GROUP OF MUTUAL FUNDS STREET 2: PARK 80 WEST PLAZA TWO CITY: SADDLE BROOK STATE: NJ ZIP: 07662 FORMER COMPANY: FORMER CONFORMED NAME: LEXINGTON GLOBAL FUND INC DATE OF NAME CHANGE: 19920703 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: 497 SEC ACT: SEC FILE NUMBER: 033-56094 FILM NUMBER: 686812 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: LEXINGTON INTERNATIONAL FUND INC CENTRAL INDEX KEY: 0000915643 STANDARD INDUSTRIAL CLASSIFICATION: [0000 ] IRS NUMBER: 223278095 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 497 SEC ACT: SEC FILE NUMBER: 033-72226 FILM NUMBER: 686813 BUSINESS ADDRESS: STREET 1: LEXINGTON GROUP OF MUTUAL STREET 2: PARK 80 WEST PLAZA TWO CITY: SADDLE BROOK STATE: NJ ZIP: 07662 BUSINESS PHONE: 2018457300 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: 497 SEC ACT: SEC FILE NUMBER: 033-91706 FILM NUMBER: 686814 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 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEXINGTON SMALL CAP ASIA GROWTH FUND INC CENTRAL INDEX KEY: 0000945228 STANDARD INDUSTRIAL CLASSIFICATION: [ ] STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 497 SEC ACT: SEC FILE NUMBER: 033-59363 FILM NUMBER: 686815 BUSINESS ADDRESS: STREET 1: PARK 80 WEST PLAZA TWO CITY: SADDLE BROOK STATE: NJ ZIP: 07663 BUSINESS PHONE: 2017127731 MAIL ADDRESS: STREET 1: PARK 80 WEST PLAZA TWO CITY: SADDLE BROOK STATE: NJ ZIP: 07663 FORMER COMPANY: FORMER CONFORMED NAME: LEXINGTON CROSBY SMALL CAP ASIA GROWTH FUND INC DATE OF NAME CHANGE: 19950511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEXINGTON TROIKA DIALOG RUSSIA FUND INC CENTRAL INDEX KEY: 0001011179 STANDARD INDUSTRIAL CLASSIFICATION: [ ] STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 497 SEC ACT: SEC FILE NUMBER: 333-02265 FILM NUMBER: 686816 BUSINESS ADDRESS: STREET 1: PARK 80 WEST PLAZA TWO CITY: SADDLE BROOK STATE: NJ ZIP: 07663 BUSINESS PHONE: 2017127731 MAIL ADDRESS: STREET 1: PARK 80 WEST PLAZA TWO CITY: SADDLE BROOK STATE: NJ ZIP: 07663 497 1 0001.txt DEFINITIVE PROSPECTUS AND SAI PILGRIM(R) - --------------------------- FUNDS FOR SERIOUS INVESTORS Prospectus Classes: A, B, C, M and T July 31, 2000 INTERNATIONAL EQUITY FUNDS Pilgrim Global Corporate Leaders Pilgrim Worldwide Growth Pilgrim International Value Pilgrim International Core Growth Pilgrim International Pilgrim International SmallCap Growth Pilgrim Emerging Markets Value Pilgrim Emerging Countries Pilgrim Worldwide Emerging Markets Pilgrim Asia-Pacific Equity Pilgrim SmallCap Asia Growth Pilgrim Troika Dialog Russia PRECIOUS METALS FUNDS Pilgrim Gold Pilgrim Silver This prospectus contains important information about investing in the Pilgrim Funds. You should read it carefully before you invest, and keep it for future reference. Please note that your investment: is not a bank deposit, is not insured or guaranteed by the FDIC, the Federal Reserve Board or any other government agency and is affected by market fluctuations. There is no guarantee that the Funds will achieve their objectives. As with all mutual funds, the Securities and Exchange Commission (SEC) has not approved or disapproved these securities nor has the SEC judged whether the information in this prospectus is accurate or adequate. Any representation to the contrary is a criminal offense. WHAT'S INSIDE - -------------------------------------------------------------------------------- [GRAPHIC] OBJECTIVE These pages contain a description of each of our Funds included in this prospectus, including its objective, [GRAPHIC] investment strategy and risks. INVESTMENT STRATEGY You'll also find: [GRAPHIC] RISKS How the Fund has performed. A chart that shows the Fund's financial performance for the past ten years (or since inception, if shorter). [GRAPHIC] HOW THE What you pay to invest. A list of the fees and expenses you FUND HAS pay -- both directly and indirectly -- when you invest in a PERFORMED Fund. An Introduction to the Pilgrim Funds 1 Funds At A Glance 2 INTERNATIONAL EQUITY FUNDS Pilgrim Global Corporate Leaders 4 Pilgrim Worldwide Growth 6 Pilgrim International Value 8 Pilgrim International Core Growth 10 Pilgrim International 12 Pilgrim International SmallCap Growth 14 Pilgrim Emerging Markets Value 16 Pilgrim Emerging Countries 18 Pilgrim Worldwide Emerging Markets 20 Pilgrim Asia-Pacific Equity 22 Pilgrim SmallCap Asia Growth 24 Pilgrim Troika Dialog Russia 26 PRECIOUS METALS FUNDS Pilgrim Gold 28 Pilgrim Silver 30 What You Pay to Invest 32 Shareholder Guide 35 Management of the Funds 42 Dividends, Distributions and Taxes 45 More Information About Risks 46 Financial Highlights 49 Where To Go For More Information Back cover INTRODUCTION TO THE PILGRIM FUNDS - -------------------------------------------------------------------------------- Risk is the potential that your investment will lose money or not earn as much as you hope. All mutual funds have varying degrees of risk, depending on the securities they invest in. Please read this prospectus carefully to be sure you understand the principal risks and strategies associated with each of our Funds. You should consult the Statement of Additional Information (SAI) for a complete list of the risks and strategies. [GRAPHIC] If you have any questions about the Pilgrim Funds, please call your financial consultant or us at 1-800-992-0180. This prospectus is designed to help you make informed decisions about your investments. INTERNATIONAL EQUITY FUNDS Pilgrim offers International Equity Funds that emphasize a growth approach to international investing, as well as International Equity Funds that apply the technique of "value investing". These Funds focus on long-term growth by investing primarily in foreign equities. They may suit you if you: * are investing for the long-term -- at least several years * are looking for exposure to international markets * are willing to accept higher risk in exchange for long-term growth. PRECIOUS METALS FUNDS Pilgrim's Precious Metals Funds seek long-term growth. They may suit you if you: * are investing for the long-term -- at least several years * are looking for exposure to international markets and precious metals * are willing to accept higher risk in exchange for long-term growth. [GRAPHIC] If you have any questions, please call 1-800-992-0180. 1 - ------ Funds At A Glance - ------ This table is a summary of the objectives, main investments and risks of each Pilgrim Fund. It is designed to help you understand the differences between the Funds, the main risks associated with each, and how risk and investment objectives relate. This table is only a summary. You should read the complete descriptions of each Fund's investment objectives, strategies and risks, which begin on page 4.
FUND INVESTMENT OBJECTIVE - ----------------------------------------------------------------------------------------------------- International Global Corporate Leaders Fund Long-term growth of capital Equity Funds Adviser: Pilgrim Investments, Inc. Worldwide Growth Fund Long-term capital appreciation Adviser: Pilgrim Investments, Inc. Sub-Adviser: Nicholas-Applegate Capital Mgt. International Value Fund Long-term capital appreciation Adviser: Pilgrim Investments, Inc. Sub-Adviser: Brandes Investment Partners, L.P. International Core Growth Fund Long-term capital appreciation Adviser: Pilgrim Investments, Inc. Sub-Adviser: Nicholas-Applegate Capital Mgt. International Fund Long-term growth of capital Adviser: Pilgrim Investments, Inc. International SmallCap Growth Fund Long-term capital appreciation Adviser: Pilgrim Investments, Inc. Sub-Adviser: Nicholas-Applegate Capital Mgt. Emerging Markets Value Fund Long-term capital appreciation Adviser: Pilgrim Investments, Inc. Sub-Adviser: Brandes Investment Partners L.P. Emerging Countries Fund Long-term capital appreciation Adviser: Pilgrim Investments, Inc. Sub-Adviser: Nicholas-Applegate Capital Mgt. Worldwide Emerging Markets Fund Long-term growth of capital Adviser: Pilgrim Investments, Inc. Asia-Pacific Equity Fund Long-term capital appreciation Adviser: Pilgrim Investments, Inc. Sub-Adviser: HSBC Asset Management SmallCap Asia Growth Fund Long-term capital appreciation Adviser: Pilgrim Investments, Inc. Sub-Adviser: Crosby Asset Management (US) Inc. Troika Dialog Russia Fund Long-term capital appreciation Adviser: Pilgrim Investments, Inc. Sub-Adviser: Troika Dialog Asset Management (Cayman Islands), Ltd. Precious Metals Gold Fund Capital appreciation and a hedge Funds Adviser: Pilgrim Investments, Inc. against the loss of buying power of the U.S. Dollar Silver Fund Maximum total return from long-term Adviser: Pilgrim Investments, Inc. growth of capital and income
2 MAIN INVESTMENTS MAIN RISKS - -------------------------------------------------------------------------------- Equity securities and equity Price volatility and other risks that equivalents of foreign and accompany an investment in [growth-oriented] U.S. companies. foreign equities. Sensitive to currency exchange rates, international political and economic conditions and other risks that affect foreign securities. Equity securities of companies Price volatility and other risks that located in countries around accompany an investment in growth-oriented the world, which may include foreign equities. Sensitive to currency the U.S., believed to have exchange rates, international political and growth potential economic conditions and other risks that affect foreign securities. Equity securities of issuers Price volatility and other risks that located in countries outside accompany an investment in foreign equities. the U.S., believed to have Sensitive to currency exchange rates, prices below their long-term international political and economic value conditions and other risks that affect foreign securities. Equity securities of larger Price volatility and other risks that companies in countries around accompany an investment in growth-oriented the world, which may include foreign equities. Sensitive to currency the U.S., believed to have exchange rates, international political and growth potential economic conditions and other risks that affect foreign securities. Equity securities and equity Price volatility and other risks that equivalents of companies accompany an investment in [growth-oriented] outside of the U.S. foreign equities. Sensitive to currency exchange rates, international political and economic conditions and other risks that affect foreign securities. Equity securities of Price volatility, liquidity and other risks small-sized companies in that accompany an investment in equity countries around the world, securities of foreign, small-sized companies. which may include the U.S., Sensitive to currency exchange rates, believed to have growth international political and economic potential conditions and other risks that affect foreign securities. Equity securities of issuers Price volatility, liquidity and other risks located in countries with that accompany an investment in equities from emerging securities markets emerging countries. Sensitive to currency believed to have prices below exchange rates, international political and their long-term value economic conditions and other risks that affect foreign securities. Equity securities of issuers Price volatility, liquidity and other risks located in countries with that accompany an investment in equities from emerging securities markets emerging countries. Sensitive to currency believed to have growth exchange rates, international political and potential. economic conditions and other risks that affect foreign securities. Equity securities and equity Price volatility, liquidity and other risks equivalents of emerging market that accompany an investment in equities from companies. emerging countries. Sensitive to currency exchange rates, international political and economic conditions and other risks that affect foreign securities. Equity securities of companies Price volatility and other risks that based in the Asia-Pacific accompany an investment in foreign equities region, excluding Australia and in securities of issuers in a single and Japan region. Sensitive to currency exchange rates, international political and economic conditions and other risks that affect foreign securities. Equity securities and equity Price volatility, liquidity and other risks equivalents of companies in that accompany an investment in equity the Asia region having market securities of issuers in a single region. capitalizations of less than Sensitive to currency exchange rates, $1 billion. international political and economic conditions and other risks that affect foreign securities. Equity securities of Russian Risk due to extremely volatile and often companies. illiquid nature of the Russian securities markets, and volatility due to non-diversification of investments. Particularly sensitive to Russian political and economic conditions, currency exchange rates, and other risks that affect funds investing in securities of a single country. Potential for expropriation, dilution, devaluation, default or excessive taxation by the Russian government. Gold and securities of Price volatility due to non-diversification companies engaged in mining or and concentration in the gold/precious metals processing gold throughout the industry. The market for gold and other world. precious metals is widely unregulated and is located in foreign countries that have the potential for instability. Precious metals earn no income, have higher transaction/storage costs, and realize gain only with an increase in market price. Securities of companies which Price volatility due to non-diversification are engaged in the and concentration in stocks in the silver exploration, mining, industry. The market for silver is limited processing, fabrication or and widely unregulated and is located in distribution of silver and in foreign countries that have the potential for silver bullion. instability. Precious metals earn no income, have higher transaction/storage costs, and realize gain only with an increase in market price. 3 - ------------- International Equity Funds - ------------- Adviser PILGRIM GLOBAL CORPORATE LEADERS FUND Pilgrim Investments, Inc. - -------------------------------------------------------------------------------- OBJECTIVE [GRAPHIC] The Fund's investment objective is to seek long-term growth of capital through investment in equity securities and equity equivalents of foreign and U.S. companies. INVESTMENT STRATEGY [GRAPHIC] The Fund normally invests at least 65% of its total assets in a diversified portfolio of blue chip securities that the portfolio managers believe represents "corporate leaders" in their respective industries. The Fund may invest in the securities of companies and governments of the following regions: * Asia Region (including Japan); * Europe; * Latin America; * Africa; * North America (including U.S. and Canada); and * Other areas and countries as the adviser may decide from time to time. The Fund will normally invest in at least three different countries. The Fund intends to select the countries, currencies and companies that provide the greatest potential for long-term growth. The Fund may invest 35% of its total assets in: * securities of smaller capitalization companies; * debt securities; and * other investments. - -------------------------------------------------------------------------------- RISKS [GRAPHIC] You could lose money on an investment in the Fund. The Fund may be affected by the following risks, among others: Price Volatility -- the value of the Fund changes as the prices of its investments go up or down. Equity securities face market, issuer and other risks, and their values may go up or down, sometimes rapidly and unpredictably. Market risk is the risk that securities may decline in value due to factors affecting securities markets generally or particular industries. Issuer risk is the risk that the value of a security may decline for reasons relating to the issuer, such as changes in the financial condition of the issuer. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. The Fund invests primarily in equity securities of larger companies, which sometimes have more stable prices than smaller companies. The Fund also may invest in small and medium-sized companies, which may be more susceptible to price swings because they have fewer financial resources, more limited product and market diversification, and many are dependent on a few key managers. Market Trends -- from time to time, the stock market may not favor the large company value securities in which the Fund invests. Rather, the market could favor growth-oriented stocks or small company stocks, or may not favor equities at all. Inability to Sell Securities -- securities of smaller companies trade in lower volume and may be less liquid than securities of larger, more established companies. The Fund could lose money if it cannot sell a security at the time and price that would be most beneficial to the Fund. Risks of Foreign Investing -- foreign investments may be riskier than U.S. investments for many reasons, including changes in currency exchange rates, unstable political and economic conditions, a lack of adequate company information, differences in the way securities markets operate, less secure foreign banks or securities depositories than those in the U.S., and foreign controls on investment. To the extent the Fund invests in emerging markets countries, the risks may be greater, partly because emerging market countries may be less politically and economically stable than other countries. It may also be more difficult to buy and sell securities in emerging market countries. Debt securities -- the value of debt securities may fall when interest rates rise. Debt securities with longer maturities tend to be more sensitive to changes in interest rates, usually making them more volatile than debt securities with shorter maturities. 4 Pilgrim Global Corporate Leaders Fund PILGRIM GLOBAL CORPORATE LEADERS FUND - -------------------------------------------------------------------------------- HOW THE FUND HAS PERFORMED [GRAPHIC] The bar chart and table below show the Fund's annual returns and long-term performance, and illustrate the variability of the Fund's returns. The Fund's past performance is not an indication of future performance. The bar chart below provides some indication of the risks of investing in the Fund by showing changes in the performance of the Fund's Class A shares from year to year. Year by Year Total Returns (%)(1)(2) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- -16.75 15.55 -3.55 31.88 1.84 10.69 16.43 6.90 19.06 39.06 Best and worst quarterly performance during this period: 4th quarter 1999: up 25.16% 3rd quarter 1990: down 18.32% The Fund's year-to-date total return as of June 30, 2000 was down 4.88%. The table below provides some indication of the risks of investing in the Fund by comparing the Fund's performance to that of a broad measure of market performance -- the MSCI World Index. Average Annual Total Returns MSCI World Class A(3) Index(4) ---------- -------- One year, ended December 31, 1999 % 31.06 25.34 Five years, ended December 31, 1999 % 16.54 20.25 Ten years, ended December 31, 1999 % 10.35 11.96 - ---------- (1) These figures are as of December 31 of each year. They do not reflect sales charges and would be lower if they did. (2) Prior to July 26, 2000, Lexington Management Corporation served as the adviser to the Fund and the Fund's shares were sold on a no-load basis. Effective July 31, 2000, the Fund's outstanding shares were classified as "Class A" shares. (3) Reflects deduction of sales charge of 5.75%. (4) The Morgan Stanley Capital International World (MSCI World) Index is an unmanaged index that measures the performance of over 1,400 securities listed on exchanges in the U.S., Europe, Canada, Australia, New Zealand, and the Far East. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Pilgrim Global Corporate Leaders Fund 5 - ------------- International Equity Funds - ------------- Adviser Pilgrim Investments, Inc. Sub-Adviser Nicholas-Applegate PILGRIM WORLDWIDE GROWTH FUND Capital Management - -------------------------------------------------------------------------------- OBJECTIVE [GRAPHIC] The Fund seeks maximum long-term capital appreciation. INVESTMENT STRATEGY [GRAPHIC] Under normal conditions, the Fund invests at least 65% of its total assets in securities of issuers located in at least three different countries, one of which may be the U.S. The Fund normally invests at least 75% of its total assets in common and preferred stocks, warrants and convertible securities. The Fund may invest in companies located in countries with emerging securities markets when the Sub-Adviser believes they present attractive investment opportunities. The Fund's Sub-Adviser emphasizes a growth approach by searching for successful, growing companies that are managing change advantageously and poised to exceed growth expectations. It focuses on a "bottom-up" analysis that evaluates the financial conditions and competitiveness of individual companies worldwide. It uses a blend of traditional fundamental research of individual securities, calling on the expertise of many external analysts in different countries throughout the world, and a computer intensive ranking system that analyzes and ranks securities. The Sub-Adviser seeks to uncover signs of "change at the margin" -- positive business developments which are not yet fully reflected in a company's stock price. It gathers financial data on 20,000 companies in over 50 countries. In analyzing specific companies for possible investment, the Sub-Adviser ordinarily looks for several of the following characteristics: above-average per share earnings growth; high return on invested capital; a healthy balance sheet; sound financial and accounting policies and overall financial strength; strong competitive advantages; effective research and product development and marketing; development of new technologies; efficient service; pricing flexibility; strong management; and general operating characteristics that will enable the companies to compete successfully in their respective markets. The Sub-Adviser usually considers whether to sell a particular security when any of those factors materially changes. In allocating the Fund's assets, the Sub-Adviser attempts to identify securities of countries that are expected to provide the best opportunities for meeting the Fund's investment objective. The Fund may also lend portfolio securities on a short-term or long-term basis, up to 30% of its total assets. - -------------------------------------------------------------------------------- RISKS [GRAPHIC] You could lose money on an investment in the Fund. The Fund may be affected by the following risks, among others: Price Volatility -- the value of the Fund changes as the prices of its investments go up or down. Equity securities face market, issuer and other risks, and their values may go up or down, sometimes rapidly and unpredictably. Market risk is the risk that securities may decline in value due to factors affecting securities markets generally or particular industries. Issuer risk is the risk that the value of a security may decline for reasons relating to the issuer, such as changes in the financial condition of the issuer. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. This Fund invests in companies that the Sub-Adviser believes have the potential for rapid growth, which may give the Fund a higher risk of price volatility than a Fund that emphasizes other styles, such as a value-oriented style. The Fund may also invest in small and medium-sized companies, which may be more susceptible to greater price swings than larger companies because they may have fewer financial resources, more limited product and market diversification and many may be dependent on a few key managers. Market Trends -- from time to time, the stock market may not favor the growth securities in which the Fund invests. Rather, the market could favor value-oriented stocks, or may not favor equities at all. Risks of Foreign Investing -- foreign investments may be riskier than U.S. investments for many reasons, including changes in currency exchange rates, unstable political and economic conditions, a lack of adequate company information, differences in the way securities markets operate, less secure foreign banks or securities depositories than those in the U.S., and foreign controls on investment. To the extent the Fund invests in emerging markets countries, the risks may be greater, partly because emerging market countries may be less politically and economically stable than other countries. It may also be more difficult to buy and sell securities in emerging market countries. Inability to Sell Securities -- securities of foreign companies may trade in lower volume and may be less liquid than securities of U.S. companies. The Fund could lose money if it cannot sell a security at the time and price that would be most beneficial to the Fund. Securities Lending -- There is the risk that when lending portfolio securities, the securities may not be available to the Fund on a timely basis and the Fund may, therefore, lose the opportunity to sell the securities at a desirable price. 6 Pilgrim Worldwide Growth Fund PILGRIM WORLDWIDE GROWTH FUND - -------------------------------------------------------------------------------- HOW THE FUND HAS PERFORMED [GRAPHIC] The bar chart and table below show the Fund's annual returns and long-term performance, and illustrate the variability of the Fund's returns. The Fund's past performance is not an indication of future performance. The bar chart below provides some indication of the risks of investing in the Fund by showing changes in the performance of the Fund's Class A shares from year to year. Year by Year Total Returns (%)(1)(2) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- 2.45 14.74 17.92 17.28 37.34 83.52 Best and worst quarterly performance during this period: 4th quarter 1999: up 44.54% 3rd quarter 1998: down 13.43% The Fund's year-to-date total return as of June 30, 2000 was down 3.63%. The table below provides some indication of the risks of investing in the Fund by comparing the Fund's performance to that of a broad measure of market performance -- the MSCI World Index. Average Annual Total Returns MSCI World Class A(3) Class B(4) Class C(5) Index(6) ---------- ---------- ---------- -------- One year, ended December 31, 1999 % 72.95 77.26 81.35 23.26 Five years, ended December 31, 1999 % 30.39 N/A 31.11 18.09 Since inception of Classes A and C(7) % 24.78 N/A 25.09 14.87 Since inception of Class B(7) % N/A 32.79 N/A 17.77 - ---------- (1) These figures are as of December 31 of each year. They do not reflect sales charges and would be lower if they did. (2) Prior to May 24, 1999, Nicholas-Applegate Capital Management was the adviser, rather than sub-adviser, to the Fund. (3) Reflects deduction of sales charge of 5.75%. (4) Reflects deduction of deferred sales charge of 5% and 2%, respectively, for 1 year and since inception returns. (5) Reflects deduction of a deferred sales charge of 1% for the 1 year return. (6) The Morgan Stanley Capital International World (MSCI World) Index is an unmanaged index that measures the performance of over 1,400 securities listed on exchanges in the U.S., Europe, Canada, Australia, New Zealand and the Far East. (7) Classes A and C commenced operations on April 19, 1993. Class B commenced operations on May 31, 1995. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Pilgrim Worldwide Growth Fund 7 - ------------- International Equity Funds - ------------- Adviser Pilgrim Investments, Inc. Sub-Adviser Brandes Investment PILGRIM INTERNATIONAL VALUE FUND Partners, L.P. - -------------------------------------------------------------------------------- OBJECTIVE [GRAPHIC] The Fund seeks long-term capital appreciation. INVESTMENT STRATEGY [GRAPHIC] The Fund invests primarily in foreign companies with market capitalizations greater than $1 billion, but it may hold up to 25% of its assets in companies with smaller market capitalizations. The portfolio managers apply the technique of "value investing" by seeking stocks that their research indicates are priced below their long-term value. The Fund holds common stocks, preferred stocks, American, European and Global depository receipts, as well as convertible securities. Under normal circumstances, the Fund will invest at least 65% of its total assets in securities of companies located in at least three countries other than the U.S. The Fund may invest up to the greater of: * 20% of its assets in any one country or industry, or, * 150% of the weighting of the country or industry in the Morgan Stanley Capital International European Australasian Far East (MSCI EAFE) Index, as long as the Fund meets any industry concentration or diversification requirements under the Investment Company Act. - -------------------------------------------------------------------------------- RISKS [GRAPHIC] You could lose money on an investment in the Fund. The Fund's investments may be affected by the following additional risks: Risks of Foreign Investing -- foreign investments may be riskier than U.S. investments for many reasons, including changes in currency exchange rates, unstable political and economic conditions, a lack of adequate company information, differences in the way securities markets operate, less secure foreign banks or securities depositories than those in the U.S., and foreign controls on investment. To the extent the Fund invests in emerging market countries, the risks may be greater, partly because emerging market countries may be less politically and economically stable than other countries. It may also be more difficult to buy and sell securities in emerging market countries. Price Volatility -- the value of the Fund changes as the prices of its investments go up or down. Equity securities face market, issuer and other risks, and their values may go up or down, sometimes rapidly and unpredictably. Market risk is the risk that securities may decline in value due to factors affecting securities markets generally or particular industries. Issuer risk is the risk that the value of a security may decline for reasons relating to the issuer, such as changes in the financial condition of the issuer. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. The Fund invests primarily in equity securities of larger companies, which sometimes have more stable prices than smaller companies. However, the Fund may also invest in small and medium-sized companies, which may be more susceptible to price swings than larger companies because they have fewer financial resources, more limited product and market diversification and many are dependent on a few key managers. Market Trends -- from time to time, the stock market may not favor the value-oriented stocks in which the Fund invests. Rather, the market could favor growth-oriented stocks, or may not favor equities at all. Inability to Sell Securities -- securities of smaller companies and some foreign companies may trade in lower volume and may be less liquid than securities of larger, more established companies or U.S. companies. The Fund could lose money if it cannot sell a security at the time and price that would be most beneficial to the Fund. 8 Pilgrim International Value Fund PILGRIM INTERNATIONAL VALUE FUND - -------------------------------------------------------------------------------- HOW THE FUND HAS PERFORMED [GRAPHIC] The bar chart and table below show the Fund's annual returns and long-term performance, and illustrate the variability of the Fund's returns. The Fund's past performance is not an indication of future performance. The bar chart below provides some indication of the risks of investing in the Fund by showing changes in the performance of the Fund's Class A shares from year to year. Year by Year Total Return (%)(1) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- 15.23 17.86 13.46 51.49 Best and worst quarterly performance during this period: 4th quarter 1999: up 24.50% 3rd quarter 1998: down 14.73% The Fund's year-to-date total return as of June 30, 2000 was up 2.35%. The table below provides some indication of the risks of investing in the Fund by comparing the Fund's performance to that of a broad measure of market performance -- the MSCI EAFE Index. Average Annual Total Returns MSCI EAFE Class A(2) Class B(3) Class C(4) Index(5) ---------- ---------- ---------- -------- One year, ended December 31, 1999 % 42.78 45.30 49.32 25.27 Since inception of Classes A and C(6) % 20.61 N/A 21.32 14.62 (7) Since inception of Class B(6) % N/A 25.73 N/A 18.66 (8) - ---------- (1) These figures are as of December 31 of each year. They do not reflect sales charges and would be lower if they did. (2) Reflects deduction of sales charge of 5.75% (3) Reflects deduction of deferred sales charge of 5% and 3%, respectively, for 1 year and since inception returns. (4) Reflects deduction of a deferred sales charge of 1% for the 1 year return. (5) The Morgan Stanley Capital International Europe Australasia Far East (MSCI EAFE) Index is an unmanaged index that measures the performance of securities listed on exchanges in markets in Europe, Australia and the Far East. (6) Classes A and C commenced operations on March 6, 1995. Class B commenced operations on April 18, 1997. (7) Index return is for period beginning March 1, 1995. (8) Index return is for period beginning May 1, 1997. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Pilgrim International Value Fund 9 - ------------- International Equity Funds - ------------- Adviser Pilgrim Investments, Inc. Sub-Adviser Nicholas-Applegate PILGRIM INTERNATIONAL CORE GROWTH FUND Capital Management - -------------------------------------------------------------------------------- OBJECTIVE [GRAPHIC] The Fund seeks maximum long-term capital appreciation. INVESTMENT STRATEGY [GRAPHIC] Under normal conditions, the Fund invests at least 65% of its total assets in securities of issuers located in countries outside the U.S. The Fund may invest up to 35% of its total assets in U.S. issuers. The Fund invests primarily in large capitalized companies ("large cap stocks") located worldwide. In the opinion of the Sub-Adviser large cap stocks are those whose stock market capitalizations are predominantly in the top 75% of publicly traded companies as measured by stock market capitalizations in over 50 countries. The market capitalization ranges of the various countries' large cap stocks may vary greatly due to fluctuating currency values, differences in the size of the respective economies, and movements in the local stock markets. Under normal conditions, the Fund invests at least 75% of its total assets in common and preferred stocks, warrants and convertible securities. The Fund may invest in companies located in countries with emerging securities markets when the Sub-Adviser believes they present attractive investment opportunities. The Fund's Sub-Adviser emphasizes a growth approach by searching for successful, growing companies that are managing change advantageously and poised to exceed growth expectations. It focuses on a "bottom-up" analysis that evaluates the financial conditions and competitiveness of individual companies worldwide. It uses a blend of traditional fundamental research of individual securities, calling on the expertise of many external analysts in different countries throughout the world, and a computer intensive ranking system that analyzes and ranks securities. The Sub-Adviser seeks to uncover signs of "change at the margin" -- positive business developments which are not yet fully reflected in a company's stock price. It gathers financial data on 20,000 companies in over 50 countries. In analyzing specific companies for possible investment, the Sub-Adviser ordinarily looks for several of the following characteristics: above-average per share earnings growth; high return on invested capital; a healthy balance sheet; sound financial and accounting policies and overall financial strength; strong competitive advantages; effective research and product development and marketing; development of new technologies; efficient service; pricing flexibility; strong management; and general operating characteristics that will enable the companies to compete successfully in their respective markets. The Sub-Adviser usually considers whether to sell a particular security when any of those factors materially changes. In allocating the Fund's assets, the Sub-Adviser attempts to identify securities of countries that are expected to provide the best opportunities for meeting the Fund's investment objective. The Fund may also lend portfolio securities on a short-term or long-term basis, up to 30% of its total assets. - -------------------------------------------------------------------------------- RISKS [GRAPHIC] You could lose money on an investment in the Fund. The Fund may be affected by the following risks, among others: Price Volatility -- the value of the Fund changes as the prices of its investments go up or down. Equity securities face market, issuer and other risks, and their values may go up or down, sometimes rapidly and unpredictably. Market risk is the risk that securities may decline in value due to factors affecting securities markets generally or particular industries. Issuer risk is the risk that the value of a security may decline for reasons relating to the issuer, such as changes in the financial condition of the issuer. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. This Fund invests in companies that the Sub-Adviser believes have the potential for rapid growth, which may give the Fund a higher risk of price volatility than a Fund that emphasizes other styles, such as a value-oriented style. The Fund invests in large companies, which sometimes have more stable prices than smaller companies. Market Trends -- from time to time, the stock market may not favor the growth securities in which the Fund invests. Rather, the market could favor value-oriented stocks or smaller company stocks, or may not favor equities at all. Risks of Foreign Investing -- foreign investments may be riskier than U.S. investments for many reasons, including changes in currency exchange rates, unstable political and economic conditions, a lack of adequate company information, differences in the way securities markets operate, less secure foreign banks or securities depositories than those in the U.S., and foreign controls on investment. To the extent the Fund invests in emerging market countries, the risks may be greater, partly because emerging market countries may be less politically and economically stable than other countries. It may also be more difficult to buy and sell securities in emerging market countries. Securities Lending -- There is the risk that when lending portfolio securities, the securities may not be available to the Fund on a timely basis and the Fund may, therefore, lose the opportunity to sell the securities at a desirable price. 10 Pilgrim International Core Growth Fund PILGRIM INTERNATIONAL CORE GROWTH FUND - -------------------------------------------------------------------------------- HOW THE FUND HAS PERFORMED [GRAPHIC] The bar chart and table below show the Fund's annual returns and long-term performance, and illustrate the variability of the Fund's returns. The Fund's past performance is not an indication of future performance. The bar chart below provides some indication of the risks of investing in the Fund by showing changes in the performance of the Fund's Class A shares from year to year. Year by Year Total Returns (%)(1)(2) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- 20.92 66.69 Best and worst quarterly performance during this period: 4th quarter 1999: up 44.07% 1st quarter 1998: up 2.61% The Fund's year-to-date total return as of June 30, 2000 was down 12.65%. The table below provides some indication of the risks of investing in the Fund by comparing the Fund's performance to that of a broad measure of market performance -- the MSCI EAFE Index. Average Annual Total Returns MSCI EAFE Class A(3) Class B(4) Class C(5) Index(6) ---------- ---------- ---------- -------- One year, ended December 31, 1999 % 57.13 60.45 64.56 25.27 Since inception(7) % 32.97 34.36 34.74 17.87 - ---------- (1) These figures are as of December 31 of each year. They do not reflect sales charges and would be lower if they did. (2) Prior to May 24, 1999, Nicholas-Applegate Capital Management was the adviser, rather than sub-adviser, to the Fund. (3) Reflects deduction of sales charge of 5.75%. (4) Reflects deduction of deferred sales charge of 5% and 3% respectively for 1 year and since inception returns. (5) Reflects deduction of a deferred sales charge of 1% for the 1 year return. (6) The Morgan Stanley Capital International Europe Australasia Far East (MSCI EAFE) Index is an unmanaged index that measures the performance of securities listed on exchanges in markets in Europe, Australia and the Far East. (7) The Fund commenced operations on February 28, 1997. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Pilgrim International Core Growth Fund 11 - ------------- International Equity Funds - ------------- Adviser PILGRIM INTERNATIONAL FUND Pilgrim Investments, Inc. - -------------------------------------------------------------------------------- OBJECTIVE [GRAPHIC] The Fund's investment objective is to seek long-term growth of capital through investment in equity securities and equity equivalents of companies outside of the U.S. INVESTMENT STRATEGY [GRAPHIC] The Fund will invest at least 65% of its total assets in securities and equivalents of companies outside of the U.S. The Fund generally invests the remaining 35% of its total assets in a similar manner, but may invest those assets in companies in the United States, in debt securities or other investments. The Fund intends to provide investors with the opportunity to invest in a portfolio of securities of companies and governments located throughout the world. In making the allocation of assets among the various countries and geographic regions, the Fund considers such factors as prospects for relative economic-growth; expected levels of inflation and interest rates; government polices influencing business conditions; the range of investment opportunities available to international investors; and other pertinent financial, tax, social, political and national factors -- all in relation to prevailing prices of the securities in each country or region. - -------------------------------------------------------------------------------- RISKS [GRAPHIC] You could lose money on an investment in the Fund. The Fund's investments may be affected by the following additional risks: Risks of Foreign Investing -- foreign investments may be riskier than U.S. investments for many reasons, including changes in currency exchange rates, unstable political and economic conditions, a lack of adequate company information, differences in the way securities markets operate, less secure foreign banks or securities depositories than those in the U.S., and foreign controls on investment. To the extent the Fund invests in emerging market countries, the risks may be greater, partly because emerging market countries may be less politically and economically stable than other countries. It may also be more difficult to buy and sell securities in emerging market countries. Price Volatility -- the value of the Fund changes as the prices of its investments go up or down. Equity securities face market, issuer and other risks, and their values may go up or down, sometimes rapidly and unpredictably. Market risk is the risk that securities may decline in value due to factors affecting securities markets generally or particular industries. Issuer risk is the risk that the value of a security may decline for reasons relating to the issuer, such as changes in the financial condition of the issuer. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. The Fund invests primarily in equity securities of larger companies, which sometimes have more stable prices than smaller companies. However, the Fund may also invest in small and medium-sized companies, which may be more susceptible to price swings than larger companies because they have fewer financial resources, more limited product and market diversification and many are dependent on a few key managers. Market Trends -- from time to time, the stock market may not favor the securities in which the Fund invests. Debt securities -- the value of debt securities may fall when interest rates rise. Debt securities with longer maturities tend to be more sensitive to changes in interest rates, usually making them more volatile than debt securities with shorter maturities. Inability to Sell Securities -- securities of smaller and foreign companies trade in lower volume and may be less liquid than securities of larger U.S. companies. The Fund could lose money if it cannot sell a security at the time and price that would be most beneficial to the Fund. 12 Pilgrim International Fund PILGRIM INTERNATIONAL FUND - -------------------------------------------------------------------------------- HOW THE FUND HAS PERFORMED [GRAPHIC] The bar chart and table below show the Fund's annual returns and long-term performance, and illustrate the variability of the Fund's returns. The Fund's past performance is not an indication of future performance. The bar chart below provides some indication of the risks of investing in the Fund by showing changes in the performance of the Fund's Class A shares from year to year. Year by Year Total Returns (%)(1)(2) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- 5.87 5.77 13.57 1.61 19.02 47.85 Best and worst quarterly performance during this period: 4th quarter 1999: up 27.01% 4th quarter 1997: down 10.65% The Fund's year-to-date total return as of June 30, 2000 was up 0.07%. The table below provides some indication of the risks of investing in the Fund by comparing the Fund's performance to that of a broad measure of market performance -- the MSCI EAFE Index. Average Annual Total Returns MSCI EAFE Class A(3)(4) Index(5) ------------- -------- One year, ended December 31, 1999 % 39.35 27.30 Five years, ended December 31, 1999 % 15.15 13.15 Since inception of Class A(6) % 13.56 12.30 - ---------- (1) These figures are as of December 31 of each year. They do not reflect sales charges and would be lower if they did. (2) Prior to July 26, 2000, Lexington Management Corporation served as the adviser to the Fund and the Fund's shares were sold on a no-load basis. Effective July 31, 2000, the Fund's outstanding shares were classified as "Class A" shares. (3) This table shows the performance of the Class A shares of the Fund. Class B and Class C shares were not offered during the period ended December 31, 1999. (4) Reflects deduction of sales charge of 5.75%. (5) The Morgan Stanley Capital International Europe Australasia Far East (MSCI EAFE) Index is an unmanaged index that measures the performance of securities listed on exchanges in markets in Europe, Australia, and the Far East. (6) Class A commenced operations on January 3, 1994. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Pilgrim International Fund 13 - ------------- International Equity Funds - ------------- Adviser Pilgrim Investments, Inc. Sub-Adviser Nicholas-Applegate PILGRIM INTERNATIONAL SMALLCAP GROWTH FUND Capital Management - -------------------------------------------------------------------------------- OBJECTIVE [GRAPHIC] The Fund seeks maximum long-term capital appreciation. INVESTMENT STRATEGY [GRAPHIC] Under normal conditions, the Fund invests at least 65% of its total assets in securities of small companies located outside the U.S. The Fund may invest up to 35% of its total assets in U.S. issuers. The Fund invests primarily in smaller-capitalized companies ("small cap stocks") located worldwide. In the opinion of the Fund's Sub-Adviser, small cap stocks are those whose stock market capitalizations are predominantly in the bottom 25% of publicly traded companies as measured by stock market capitalizations in over 50 countries. The market capitalization ranges of the various countries' small cap stocks may vary greatly due to fluctuating currency values, differences in the size of the respective economies, and movements in the local stock markets. The Fund normally invests at least 75% of its total assets in common and preferred stock, warrants and convertible securities. The Fund may invest in companies located in countries with emerging securities markets when the Sub-Adviser believes they present attractive investment opportunities. The Fund's Sub-Adviser emphasizes a growth approach by searching for successful, growing companies that are managing change advantageously and poised to exceed growth expectations. It focuses on a "bottom-up" analysis that evaluates the financial conditions and competitiveness of individual companies worldwide. It uses a blend of traditional fundamental research of individual securities, calling on the expertise of many external analysts in different countries throughout the world, and a computer intensive ranking system that analyzes and ranks securities. The Sub-Adviser seeks to uncover signs of "change at the margin" -- positive business developments which are not yet fully reflected in a company's stock price. In analyzing specific companies for possible investment, the Sub-Adviser ordinarily looks for several of the following characteristics: above-average per share earnings growth; high return on invested capital; a healthy balance sheet; sound financial and accounting policies and overall financial strength; strong competitive advantages; effective research and product development and marketing; development of new technologies; efficient service; pricing flexibility; strong management; and general operating characteristics that will enable the companies to compete successfully in their respective markets. The Sub-Adviser usually considers whether to sell a particular security when any of those factors materially changes. The Fund may also lend portfolio securities on a short-term or long-term basis, up to 30% of its total assets. - -------------------------------------------------------------------------------- RISKS [GRAPHIC] You could lose money on an investment in the Fund. The Fund may be affected by the following risks, among others: Price Volatility -- the value of the Fund changes as the prices of its investments go up or down. Equity securities face market, issuer and other risks, and their values may go up or down, sometimes rapidly and unpredictably. Market risk is the risk that securities may decline in value due to factors affecting securities markets generally or particular industries. Issuer risk is the risk that the value of a security may decline for reasons relating to the issuer, such as changes in the financial condition of the issuer. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. This Fund invests in companies that the Sub-Adviser believes have the potential for rapid growth, which may give the Fund a higher risk of price volatility than a Fund that emphasizes other styles, such as a value-oriented style. The Fund invests in small companies, which may be more susceptible to greater price swings than larger companies because they may have fewer financial resources, more limited product and market diversification and many are dependent on a few key managers. Market Trends -- from time to time, the stock market may not favor the small-cap growth securities in which the Fund invests. Rather, the market could favor value-oriented stocks or large company stocks, or may not favor equities at all. Risks of Foreign Investing -- foreign investments may be riskier than U.S. investments for many reasons, including changes in currency exchange rates, unstable political and economic conditions, a lack of adequate company information, differences in the way securities markets operate, less secure foreign banks or securities depositories than those in the U.S., and foreign controls on investment. To the extent the Fund invests in emerging market countries, the risks may be greater, partly because emerging market countries may be less politically and economically stable than other countries. It may also be more difficult to buy and sell securities in emerging market countries. Inability to Sell Securities -- securities of smaller and foreign companies trade in lower volume and may be less liquid than securities of larger U.S. companies. The Fund could lose money if it cannot sell a security at the time and price that would be most beneficial to the Fund. Securities Lending -- There is the risk that when lending portfolio securities, the securities may not be available to the Fund on a timely basis and the Fund may, therefore, lose the opportunity to sell the securities at a desirable price. 14 Pilgrim International SmallCap Growth Fund PILGRIM INTERNATIONAL SMALLCAP GROWTH FUND - -------------------------------------------------------------------------------- HOW THE FUND HAS PERFORMED [GRAPHIC] The bar chart and table below show the Fund's annual returns and long-term performance, and illustrate the variability of the Fund's returns. The Fund's past performance is not an indication of future performance. The bar chart below provides some indication of the risks of investing in the Fund by showing changes in the performance of the Fund's Class A shares from year to year. Year by Year Total Returns (%)(1)(2) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- 5.51 17.58 13.46 35.57 121.93 Best and worst quarterly performance during this period: 4th quarter 1999: up 53.34% 3rd quarter 1998: down 15.35% The Fund's year-to-date total return as of June 30, 2000 was up 0.84%. The table below provides some indication of the risks of investing in the Fund by comparing the Fund's performance to that of a broad measure of market performance -- the Salomon EPAC EM Index. Average Annual Total Returns Salomon EPAC EM Class A(3) Class B(4) Class C(5) Index(6) ---------- ---------- ---------- -------- One year, ended December 31, 1999 % 109.14 115.22 119.11 23.19 Five years, ended December 31, 1999 % 31.89 N/A 32.30 7.08 Since inception of Classes A and C(7) % 28.22 N/A 28.68 5.36 Since inception of Class B(7) % N/A 35.89 N/A 7.64 - ---------- (1) These figures are as of December 31 of each year. They do not reflect sales charges and would be lower if they did. (2) Prior to May 24, 1999, Nicholas-Applegate Capital Management was the adviser, rather than sub-adviser, to the Fund. (3) Reflects deduction of sales charge of 5.75%. (4) Reflects deduction of deferred sales charge of 5% and 2%, respectively, for 1 year and since inception returns. (5) Reflects deduction of a deferred sales charge of 1% for the 1 year return. (6) The Salomon EPAC Extended Market (Salomon EPAC EM) Index is an unmanaged index that measures the performance of securities of smaller- capitalization companies in 22 countries excluding the U.S. and Canada. (7) Classes A and C commenced operations on August 31, 1994. Class B commenced operations on May 31, 1995. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Pilgrim International SmallCap Growth Fund 15 - ------------- International Equity Funds - ------------- Adviser Pilgrim Investments, Inc. Sub-Adviser Brandes Investment PILGRIM EMERGING MARKETS VALUE FUND Partners, L.P. - -------------------------------------------------------------------------------- OBJECTIVE [GRAPHIC] The Fund seeks long-term capital appreciation. INVESTMENT STRATEGY [GRAPHIC] The Fund invests primarily in companies located in countries with emerging markets, including companies that may be smaller and lesser-known. The portfolio managers apply the technique of "value investing" by seeking stocks that their research indicates are priced below their long-term value. The Fund may invest in common stocks, preferred stocks, American, European and Global depositary receipts, shares of closed-end investment companies, as well as convertible securities. Under normal market conditions, the Fund will invest at least 65% of its total assets in securities of companies located in countries with emerging markets. Countries with emerging markets include those countries that are generally considered to be emerging market countries by the international financial community. The Fund may invest up to the greater of: * 20% of its assets in any one country or industry, or, * 150% of the weighting of the country or industry in the Morgan Stanley Capital International Emerging Markets Free (MSCI EMF) Index, as long as the Fund meets any industry concentration or diversification requirements under the Investment Company Act. - -------------------------------------------------------------------------------- RISKS [GRAPHIC] You could lose money on an investment in the Fund. The Fund's investments may be affected by the following additional risks: Risks of Foreign Investing -- foreign investments may be riskier than U.S. investments for many reasons, including changes in currency exchange rates, unstable political and economic conditions, a lack of adequate company information, differences in the way securities markets operate, less secure foreign banks or securities depositories than those in the U.S., and foreign controls on investment. For emerging market countries, the risks may be greater, partly because emerging market countries may be less politically and economically stable than other countries. It may also be more difficult to buy and sell securities in emerging market countries. Price Volatility -- the value of the Fund changes as the prices of its investments go up or down. Equity securities face market, issuer and other risks, and their values may go up or down, sometimes rapidly and unpredictably. Market risk is the risk that securities may decline in value due to factors affecting securities markets generally or particular industries. Issuer risk is the risk that the value of a security may decline for reasons relating to the issuer, such as changes in the financial condition of the issuer. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. The Fund may invest in smaller companies, which may be more susceptible to price swings than larger companies because they have fewer financial resources, more limited product and market diversification and many are dependent on a few key managers. Market Trends -- from time to time, the stock market may not favor the value-oriented stocks in which the Fund invests. Rather, the market could favor growth-oriented stocks, or may not favor equities at all. Inability to Sell Securities -- securities of smaller and emerging market companies trade in lower volume and may be less liquid than securities of companies in larger, more established markets. The Fund could lose money if it cannot sell a security at the time and price that would be most beneficial to the Fund. 16 Pilgrim Emerging Markets Value Fund PILGRIM EMERGING MARKETS VALUE FUND - -------------------------------------------------------------------------------- HOW THE FUND HAS PERFORMED [GRAPHIC] The bar chart and table below show the Fund's annual returns and long-term performance, and illustrate the variability of the Fund's returns. The Fund's past performance is not an indication of future performance. The bar chart below provides some indication of the risks of investing in the Fund by showing changes in the performance of the Fund's Class A shares from year to year. Year by Year Total Return (%)(1) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- -22.58 67.11 Best and worst quarterly performance during this period: 2nd quarter 1999: up 26.74% 2nd quarter 1998: down 24.79% The Fund's year-to-date total return as of June 30, 2000 was down 6.59%. The table below provides some indication of the risks of investing in the Fund by comparing the Fund's performance to that of a broad measure of market performance -- the MSCI EMF Index. Average Annual Total Return MSCI EMF Class A(2) Class B(3) Class C(4) Index(5) ---------- ---------- ---------- -------- One year, ended December 31, 1999 % 57.57 60.94 65.01 63.70 Since Inception(6) % 10.43 11.19 12.87 11.46 - ---------- (1) These figures are as of December 31 of each year. They do not reflect sales charges and would be lower if they did. (2) Reflects deduction of sales charge of 5.75% (3) Reflects deduction of deferred sales charge of 5% and 4%, respectively, for 1 year and since inception returns. (4) Reflects deduction of a deferred sales charge of 1% for the 1 year return. (5) The Morgan Stanley Capital International Emerging Markets Free (MSCI EMF) Index is an unmanaged index that measures the performance of securities listed on exchanges in developing nations throughout the world. (6) The Fund commenced operations on January 1, 1998. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Pilgrim Emerging Markets Value Fund 17 - ------------- International Equity Funds - ------------- Adviser Pilgrim Investments, Inc. Sub-Adviser Nicholas-Applegate PILGRIM EMERGING COUNTRIES FUND Capital Management - -------------------------------------------------------------------------------- OBJECTIVE [GRAPHIC] The Fund seeks maximum long-term capital appreciation. INVESTMENT STRATEGY [GRAPHIC] The Fund invests at least 65% of its total assets in equity securities of issuers located in at least three countries with emerging securities markets -- that is, countries with securities markets which are, in the opinion of the Sub-Adviser, emerging as investment markets but have yet to reach a level of maturity associated with developed foreign stock markets. The Sub-Adviser currently selects portfolio securities from an investment universe of approximately 6,000 foreign issuers in over 35 emerging markets. Under normal market conditions, the Fund invests at least 75% of its total assets in common and preferred stock, warrants and convertible securities. The Fund may invest at least 35% of its assets in U.S. companies. The Fund's Sub-Adviser emphasizes a growth approach, and seeks issuers in the early stages of development believed to be undergoing a basic change in operations. In analyzing specific companies for possible investment, the Sub-Adviser ordinarily looks for several of the following characteristics: above-average per share earnings growth; high return on invested capital; a healthy balance sheet; sound financial and accounting policies and overall financial strength; strong competitive advantages; effective research and product development and marketing; development of new technologies; efficient service; pricing flexibility; strong management; and general operating characteristics that will enable the companies to compete successfully in their respective markets. The Sub-Adviser usually considers whether to sell a particular security when any of those factors materially changes. The Fund may also lend portfolio securities on a short-term or long-term basis, up to 30% of its total assets. - -------------------------------------------------------------------------------- RISKS [GRAPHIC] You could lose money on an investment in the Fund. The Fund may be affected by the following risks, among others: Price Volatility -- the value of the Fund changes as the prices of its investments go up or down. Equity securities face market, issuer and other risks, and their values may go up or down, sometimes rapidly and unpredictably. Market risk is the risk that securities may decline in value due to factors affecting securities markets generally or particular industries. Issuer risk is the risk that the value of a security may decline for reasons relating to the issuer, such as changes in the financial condition of the issuer. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. This Fund invests in companies that the Sub-Adviser believes have the potential for rapid growth, which may give the Fund a higher risk of price volatility than a Fund that emphasizes other styles, such as a value-oriented style. The Fund may invest in small and medium-sized companies, which may be more susceptible to greater price swings than larger companies because they may have fewer financial resources, more limited product and market diversification and many are dependent on a few key managers. Market Trends -- from time to time, the stock market may not favor the growth securities in which the Fund invests, or may not favor equities at all. Risks of Foreign Investing -- foreign investments may be riskier than U.S. investments for many reasons, including changes in currency exchange rates, unstable political and economic conditions, a lack of adequate company information, differences in the way securities markets operate, less secure foreign banks or securities depositories than those in the U.S., and foreign controls on investment. Investments in emerging market countries are generally riskier than other kinds of foreign investments, partly because emerging market countries may be less politically and economically stable than other countries. It may also be more difficult to buy and sell securities in emerging market countries. Inability to Sell Securities -- securities of emerging market companies trade in lower volume and may be less liquid than securities of companies in larger, more established markets. The Fund could lose money if it cannot sell a security at the time and price that would be most beneficial to the Fund. Securities Lending -- There is the risk that when lending portfolio securities, the securities may not be available to the Fund on a timely basis and the Fund may, therefore, lose the opportunity to sell the securities at a desirable price. 18 Pilgrim Emerging Countries Fund PILGRIM EMERGING COUNTRIES FUND - -------------------------------------------------------------------------------- HOW THE FUND HAS PERFORMED [GRAPHIC] The bar chart and table below show the Fund's annual returns and long-term performance, and illustrate the variability of the Fund's returns. The Fund's past performance is not an indication of future performance. The bar chart below provides some indication of the risks of investing in the Fund by showing changes in the performance of the Fund's Class A shares from year to year. Year by Year Total Returns (%)(1)(2) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- 6.34 27.50 9.44 -22.19 75.80 Best and worst quarterly performance during this period: 4th quarter 1999: up 36.28% 3rd quarter 1998: down 26.06% The Fund's year-to-date total return as of June 30, 2000 was down 8.36%. The table below provides some indication of the risks of investing in the Fund by comparing the Fund's performance to that of a broad measure of market performance -- the MSCI EMF Index. Average Annual Total Returns MSCI EMF Class A(3) Class B(4) Class C(5) Index(6) ---------- ---------- ---------- -------- One year, ended December 31, 1999 % 65.74 69.71 73.71 63.70 Five years, ended December 31, 1999 % 13.85 N/A 14.38 2.00 Since inception of Classes A and C(7) % 12.58 N/A 12.89 -1.77 Since inception of Class B(7) % N/A 14.66 N/A 0.84 - ---------- (1) These figures are as of December 31 of each year. They do not reflect sales charges and would be lower if they did. (2) Prior to May 24, 1999, Nicholas-Applegate Capital Management was the adviser, rather than sub-adviser, to the Fund. (3) Reflects deduction of sales charge of 5.75%. (4) Reflects deduction of deferred sales charge of 5% and 1%, respectively, for 1 year and since inception returns. (5) Reflects deduction of a deferred sales charge of 1% for the 1 year return. (6) The Morgan Stanley Capital International Emerging Markets Free (MSCI EMF) Index is an unmanaged index that measures the performance of securities listed on exchanges in developing nations throughout the world. (7) Classes A and C commenced operations on November 28, 1994. Class B commenced operations on May 31, 1995. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Pilgrim Emerging Countries Fund 19 - ------------- International Equity Funds - ------------- Adviser PILGRIM WORLDWIDE EMERGING MARKETS FUND Pilgrim Investments, Inc. - -------------------------------------------------------------------------------- OBJECTIVE [GRAPHIC] The Fund's investment objective is to seek long-term growth of capital primarily through investment in equity securities and equity equivalents of emerging market companies. INVESTMENT STRATEGY [GRAPHIC] The Fund will invest at least 65% of its total assets according to its investment objective. The Fund's definition of emerging markets includes, but is not limited to, the following: Africa -- Botswana, Egypt, Ghana, Ivory Coast, Kenya, Mauritius, Morocco, Namibia, South Africa, Swaziland, Tunisia, Zambia and Zimbabwe; Asia: -- Bahrain, Bangladesh, China, Hong Kong, India, Indonesia, Malaysia, Pakistan, the Philippines, Singapore, South Korea, Sri Lanka, Taiwan and Thailand; Europe -- Croatia, Cyprus, Czech Republic, Estonia, Finland, Greece, Hungary, Latvia, Lithuania, Poland, Portugal, Romania, Russia, Slovakia and Slovenia; The Middle East -- Israel, Jordan, Lebanon, Oman and Turkey; Latin America -- Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Nicaragua, Peru and Venezuela. The Adviser considers an emerging markets company to be any company domiciled in an emerging market country, or any company that derives 50% or more of its total revenue from either goods or services produced or sold in countries with emerging markets. The Fund may invest the remaining 35% of its assets in equity securities without regard to whether the issuer qualifies as an emerging market company, debt securities denominated in the currency of an emerging market country or issued or guaranteed by an emerging market company or the government of an emerging market country, short-term or medium-term debt securities or other types of securities. The Fund's investment approach is to focus on positive returns through long-term capital gains. The investment strategy is based on a "top-down" approach that compares macro trends, such as economics, politics, industry trends, and commodity trends on a relative basis. Countries are grouped regionally and globally and ranked based on their macro scores. Once specific countries are identified as relative outperformers, specific companies are selected as investments. The selection process for selecting individual companies is based on fundamental research, industry themes, and identifying specific catalysts for growth. - -------------------------------------------------------------------------------- RISKS [GRAPHIC] You could lose money on an investment in the Fund. The Fund may be affected by the following risks, among others: Price Volatility -- the value of the Fund changes as the prices of its investments go up or down. Equity securities face market, issuer and other risks, and their values may go up or down, sometimes rapidly and unpredictably. Market risk is the risk that securities may decline in value due to factors affecting securities markets generally or particular industries. Issuer risk is the risk that the value of a security may decline for reasons relating to the issuer, such as changes in the financial condition of the issuer. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. The Fund may invest in small and medium-sized companies, which may be more susceptible to greater price swings than larger companies because they may have fewer financial resources, more limited product and market diversification and many are dependent on a few key managers. Market Trends -- from time to time, the stock market may not favor the securities in which the Fund invests, or may not favor equities at all. Risks of Foreign Investing -- foreign investments may be riskier than U.S. investments for many reasons, including changes in currency exchange rates, unstable political and economic conditions, a lack of adequate company information, differences in the way securities markets operate, less secure foreign banks or securities depositories than those in the U.S., and foreign controls on investment. Investments in emerging market countries are generally riskier than other kinds of foreign investments, partly because emerging market countries may be less politically and economically stable than other countries. It may also be more difficult to buy and sell securities in emerging market countries. Inability to Sell Securities -- securities of emerging market companies trade in lower volume and may be less liquid than securities of companies in larger, more established markets. The Fund could lose money if it cannot sell a security at the time and price that would be most beneficial to the Fund. Debt securities -- the value of debt securities may fall when interest rates rise. Debt securities with longer maturities tend to be more sensitive to changes in interest rates, usually making them more volatile than debt securities with shorter maturities. 20 Pilgrim Worldwide Emerging Markets Fund PILGRIM WORLDWIDE EMERGING MARKETS FUND - -------------------------------------------------------------------------------- HOW THE FUND HAS PERFORMED [GRAPHIC] The bar chart and table below show the Fund's annual returns and long-term performance, and illustrate the variability of the Fund's returns. The Fund's past performance is not an indication of future performance. The bar chart below provides some indication of the risks of investing in the Fund by showing changes in the performance of the Fund's Class A shares from year to year. Year by Year Total Returns (%)(1)(2) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- -14.44 24.19 3.77 63.37 -13.81 -5.93 7.38 -11.40 -29.06 112.58 Best and worst quarterly performance during this period: 4th quarter 1999: up 78.49% 3rd quarter 1998: down 26.18% The Fund's year-to-date total return as of June 30, 2000 was down 21.32%. The table below provides some indication of the risks of investing in the Fund by comparing the Fund's performance to that two broad measures of market performance -- the MSCI Emerging Markets Free Index and the MSCI EAFE Index. Average Annual Total Returns MSCI MSCI EMF EAFE Class A Index(5) Index(6) ------- -------- -------- One year, ended December 31, 1999 % 100.36 66.41 27.30 Five years, ended December 31, 1999 % 4.93 2.00 13.15 Ten years, ended December 31, 1999 % 7.04 11.05 7.33 - ---------- (1) These figures are as of December 31 of each year. They do not reflect sales charges and would be lower if they did. (2) Prior to July 26, 2000, Lexington Management Corporation served as the adviser to the Fund and the Fund's shares were sold on a no-load basis. Effective July 31, 2000, the Fund's outstanding shares were classified as "Class A" shares. (3) Prior to June 17, 1991, the Fund operated under a different investment objective. (4) Reflects deduction of sales charge of 5.75%. (5) The Morgan Stanley Capital International Emerging Markets Free (MSCI EMF) Index is an unmanaged index that measures the performance of securities listed on exchanges in developing nations throughout the world. (6) The Morgan Stanley Capital International Europe Australasia Far East (MSCI EAFE) Index is an unmanaged index that measures the performance of securities listed on exchanges in markets in Europe, Australia, and the Far East. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Pilgrim Worldwide Emerging Markets Fund 21 - ------------- International Equity Funds - ------------- Adviser Pilgrim Investments, Inc. Sub-Adviser HSBC Asset Management (Americas), Inc. and HSBC Asset Management (Hong PILGRIM ASIA-PACIFIC EQUITY FUND Kong) Limited - -------------------------------------------------------------------------------- OBJECTIVE [GRAPHIC] The Fund seeks long-term capital appreciation. INVESTMENT STRATEGY [GRAPHIC] The Fund normally invests at least 65% of its total assets in equity securities listed on stock exchanges in countries in the Asia-Pacific region or issued by companies based in this region. Asia-Pacific countries in which the Fund invests include, but are not limited to, China, Hong Kong, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand, but do not include Japan and Australia. The equity securities in which the Fund may invest include common stock, convertible securities, preferred stock, warrants, American Depositary Receipts, European Depositary Receipts and other depositary receipts. The Fund is managed using the investment philosophy that the Sub-Adviser, HSBC Asset Management Americas, Inc. and HSBC Asset Management Hong Kong Limited (HSBC), uses in managing private Asia-Pacific portfolios. HSBC bases investment decisions on a disciplined approach that takes into consideration the following factors: a macroeconomic overview of the region, specific country analysis, setting target country weightings, evaluation of industry sectors within each country, and selection of specific stocks. In selecting specific securities, the Sub-Adviser emphasizes a value approach that seeks growth at a reasonable price. This approach involves analysis of such fundamental factors as absolute rates of change of earnings growth, earnings growth relative to the market and industry, quality of earnings and stability of earnings growth, quality of management and product line, interest rate sensitivity and liquidity of the stock. The criteria used by the Fund to determine whether an issuer is based in the Asia-Pacific region are: the country in which the issuer was organized; the country in which the principal securities market for that issuer is located; the country in which the issuer derives at least 50% of its revenues or profits from goods produced or sold, investments made, or services performed; or the country in which at least 50% of the issuer's assets are located. - -------------------------------------------------------------------------------- RISKS [GRAPHIC] You could lose money on an investment in the Fund. The Fund may be affected by the following risks, among others: Price Volatility -- the value of the Fund changes as the prices of its investments go up or down. Equity securities face market, issuer and other risks, and their values may go up or down, sometimes rapidly and unpredictably. Market risk is the risk that securities may decline in value due to factors affecting securities markets generally or particular industries. Issuer risk is the risk that the value of a security may decline for reasons relating to the issuer, such as changes in the financial condition of the issuer. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. Market Trends -- from time to time, the stock market may not favor the value securities in which the Fund invests. Rather, the market could favor growth-oriented stocks, or may not favor equities at all. Risks of Foreign Investing -- foreign investments may be riskier than U.S. investments for many reasons, including changes in currency exchange rates, unstable political and economic conditions, a lack of adequate company information, differences in the way securities markets operate, less secure foreign banks or securities depositories than those in the U.S., and foreign controls on investment. To the extent the Fund invests in emerging market countries, the risks may be greater, partly because emerging market countries may be less politically and economically stable than other countries. It may also be more difficult to buy and sell securities in emerging market countries. Risks of the Asia-Pacific Region -- the Asia-Pacific region includes countries in various stages of economic development, including emerging market countries. In 1997 and 1998, securities markets in Asian countries suffered significant downturns and volatility, and currencies lost value in relation to the U.S. dollar. 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. Risks of Concentration -- because the Fund concentrates on a single region of the world, the Fund's performance may be more volatile than that of a Fund that invests globally. If Asia-Pacific securities fall out of favor, it may cause the Fund to underperform funds that focus on other types of stocks. Inability to Sell Securities -- securities of emerging market companies trade in lower volume and may be less liquid than securities of companies in larger, more established markets. The Fund could lose money if it cannot sell a security at the time and price that would be most beneficial to the Fund. 22 Pilgrim Asia-Pacific Equity Fund PILGRIM ASIA-PACIFIC EQUITY FUND - -------------------------------------------------------------------------------- HOW THE FUND HAS PERFORMED [GRAPHIC] The bar chart and table below show the Fund's annual returns and long-term performance, and illustrate the variability of the Fund's returns. The Fund's past performance is not an indication of future performance. The bar chart below provides some indication of the risks of investing in the Fund by showing changes in the performance of the Fund's Class A shares from year to year. Year by Year Total Returns (%)(1) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- 9.46 -43.73 -15.51 74.41 Best and worst quarterly performance during this period: 2nd quarter 1999: up 39.92% 4th quarter 1997: down 33.11% The Fund's year-to-date total return as of June 30, 2000 was down 19.04%. The table below provides some indication of the risks of investing in the Fund by comparing the Fund's performance to that of a broad measure of market performance -- the MSCI Far East ex-Japan Index. Average Annual Total Returns MSCI Far East Free ex-Japan Class A(2) Class B(3) Class M(4) Index(5) ---------- ---------- ---------- -------- One year, ended December 31, 1999 % 64.46 68.00 67.37 59.40 Since inception(6) % -3.80 -3.72 -3.87 -2.14 - ---------- (1) These figures are as of December 31 of each year. They do not reflect sales charges and would be lower if they did. (2) Reflects deduction of sales charge of 5.75%. (3) Reflects deduction of deferred sales charge of 5% and 2%, respectively, for 1 year and since inception returns. (4) Reflects deduction of sales charge of 3.5% for the 1 year return. (5) The Morgan Stanley Capital International Far East Free ex-Japan (MSCI Far East Free ex-Japan) Index is an unmanaged index that measures the performance of securities listed on exchanges in the Far East markets excluding Japan. (6) The Fund commenced operations on September 1, 1995. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Pilgrim Asia-Pacific Equity Fund 23 - ------------- International Equity Funds - ------------- Adviser Pilgrim Investments, Inc. Sub-Adviser Crosby Asset Management PILGRIM SMALLCAP ASIA GROWTH FUND (U.S.) Inc. - -------------------------------------------------------------------------------- OBJECTIVE [GRAPHIC] The Fund's investment objective is to seek long-term capital appreciation primarily by investing in equity securities and equity equivalents of companies in the Asia Region having market capitalizations of less than $1 billion. INVESTMENT STRATEGY [GRAPHIC] The Fund will normally invest at least 65% of its total assets in equity securities of smaller companies in the Asia Region. The Fund will primarily invest in listed securities but may also invest in unlisted securities. The Fund intends to invest primarily in companies which: * have proven management; * are undervalued and under-researched by the investment community; * are within industry sectors with strong growth prospects; and * which have potential investment returns that are superior to the Asian market as a whole. The Fund may invest 35% of its total assets in: * companies with market capitalizations of $1 billion or more; * companies outside the Asia Region (e.g. Australia or New Zealand); * debt securities; and * other investments. * The Fund considers the following countries to be in the Asia Region: Bangladesh, China, Hong Kong, India, Indonesia, Korea, Malaysia, Pakistan, The Philippines, Singapore, Sri Lanka, Vietnam, Taiwan and Thailand. The Fund considers a company to be within the Asia Region if its principal securities' trading market is located in the Asia Region. The Fund will normally invest in at least three different countries. The Fund does not intend to invest in Japanese securities. - -------------------------------------------------------------------------------- RISKS [GRAPHIC] You could lose money on an investment in the Fund. The Fund may be affected by the following risks, among others: Price Volatility -- the value of the Fund changes as the prices of its investments go up or down. Equity securities face market, issuer and other risks, and their values may go up or down, sometimes rapidly and unpredictably. Market risk is the risk that securities may decline in value due to factors affecting securities markets generally or particular industries. Issuer risk is the risk that the value of a security may decline for reasons relating to the issuer, such as changes in the financial condition of the issuer. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. The Fund invests in small companies, which may be more susceptible to price swings than larger companies because they may have fewer financial resources, more limited product and market diversification and many are dependent on a few key managers. Market Trends -- from time to time, the stock market may not favor the securities in which the Fund invests. Risks of Foreign Investing -- foreign investments may be riskier than U.S. investments for many reasons, including changes in currency exchange rates, unstable political and economic conditions, a lack of adequate company information, differences in the way securities markets operate, less secure foreign banks or securities depositories than those in the U.S., and foreign controls on investment. To the extent the Fund invests in emerging market countries, the risks may be greater, partly because emerging market countries may be less politically and economically stable than other countries. It may also be more difficult to buy and sell securities in emerging market countries. Risks of the Asia-Pacific Region -- the Asia-Pacific region includes countries in various stages of economic, development, including emerging market countries. In 1997 and 1998, securities markets in Asian countries suffered significant downturns and volatility, and currencies lost value in relation to the U.S. dollar. 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. Risks of Concentration -- because the Fund concentrates on a single region of the world, the Fund's performance may be more volatile than that of a Fund that invests globally. If Asia-Pacific securities fall out of favor, it may cause the Fund to underperform funds that focus on other types of stocks. Inability to Sell Securities -- securities of smaller and emerging market companies trade in lower volume and may be less liquid than securities of companies in larger, more established markets. The Fund could lose money if it cannot sell a security at the time and price that would be most beneficial to the Fund. 24 Pilgrim SmallCap Asia Growth Fund PILGRIM SMALLCAP ASIA GROWTH FUND - -------------------------------------------------------------------------------- HOW THE FUND HAS PERFORMED [GRAPHIC] The bar chart and table below show the Fund's annual returns and long-term performance, and illustrate the variability of the Fund's returns. The Fund's past performance is not an indication of future performance. The bar chart below provides some indication of the risks of investing in the Fund by showing changes in the performance of the Fund's Class A shares from year to year. Year by Year Total Returns (%)(1)(2) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- -4.39 25.50 -42.32 -19.41 57.29 Best and worst quarterly performance during this period: 2nd quarter 1999: up 39.57% 4th quarter 1997: down 41.41% The Fund's year-to-date total return as of June 30, 2000 was down 10.50%. The table below provides some indication of the risks of investing in the Fund by comparing the Fund's performance to that two broad measures of market performance -- the MSCI Far East Free ex Japan Index and the MSCI EAFE Index. Average Annual Total Returns MSCI MSCI Far East Free EAFE Class A(3)(4) ex Japan Index(5) Index(6) ------------- ----------------- -------- One year, ended December 31, 1999 % 48.25 67.38 27.30 Since inception of Class A(7) % -3.66 .47 13.99 - ---------- (1) These figures are as of December 31 of each year. They do not reflect sales charges and would be lower if they did. (2) Prior to July 26, 2000, Lexington Management Corporation served as the adviser to the Fund and the Fund's shares were sold on a no-load basis. Effective July 31, 2000, the Fund's outstanding shares were classified as "Class A" shares. (3) This table shows the per-formance of the Class A shares of the Fund. Class B shares were not offered during the period ended December 31, 1999. (4) Reflects deduction of sales charge of 5.75%. (5) The Morgan Stanley Capital International (MSCI) Far East Free ex Japan Index is an unmanaged index that measures the performance of securities listed on exchanges in the Far East markets except Japan. (6) The Morgan Stanley Capital International Europe Australasia Far East (MSCI EAFE) Index is an unmanaged index that measures the performance of securities listed on exchanges in markets in Europe, Australia, and the Far East. (7) Class A commenced operations on July 3, 1995. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Pilgrim SmallCap Asia Growth Fund 25 - ------------- International Equity Funds - ------------- Adviser Pilgrim Investments, Inc. Sub-Adviser Troika Dialog Asset Management PILGRIM TROIKA DIALOG RUSSIA FUND (Cayman Islands), Ltd. - -------------------------------------------------------------------------------- OBJECTIVE [GRAPHIC] The Fund's investment objective is to seek long-term capital appreciation through investment primarily in equity securities of Russian companies. INVESTMENT STRATEGY [GRAPHIC] The Fund seeks to achieve its objective by investing at least 65% of its total assets in equity securities and equity equivalents of Russian companies. The Fund may invest the other 35% of its total assets in debt securities issued by Russian companies and debt securities issued or guaranteed by the Russian government. The Fund may also invest in the equity securities of issuers outside of Russia which the Fund believes will experience growth in revenue and profits from participation in the development of the economies of the former Soviet Union. When the Fund anticipates unusual markets or other conditions, it may temporarily depart from its goal and invest substantially in high-quality short-term investments. This could help the Fund avoid losses, but may mean lost opportunities. - -------------------------------------------------------------------------------- RISKS [GRAPHIC] You could lose money on an investment in the Fund. The Fund may be affected by the following risks, among others: Risks of Investing in Securities of Russian Companies The following risks apply to all mutual funds that invest in securities of Russian companies including Pilgrim Troika Dialog Russia Fund. Political Risk -- Since the breakup of the Soviet Union in 1991, Russia has experienced and continues to experience dramatic political and social change. Russia is undergoing a rapid transition from a centrally-controlled command system to a more market-oriented democratic model. The Fund may be affected unfavorably by political developments, social instability, changes in government policies, and other political and economic developments. Market Concentration and Liquidity Risk -- The Russian securities markets are substantially smaller, less liquid and more volatile than the securities markets in the United States. A few issuers represent a large percentage of market capitalization and trading volume. Due to these factors and despite the Fund's policy on liquidity, it may be difficult for the Fund to buy or sell some securities because of the poor liquidity. Lack of Reliable Financial Information -- There may not be available reliable financial information which has been prepared and audited in accordance with U.S. or Western European generally accepted accounting principles and auditing standards. Unfavorable Actions -- There is the potential for unfavorable action such as expropriation, dilution, devaluation, default or excessive taxation by the Russian government or any of its agencies or political subdivisions with respect to investments in Russian securities by or for the benefit of foreign entities. The Fund's investments will include investments in Russian companies that have characteristics and business relationships common to companies outside of Russia, and as a result, outside economic forces may cause fluctuations in the value of securities held by the Fund. Settlement and Custody Risk -- Ownership of shares in Russian companies is recorded by the companies themselves and by registrars instead of through a central registration system. It is possible that the Fund's ownership rights could be lost through fraud or negligence. Since the Russian banking institutions and registrars are not guaranteed by the state, the Fund may not be able to pursue claims on behalf of the Fund's shareholders. Risks of Concentration -- because the Fund concentrates on a single region of the world, the Fund's performance may be more volatile than that of a fund that invests globally. If Russian securities fall out of favor, it may cause the Fund to underperform funds that focus on other types of stocks. Lower Quality Debt Securities -- Junk bonds are highly speculative. Changes in economic conditions or other circumstances are more likely to lead to a weakened capacity of issuers of securities to make principal and interest payments than with higher-grade debt securities. Non-Diversification Risk -- The Fund is a non-diversified investment company. There is additional risk associated with being non-diversified, since a greater proportion of the Fund's total assets may be invested in a single company. 26 Pilgrim Troika Dialog Russia Fund PILGRIM TROIKA DIALOG RUSSIA FUND - -------------------------------------------------------------------------------- HOW THE FUND HAS PERFORMED [GRAPHIC] The bar chart and table below show the Fund's annual returns and long-term performance, and illustrate the variability of the Fund's returns. The Fund's past performance is not an indication of future performance. The bar chart below provides some indication of the risks of investing in the Fund by showing changes in the performance of the Fund's Class A shares from year to year. Year by Year Total Returns (%)(1)(2) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- -9.01 67.50 -82.99 159.76 Best and worst quarterly performance during this period: 4th quarter 1999: up 95.36% 3rd quarter 1998: down 64.89% The Fund's year-to-date total return as of June 30, 2000 was up 2.67%. The table below provides some indication of the risks of investing in the Fund by comparing the Fund's performance to that two broad measures of market performance -- the Moscow Times Index and the Russian Trading System Index. Average Annual Total Returns Russian Moscow Trading Times System Class A(3)(4) Index(5) Index(6) ------------- -------- -------- One year, ended December 31, 1999 % 144.82 243.06 201.56 Since inception of Class A(7) % -10.99 -0.16 -6.85 - ---------- (1) These figures are as of December 31 of each year. They do not reflect sales charges and would be lower if they did. (2) Prior to July 26, 2000, Lexington Management Corporation served as the adviser to the Fund and the Fund's shares were sold on a no-load basis. Effective July 31, 2000, the Fund's outstanding shares were classified as "Class A" shares. (3) This table shows the performance of the Class A shares of the Fund. Class B shares were not offered during the period ended December 31, 1999. (4) Reflects deduction of sales charge of 5.75%. (5) The Moscow Times Index is an unmanaged index that measures the performance of 50 Russian stocks considered to represent the most liquid and most highly capitalized Russian stocks. (6) The Russian Trading System Index is a capitalization-weighted index that is calculated in U.S. dollars. The index is comprised of 100 stocks traded on the Russian Trading System. (7) Class A commenced operations on July 3, 1996. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Pilgrim Troika Dialog Russia Fund 27 - ------------ Precious Metals Funds - ------------ Adviser PILGRIM GOLD FUND Pilgrim Investments, Inc. - -------------------------------------------------------------------------------- OBJECTIVE [GRAPHIC] The Fund's investment objective is to attain capital appreciation and hedge against the loss of buying power of the U.S. Dollar as may be obtained through investment in gold and securities of companies engaged in mining or processing gold throughout the world. INVESTMENT STRATEGY [GRAPHIC] Under normal conditions the Fund will invest at least 65% of the value of its total assets in gold and the equity securities of companies engaged in mining or processing gold ("gold-related securities"). The Fund may also invest in other precious metals, including platinum, palladium and silver. The Fund intends to invest less than half of the value of its assets in gold and other precious metals. The Fund's performance and ability to meet its objective will be largely dependent on the market value of gold. The portfolio manager seeks to maximize on advances and minimize on declines by monitoring and anticipating shifts in the relative values of gold related companies throughout the world. A substantial portion of the Fund's investments will be in the securities of foreign issuers. - -------------------------------------------------------------------------------- RISKS [GRAPHIC] You could lose money on an investment in the Fund. The Fund's investments may be affected by the following additional risks: Price Volatility -- the value of the Fund changes as the prices of its investments go up or down. Equity securities face market, issuer and other risks, and their values may go up or down, sometimes rapidly and unpredictably. Market risk is the risk that securities may decline in value due to factors affecting securities markets generally or particular industries. Issuer risk is the risk that the value of a security may decline for reasons relating to the issuer, such as changes in the financial condition of the issuer. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. Precious Metals Risk -- the Fund's focus on precious metals and precious metal stocks may expose the investor to additional risks. The market for gold or other precious metals is concentrated in countries that have the potential for instability and the market for gold and other precious metals is widely unregulated. As a result, the price of precious gold and precious metal stocks, and therefore the Fund, may fluctuate significantly. Precious metal investments have the following characteristics: they earn no income; transaction and storage costs may be higher; and the Fund will realize gain only with an increase in the market price. Risks of Foreign Investing -- foreign investments may be riskier than U.S. investments for many reasons, including changes in currency exchange rates, unstable political and economic conditions, a lack of adequate company information, differences in the way securities markets operate, less secure foreign banks or securities depositories than those in the U.S., and foreign controls on investment. To the extent the Fund invests in emerging, market countries, the risks may be greater, partly because emerging market countries may be less politically and economically stable than other countries. It may also be more difficult to buy and sell securities in emerging market countries. Non-Diversification Risk -- The Fund is a non-diversified investment company. There is additional risk associated with being non-diversified, since a greater proportion of the Fund's total assets may be invested in a single company. 28 Pilgrim Gold Fund PILGRIM GOLD FUND - -------------------------------------------------------------------------------- HOW THE FUND HAS PERFORMED [GRAPHIC] The bar chart and table below show the Fund's annual returns and long-term performance, and illustrate the variability of the Fund's returns. The Fund's past performance is not an indication of future performance. The bar chart below provides some indication of the risks of investing in the Fund by showing changes in the performance of the Fund's Class A shares from year to year. Year by Year Total Returns (%)(1)(2) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- -20.65 -6.14 -20.51 86.96 -7.28 -1.89 7.84 -42.98 -6/39 8.58 Best and worst quarterly performance during this period: 2nd quarter 1993: up 34.36% 4th quarter 1997: down 29.07% The Fund's year-to-date total return as of June 30, 2000 was down 16.72%. The table below provides some indication of the risks of investing in the Fund by comparing the Fund's performance to that two broad measures of market performance -- the S&P 500 Index and Gold Bullion. Average Annual Total Returns S&P 500 Gold Class A(3) Index(4) Bullion(5) ---------- -------- ---------- One year, ended December 31, 1999 % 2.34 21.04 0.85 Five years, ended December 31, 1999 % -5.45 28.56 -5.41 Ten years, ended December 31, 1999 % -15.01 18.21 -3.14 - ---------- (1) These figures are as of December 31 of each year. They do not reflect sales charges and would be lower if they did. (2) Prior to July 26, 2000, Lexington Management Corporation served as the adviser to the Fund and the Fund's shares were sold on a no-load basis. Effective July 31, 2000, the Fund's outstanding shares were classified as "Class A" shares. (3) Reflects deduction of sales charge of 5.75%. (4) The S&P 500 Index is an unmanaged index that measures the performance of securities of approximately 500 large-capitalization U.S. companies. (5) Gold Bullion is a commodity traded on the New York Mercantile Exchange. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Pilgrim Gold Fund 29 - ------------ Precious Metals Funds - ------------ Adviser PILGRIM SILVER FUND Pilgrim Investments, Inc. - -------------------------------------------------------------------------------- OBJECTIVE [GRAPHIC] The Fund's investment objective is to maximize total return on its assets from long-term growth of capital and income principally through investment in a portfolio of securities which are engaged in the exploration, mining, processing, fabrication or distribution of silver ("silver-related companies") and in silver bullion. INVESTMENT STRATEGY [GRAPHIC] The Fund will seek to achieve its objective through investment in common stocks of established silver-related companies and in silver bullion which have the potential for long-term growth of capital or income, or both. The common stocks of silver-related companies in which the Fund intends to invest may or may not pay dividends. The Fund may also invest in other types of securities of silver-related companies including convertible securities, preferred stocks, bonds, notes and warrants. When the Adviser believes that the return on debt securities will equal or exceed the return on common stocks, the Fund may, in pursuing its objective of maximizing growth and income, substantially increase its holding in debt securities. The securities in which the Fund invests include issues of established silver-related companies domiciled in the United States, Canada and Mexico as well as other silver producing countries throughout the world. At least 80% of the Fund's assets will be invested in established silver-related companies which have been in business more than three years. Approximately 80% of silver is provided as a by-product or co-product of other mining operations, such as gold mining. The Fund has the ability to significantly increase its exposure to silver by increasing its holding of silver bullion. - -------------------------------------------------------------------------------- RISKS [GRAPHIC] You could lose money on an investment in the Fund. The Fund's investments may be affected by the following additional risks: Price Volatility -- the value of the Fund changes as the prices of its investments go up or down. Equity securities face market, issuer and other risks, and their values may go up or down, sometimes rapidly and unpredictably. Market risk is the risk that securities may decline in value due to factors affecting securities markets generally or particular industries. Issuer risk is the risk that the value of a security may decline for reasons relating to the issuer, such as changes in the financial condition of the issuer. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. Precious Metals Risk -- the Fund's focus on precious metals and precious metal stocks may expose the investor to additional risks. The market for silver is relatively limited, the sources of silver are concentrated in countries that have the potential for instability and the market for silver is widely unregulated. As a result, the price of silver, and therefore the Fund, may fluctuate significantly. Precious metal investments have the following characteristics: they earn no income; transaction and storage costs may be higher; and the Fund will realize gain only with an increase in the market price. Risks of Foreign Investing -- foreign investments may be riskier than U.S. investments for many reasons, including changes in currency exchange rates, unstable political and economic conditions, a lack of adequate company information, differences in the way securities markets operate, less secure foreign banks or securities depositories than those in the U.S., and foreign controls on investment. To the extent the Fund invests in emerging, market countries, the risks may be greater, partly because emerging market countries may be less politically and economically stable than other countries: It may also be more difficult to buy and sell securities in emerging market countries. Debt securities -- the value of debt securities may fall when interest rates rise. Debt securities with longer maturities tend to be more sensitive to changes in interest rates, usually making them more volatile than debt securities with shorter maturities. Non-Diversification Risk -- The Fund is a non-diversified investment company. There is additional risk associated with being non-diversified, since a greater proportion of the Fund's total assets may be invested in a single company. 30 Pilgrim Silver Fund PILGRIM SILVER FUND - -------------------------------------------------------------------------------- HOW THE FUND HAS PERFORMED [GRAPHIC] The bar chart and table below show the Fund's annual returns and long-term performance, and illustrate the variability of the Fund's returns. The Fund's past performance is not an indication of future performance. The bar chart below provides some indication of the risks of investing in the Fund by showing changes in the performance of the Fund's Class A shares from year to year. Year by Year Total Returns (%)(1)(2) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- -19.01 76.52 -8.37 12.37 2.38 -8.05 -29.64 8.70 Best and worst quarterly performance during this period: 2nd quarter 1993: up 28.47% 4th quarter 1994: down 18.60% The Fund's year-to-date total return as of June 30, 2000 was down 16.89%. The table below provides some indication of the risks of investing in the Fund by comparing the Fund's performance to that two broad measures of market performance -- the S&P 500 Index and Silver Bullion. Average Annual Total Returns S&P 500 Silver Class A(3) Index(4) Bullion(5) ---------- -------- ---------- One year, ended December 31, 1999 % 2.45 21.04 6.49% Five years, ended December 31, 1999 % -5.28 28.56 1.91 Since inception of Class A(6) % 1.14 19.70 4.08 - ---------- (1) These figures are as of December 31 of each year. They do not reflect sales charges and would be lower if they did. (2) Prior to July 26, 2000, Lexington Management Corporation served as the adviser to the Fund and the Fund's shares were sold on a no-load basis. Effective July 31, 2000, the Fund's outstanding shares were classified as "Class A" shares. (3) Reflects deduction of sales charge of 5.75%. (4) The S&P 500 Index is an unmanaged index that measures the performance of securities of approximately 500 large-capitalization U.S. companies. (5) Silver Bullion is a commodity traded on the New York Mercantile Exchange. (6) Class A commenced operations on January 2, 1992. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Pilgrim Silver Fund 31 WHAT YOU PAY TO INVEST - -------------------------------------------------------------------------------- There are two types of fees and expenses when you invest in mutual funds: fees, including sales charges, you pay directly when you buy or sell shares, and operating expenses paid each year by the Fund. The tables that follow show the fees and expenses for each of the Pilgrim Funds. Fees You Pay Directly
Class A Class B Class C(1) Class M(1) ------- ------- ---------- ---------- Maximum sales charge on your investment (as a % of offering price) % Equity Funds and Precious Metals Funds 5.75(2) none none 3.50(2) Maximum deferred sales charge (as a % of purchase or sales price, whichever is less) Equity Funds and Precious Metals Funds none(3) 5.00(4) 1.00(5) none
- ---------- (1) Not all Funds offer Classes C and M. Please see page 35. (2) Reduced for purchases of $50,000 and over. Please see page 36. (3) A contingent deferred sales charge of no more than 1% may be assessed on redemptions of Class A shares that were purchased without an initial sales charge as part of an investment of $1 million or more. Please see page 36. (4) Imposed upon redemption within 6 years from purchase. The fee has scheduled reductions after the first year. Please see page 36. (5) Imposed upon redemption within 1 year from purchase. Operating Expenses Paid Each Year by the Funds(1) (as a % of average net assets) Class A
Distribution Total and Service Fund Fee Waiver Management (12b-1) Other Operating by Net Fund Fee Fees Expenses(2) Expenses Adviser(3) Expenses - ---- --- ---- ----------- -------- ---------- -------- Global Corporate Leaders % 1.00 0.25 0.42 1.67 -- 1.67 Worldwide Growth % 1.00 0.35 0.30 1.65 -- 1.65 International Value % 1.00 0.30 0.38 1.68 -- 1.68 International Core Growth % 1.00 0.35 0.38 1.73 -- 1.73 International % 1.00 0.25 0.70 1.95 -- 1.95 International SmallCap Growth % 1.00 0.35 0.42 1.77 -- 1.77 Emerging Markets Value % 1.00 0.30 0.91 2.21 -- 2.21 Emerging Countries % 1.25 0.35 0.93 2.53 -0.53 2.00 Worldwide Emerging Markets % 1.00 0.25 0.73 1.98 -- 1.98 Asia-Pacific Equity % 1.25 0.25 1.48 2.98 -0.98 2.00 SmallCap Asia Growth % 1.25 0.25 0.95 2.45 -- 2.45 Troika Dialog Russia % 1.25 0.25 0.24 1.74 -- 1.74 Gold % 0.95 0.25 0.46 1.66 -- 1.66 Silver % 1.00 0.25 0.55 1.80 -- 1.80 Class B(4) Distribution Total and Service Fund Fee Waiver Management (12b-1) Other Operating by Net Fund Fee Fees Expenses(2) Expenses Adviser(3) Expenses - ---- --- ---- ----------- -------- ---------- -------- Worldwide Growth % 1.00 1.00 0.30 2.30 -- 2.30 International Value % 1.00 1.00 0.41 2.41 -- 2.41 International Core Growth % 1.00 1.00 0.38 2.38 -- 2.38 International % 1.00 1.00 0.70 2.70 -- 2.70 International SmallCap Growth % 1.00 1.00 0.42 2.42 -- 2.42 Emerging Markets Value % 1.00 1.00 0.93 2.93 -- 2.93 Emerging Countries % 1.25 1.00 0.93 3.18 -0.53 2.65 Asia-Pacific Equity % 1.25 1.00 1.48 3.73 -0.98 2.75 SmallCap Asia Growth % 1.25 1.00 0.95 3.20 -- 3.20
32 What You Pay to Invest WHAT YOU PAY TO INVEST - -------------------------------------------------------------------------------- Operating Expenses Paid Each Year by the Funds(1) (as a % of average net assets) Class C(5)
Distribution Total and Service Fund Fee Waiver Management (12b-1) Other Operating by Net Fund Fee Fees Expenses(2) Expenses Adviser(3) Expenses - ---- --- ---- ----------- -------- ---------- -------- Worldwide Growth % 1.00 1.00 0.30 2.30 -- 2.30 International Value % 1.00 1.00 0.41 2.41 -- 2.41 International Core Growth % 1.00 1.00 0.38 2.38 -- 2.38 International % 1.00 1.00 0.70 2.70 -- 2.70 International SmallCap Growth % 1.00 1.00 0.42 2.42 -- 2.42 Emerging Markets Value % 1.00 1.00 0.91 2.91 -- 2.91 Emerging Countries % 1.25 1.00 0.93 3.18 -0.53 2.65 Class M Distribution Total and Service Fund Fee Waiver Management (12b-1) Other Operating by Net Fund Fee Fees Expenses(2) Expenses Adviser(3) Expenses - ---- --- ---- ----------- -------- ---------- -------- Asia-Pacific Equity % 1.25 0.75 1.48 3.48 -0.98 2.50
- ---------- (1) These tables show the estimated operating expenses for each Fund by class as a ratio of expenses to average daily net assets. These estimates are based on each Fund's actual operating expenses for its most recent complete fiscal year and fee waivers to which the Adviser has agreed for each Fund except Global Corporate Leaders, International, Worldwide Emerging Markets, SmallCap Asia Growth, Troika Dialog Russia, Gold and Silver Funds. For those Funds, estimated operating expenses are based on estimated contractual operating expenses commencing with Pilgrim Investments' management of these Funds. (2) For the Worldwide Growth, International Core Growth, International SmallCap Growth and Emerging Countries Funds, other expenses have been restated to reflect the elimination of certain administrative fees effective May 24, 1999. (3) Pilgrim Investments has entered into expense limitation agreements with each Fund except International Value and Emerging Markets Value under which it will limit expenses of the Fund, excluding interest, taxes, brokerage and extraordinary expenses, subject to possible reimbursement to Pilgrim Investments within three years. The amount of each Fund's expenses waived or reimbursed during the last fiscal year by Pilgrim Investments is shown under the heading "Fee Waiver by Adviser". For each Fund the expense limit will continue through at least October 31, 2001. Nicholas-Applegate Capital Management bears 50% of the cost of maintaining the expense limit for Funds which it serves as sub-adviser. (4) Because Class B shares are new for International and SmallCap Asia Growth Funds, their expenses are estimated based on Class A expenses. (5) Because Class C shares are new for International Fund, expenses are estimated based on Class A expenses. [GRAPHIC] If you have any questions, please call 1-800-992-0180. What You Pay to Invest 33 WHAT YOU PAY TO INVEST - -------------------------------------------------------------------------------- Examples The examples that follow are intended to help you compare the cost of investing in the Pilgrim Funds with the cost of investing in other mutual funds. Each example assumes that you invested $10,000, reinvested all your dividends, the Fund earned an average annual return of 5%, and annual operating expenses remained at the current level. Keep in mind that this is only an estimate -- actual expenses and performance may vary. Class A Fund 1 year 3 years 5 years 10 years - ---- ------ ------- ------- -------- Global Corporate Leaders $ 735 1,071 1,430 2,438 Worldwide Growth $ 733 1,065 1,420 2,417 International Value $ 736 1,074 1,435 2,448 International Core Growth $ 741 1,089 1,460 2,499 International $ 762 1,152 1,567 2,719 International SmallCap Growth $ 745 1,100 1,479 2,539 Emerging Markets Value $ 786 1,226 1,692 2,973 Emerging Countries $ 766 1,219 1,751 3,198 Worldwide Emerging Markets $ 764 1,161 1,581 2,749 Asia-Pacific Equity $ 766 1,264 1,885 3,549 SmallCap Asia Growth $ 809 1,295 1,805 3,201 Troika Dialog Russia $ 742 1,091 1,464 2,509 Gold $ 734 1,068 1,425 2,427 Silver $ 747 1,109 1,494 2,569 Class B
If you sell your shares If you don't sell your shares ------------------------------------- ------------------------------------- Fund 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years - ---- ------ ------- ------- -------- ------ ------- ------- -------- Worldwide Growth $ 733 1,018 1,430 2,473 233 718 1,230 2,473 International Value $ 744 1,051 1,485 2,566 244 751 1,285 2,566 International Core Growth $ 741 1,042 1,470 2,555 241 742 1,270 2,555 International $ 773 1,138 1,630 2,851 273 838 1,430 2,851 International SmallCap Growth $ 745 1,055 1,491 2,596 245 755 1,291 2,596 Emerging Markets Value $ 796 1,207 1,743 3,082 296 907 1,543 3,082 Emerging Countries $ 768 1,179 1,769 3,259 268 879 1,569 3,259 Asia-Pacific Equity $ 778 1,255 1,955 3,679 278 955 1,755 3,679 SmallCap Asia Growth $ 823 1,286 1,874 3,331 323 986 1,674 3,331 Class C If you sell your shares If you don't sell your shares ------------------------------------- ------------------------------------- Fund 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years - ---- ------ ------- ------- -------- ------ ------- ------- -------- Worldwide Growth $ 333 718 1,230 2,636 233 718 1,230 2,636 International Value $ 344 751 1,285 2,746 244 751 1,285 2,746 International Core Growth $ 341 742 1,270 2,716 241 742 1,270 2,716 International $ 373 838 1,430 3,032 273 838 1,430 3,032 International SmallCap Growth $ 345 755 1,291 2,756 245 755 1,291 2,756 Emerging Markets Value $ 394 901 1,533 3,233 294 901 1,533 3,233 Emerging Countries $ 368 879 1,569 3,409 268 879 1,569 3,409
Class M Fund 1 year 3 years 5 years 10 years - ---- ------ ------- ------- -------- Asia-Pacific Equity $ 594 1,200 1,927 3,845 34 What You Pay to Invest SHAREHOLDER CHOOSING A SHARE CLASS GUIDE - -------------------------------------------------------------------------------- PILGRIM PURCHASE OPTIONSTM Depending upon the Fund, you may select from up to four separate classes of shares: Class A, Class B, Class C and Class M. Class A * Front-end sales charge, as described on the next page (except for Money Market Fund). * Distribution and service (12b-1) fees of 0.25% to 0.35%. Class B * No front-end sales charge; all your money goes to work for you right away. * Distribution and service (12b-1) fees of 1% (0.75% for Strategic Income Fund). * A contingent deferred sales charge, as described on the next page. * Automatic conversion to Class A shares after eight years, thus reducing future annual expenses. Class B shares acquired initially through Funds that were part of the Nicholas-Applegate Mutual Funds at the time of purchase will convert after seven years from the date of original purchase. * Not offered by Global Corporate Leaders Fund, Worldwide Emerging Markets Fund, Troika Dialog Russia Fund, Gold Fund and Silver Fund. Class C * No front-end sales charge; all your money goes to work for you right away. * Distribution and service (12b-1) fees of 1% (0.75% for Strategic Income Fund). * A 1% contingent deferred sales charge on shares sold within one year of purchase. * No automatic conversion to Class A shares, so annual expenses continue at the Class C level throughout the life of your investment. * Not offered by Bank and Thrift Fund, Asia-Pacific Equity Fund, Global Corporate Leaders Fund, Worldwide Emerging Markets Fund, SmallCap Asia Growth Fund, Troika Dialog Russia Fund, Gold Fund and Silver Fund. Class M * Lower front-end sales charge than Class A, as described on the next page. * Distribution and service (12b-1) fees of 0.75%. * No automatic conversion to Class A shares, so annual expenses continue at the Class M level throughout the life of your investment. * Offered only by MagnaCap Fund, LargeCap Leaders Fund, MidCap Value Fund, Asia-Pacific Equity Fund, Government Securities Income Fund and High Yield Fund. When choosing between classes, you should carefully consider the ongoing annual expenses along with the initial sales charge or the contingent deferred sales charge. The relative impact of the initial sales charges and ongoing annual expenses will depend on the length of time a share is held. Higher distribution fees mean a higher expense ratio, so Class B and Class C shares pay correspondingly lower dividends and may have a lower net asset value than Class A or Class M shares. Orders for Class B shares and Class M shares in excess of $250,000 and $1,000,000, respectively, will be accepted as orders for Class A shares or declined. You should discuss which Class of shares is right for you with your investment professional. Distribution and Shareholder Service Fees To pay for the cost of promoting the Funds and servicing your shareholder account, each class of each Fund has adopted a Rule 12b-1 plan which requires fees to be paid out of the assets of each class. Over time the fees will increase your cost of investing and may exceed the cost of paying other types of sales charges. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Shareholder Guide 35 SHAREHOLDER GUIDE CHOOSING A SHARE CLASS - -------------------------------------------------------------------------------- SALES CHARGE CALCULATION Class A(1) Class A shares of the Funds are sold subject to the following sales charge: U.S. and International Equity Funds, Equity & Income Funds and Precious Metals Funds Income Funds ---------------------- ---------------------- As a % As a % of the As a % of of the As a % of offering net offering net Your Investment price asset value price asset value - --------------- ----- ----------- ----- ----------- Less than $50,000 5.75 6.10 4.75 4.99 $50,000 - $99,999 4.50 4.71 4.50 4.71 $100,000 - $249,999 3.50 3.63 3.50 3.63 $250,000 - $499,999 2.50 2.56 2.50 2.56 $500,000 - $1,000,000 2.00 2.04 2.00 2.04 $1,000,000 and over See below See below - ---------- (1) Shareholders that purchased funds that were a part of the Lexington family of funds at the time of purchase are not subject to sales charges for the life of their account. Money Market Fund. There is no sales charge if you purchase Class A shares of Money Market Fund. However, if the Class A shares are exchanged for shares of another Pilgrim Fund, you will be charged the applicable sales load for that fund upon the exchange. Investments of $1 Million or More. There is no front-end sales charge if you purchase Class A shares in an amount of $1 million or more. However, the shares will be subject to a contingent deferred sales charge if they are redeemed within one or two years of purchase, depending on the amount of the purchase, as follows: Period during which Your investment CDSC CDSC applies --------------- ---- ------------ $1,000,000 to $2,499,999 1.00% 2 years $2,500,000 to $4,999,999 0.50% 1 year $5,000,000 and over 0.25% 1 year However, Class A shares that were purchased in an amount of $1 million or more through Funds that were part of the Nicholas-Applegate Mutual Funds at the time of purchase will be subject to a contingent deferred sales charge of 1% within one year from the date of purchase. Class A shares that were purchased in an amount of $1 million or more through funds that were part of the Northstar family of funds at the time of purchase are subject to a different contingent deferred sales charge period of 18 months from the date of purchase. See the SAI for further information. Class B Class C and Class T Class B and Class C shares are offered at their net asset value per share without any initial sales charge. However, you may be charged a contingent deferred sales charge (CDSC) on shares that you sell within a certain period of time after you bought them. The amount of the CDSC is based on the lesser of the net asset value of the shares at the time of purchase or redemption. There is no CDSC on shares acquired through the reinvestment of dividends and capital gains distributions. The CDSCs are as follows: Class B Deferred Sales Charge(1) CDSC on shares Years after purchase being sold - -------------------- ---------- 1st year 5% 2nd year 4% 3rd year 3% 4th year 3% 5th year 2% 6th year 1% After 6th year none - ---------- (1) Class B shares that were purchased through funds that were part of the Northstar family of funds at the time of purchase are subject to a different contingent deferred sales charge. Please see the SAI for further information. Class C Deferred Sales Charge CDSC on shares Years after purchase being sold - -------------------- ---------- 1st year 1% After 1st year none Class T Deferred Sales Charge CDSC on shares Years after purchase being sold - -------------------- ---------- 1st year 4% 2nd year 3% 3rd year 2% 4th year 1% After 4th year none To keep your CDSC as low as possible, each time you place a request to redeem shares the Funds will first redeem shares in your account that are not subject to a CDSC, and then will sell shares that have the lowest CDSC. Class M Class M shares of the Funds are sold subject to the following sales charge. MagnaCap, LargeCap Leaders, Government MidCap Value, Securities and Income and Asia-Pacific High Yield Equity Funds Funds ------------------- ------------------- As a % As a % As a % As a % of the of net of the of net offering asset offering asset Your investment price value price value - --------------- ----- ----- ----- ----- Less than $50,000 3.50% 3.63% 3.25% 3.36% $50,000 - $99,999 2.50% 2.56% 2.25% 2.30% $100,000 - $249,999 1.50% 1.52% 1.50% 1.52% $250,000 - $499,999 1.00% 1.01% 1.00% 1.01% $500,000 and over none none none none 36 Shareholder Guide SHAREHOLDER CHOOSING A SHARE CLASS GUIDE - -------------------------------------------------------------------------------- Sales Charge Reductions and Waivers Reduced Sales Charges. You may reduce the initial sales charge on a purchase of Class A or Class M shares of the funds by combining multiple purchases to take advantage of the breakpoints in the sales charge schedules. You may do this by: Letter of Intent -- lets you purchase shares over a 13 month period and pay the same sales charge as if the shares had all been purchased at once. Rights of Accumulation -- lets you add the value of shares of any open-end Pilgrim Fund (excluding the Money Market Fund) you already own to the amount of your next purchase for purposes of calculating the sales charge. Combination Privilege -- shares held by investors in the Pilgrim Funds which impose a CDSC may be combined with Class A or Class M shares for a reduced sales charge. See the Account Application or the Statement of Additional Information for details, or contact your financial representative or the Shareholder Servicing Agent for more information. CDSC Waivers. If you notify the Transfer Agent at the time of redemption, the CDSC for each Class will be waived in the following cases: * redemptions following the death or permanent disability of a shareholder if made within one year of death or the initial determination of permanent disability. The waiver is available only for shares held at the time of death or initial determination of permanent disability. * for Class B Shares, redemptions pursuant to a Systematic Withdrawal Plan, up to a maximum of 12% per year of a shareholder's account value based on the value of the account at the time the plan is established and annually thereafter, provided all dividends and distributions are reinvested and the total redemptions do not exceed 12% annually. * mandatory distributions from a tax-deferred retirement plan or an IRA. However, if you purchased shares that were part of the Nicholas-Applegate Mutual Funds, you may be eligible for a CDSC waiver prior to the mandatory distribution age. * If you think you may be eligible for a CDSC waiver, contact your financial representative or the Shareholder Servicing Agent. Reinstatement Privilege. If you sell Class B, Class C or Class T shares of a Pilgrim Fund, you may reinvest some or all of the proceeds in the same share class within 90 days without a sales charge. Reinstated Class B, Class C and Class T shares will retain their original cost and purchase date for purposes of the CDSC. This privilege can be used only once per calendar year. If you want to use the Reinstatement Privilege, contact your financial representative or the Shareholder Servicing Agent. Consult the SAI for more information. Sales Charge Waivers. Class A or Class M shares may be purchased without a sales charge by certain individuals and institutions. For additional information, contact the Shareholder Servicing Agent, or see the Statement of Additional Information. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Shareholder Guide 37 SHAREHOLDER GUIDE HOW TO PURCHASE SHARES - -------------------------------------------------------------------------------- The minimum initial investment amounts for the Pilgrim Funds are as follows: * Non-retirement accounts: $1,000 * Retirement accounts: $250 * Pre-Authorized Investment Plan: $100 to open; you must invest at least $100 a month. The minimum additional investment is $100. Make your investment using the table on the right. The Funds and the Distributor reserve the right to reject any purchase order. Please note that cash, travelers checks, third party checks, money orders and checks drawn on non-US banks (even if payment may be effected through a US bank) will not be accepted. The Pilgrim Funds reserve the right to waive minimum investment amounts. The Funds reserve the right to liquidate sufficient shares to recover annual transfer agent fees or to close your account and redeem your shares should you fail to maintain your account value at a minimum of $1,000.00 ($250.00 for IRAs). Retirement Plans The Funds have available prototype qualified retirement plans for both corporations and for self-employed individuals. They also have available prototype IRA, Roth IRA and Simple IRA plans (for both individuals and employers), Simplified Employee Pension Plans, Pension and Profit Sharing Plans and Tax Sheltered Retirement Plans for employees of public educational institutions and certain non-profit, tax-exempt organizations. State Street Bank and Trust-Kansas City (SSB) acts as the custodian under these plans. For further information, contact the Shareholder Servicing Agent at (800) 992-0180. SSB currently receives a $12 custodial fee annually for the maintenance of such accounts. Initial Additional Method Investment Investment ------ ---------- ---------- By Contacting An investment Your professional with an Investment authorized firm Professional can help you establish and maintain your account. By Mail Visit or consult an Visit or consult an investment investment professional. Make professional. Fill out your check payable to the Account Additions the Pilgrim Funds and form included on the mail it, along with a bottom of your account completed Application. statement along with Please indicate your your check payable to investment professional the Fund and mail on the New Account them to the address on Application the account statement. Remember to write your account number on the check. By Wire Call the Pilgrim Wire the funds in the Operations Department same manner described at (800) 336-3436 to under "Initial obtain an account Investment." number and indicate your investment professional on the account. Instruct your bank to wire funds to the Fund in the care of: State Street Bank and Trust -- Kansas City ABA #101003621 Kansas City, MO credit to: ______________ (the Fund) A/C #751-8315; for further credit to: _________________ Shareholder A/C #________________ (A/C # you received over the telephone) Shareholder Name: _____________________ (Your Name Here) After wiring funds you must complete the Account Application and send it to: Pilgrim Funds P.O. Box 219368 Kansas City, MO 64121-6368 38 Shareholder Guide SHAREHOLDER HOW TO REDEEM SHARES GUIDE - -------------------------------------------------------------------------------- You may redeem shares using the table on the right. Under unusual circumstances, a Fund may suspend the right of redemption as allowed by federal securities laws. Systematic Withdrawal Plan You may elect to make periodic withdrawals from your account on a regular basis. * Your account must have a current value of at least $10,000. * Minimum withdrawal amount is $100. * You may choose from monthly, quarterly, semi-annual or annual payments. For additional information, contact the Shareholder Servicing Agent, see the Account Application or the Statement of Additional Information. Payments Normally, payment for shares redeemed will be made within three days after receipt by the Transfer Agent of a written request in good order. When you place a request to redeem shares for which the purchase money has not yet been collected, the request will be executed at the next determined net asset value, but the Fund will not release the proceeds until your purchase payment clears. This may take up to 15 days or more. To reduce such delay, purchases should be made by bank wire or federal funds. Each Fund normally intends to pay in cash for all shares redeemed, but under abnormal conditions that make payment in cash unwise, a Fund may make payment wholly or partly in securities at their then current market value equal to the redemption price. In such case, a Fund could elect to make payment in securities for redemptions in excess of $250,000 or 1% of its net assets during any 90-day period for any one shareholder. An investor may incur brokerage costs in converting such securities to cash. Redemption Fee A 2% redemption fee will be charged on the redemption of shares of the Pilgrim Troika Dialog Russia Fund held less than 365 days. The redemption fee will not apply to shares representing the reinvestment of dividends and capital gains distributions. The redemption fee will be applied on a share by share basis using the "first shares in, first shares out" (FIFO) method. Therefore, the oldest shares are sold first. Method Procedures ------ ---------- By Contacting Your You may redeem by contacting your Investment Professional investment professional. Investment professionals may charge for their services in connection with your redemption request, but neither the Fund nor the Distributor imposes any such charge. By Mail Send a written request specifying the Fund name and share class, your account number, the name(s) in which the account is registered, and the dollar value or number of shares you wish to redeem to: Pilgrim Funds P.O. Box 219368 Kansas City, MO 64121-6368 If certificated shares have been issued, the certificate must accompany the written request. Corporate investors and other associations must have an appropriate certification on file authorizing redemptions. A suggested form of such certification is provided on the Account Application. A signature guarantee may be required. By Telephone -- You may redeem shares by telephone on all Expedited Redemption accounts other than retirement accounts, unless you check the box on the Account Application which signifies that you do not wish to use telephone redemptions. To redeem by telephone, call the Shareholder Servicing Agent at (800) 992-0180. Receiving Proceeds By Check: You may have redemption proceeds (up to a maximum of $100,000) mailed to an address which has been on record with Pilgrim Funds for at least 30 days. Receiving Proceeds By Wire: You may have redemption proceeds (subject to a minimum of $5,000) wired to your pre-designated bank account. You will not be able to receive redemption proceeds by wire unless you check the box on the Account Application which signifies that you wish to receive redemption proceeds by wire and attach a voided check. Under normal circumstances, proceeds will be transmitted to your bank on the business day following receipt of your instructions, provided redemptions may be made. In the event that share certificates have been issued, you may not request a wire redemption by telephone. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Shareholder Guide 39 SHAREHOLDER GUIDE TRANSACTION POLICIES - -------------------------------------------------------------------------------- Net Asset Value The net asset value (NAV) per share for each Fund and class is determined each business day as of the close of regular trading on the New York Stock Exchange (usually at 4:00 p.m. Eastern Time). The NAV per share of each class of each Fund is calculated by taking the value of the Fund's assets attributable to that class, subtracting the Fund's liabilities attributable to that class, and dividing by the number of shares of that class that are outstanding. Because foreign securities may trade on days when the Funds do not price shares, the net asset value of a Fund that invests in foreign securities may change on days when shareholders will not be able to purchase or redeem the Fund's shares. In general, assets are valued based on actual or estimated market value, with special provisions for assets not having readily available market quotations, and short-term debt securities, and for situations where market quotations are deemed unreliable. Short-term debt securities having a maturity of 60 days or less are valued at amortized cost, unless the amortized cost does not approximate market value. Securities prices may be obtained from automated pricing services. When market quotations are not readily available or are deemed unreliable, securities are valued at their fair value as determined in good faith under the supervision of the Board of Directors or Trustees. Valuing securities at fair value involves greater reliance on judgment than securities that have readily available market quotations. Price of Shares When you buy shares, you pay the NAV plus any applicable sales charge. When you sell shares, you receive the NAV minus any applicable deferred sales charge. Exchange orders are effected at NAV. Execution of Requests Purchase and sale requests are executed at the next NAV determined after the order is received in proper form by the Transfer Agent or Distributor. A purchase order will be deemed to be in proper form when all of the required steps set forth above under "How to Purchase Shares" have been completed. If you purchase by wire, however, the order will be deemed to be in proper form after the telephone notification and the federal funds wire have been received. If you purchase by wire, you must submit an application form in a timely fashion. If an order or payment by wire is received after the close of regular trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time), the shares will not be credited until the next business day. You will receive a confirmation of each new transaction in your account, which also will show you the number of Fund shares you own including the number of shares being held in safekeeping by the Transfer Agent for your account. You may rely on these confirmations in lieu of certificates as evidence of your ownership. Certificates representing shares of the Funds will not be issued unless you request them in writing. Telephone Orders The Funds and their transfer agent will not be responsible for the authenticity of phone instructions or losses, if any, resulting from unauthorized shareholder transactions if they reasonably believe that such instructions were genuine. The Funds and their transfer agent have established reasonable procedures to confirm that instructions communicated by telephone are genuine. These procedures include recording telephone instructions for exchanges and expedited redemptions, requiring the caller to give certain specific identifying information, and providing written confirmation to shareholders of record not later than five days following any such telephone transactions. If the Funds and their transfer agent do not employ these procedures, they may be liable for any losses due to unauthorized or fraudulent telephone instructions. Exchanges You may exchange shares of a Fund for shares of the same class of any other Pilgrim Fund, except for Lexington Money Market Trust and Pilgrim Corporate Leaders Trust Fund, without paying any additional sales charge, except that Class A shares of the Pilgrim Money Market Fund for which no sales charge was paid must pay the applicable sales load on an exchange into Class A shares of another Fund. In addition, Class T shares of any Fund may be exchanged for Class B shares of the Pilgrim Money Market Fund. Shares subject to a CDSC will continue to age from the date that the original shares were purchased. If you exchange shares of a Fund that at the time you acquired the shares was a Nicholas-Applegate Mutual Fund, the shares you receive on the exchange will be subject to the current CDSC structure and conversion rights of the Fund being acquired, although the shares will continue to age for CDSC and conversion purposes from the date the original shares were acquired. The total value of shares being exchanged must at least equal the minimum investment requirement of the Fund into which they are being exchanged. Exchanges of shares are sales and may result in a gain or loss for federal and state income tax purposes. There is no specific limit on exchange frequency; however, the Funds are intended for long-term investment and not as a short-term trading vehicle. The adviser may prohibit excessive exchanges (more than four per year). The adviser also may, on 60 days' prior notice, restrict the frequency of, otherwise modify, or impose charges of up to $5.00 upon exchanges. You will automatically have the ability to request an exchange by calling the Shareholder Service Agent unless you mark the box on the Account Application that indicates that you do not wish to have the telephone exchange privilege. A Fund may change or cancel its exchange policies at any time, upon 60 days' written notice to shareholders. 40 Shareholder Guide SHAREHOLDER TRANSACTION POLICIES GUIDE - -------------------------------------------------------------------------------- Systematic Exchange Privilege With an initial account balance of at least $5,000 and subject to the information and limitations outlined above, you may elect to have a specified dollar amount of shares systematically exchanged, monthly, quarterly, semi-annually or annually (on or about the 10th of the applicable month), from your account to an identically registered account in the same class of any other open-end Pilgrim Fund. This exchange privilege may be modified at any time or terminated upon 60 days' written notice to shareholders. Small Accounts Due to the relatively high cost of handling small investments, the Funds reserve the right upon 30 days' written notice to redeem, at NAV, the shares of any shareholder whose account (except for IRAs) has a value of less than $1,000, other than as a result of a decline in the NAV per share. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Shareholder Guide 41 MANAGEMENT OF THE FUNDS ADVISER - -------------------------------------------------------------------------------- Pilgrim Investments, Inc. ("Pilgrim" or "Pilgrim Investments") serves as the investment adviser to each of the Funds. Pilgrim has overall responsibility for the management of the Funds. Pilgrim provides or oversees all investment advisory and portfolio management services for each Fund, and assists in managing and supervising all aspects of the general day-to-day business activities and operations of the Funds, including custodial, transfer agency, dividend disbursing, accounting, auditing, compliance and related services. Organized in December 1994, Pilgrim is registered as an investment adviser. Pilgrim is an indirect wholly-owned subsidiary of ReliaStar Financial Corp. ("ReliaStar") (NYSE: RLR). Through its subsidiaries, ReliaStar offers individuals and institutions life insurance and annuities, employee benefits products and services, life and health reinsurance, retirement plans, mutual funds, bank products, and personal finance education. Prior to April 30, 2000, Pilgrim Advisors, Inc. ("Pilgrim Advisors") served as investment adviser to certain of the Funds. On April 30, 2000, Pilgrim Advisors, an indirect wholly-owned subsidiary of ReliaStar, merged with Pilgrim Investments. Pilgrim Advisors and Pilgrim Investments were sister companies and shared certain resources and investment personnel. Prior to July 26, 2000, Lexington Management Corporation ("Lexington") served as investment adviser to certain of the Funds. On July 26, 2000, ReliaStar acquired Lexington Global Asset Managers, Inc., the parent company of Lexington, and Pilgrim Investments was approved as Adviser to the Funds formerly advised by Lexington. As of June 30, 2000, Pilgrim managed over $16.8 billion in assets. Pilgrim's principal address is 40 North Central Avenue, Suite 1200, Phoenix, Arizona 85004. Pilgrim receives a monthly fee for its services based on the average daily net assets of each of the Funds. The following table shows the aggregate annual advisory fee paid by each Fund for the most recent fiscal year as a percentage of that Fund's average daily net assets: Advisory Fund Fee ---- --- Global Corporate Leaders Worldwide Growth 1.00% International Value 1.00 International Core Growth 1.00 International 1.00 International SmallCap Growth 1.00 Emerging Markets Value 1.00 Emerging Countries 1.25 Worldwide Emerging Markets 1.00 Asia-Pacific Equity 1.25 SmallCap Asia Growth 1.25 Troika Dialog Russia 1.25 Gold 0.95 Silver 1.00 Pilgrim Directly Manages the Portfolios of the Following Funds: Global Corporate Leaders Fund Richard T. Saler has served as a member of the portfolio management team that manages Global Corporate Leaders Fund since July 1994. Mr. Saler has over 13 years of investment experience. Mr. Saler serves as Senior Vice President and Senior Portfolio Manager of Pilgrim. Prior to rejoining Pilgrim in 1992, he was a strategist with Nomura Securities in 1991. Mr. Saler first joined Pilgrim in 1986 and focused on international markets. Phillip A. Schwartz has served as a member of the portfolio management team that manages Global Corporate Leaders Fund since January 1998. Mr. Schwartz has over 13 years of investment experience. Mr. Schwartz serves as Vice President and Portfolio Manager of Pilgrim. Prior to joining Pilgrim in 1993, Mr. Schwartz was Vice President of European Research Sales with Cheuvreuz De Virieu in Paris and New York, serving the institutional market. Prior to Cheuvreux, he was affiliated with Olde and Co. and Kidder, Peabody as a stockbroker. Alan H. Wapnick has served a member of the portfolio management team that manages Global Corporate Leaders Fund since January 1998. Mr. Wapnick serves as Senior Vice President and Senior Portfolio Manager of Pilgrim. Prior to joining Pilgrim in 1986, Mr. Wapnick was an equity analyst with Merrill Lynch, J.&W. Seligman, Dean Witter and most recently, Union Carbide Corporation. International Fund and Worldwide Emerging Markets Fund Richard T. Saler, whose background is described above, has served as the Senior Portfolio Manager of the team that manages International Fund since January 1994 and a member of the portfolio management team that manages Worldwide Emerging Markets Fund since June 7, 2000. Phillip A. Schwartz, whose background is described above, has served as a member of the portfolio management team that manages International Fund since January 1998 and Worldwide Emerging Markets Fund since June 7, 2000. 42 Management of the Funds MANAGEMENT SUB-ADVISERS OF THE FUNDS - -------------------------------------------------------------------------------- Gold Fund and Silver Fund James A. Vail has served as the Portfolio Manager of Gold Fund and Silver Fund since June 1998. Mr. Vail serves as Vice President and Portfolio Manager of Pilgrim. He is a Chartered Financial Analyst, a member of the New York Society of Security Analysts and has 25 years of investment experience. Prior to joining Pilgrim in 1991, Mr. Vail held investment research positions with Chemical Bank, Oppenheimer & Co., Robert Fleming, Inc. and most recently, Beacon Trust Company, where he was a Senior Investment Analyst. For the following Funds, Pilgrim has engaged a Sub-Adviser to provide the day-to-day management of the Fund's portfolio. The Sub-Advisers are among the most respected institutional investment advisers in the world, and have been selected primarily on the basis of their successful application of a consistent, well-defined, long-term investment approach over a period of several market cycles. International Value Fund and Emerging Markets Value Fund Brandes Investment Partners, L.P. A registered investment adviser, Brandes Investment Partners, L.P. (Brandes) serves as Sub-Adviser to the Pilgrim International Value Fund and the Pilgrim Emerging Markets Value Fund. The company was formed in May 1996 as the successor to its general partner, Brandes Investment Partners, Inc. which has been providing investment advisory services (through various predecessor entities) since 1974. Brandes currently manages over $33 billion in international portfolios. Brandes' principal address is 12750 High Bluff Drive, San Diego, California 92130. Charles Brandes has co-managed the Pilgrim International Value Fund and the Pilgrim Emerging Markets Value Fund since the Funds were formed in March 1995 and January 1998, respectively. Mr. Brandes has over 31 years of investment management experience. He founded the general partner of Brandes in 1974 and owns a controlling interest in it. At Brandes, he serves as a Managing Partner. He is a Chartered Financial Analyst and a Member of the Association for Investment Management and Research. Ian Sunder has co-managed the Pilgrim Emerging Markets Value Fund since the Fund was formed in January 1998. Mr. Sunder has over nine years of investment management experience. At Brandes, he serves as a Portfolio Manager. He is a Chartered Financial Analyst, and a Member of the Association for Investment Management and Research and the Financial Analysts Society. Jeff Busby has co-managed the Pilgrim International Value Fund since the fund was formed in March 1995. Mr. Busby has over 13 years of investment management experience. At Brandes, he serves as a Managing Partner. He is also responsible for overseeing all trading activities for the firm. He is a Chartered Financial Analyst, and a Member of the Association for Investment Management and Research and the Financial Analysts Society. Asia-Pacific Equity Fund HSBC Asset Management (Americas) Inc., HSBC Asset Management (Hong Kong) Limited and HSBC Asset Management (Europe) Limited (collectively, HSBC) serve jointly as Sub-Adviser to Asia-Pacific Equity Fund. The firms are part of HSBC Asset Management, the global investment advisory and fund management business unit of HSBC Holdings plc (founded as the Hong Kong and Shanghai Banking Corporation in 1865) which, with headquarters in London, is one of the world's largest banking and financial organizations. HSBC Asset Management manages over approximately $75 billion of assets worldwide for a wide variety of institutional, retail and private clients. HSBC Asset Management has advisory operations in Hong Kong and Singapore, among other locations. Its parent company has over a century of operations in local economies throughout the Asia-Pacific region. HSBC Asset Management's principal business address is 140 Broadway, 6th Floor, New York, New York 10005. Fredric Lutcher III, Managing Director, Chief Financial Officer, HSBC Americas, and Man Wing Chung, Chief Investment Officer Asia (ex Japan), HSBC Hong Kong, are primarily responsible for portfolio management of Asia-Pacific Equity Fund. Mr. Lutcher joined HSBC in 1997, and has over 20 years of investment experience. Prior to joining HSBC, Mr. Lutcher was with Merrill Lynch Asset Management. Mr. Chung has been with HSBC since 1993 and has over 12 years investment experience. International Core Growth Fund, Worldwide Growth Fund, International SmallCap Growth Fund and Emerging Countries Fund Nicholas-Applegate Capital Management (NACM) NACM serves as Sub-Adviser to the Funds listed above. Founded in 1984, NACM manages over $40 billion of discretionary assets for numerous clients, including employee benefit plans of corporations, public retirement systems and unions, university endowments, foundations, and other institutional investors and individuals. Each of the Funds listed above is managed by a team of portfolio managers and analysts employed by NACM. NACM has offices in San Diego, New York, Chicago and San Francisco. It's principal business address is 600 West Broadway, San Diego, California 92101. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Management of the Funds 43 MANAGEMENT OF THE FUNDS SUB-ADVISERS - -------------------------------------------------------------------------------- Pilgrim SmallCap Asia Growth Fund Crosby Asset Management (US) Inc. (Crosby) Crosby is the sub-adviser of the Pilgrim Small Cap Asia Growth Fund. Crosby is located at 32/F Asia Pacific Finance Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong. Crosby is a subsidiary of Crosby Group, Hong Kong. Crosby provides investment advice and management to Pilgrim Small Cap Asia Growth Fund. Christina Lam is the lead manager on a portfolio management team that manages the Pilgrim Small Cap Asia Growth Fund. Ms. Lam joined Crosby Asset Management in 1991. She is responsible for the investment management of the listed equity portfolios under the management of Crosby Asset Management. After graduating with a Law Degree with Honors from Warwick University, she qualified as a Barrister from Lincoln's Inn in London. In 1987 she joined Schroder Securities Limited in Hong Kong as an investment analyst, where her coverage included the utilities, industrials and retail sectors and conglomerates. Pilgrim Troika Dialog Russia Fund Troika Dialog Asset Management (Cayman Islands) Ltd. (TDAM) TDAM is the sub-adviser of Pilgrim Troika Dialog Russia Fund. TDAM is located as Troika Dialog Asset Management (Cayman Islands), Ltd. Romanov Pereulok #4, 103875 Moscow, Russia. TDAM provides investment advice and management to Pilgrim Troika Dialog Russia Fund. TDAM is a majority owned subsidiary of The Bank of Moscow. Timothy D. McCarthy is a member of the portfolio management team that manages the Pilgrim Troika Dialog Russia Fund. Mr. McCarthy has a B.S. degree in Economics from the State University of New York at Onconta and an M.B.A. from the State University of New York at Binghamton. He joined Troika Dialog, Moscow in July, 1998. Prior to May, 1998 he was an Executive Director with Alfa Asset Management, Moscow. From January, 1995 to March, 1997 he was co-founder and director of Capital Regent Securities, a Moscow based investment and advisory firm. From June, 1990 to December, 1994 he was a consultant and senior consultant with Deloitte & Touche Management Consulting New York. Ruben Vardanian is a member of the portfolio management team that manages the Pilgrim Troika Dialog Russia Fund. Mr. Vardanian is Chairman of the Board of Troika Dialog Asset Management. He is Vice Chairman of the Board of Directors of the Depository Clearing Company, Moscow. He is a member of the expert council of the Federal Securities Commission of Russia and a Director of the Russian Trading System (RTS). He is also Chairman of the Board of Directors of the Russian Capital markets self-regulatory organization (NAUFOR). Mr. Vardanian received a Masters Degree with Distinction from the Finance Department of Moscow State University. He received post-graduate training with Banca CRT in Italy and with the Emerging Markets Division of Merrill Lynch in New York. Pavel Teplukhin is a member of the portfolio management team that manages the Pilgrim Troika Dialog Russia Fund. He is the President of Troika Dialog Asset Management. Dr. Teplukhin received a diploma in Economics and a Doctorate in Economic Analysis and Statistics from Moscow State University. He also received a Master of Science in Economics/Macroeconomics from the London School of Economics. From 1993 to 1996, Dr. Teplukhin was Economic Adviser to the First Deputy Prime Minister at the Ministry of Finance of the Russia Federation. Oleg Larichev is a member of the portfolio management team that manages the Pilgrim Troika Dialog Russia Fund. Mr. Larichev received a Master of Arts in Economics from the New Economic School, Moscow and a Diploma in Computer Graphics from Moscow State University. He has been associated with Troika Dialog, Moscow since September, 1996. Prior to September, 1996 he was an economics expert with the Russia European Center for Economic Policy. Prior to April, 1995 he held part-time positions with the World Bank and the Moscow office of the London School of Economics. 44 Management of the Funds DIVIDENDS, DISTRIBUTIONS DIVIDENDS/TAXES AND TAXES - -------------------------------------------------------------------------------- Dividends The Funds generally distribute most or all of their net earnings in the form of dividends. Each Fund pays dividends and capital gains, if any, annually. Dividend Reinvestment Unless you instruct a Fund to pay you dividends in cash, dividends and distributions paid by a Fund will be reinvested in additional shares of the Fund. You may, upon written request or by completing the appropriate section of the Account Application, elect to have all dividends and other distributions paid on Class A, B, C, M or T shares of a Fund invested in another Pilgrim Fund which offers the same class shares. If you are a shareholder of Pilgrim Prime Rate Trust, whose shares are not held in a broker or nominee account, you may, upon written request, elect to have all dividends invested into a pre-existing Class A account of any open-end Pilgrim Fund. Taxes The following information is meant as a general summary for U.S. shareholders. Please see the Statement of Additional Information for additional information. You should rely your own tax adviser for advice about the particular federal, state and local tax consequences to you of investing in a Fund. Each Fund will distribute most of its net investment income and net capital gains to its shareholders each year. Although the Funds will not be taxed on amounts they distribute, most shareholders will be taxed on amounts they receive. A particular distribution generally will be taxable as either ordinary income or long-term capital gains. It does not matter how long you have held your Fund shares or whether you elect to receive your distributions in cash or reinvest them in additional Fund shares. For example, if a Fund designates a particular distribution as a long-term capital gains distribution, it will be taxable to you at your long-term capital gains rate. Dividends declared by a Fund in October, November or December and paid during the following January may be treated as having been received by shareholders in the year the distributions were declared. You will receive an annual statement summarizing your dividend and capital gains distributions. If you invest through a tax-deferred account, such as a retirement plan, you generally will not have to pay tax on dividends until they are distributed from the account. These accounts are subject to complex tax rules, and you should consult your tax adviser about investment through a tax-deferred account. There may be tax consequences to you if you sell or redeem Fund shares. You will generally have a capital gain or loss, which will be long-term or short-term, generally depending on how long you hold those shares. If you exchange shares, you may be treated as if you sold them. You are responsible for any tax liabilities generated by your transactions. As with all mutual funds, a Fund may be required to withhold U.S. federal income tax at the rate of 31% of all taxable distributions payable to you if you fail to provide the Fund with your correct taxpayer identification number or to make required certifications, or if you have been notified by the IRS that you are subject to backup withholding. Backup withholding is not an additional tax; rather, it is a way in which the IRS ensures it will collect taxes otherwise due. Any amounts withheld may be credited against your U.S. federal income tax liability. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Dividends, Distributions and Taxes 45 MORE INFORMATION ABOUT RISKS - -------------------------------------------------------------------------------- All mutual funds involve risk -- some more than others -- and there is always the chance that you could lose money or not earn as much as you hope. A Fund's risk profile is largely a factor of the principal securities in which it invests and investment techniques that it uses. The following pages discuss the risks associated with certain of the types of securities in which the Funds may invest and certain of the investment practices that the Funds may use. For more information about these and other types of securities and investment techniques that may be used by the Funds, see the Statement of Additional Information (SAI). Many of the investment techniques and strategies discussed in this prospectus and in the SAI are discretionary, which means that the adviser or sub-adviser can decide whether to use them or not. The adviser or sub-adviser of a Fund may also use investment techniques or make investments in securities that are not a part of the Fund's principal investment strategy. PRINCIPAL RISKS Investments in Foreign Securities. There are certain risks in owning foreign securities, including those resulting from: fluctuations in currency exchange rates; devaluation of currencies; political or economic developments and the possible imposition of currency exchange blockages or other foreign governmental laws or restrictions; reduced availability of public information concerning issuers; accounting, auditing and financial reporting standards or other regulatory practices and requirements that are not uniform when compared to those applicable to domestic companies; settlement and clearance procedures in some countries that may not be reliable and can result in delays in settlement; higher transaction and custody expenses than for domestic securities; and limitations on foreign ownership of equity securities. Also, securities of many foreign companies may be less liquid and the prices more volatile than those of domestic companies. With certain foreign countries, there is the possibility of expropriation, nationalization, confiscatory taxation and limitations on the use or removal of funds or other assets of the Funds, including the withholding of dividends. Each Fund that invests in foreign securities may enter into foreign currency transactions either on a spot or cash basis at prevailing rates or through forward foreign currency exchange contracts to have the necessary currencies to settle transactions, or to help protect Fund assets against adverse changes in foreign currency exchange rates, or to provide exposure to a foreign currency commensurate with the exposure to securities from that country. Such efforts could limit potential gains that might result from a relative increase in the value of such currencies, and might, in certain cases, result in losses to the Fund. Emerging Markets Investments. Because of less developed markets and economies and, in some countries, less mature governments and governmental institutions, the risks of investing in foreign securities can be intensified in the case of investments in issuers domiciled or doing substantial business in emerging market countries. These risks include: high concentration of market capitalization and trading volume in a small number of issuers representing a limited number of industries, as well as a high concentration of investors and financial intermediaries; political and social uncertainties; over-dependence on exports, especially with respect to primary commodities, making these economies vulnerable to changes in commodity prices; overburdened infrastructure and obsolete or unseasonal financial systems; environmental problems; less well developed legal systems; and less reliable custodial services and settlement practices. Inability to Sell Securities. Some securities usually trade in lower volume and may be less liquid than securities of large established companies. These less liquid securities could include securities of small and mid-size U.S. companies, high-yield securities, convertible securities, unrated debt and convertible securities, securities that originate from small offerings, and foreign securities, particularly those from companies in emerging markets. The Fund could lose money if it cannot sell a security at the time and price that would be most beneficial to the Fund. High Yield Securities. Investments in high yield securities generally provide greater income and increased opportunity for capital appreciation than investments in higher quality debt securities, but they also typically entail greater potential price volatility and principal and income risk. High yield securities are not considered investment grade, and are regarded as predominantly speculative with respect to the issuing company's continuing ability to meet principal and interest payments. The prices of high yield securities have been found to be less sensitive to interest rate changes than higher-rated investments, but more sensitive to adverse economic downturns or individual corporate developments. High yield securities structured as zero coupon or pay-in-kind securities tend to be more volatile. The secondary market in which high yield securities are traded is generally less liquid than the market for higher grade bonds. At times of less liquidity, it may be more difficult to value high yield securities. Corporate Debt Securities. Corporate debt securities are subject to the risk of the issuer's inability to meet principal and interest payments on the obligation and may also be subject to price volatility due to such factors as interest rate sensitivity, market perception of the credit-worthiness of the issuer and general market liquidity. When interest rates decline, the value of the Fund's debt securities can be expected to rise, and when interest rates rise, the value of those securities can be expected to decline. Debt securities with longer maturities tend to be more sensitive to interest rate movements than those with shorter maturities. One measure of risk for fixed income securities is duration. Duration is one of the tools used by a portfolio manager in selection of fixed income securities. Historically, the maturity of a bond was used as a proxy for the sensitivity of a bond's price to changes in interest rates, otherwise known as a bond's "interest rate risk" or "volatility." According to this measure, the longer the maturity of a bond, the more its price will change for a given 46 More Information About Risks MORE INFORMATION ABOUT RISKS - -------------------------------------------------------------------------------- change in market interest rates. However, this method ignores the amount and timing of all cash flows from the bond prior to final maturity. Duration is a measure of average life of a bond on a present value basis, which was developed to incorporate a bond's yield, coupons, final maturity and call features into one measure. For point of reference, the duration of a noncallable 7% coupon bond with a remaining maturity of 5 years is approximately 4.5 years, and the duration of a noncallable 7% coupon bond with a remaining maturity of 10 years is approximately 8 years. Material changes in interest rates may impact the duration calculation. U.S. Government Securities. Some U.S. Government agency securities may be subject to varying degrees of credit risk particularly those not backed by the full faith and credit of the United States Government. All U.S. Government securities may be subject to price declines in the securities due to changing interest rates. Convertible Securities. The price of a convertible security will normally fluctuate in some proportion to changes in the price of the underlying equity security, and as such is subject to risks relating to the activities of the issuer and general market and economic conditions. The income component of convertible securities causes fluctuations based upon changes in interest rates and the credit quality of the issuer. Convertible securities are often lower rated securities. A Fund may be required to redeem or convert a convertible security before the holder would otherwise choose. Other Investment Companies. Each Fund (except the MagnaCap, High Yield and Government Securities Income Funds) may invest up to 10% of its assets in other investment companies. When a Fund invests in other investment companies, you indirectly pay a proportionate share of the expenses of that other investment company (including management fees, administration fees, and custodial fees) in addition to the expenses of the Fund. Restricted and Illiquid Securities. Each Fund may invest in restricted and illiquid securities (except MagnaCap Fund may not invest in restricted securities). If a security is illiquid, the Fund might be unable to sell the security at a time when the adviser might wish to sell, and the security could have the effect of decreasing the overall level of the Fund's liquidity. Further, the lack of an established secondary market may make it more difficult to value illiquid securities, which could vary from the amount the Fund could realize upon disposition. Restricted securities, i.e., securities subject to legal or contractual restrictions on resale, may be illiquid. However, some restricted securities may be treated as liquid, although they may be less liquid than registered securities traded on established secondary markets. Mortgage-Related Securities. Although mortgage loans underlying a mortgage-backed security may have maturities of up to 30 years, the actual average life of a mortgage-backed security typically will be substantially less because the mortgages will be subject to normal principal amortization, and may be prepaid prior to maturity. Like other fixed income securities, when interest rates rise, the value of a mortgage-backed security generally will decline; however, when interest rates are declining, the value of mortgage-backed securities with prepayment features may not increase as much as other fixed income securities. The rate of prepayments on underlying mortgages will affect the price and volatility of a mortgage-related security, and may have the effect of shortening or extending the effective maturity of the security beyond what was anticipated at the time of the purchase. Unanticipated rates of prepayment on underlying mortgages can be expected to increase the volatility of such securities. In addition, the value of these securities may fluctuate in response to the market's perception of the creditworthiness of the issuers of mortgage-related securities owned by a Fund. Additionally, although mortgages and mortgage-related securities are generally supported by some form of government or private guarantee and/or insurance, there is no assurance that private guarantors or insurers will be able to meet their obligations. Interests in Loans. Certain Funds may invest in participation interests or assignments in secured variable or floating rate loans, which include participation interests in lease financings. Loans are subject to the credit risk of nonpayment of principal or interest. Substantial increases in interest rates may cause an increase in loan defaults. Although the loans will generally be fully collateralized at the time of acquisition, the collateral may decline in value, be relatively illiquid, or lose all or substantially all of its value subsequent to the Fund's investment. Many loans are relatively illiquid, and may be difficult to value. Derivatives. Generally, derivatives can be characterized as financial instruments whose performance is derived, at least in part, from the performance of an underlying asset or assets. Some derivatives are sophisticated instruments that typically involve a small investment of cash relative to the magnitude of risks assumed. These may include swap agreements, options, forwards and futures. Derivative securities are subject to market risk, which could be significant for those that have a leveraging effect. Many of the Funds do not invest in these types of derivatives, and some do, so please check the description of the Fund's policies. Derivatives are also subject to credit risks related to the counterparty's ability to perform, and any deterioration in the counterparty's creditworthiness could adversely affect the instrument. A risk of using derivatives is that the adviser or sub-adviser might imperfectly judge the market's direction. For instance, if a derivative is used as a hedge to offset investment risk in another security, the hedge might not correlate to the market's movements and may have unexpected or undesired results, such as a loss or a reduction in gains. Temporary Defensive Strategies. When the adviser or sub-adviser to a Fund anticipates unusual market or other conditions, the Fund [GRAPHIC] If you have any questions, please call 1-800-992-0180. More Information About Risks 47 MORE INFORMATION ABOUT RISKS - -------------------------------------------------------------------------------- may temporarily depart from its principal investment strategies as a defensive measure. To the extent that a Fund invests defensively, it likely will not achieve capital appreciation. Portfolio Turnover. Each Fund, except the Asia-Pacific Equity Fund, is generally expected to engage in frequent and active trading of portfolio securities to achieve its investment objective. A high portfolio turnover rate involves greater expenses to a Fund, including brokerage commissions and other transaction costs, and is likely to generate more taxable short-term gains for shareholders, which may have an adverse effect on the performance of the Fund. OTHER RISKS Repurchase Agreements. Each Fund may enter into repurchase agreements, which involve the purchase by a Fund of a security that the seller has agreed to buy back. If the seller defaults and the collateral value declines, the Fund might incur a loss. If the seller declares bankruptcy, the Fund may not be able to sell the collateral at the desired time. Lending Portfolio Securities. In order to generate additional income, certain Funds may lend portfolio securities in an amount up to 331|M/3% of total Fund assets to broker-dealers, major banks, or other recognized domestic institutional borrowers of securities. As with other extensions of credit, there are risks of delay in recovery or even loss of rights in the collateral should the borrower default or fail financially. Borrowing. Certain Funds may borrow for certain types of temporary or emergency purposes subject to certain limits. Borrowing may exaggerate the effect of any increase or decrease in the value of portfolio securities or the net asset value of a Fund, and money borrowed will be subject to interest costs. Interest costs on borrowings may fluctuate with changing market rates of interest and may partially offset or exceed the return earned on borrowed funds. Under adverse market conditions, a Fund might have to sell portfolio securities to meet interest or principal payments at a time when fundamental investment considerations would not favor such sales. Reverse Repurchase Agreements and Dollar Rolls. A reverse repurchase agreement or dollar roll involves the sale of a security, with an agreement to repurchase the same or substantially similar securities at an agreed upon price and date. Whether such a transaction produces a gain for a Fund depends upon the costs of the agreements and the income and gains of the securities purchased with the proceeds received from the sale of the security. If the income and gains on the securities purchased fail to exceed the costs, net asset value will decline faster than otherwise would be the case. Reverse repurchase agreements and dollar rolls, as leveraging techniques, may increase a Fund's yield; however, such transactions also increase a Fund's risk to capital and may result in a shareholder's loss of principal. Short Sales. Certain Funds may make short sales. A "short sale" is the sale by a Fund of a security which has been borrowed from a third party on the expectation that the market price will drop. If the price of the security rises, the Fund may have to cover its short position at a higher price than the short sale price, resulting in a loss. Pairing Off Transactions. A pairing-off transaction occurs when a Fund commits to purchase a security at a future date, and then the Fund "pairs-off" the purchase with a sale of the same security prior to or on the original settlement date. Whether a pairing-off transaction on a debt security produces a gain depends on the movement of interest rates. If interest rates increase, then the money received upon the sale of the same security will be less than the anticipated amount needed at the time the commitment to purchase the security at the future date was entered and the Fund will experience a loss. Percentage and Rating Limitations Unless otherwise stated, the percentage limitations in this prospectus apply at the time of investment. 48 More Information About Risks FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The financial highlights tables on the following pages are intended to help you understand each Fund's financial performance for the past five years or, if shorter, the period of the Fund's operations. Certain information reflects financial results for a single share. The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions). A report of each Fund's independent accountant, along with the Fund's financial statements, is included in the Fund's annual report, which is available upon request. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Financial Highlights 49 FINANCIAL PILGRIM GLOBAL CORPORATE LEADERS FUND HIGHLIGHTS - -------------------------------------------------------------------------------- The information in the table below has been audited by KPMG, LLP, independent auditors.
1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- Per Share Operating Performance Net Asset Value, Beginning of Period $ 9.46 10.59 11.28 11.32 11.17 Net investment income (loss) $ (0.02) 0.99 0.03 0.01 0.09 Net realized and unrealized gain (loss) from investment operations $ 3.67 1.02 0.73 1.84 1.10 Total income (loss) from investment operations $ 3.65 2.01 0.76 1.85 1.19 Less distributions: Distributions from net investment income $ (0.74) (0.80) (0.09) (0.16) (0.29) Distributions in excess of net investment income $ -- -- -- -- (0.13) Distributions from net realized gains $ (0.08) (2.34) (1.36) (1.73) (0.62) Distributions in excess of net realized gains $ -- -- -- -- -- Total distributions $ (0.82) (3.14) (1.45) (1.89) (1.04) Net asset value, end of period $ 12.29 9.46 10.59 11.28 11.32 Total Return % 39.06 19.06 6.90 16.43 10.69 Ratios/Supplemental Data Net asset, end of period (thousands) $ 19,617 17,803 35,085 37,223 53,614 Ratio of expenses to average net assets, before reimbursement or waiver % 1.96 2.12 1.75 1.90 1.67 Ratio of expenses to average net assets, net of reimbursement or waiver % 1.96 2.12 1.75 1.90 1.67 Ratio of net investment income (loss) to average net assets, before reimbursement or waiver % (0.65) (0.06) 0.23 0.11 0.48 Ratio of net investment income (loss) to average net assets, net of reimbursement or waiver % (0.65) (0.06) 0.23 0.11 0.48 Portfolio Turnover Rate % 12.76 137.33 177.48 128.05 166.35
50 Pilgrim Global Corporate Leaders Fund FINANCIAL HIGHLIGHTS PILGRIM WORLDWIDE GROWTH FUND - -------------------------------------------------------------------------------- For the three months ended June 30, 1999, the information in the table below has been audited by KPMG LLP, independent auditors. For all periods ending prior to June 30, 1999, the financial information was audited by other independent auditors.
Class A ------------------------------------------------------------------------ Six months Three ended months Dec. 31, ended 1999 June 30, Year ended March 31, (unaudited) 1999(1) 1999 1998 1997 1996 1995 ----------- ------- ---- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 23.58 21.39 19.33 16.88 16.57 14.29 14.94 Income from investment operations: Net investment income (loss) $ (0.11) -- (0.02) 0.04 (0.16) (0.07) (0.05) Net realized and unrealized gains (loss) on investments $ 10.71 2.19 5.78 5.33 2.20 2.86 (0.09) Total from investment operations $ 10.60 2.19 5.76 5.37 2.04 2.79 (0.14) Less distributions from: Net investment income $ -- -- 0.06 -- -- 0.12 0.02 Net realized gains on investments $ 3.07 -- 3.64 2.92 1.73 0.39 0.49 Net asset value, end of period $ 31.11 23.58 21.39 19.33 16.88 16.57 14.29 Total Return(3): % 47.79 10.24 33.56 34.55 12.51 19.79 (0.90) Ratios/Supplemental Data: Net assets, end of period (000's) $ 150,384 66,245 49,134 38,647 24,022 23,481 22,208 Ratios to average net assets: Net expenses after expense reimbursement(4) % 1.61 1.75 1.86 1.86 1.85 1.85 1.85 Gross expenses prior to expense reimbursement(4) % 1.61 1.75 2.02 2.21 2.17 2.17 2.18 Net investment income (loss) after expense reimbursement(4) % (1.13) (0.03) (0.62) (0.69) (0.93) (0.35) (0.42) Portfolio turnover % 92 57 247 202 182 132 99 Class B --------------------------------------------------------------- Six months Three ended months May 31, Dec. 31, ended 1995(2) to 1999 June 30, Year ended March 31, March 31, (unaudited) 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) $ (0.17) (0.03) (0.08) (0.17) (0.14) (0.05) Net realized and unrealized gains (loss) on investments $ 12.02 2.46 6.25 5.44 1.82 1.89 Total from investment operations $ 11.85 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 $ 35.03 26.64 24.21 20.10 16.02 14.34 Total Return(3): % 47.25 10.04 32.74 34.03 11.72 14.72 Ratios/Supplemental Data: Net assets, end of period (000's) $ 82,286 27,938 18,556 10,083 5,942 1,972 Ratios to average net assets: Net expenses after expense reimbursement(4) % 2.26 2.40 2.51 2.51 2.50 2.50 Gross expenses prior to expense reimbursement(4) % 2.26 2.40 2.67 2.70 4.81 9.50 Net investment income (loss) after expense reimbursement(4) % (1.78) (0.68) (1.31) (1.37) (1.62) (1.28) Portfolio turnover % 92 57 247 202 182 132 Class C ----------------------------------------------------------------------- Six months Three ended months Dec. 31, ended 1999 June 30, Year ended March 31, (unaudited) 1999(1) 1999 1998 1997 1996 1995 ----------- ------- ---- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 23.69 21.52 19.05 16.92 16.76 14.44 14.86 Income from investment operations: Net investment income (loss) $ (0.19) (0.04) (0.20) (0.19) (0.28) (0.21) (0.15) Net realized and unrealized gains (loss) on investments $ 10.72 2.21 5.83 5.41 2.23 2.92 (0.08) Total from investment operations $ 10.53 2.17 5.63 5.22 1.95 2.71 (0.23) Less distributions from: Net investment income $ -- -- 0.01 -- -- 0.01 -- Net realized gains on investments $ 3.08 -- 3.15 3.09 1.79 0.38 0.19 Net asset value, end of period $ 31.14 23.69 21.52 19.05 16.92 16.76 14.44 Total Return(3): % 47.25 10.08 32.73 33.72 11.81 18.95 (1.49) Ratios/Supplemental Data: Net assets, end of period (000's) $ 190,853 111,250 98,470 84,292 70,345 71,155 71,201 Ratios to average net assets: Net expenses after expense reimbursement(4) % 2.26 2.40 2.51 2.51 2.50 2.50 2.50 Gross expenses prior to expense reimbursement(4) % 2.26 2.40 2.67 2.77 2.61 2.57 2.57 Net investment income (loss) after expense reimbursement(4) % (1.78) (0.68) (1.28) (1.34) (1.57) (0.99) (1.06) Portfolio turnover % 92 57 247 202 182 132 99
(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. (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. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Pilgrim Worldwide Growth Fund 51 FINANCIAL PILGRIM INTERNATIONAL VALUE FUND HIGHLIGHTS - -------------------------------------------------------------------------------- For the years ended 1999, 1998 and 1997, the information in the table below has been audited by PricewaterhouseCoopers LLP, independent auditors. For all periods ending prior to October 31, 1997, the financial information was audited by other independent auditors.
Class A Class B ------------------------------------------- ------------------------- Year ended October 31, Year ended October 31, 1999 1998 1997 1996 1995(1) 1999 1998 1997(2) ---- ---- ---- ---- ------- ---- ---- ------- Operating performance Net asset value at the beginning of the period $ 11.88 10.90 9.05 8.10 7.64 11.76 10.87 10.00 Net investment income (loss) $ .08 0.11 (0.09) 0.14 0.09 .01 0.07 (0.02) Net realized and unrealized gain on investments $ 3.58 0.96 2.30 0.85 0.37 3.51 0.91 0.89 Total from investment operations $ 3.66 1.07 2.21 0.99 0.46 3.52 0.98 0.87 Dividends from net investment income $ (.12) -- (0.14) (0.04) -- (.04) -- -- Dividends from net realized gain on investments sold $ (.67) (0.09) (0.22) -- -- (.67) (0.09) -- Total distributions $ (.79) (0.09) (0.36) (0.04) -- (.71) (0.09) -- Net asset value at the end of the period $ 14.75 11.88 10.90 9.05 8.10 14.57 11.76 10.87 Total investment return(3) % 32.55 9.86 27.59 12.15 9.39(4) 31.55 9.16 8.70 Ratios and supplemental data Net assets at the end of the period ($000s) $ 451,815 211,018 60,539 16,777 5,188 278,871 145,976 59,185 Ratio of expenses to average net assets % 1.68 1.74 1.80 1.85 1.85(4) 2.41 2.47 2.50(4) Ratio of expense reimbursement to average net assets % -- -- 0.27 0.97 6.08(4) -- -- 0.08(4) Ratio of net investment income to average net assets % .92 1.62 0.46 1.52 1.67(4) .18 0.69 (0.71)(4) Portfolio turnover rate % 29 32 26 74 -- 29 32 26 Class C ------------------------------------------------ Year ended October 31, 1999 1998 1997 1996 1995(1) ---- ---- ---- ---- ------- Operating performance Net asset value at the beginning of the period $ 11.75 10.86 8.93 8.05 7.61 Net investment income (loss) $ 0.00 0.06 (0.06) 0.05 0.06 Net realized and unrealized gain on investments $ 3.51 0.92 2.20 0.86 0.38 Total from investment operations $ 3.51 0.98 2.14 0.91 0.44 Dividends from net investment income $ (.04) -- (0.04) (0.03) -- Dividends from net realized gain on investments sold $ (.67) (0.09) (0.17) -- -- Total distributions $ (.71) (0.09) (0.21) (0.03) -- Net asset value at the end of the period $ 14.55 11.75 10.86 8.93 8.05 Total investment return(3) % 31.50 9.07 25.92 11.39 8.89(4) Ratios and supplemental data Net assets at the end of the period ($000s) $ 310,227 137,651 62,103 14,530 5,749 Ratio of expenses to average net assets % 2.41 2.47 2.50 2.50 2.50(4) Ratio of expense reimbursement to average net assets % -- -- 0.24 1.21 6.08(4) Ratio of net investment income to average net assets % .19 0.68 (0.23) 0.62 1.13(4) Portfolio turnover rate % 29 32 26 74 --
(1) The mutual fund commenced operations on March 6, 1995 as the Brandes International Fund, a series of the Brandes Investment Trust. At the close of business on April 18, 1997 (the "Closing"), the Pilgrim International Value Fund (formerly the "Northstar International Value Fund") acquired the net assets of the Brandes International Fund, pursuant to an Agreement of Reorganization dated February 4, 1997. On April 21, 1997, the Brandes International Fund was reorganized as the Northstar International Value Fund. (2) Class B commenced operations on April 18, 1997. (3) Assumes dividends have been reinvested and does not reflect the effect of sales charges. (4) Annualized. 52 Pilgrim International Value Fund FINANCIAL HIGHLIGHTS PILGRIM INTERNATIONAL CORE GROWTH FUND - -------------------------------------------------------------------------------- For the three months ended June 30, 1999, the information in the table below has been audited by KPMG LLP, independent auditors. For all periods ending prior to June 30, 1999, the financial information was audited by another independent auditor.
Class A -------------------------------------------------------- Six months Three ended months February 28, Dec. 31, ended 1997(1) to 1999 June 30, Year ended March 31, March 31, (unaudited) 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) $ (0.15) 0.04 (0.01) (0.02) -- Net realized and unrealized gains on investments $ 9.74 1.17 1.02 4.56 0.23 Total from investment operations $ 9.59 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 $ 27.35 18.92 17.71 17.01 12.73 Total Return(3): % 52.07 6.83 5.90 36.10 1.76 Ratios/Supplemental Data: Net assets, end of period (000's) $ 19,460 12,409 21,627 12,664 2 Ratios to average net assets: Net expenses after expense reimbursement(4) % 1.75 1.77 1.89 1.96 1.95 Gross expenses prior to expense reimbursement(4) % 2.11 1.86 2.13 3.02 4,579.78 Net investment income (loss) after expense reimbursement(4) % (1.47) 0.50 (0.51) (0.45) 0.00 Portfolio turnover % 103 67 214 274 76 Class B -------------------------------------------------------- Six months Three ended months February 28, Dec. 31, ended 1997(1) to 1999 June 30, Year ended March 31, March 31, (unaudited) 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) $ (0.20) -- (0.16) (0.11) -- Net realized and unrealized gains on investments $ 9.76 1.19 1.05 4.66 0.18 Total from investment operations $ 9.56 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 $ 27.48 19.08 17.89 17.10 12.68 Total Return(3): % 51.40 6.65 5.24 35.31 1.44 Ratios/Supplemental Data: Net assets, end of period (000's) $ 19,465 12,034 11,033 7,942 1 Ratios to average net assets: Net expenses after expense reimbursement(4) % 2.40 2.36 2.53 2.61 2.59 Gross expenses prior to expense reimbursement(4) % 2.76 2.45 2.77 3.04 16,000.25 Net investment income (loss) after expense reimbursement(4) % (2.12) (0.09) (1.13) (1.32) 0.00 Portfolio turnover % 103 67 214 274 76 Class C -------------------------------------------------------- Six months Three ended months February 28, Dec. 31, ended 1997(1) to 1999 June 30, Year ended March 31, March 31, (unaudited) 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) $ (0.21) -- (0.05) (0.07) -- Net realized and unrealized gains on investments $ 9.80 1.20 0.94 4.55 0.18 Total from investment operations $ 9.59 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 $ 27.57 19.14 17.94 17.16 12.68 Total Return(3): % 51.46 6.69 5.22 35.25 1.44 Ratios/Supplemental Data: Net assets, end of period (000's) $ 21,104 11,936 10,400 3,517 43 Ratios to average net assets: Net expenses after expense reimbursement(4) % 2.40 2.36 2.55 2.61 2.41 Gross expenses prior to expense reimbursement(4) % 2.76 2.45 2.79 5.10 25.55 Net investment income (loss) after expense reimbursement(4) % (2.12) (0.09) (1.19) (1.27) (0.07) Portfolio turnover % 103 67 214 274 76
(1) The Fund commenced operations on February 28, 1997. (2) Effective May 24, 1999, Pilgrim Investments Inc., became the Investment Manager of the Fund, concurrently Nicholas-Applegate Capital Management was appointed as sub-advisor. (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. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Pilgrim International Core Growth Fund 53 FINANCIAL PILGRIM INTERNATIONAL FUND HIGHLIGHTS - -------------------------------------------------------------------------------- The information in the table below has been audited by KPMG, LLP, independent auditors.
1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- Per Share Operating Performance Net Asset Value, Beginning of Period $ 11.61 10.10 10.86 10.60 10.37 Net investment income (loss) $ (0.01) 0.17 0.07 (0.02) (0.01) Net realized and unrealized gain (loss) from investment operations $ 5.46 1.74 0.10 1.45 0.61 Total income (loss) from investment operations $ 5.45 1.91 0.17 1.43 0.60 Less distributions: Distributions from net investment income $ (0.03) (0.06) (0.13) (0.20) -- Distributions in excess of net investment income $ -- -- -- -- (0.35) Distributions from net realized gains $ (3.58) (0.34) (0.80) (0.97) (0.02) Distributions in excess of net realized gains $ -- -- -- -- -- Total distributions $ (3.61) (0.40) (0.93) (1.17) (0.37) Net asset value, end of period $ 13.45 11.61 10.10 10.86 10.60 Total Return % 47.85 19.02 1.61 13.57 5.77 Ratios/Supplemental Data Net assets, end of period (thousands) $ 25,304 24,000 19,949 18,891 17,855 Ratio of expenses to average net assets, before reimbursement or waiver % 1.98 2.25 2.15 2.45 2.46 Ratio of expenses to average net assets, net of reimbursement or waiver % 1.98 1.75 1.75 2.45 2.46 Ratio of net investment income (loss) to average net assets, before reimbursement or waiver % (0.21) (0.16) 0.13 (0.39) (0.12) Ratio of net investment income (loss) to average net assets, net of reimbursement or waiver % (0.21) 0.35 0.53 (0.39) (0.12) Portfolio Turnover Rate % 143.82 143.67 122.56 113.55 137.72
54 Pilgrim International Fund FINANCIAL HIGHLIGHTS PILGRIM INTERNATIONAL SMALLCAP GROWTH FUND - -------------------------------------------------------------------------------- For the three months ended June 30, 1999, the information in the table below has been audited by KPMG LLP, independent auditors. For all periods ending prior to June 30, 1999, the financial information was audited by other independent auditors.
Class A ------------------------------------------------------------------------- Six months Three ended months August 31, Dec. 31, ended 1994(1) to 1999 June 30, Year ended March 31, March 31, (unaudited) 1999(3) 1999 1998 1997 1996 1995 ----------- ------- ---- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 23.80 21.03 19.29 14.92 13.15 11.51 12.50 Income from investment operations: Net investment income (loss) $ (0.14) (0.03) 0.02 (0.15) 0.04 (0.02) -- Net realized and unrealized gains on investments $ 19.00 2.80 3.21 5.36 1.88 1.79 (0.98) Total from investment operations $ 18.86 2.77 3.23 5.21 1.92 1.77 (0.98) Less distributions from: Net investment income $ -- -- -- -- 0.01 0.13 0.01 Net realized gains on investments $ 2.06 -- 1.49 0.84 0.14 -- -- Net asset value, end of period $ 40.60 23.80 21.03 19.29 14.92 13.15 11.51 Total Return(4): % 81.29 13.17 17.26 36.31 14.67 15.46 (7.85) Ratios/Supplemental Data: Net assets, end of period (000's) $ 146,057 37,490 25,336 11,183 5,569 1,056 610 Ratios to average net assets: Net expenses after expense reimbursement(5) % 1.65 1.84 1.94 1.96 1.95 1.95 1.95 Gross expenses prior to expense reimbursement(5) % 1.66 1.86 2.08 2.75 3.76 10.06 9.77 Net investment income (loss) after expense reimbursement(5) % (1.40) (0.69) (0.82) (1.56) (1.05) (0.27) (0.07) Portfolio turnover % 71 44 146 198 206 141 75 Class B ------------------------------------------------------------------- Six months Three ended months May 31, Dec. 31, ended 1995(2) to 1999 June 30, Year ended March 31, March 31, (unaudited) 1999(3) 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) $ (0.24) (0.07) (0.20) (0.15) (0.15) (0.02) Net realized and unrealized gains on investments $ 20.12 2.97 3.46 5.56 2.09 1.48 Total from investment operations $ 19.88 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 $ 43.02 25.33 22.43 20.16 15.89 13.96 Total Return(4): % 80.57 12.93 16.55 35.73 13.96 11.68 Ratios/Supplemental Data: Net assets, end of period (000's) $ 77,785 19,331 16,158 12,033 5,080 1,487 Ratios to average net assets: Net expenses after expense reimbursement(5) % 2.30 2.49 2.59 2.61 2.60 2.60 Gross expenses prior to expense reimbursement(5) % 2.31 2.51 2.73 2.98 4.89 16.15 Net investment income (loss) after expense reimbursement(5) % (2.02) (1.34) (1.45) (2.20) (1.66) (0.64) Portfolio turnover % 71 44 146 198 206 141 Class C ------------------------------------------------------------------------- Six months Three ended months August 31, Dec. 31, ended 1994(1) to 1999 June 30, Year ended March 31, March 31, (unaudited) 1999(3) 1999 1998 1997 1996 1995 ----------- ------- ---- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 23.34 20.60 18.53 14.87 13.05 11.32 12.50 Income from investment operations: Net investment income (loss) $ (0.19) (0.06) (0.10) (0.11) (0.16) 0.01 (0.04) Net realized and unrealized gains on investments $ 18.36 2.80 3.09 5.09 1.98 1.72 (1.12) Total from investment operations $ 18.17 2.74 2.99 4.98 1.82 1.73 (1.16) Less distributions from: Net investment income $ -- -- -- -- -- -- 0.02 Net realized gains on investments $ 2.01 -- 0.92 1.32 -- -- -- Net asset value, end of period $ 39.50 23.34 20.60 18.53 14.87 13.05 11.32 Total Return(4): % 80.48 13.31 16.55 35.63 13.98 15.30 (9.25) Ratios/Supplemental Data: Net assets, end of period (000's) $ 72,787 18,354 13,226 8,014 3,592 933 24 Ratios to average net assets: Net expenses after expense reimbursement(5) % 2.30 2.49 2.59 2.61 2.60 2.60 2.61 Gross expenses prior to expense reimbursement(5) % 2.31 2.51 2.73 3.38 3.95 16.15 75.37 Net investment income (loss) after expense reimbursement(5) % (2.02) (1.34) (1.45) (2.18) (1.67) (1.02) (0.76) Portfolio turnover % 71 44 146 198 206 141 75
(1) The Fund commenced operations on August 31, 1994. (2) Commencement of share offerings. (3) Effective May 24, 1999, Pilgrim Investments Inc., became the Investment Manager of the Fund, concurrently Nicholas-Applegate Capital Management was appointed as sub-advisor. (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 for less than one year is not annualized. (5) Annualized. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Pilgrim International SmallCap Growth Fund 55 FINANCIAL PILGRIM EMERGING MARKETS VALUE FUND HIGHLIGHTS - -------------------------------------------------------------------------------- The information in the table below has been audited by PricewaterhouseCoopers LLP, independent auditors.
Class A(1) Class B(1) Class C(1) ---------------------- ---------------------- ---------------------- Year ended October 31, Year ended October 31, Year ended October 31, 1999 1998 1999 1998 1999 1998 ---- ---- ---- ---- ---- ---- Operating performance Net asset value at the beginning of the period $ 7.69 10.00 7.65 10.00 7.63 10.00 Net investment income $ .12 0.12 .08 0.09 .04 0.09 Net realized and unrealized loss on investments $ 3.01 (2.43) 2.97 (2.44) 3.00 (2.46) Total from investment operations $ 3.13 (2.31) 3.05 (2.35) 3.04 (2.37) Dividends from net investment income $ (.14) (.10) (.11) Net asset value at the end of the period $ 10.68 7.69 10.60 7.65 10.56 7.63 Total investment return(2) % 41.48 (23.10) 40.41 (23.50) 40.49 (23.70) Ratios and supplemental data Net assets at the end of the period ($000s) $ 9,281 3,815 3,823 3,583 6,674 2,304 Ratio of expenses to average net assets(3) % 2.06 1.80 2.70 2.50 2.75 2.50 Ratio of expense reimbursement to average net assets(3) % .15 2.08 .23 2.24 .16 2.37 Ratio of net investment income to average net assets(3) % 1.36 3.38 .67 2.55 .61 2.60 Portfolio turnover rate % 38 7 38 7 38 7
(1) Class A, B and C commenced operations on January 1, 1998. (2) Assumes dividends have been reinvested and does not reflect the effect of sales charges. (3) Annualized. 56 Pilgrim Emerging Markets Value Fund FINANCIAL HIGHLIGHTS PILGRIM EMERGING COUNTRIES FUND - -------------------------------------------------------------------------------- For the three months ended June 30, 1999, the information in the table below has been audited by KPMG LLP, independent auditors. For all periods ending prior to June 30, 1999, the financial information was audited by other independent auditors.
Class A ---------------------------------------------------------------------- Six months Three ended months Nov. 28, Dec. 31, ended 1994(1) to 1999 June 30, Year Ended March 31, Mar. 31, (unaudited) 1999(3) 1999 1998 1997 1996 1995 ----------- ------- ---- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 16.74 13.43 17.39 17.20 14.03 11.00 12.50 Income from investment operations: Net investment income (loss) $ (0.12) (0.05) (0.06) 0.03 (0.06) (0.04) 0.04 Net realized and unrealized gains (loss) on investments $ 5.39 3.36 (3.81) 1.22 3.51 3.15 (1.54) Total from investment operations $ 5.27 3.31 (3.87) 1.25 3.45 3.11 (1.50) 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 $ 22.01 16.74 13.43 17.39 17.20 14.03 11.00 Total Return(4): % 31.64 24.65 (22.23) 8.06 24.79 28.43 (11.98) Ratios/Supplemental Data: Net assets, end of period (000's) $ 68,449 53,483 47,180 71,014 38,688 4,718 1,197 Ratio to average net assets: Net expenses after expense reimbursement(5) % 2.07 2.13 2.27 2.26 2.25 2.25 2.25 Gross expenses prior to expense reimbursement(5) % 2.29 2.66 2.56 2.48 3.08 6.72 6.15 Net investment income (loss) after expense reimbursement(5) % (1.40) (1.30) (0.25) 0.55 (1.14) (0.35) 1.09 Portfolio turnover % 110 67 213 243 176 118 61 Class B ---------------------------------------------------------------- Six months Three ended months May 31, Dec. 31, ended 1995(2) to 1999 June 30, Year Ended March 31, March 31, (unaudited) 1999(3) 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) $ (0.18) (0.07) (0.22) (0.07) (0.11) (0.04) Net realized and unrealized gains (loss) on investments $ 5.44 3.41 (3.70) 1.26 3.47 1.56 Total from investment operations $ 5.26 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 $ 22.24 16.98 13.64 17.64 17.29 14.02 Total Return(4): % 31.21 24.49 (22.23) 7.47 24.00 12.16 Ratios/Supplemental Data: Net assets, end of period (000's) $ 33,019 26,342 22,338 38,796 24,558 3,557 Ratio to average net assets: Net expenses after expense reimbursement(5) % 2.72 2.75 2.91 2.91 2.90 2.90 Gross expenses prior to expense reimbursement(5) % 2.94 3.28 3.20 3.06 3.66 7.58 Net investment income (loss) after expense reimbursement(5) % (2.07) (1.92) (0.80) (0.20) (1.77) (1.05) Portfolio turnover % 110 67 213 243 176 118 Class C ---------------------------------------------------------------------- Six months Three ended months Nov. 28, Dec. 31, ended 1994(1) to 1999 June 30, Year Ended March 31, Mar. 31, (unaudited) 1999(3) 1999 1998 1997 1996 1995 ----------- ------- ---- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 16.35 13.14 16.98 16.81 13.71 10.79 12.50 Income from investment operations: Net investment income (loss) $ (0.17) (0.07) (0.27) (0.12) (0.10) (0.05) -- Net realized and unrealized gains (loss) on investments $ 5.24 3.28 (3.49) 1.26 3.37 2.97 (1.70) Total from investment operations $ 5.07 3.21 (3.76) 1.14 3.27 2.92 (1.70) Less distributions from: Net investment income $ -- -- -- -- -- -- 0.01 Net realized gains on investments $ -- -- 0.08 0.97 0.17 -- -- Net asset value, end of period $ 21.42 16.35 13.14 16.98 16.81 13.71 10.79 Total Return(4): % 31.25 24.43 (22.21) 7.47 23.94 27.30 (13.64) Ratios/Supplemental Data: Net assets, end of period (000's) $ 30,442 24,230 19,246 36,986 29,376 4,345 59 Ratio to average net assets: Net expenses after expense reimbursement(5) % 2.72 2.75 2.90 2.91 2.90 2.90 2.90 Gross expenses prior to expense reimbursement(5) % 2.94 3.28 3.19 3.09 3.12 6.23 242.59 Net investment income (loss) after expense reimbursement(5) % (2.07) (1.92) (0.77) (0.26) (1.75) (1.06) (0.04) Portfolio turnover % 110 67 213 243 176 118 61
(1) The Fund commenced operations on November 28, 1994. (2) Commencement of offering shares. (3) Effective May 24, 1999, Pilgrim Investments Inc., became the Investment Manager of the Fund, concurrently Nicholas-Applegate Capital Management was appointed as sub-advisor. (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 for less than one year is not annualized. (5) Annualized. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Pilgrim Emerging Countries Fund 57 FINANCIAL PILGRIM WORLDWIDE EMERGING MARKETS FUND HIGHLIGHTS - -------------------------------------------------------------------------------- The information in the table below has been audited by KPMG, LLP, independent auditors.
1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- Per Share Operating Performance Net Asset Value, Beginning of Period $ 7.13 10.18 11.49 10.70 11.47 Net investment income (loss) $ (0.05) 0.12 0.01 -- 0.08 Net realized and unrealized gain (loss) from investment operations $ 8.05 (3.08) (1.32) 0.79 (0.76) Total income (loss) from investment operations $ 8.00 (2.96) (1.31) 0.79 (0.68) Less distributions: Distributions from net investment income $ (0.03) (0.09) -- -- (0.08) Distributions in excess of net investment income $ -- -- -- -- (0.01) Distributions from net realized gains $ -- -- -- -- -- Distributions in excess of net realized gains $ -- -- -- -- -- Total distributions $ (0.03) (0.09) -- -- (0.09) Net asset value, end of period $ 15.10 7.13 10.18 11.49 10.70 Total Return % 112.58 (29.06) (11.40) 7.38 (5.93) Ratios/Supplemental Data Net assets, end of period (thousands) $ 154,994 65,323 137,686 254,673 265,544 Ratio of expenses to average net assets, before reimbursement or waiver % 2.00 1.85 1.82 1.76 1.88 Ratio of expenses to average net assets, net of reimbursement or waiver % 2.00 1.85 1.82 1.76 1.88 Ratio of net investment income (loss) to average net assets, before reimbursement or waiver % (0.66) 1.14 0.09 (0.01) 0.70 Ratio of net investment income (loss) to average net assets, net of reimbursement or waiver % (0.66) 1.14 0.09 (0.01) 0.70 Portfolio Turnover Rate % 184.39 107.19 112.05 86.26 92.85
58 Pilgrim Worldwide Emerging Markets Fund FINANCIAL HIGHLIGHTS PILGRIM ASIA-PACIFIC EQUITY FUND - -------------------------------------------------------------------------------- The information in the table below, except for the six months ended December 31, 1999, has been audited by KPMG LLP, independent auditors.
Class A ----------------------------------------------------- Six months ended Ten months Dec. 31, ended 1999 Year ended June 30, June 30, (unaudited) 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) $ (0.02) -- 0.03 0.02 0.03 Net realized and unrealized gain (loss) on investments $ 1.73 2.76 (6.50) 0.58 0.34 Total from investment operations $ 1.71 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 $ 8.93 7.22 4.46 10.93 10.35 Total Return(2): % 23.68 61.88 (59.29) 5.78 3.76 Ratios/Supplemental Data: Net assets, end of period (000's) $ 17,309 14,417 11,796 32,485 18,371 Ratios to average net assets: Net expenses after expense reimbursement(3) % 2.00 2.00 2.00 2.00 2.00 Gross expenses prior to expense reimbursement(3) % 2.88 2.98 2.80 2.54 3.47 Net investment income (loss) after expense reimbursement(3) % (0.65) 0.01 0.38 0.00 0.33 Portfolio turnover rate % 66 111 81 38 15 Class B ---------------------------------------------------- Six months ended Ten months Dec. 31, ended 1999 Year ended June 30, June 30, (unaudited) 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) $ (0.05) (0.04) (0.03) (0.07) (0.01) Net realized and unrealized gain (loss) on investments $ 1.68 2.69 (6.43) 0.59 0.32 Total from investment operations $ 1.63 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 $ 8.65 7.02 4.37 10.83 10.31 Total Return(2): % 23.22 60.64 (59.65) 5.04 3.19 Ratios/Supplemental Data: Net assets, end of period (000's) $ 16,393 12,959 9,084 30,169 17,789 Ratios to average net assets: Net expenses after expense reimbursement(3) % 2.75 2.75 2.75 2.75 2.75 Gross expenses prior to expense reimbursement(3) % 3.63 3.73 3.55 3.29 4.10 Net investment income (loss) after expense reimbursement(3) % (1.40) (0.74) (0.39) (0.79) (0.38) Portfolio turnover rate % 66 111 81 38 15 Class M ----------------------------------------------------- Six months ended Ten months Dec. 31, ended 1999 Year ended June 30, June 30, (unaudited) 1999 1998 1997 1996(1) ----------- ---- ---- ---- ------- 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) $ (0.04) (0.02) -- (0.05) -- Net realized and unrealized gain (loss) on investments $ 1.69 2.69 (6.46) 0.59 0.33 Total from investment operations $ 1.65 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 $ 8.72 7.07 4.40 10.86 10.32 Total Return(2): % 23.34 60.68 (59.48) 5.26 3.32 Ratios/Supplemental Data: Net assets, end of period (000's) $ 7,954 5,184 4,265 11,155 6,476 Ratios to average net assets: Net expenses after expense reimbursement(3) % 2.50 2.50 2.50 2.50 2.50 Gross expenses prior to expense reimbursement(3) % 3.38 3.48 3.30 3.04 3.88 Net investment income (loss) after expense reimbursement(3) % (1.15) (0.49) (0.07) (0.55) (0.16) Portfolio turnover rate % 66 111 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. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Pilgrim Asia-Pacific Equity Fund 59 FINANCIAL PILGRIM SMALLCAP ASIA GROWTH FUND HIGHLIGHTS - -------------------------------------------------------------------------------- The information in the table below has been audited by KPMG, LLP, independent auditors.
1999 1998 1997 1996 1995(a) ---- ---- ---- ---- ------- Per Share Operating Performance Net Asset Value, Beginning of Period $ 5.69 7.06 12.24 9.76 10.00 Net investment income (loss) $ (0.10) -- (0.05) (0.05) 0.02 Net realized and unrealized gain (loss) from investment operations $ 3.36 (1.37) (5.13) 2.54 (0.24) Total income (loss) from investment operations $ 3.26 (1.37) (5.18) 2.49 (0.22) Less distributions: Distributions from net investment income $ -- -- -- -- (0.02) Distributions in excess of net investment income $ -- -- -- (0.01) -- Distributions from net realized gains $ -- -- -- -- -- Distributions in excess of net realized gains $ -- -- -- -- -- Total distributions $ -- -- -- (0.01) (0.02) Net asset value, end of period $ 8.95 5.69 7.06 12.24 9.76 Total Return % 57.29 (19.41) (42.32) 25.50 (4.39)* Ratios/Supplemental Data Net asset, end of period (thousands) $ 14,392 18,278 13,867 23,796 8,936 Ratio of expenses to average net assets, before reimbursement or waiver % 3.00 2.86 2.30 2.64 3.51* Ratio of expenses to average net assets, net of reimbursement or waiver % 2.50 2.50 2.30 2.42 1.75* Ratio of net investment income (loss)to average net assets, before reimbursement or waiver % (1.56) (0.57) (0.32) (0.86) (1.24)* Ratio of net investment income (loss)to average net assets, net of reimbursement or waiver % (1.05) (0.21) (0.32) (0.64) 0.52* Portfolio Turnover Rate % 172.89 193.48 187.41 176.49 40.22*
* Annualized. (a) Small Cap Asia Growth Fund commenced operations on July 3, 1995. 60 Pilgrim SmallCap Asia Growth Fund FINANCIAL HIGHLIGHTS PILGRIM TROIKA DIALOG RUSSIA FUND - -------------------------------------------------------------------------------- The information in the table below has been audited by KPMG, LLP, independent auditors.
1999 1998 1997 1996(a) ---- ---- ---- ------- Per Share Operating Performance Net Asset Value, Beginning of Period $ 2.64 17.50 11.24 12.12 Net investment income (loss) $ 0.18 0.15 (0.01) (0.05) Net realized and unrealized gain (loss) from investment operations $ 3.99 (14.70) 7.57 (0.51) Total income (loss) from investment operations $ 4.17 (14.55) 7.56 (0.56) Less distributions: Distributions from net investment income $ (0.07) (0.07) -- -- Distributions in excess of net investment income $ -- -- -- -- Distributions from net realized gains $ -- (0.24) (1.30) (0.32) Distributions in excess of net realized gains $ -- -- -- -- Total distributions $ (0.07) (0.31) (1.30) (0.32) Net asset value, end of period $ 6.74 2.64 17.50 11.24 Total Return % 159.76 (82.99) 67.50 (9.01)* Ratios/Supplemental Data Net assets, end of period (thousands) $ 59,011 19,147 137,873 13,846 Ratio of expenses to average net assets, before reimbursement or waiver % 3.32# 2.64# 2.89# 5.07*# Ratio of expenses to average net assets, net of reimbursement or waiver % 2.23# 1.84# 1.85# 2.65*# Ratio of net investment income (loss) to average net assets, before reimbursement or waiver % 3.30# 0.57# (1.14)# (3.69)*# Ratio of net investment income (loss) to average net assets, net of reimbursement or waiver % 4.39# 1.36# (0.11)# (1.27)*# Portfolio Turnover Rate % 91.14 65.76 66.84 115.55
* Annualized. # (before, or net of) reimbursement or waiver or redemption fee proceeds. (a) The Fund's commencement of operations was June 3, 1996 with the investment of its initial capital. The Fund's registration statement with the Securities and Exchange Commission became effective on July 3, 1996. Financial results prior to the effective date of the Fund's registration statement are not presented in this Financial Highlights Table. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Pilgrim Troika Dialog Russia Fund 61 FINANCIAL PILGRIM GOLD FUND HIGHLIGHTS - -------------------------------------------------------------------------------- The information in the table below has been audited by KPMG, LLP, independent auditors.
1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- Per Share Operating Performance Net Asset Value, Beginning of Period $ 3.03 3.24 5.97 6.24 6.37 Net investment income (loss) $ (0.01) -- -- 0.02 -- Net realized and unrealized gain (loss) from investment operations $ 0.27 (0.21) (2.52) 0.50 (0.12) Total income (loss) from investment operations $ 0.26 (0.21) (2.52) 0.52 (0.12) Less distributions: Distributions from net investment income $ -- -- (0.21) (0.79) (0.01) Distributions in excess of net investment income $ -- -- -- -- -- Distributions from net realized gains $ -- -- -- -- -- Distributions in excess of net realized gains $ -- -- -- -- -- Total distributions $ -- -- (0.21) (0.79) (0.01) Net asset value, end of period $ 3.29 3.03 3.24 5.97 6.24 Total Return % 8.58 (6.39) (42.98) 7.84 (1.89) Ratios/Supplemental Data Net assets, end of period (thousands) $ 72,516 50,841 53,707 109,287 135,779 Ratio of expenses to average net assets, before reimbursement or waiver % 1.94 1.74 1.65 1.60 1.70 Ratio of expenses to average net assets, net of reimbursement or waiver % 1.94 1.74 1.65 1.60 1.70 Ratio of net investment income (loss) to average net assets, before reimbursement or waiver % (0.02) 0.08 0.17 (0.32) 0.07 Ratio of net investment income (loss) to average net assets, net of reimbursement or waiver % (0.02) 0.08 0.17 (0.32) 0.07 Portfolio Turnover Rate % 78.55 28.93 38.32 31.04 40.41
62 Pilgrim Gold Fund FINANCIAL HIGHLIGHTS PILGRIM SILVER FUND - -------------------------------------------------------------------------------- The information in the table below has been audited by KPMG, LLP, independent auditors.
1999 1998(a) 1998(b) 1997(b) 1996(b) 1995(b) ---- ------- ------- ------- ------- ------- Per Share Operating Performance Net Asset Value, Beginning of Period $ 2.73 3.26 3.95 4.46 4.00 3.92 Net investment income (loss) $ 0.01 (0.01) (0.02) (0.04) (0.03) (0.03) Net realized and unrealized gain (loss) from investment operations $ 0.23 (0.52) (0.66) (0.43) 0.51 0.11 Total income (loss) from investment operations $ 0.24 (0.53) (0.68) (0.47) 0.48 0.08 Less distributions: Distributions from net investment income $ (0.01) -- -- -- -- -- Distributions in excess of net investment income $ -- -- (0.01) (0.04) (0.02) -- Distributions from net realized gains $ -- -- -- -- -- -- Distributions in excess of net realized gains $ -- -- -- -- -- -- Total distributions $ (0.01) -- (0.01) (0.04) (0.02) -- Net asset value, end of period $ 2.96 2.73 3.26 3.95 4.46 4.00 Total Return % 8.70 (16.26) (17.32) (10.76) 12.02 2.04 Ratios/Supplemental Data Net assets, end of period (thousands) $ 25,413 25,560 34,921 42,035 73,945 65,517 Ratio of expenses to average net assets, before reimbursement or waiver % 2.11 2.37* 1.90 1.96 1.73 1.82 Ratio of expenses to average net assets, net of reimbursement or waiver % 2.11 2.37* 1.90 1.96 1.73 1.82 Ratio of net investment income (loss) to average net assets, before reimbursement or waiver % 0.49 (0.61)* (0.54) (0.78) (0.72) (0.83) Ratio of net investment income (loss) to average net assets, net of reimbursement or waiver % 0.49 (0.61)* (0.54) (0.78) (0.72) (0.83) Portfolio Turnover Rate % 29.44 5.68 28.78 18.76 44.30 44.22
* Annualized. (a) Six month period ended December 31, 1998. The Fund changed its fiscal year-end from June 30th to December 31st. (b) Fiscal year-end June 30th. [GRAPHIC] If you have any questions, please call 1-800-992-0180. Pilgrim Silver Fund 63 WHERE TO GO FOR MORE INFORMATION You'll find more information about the Pilgrim Funds in our: ANNUAL/SEMI-ANNUAL REPORTS Includes a discussion of recent market conditions and investment strategies that significantly affected performance, the financial statements and the auditor's reports (in annual report only). STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI contains more detailed information about the Pilgrim Funds. The SAI is legally part of this prospectus (it is incorporated by reference). A copy has been filed with the Securities and Exchange Commission (SEC). Please write or call for a free copy of the current Annual/Semi-Annual reports, the SAI or other Fund information, or to make shareholder inquiries: The Pilgrim Funds 40 North Central Avenue, Suite 1200 Phoenix, AZ 85004 1-800-992-0180 Or visit our website at www.pilgrimfunds.com. This information may also be reviewed or obtained from the SEC. In order to review the information in person, you will need to visit the SEC's Public Reference Room in Washington, D.C. or call 202-942-8090. Otherwise, you may obtain the information for a fee by contacting the SEC at: Securities and Exchange Commission Public Reference Section Washington, D.C. 20549-0102 or at the e-mail address: publicinfo@sec.gov Or obtain the information at no cost by visiting the SEC's Internet website at http://www.sec.gov. When contacting the SEC, you will want to refer to the Fund's SEC file number. The file numbers are as follows: Pilgrim Mayflower Trust 811-7978 Pilgrim Advisory Funds, Inc. 811-9040 Pilgrim Mutual Funds 811-7428 Pilgrim Global Corporate Leaders Fund 811-5113 Pilgrim International Fund 811-8172 Pilgrim Worldwide Emerging Markets Fund 811-1838 Pilgrim SmallCap Asia Growth Fund 811-7287 Pilgrim Troika Dialog Russia Fund 811-7587 Pilgrim Gold Fund 811-2881 Pilgrim Silver Fund 811-4111 INTLPROS073100-073100 GRAPHICS DESCRIPTION APPENDIX There are four icon sized graphics used throughout the prospectus as follows: 1. In the sections describing the Objective of the Funds, the graphic icon is that of a dart in the bullseye of a target. 2. In the sections describing the Investment Strategy of the Funds, the graphic icon is that of a compass pointing due north. 3. In the sections describing the Risks of the Funds, the graphic icon is that of an old fashioned scale tilting heavy on the left side. 4. In the sections describing the Performance history of the Funds, the graphic icon is that of a stack of US currency bills. 5. On the bottom footer of every odd numbered page (right hand page), the graphic icon is that of a telephone by the 800 number of the fund to call for information. [SAI INSERTS HERE] -----END PRIVACY-ENHANCED MESSAGE-----