N-30D 1 e-7903.txt ANNUAL REPORT FOR YEAR ENDING 10-31-01 Annual Report October 31, 2001 Classes A, B, C, and M International Equity Funds Pilgrim Worldwide Growth Pilgrim International Value Pilgrim International Pilgrim International Core Growth Pilgrim International SmallCap Growth Pilgrim Emerging Countries Pilgrim Global Communications Pilgrim Global Information Technology Pilgrim Asia-Pacific Equity Pilgrim European Equity Pilgrim Russia Precious Metals Fund Pilgrim Precious Metals [LOGO] ING PILGRIM TABLE OF CONTENTS -------------------------------------------------------------------------------- Letter to Shareholders ................................ 1 Portfolio Managers' Reports: International Equity Funds ....................... 2 Precious Metals Fund ............................. 24 Index Descriptions .................................... 26 Report of Independent Accountants ..................... 27 Statements of Assets and Liabilities .................. 28 Statements of Operations .............................. 33 Statements of Changes in Net Assets ................... 35 Financial Highlights .................................. 41 Notes to Financial Statements ......................... 53 Portfolios of Investments ............................. 71 Shareholder Meetings .................................. 104 Tax Information ....................................... 106 LETTER TO SHAREHOLDERS -------------------------------------------------------------------------------- Dear Shareholder: We are pleased to present the October 31, 2001 Annual Report for the International Pilgrim Funds. In February 2001, ING Pilgrim Group, Inc. and ING Pilgrim Investments, Inc. became ING Pilgrim Group, LLC and ING Pilgrim Investments, LLC, respectively. Our fund family now has many funds of varying types which may provide core investment choices for the serious investor. As our fund family has grown, we have taken steps to rationalize the reporting for similar funds. We have conformed all of our International Funds to an October 31 year end for financial reporting purposes. There are eleven International Equity Funds and one Precious Metals Fund included in this Annual Report. At ING Pilgrim, we are dedicated to providing core investments for the serious investor. We believe that the key to success is matching quality core investments to the individual needs of investors. Core investments are the foundation of every portfolio and the basis of other important investment decisions. ING Pilgrim prides itself on providing a family of core investments designed to help you reach your financial goals. Our goal is for every investor to have a successful investment experience.(SM) Sincerely, ING Pilgrim Group, LLC December 15, 2001 1 PILGRIM WORLDWIDE GROWTH FUND Portfolio Managers' Report -------------------------------------------------------------------------------- Portfolio Management Team: Mary Lisanti, Portfolio Manager; Jeffrey Bernstein, Portfolio Manager; Philip A. Schwartz, Portfolio Manager; Richard T. Saler, Portfolio Manager, ING Pilgrim Investments, LLC. Goal: The Pilgrim Worldwide Growth Fund (the "Fund") seeks to invest at least 65% of its assets in equity securities of issuers located in at least three countries, one of which may be the U.S. The Fund generally invests at least 75% of its assets in common and preferred stocks, warrants and convertible securities. The Fund may invest in countries with emerging securities markets when portfolio managers believe they present attractive opportunities. Investment Strategy: U.S. component: The Fund seeks to invest in equity securities of large U.S. companies the portfolio managers feel have above-average prospects for growth. The Fund considers a company to be large if its market capitalization corresponds to the upper 90% of the S&P 500 Index. The portfolio managers emphasize a growth approach by searching for companies that they believe are managing change advantageously and may be poised to exceed growth expectations. The portfolio managers focus on both a "bottom-up" analysis that evaluates the financial condition and competitiveness of individual companies and a "top-down" thematic approach and sell discipline. The portfolio managers seek to identify themes that reflect the major social, economic and technological trends that they believe are likely to shape the future of business and commerce over the next three to five years. They also seek to provide a framework for identifying the industries and companies they believe may benefit most. International component: The portfolio managers primarily use "bottom-up" fundamental analysis to identify stocks, which they believe offer good value relative to their peers in the same industry, sector or region. They also use "top-down" analysis to identify important themes or issues which may affect the investment environment in regions or sectors, and to estimate market risks. The portfolio managers focus on various factors, including valuation, catalysts to stock price appreciation, quality of management and financial measures. Market Overview: U.S. Market: U.S. equity markets were in the midst of one of the deepest and longest bear markets before the September 11th attacks, and the economy was teetering on the edge of recession. Industrial capacity utilization hit its lowest level since the 1980-82 recession, and unemployment rose above 5% for the first time since 1997. However, in the aftermath of the tragedy, markets were able to steady themselves and then recover, as swift action was taken on both the fiscal and monetary policy fronts. The Federal Reserve -- already pursuing a more accommodative strategy -- continued to increase liquidity throughout 2001 with ten rate cuts in ten months, totaling 450 basis points. While the signs of recovery have been more encouraging over the past few weeks, the past year has been one of the most difficult on record. The NASDAQ Composite fell 49.84% in the latest twelve month period, and fell 72.98% from peak to trough, which was reached in late September. The Dow Jones Industrial Average fell 17.28%, while the S&P 500 Index tumbled 24.90%. Small and mid cap stocks performed somewhat better, although the Russell 2000 Index still declined 12.70% and the S&P Midcap Index dropped 12.44% over the past year. Foreign Markets: The fiscal year ended October 31, 2001 proved one of the more difficult in memory, with only two counter-trend rallies offering relief. The deteriorating global economy darkened profit forecasts all year long, and then, any hope of quick recovery was dashed on September 11th. Key this year has been whether Federal Reserve rate cuts, as aggressive as they have been, can quickly restore economic confidence. The effects of the bursting technology bubble were felt worldwide, and the MSCI EAFE Index declined 24.7%. European economies suffered as well, where the MSCI Europe Index fell by 24.2%. The Euro's 4.7% gain versus the US Dollar reflects an improving opinion on the merits of the currency, and a relatively tighter monetary policy. Earnings visibility, however, remains weak given the business environment and the after-effects of the telecom spending spree. In Japan, hopes for reform were piqued earlier this year upon Prime Minister Koizumi's arrival. With strong popular support and promises of a final write-down of bad loans, Koizumi spurred a Japanese market rally that proved short-lived. The MSCI Japan Index fell 33.1% for the year, as a harder economic reality emerged. Progress in structural reform advanced with puzzling difficulty. Investors then grew concerned about Japan's ability to reform without first experiencing major financial stress. Outperforming sectors internationally were in the high earnings visibility areas of consumer non-durables, whereas, IT services, technology hardware and telecom sectors suffered the most. Performance: For the fiscal year ended October 31, 2001 the Fund's Class A shares, excluding sales charges, declined 38.80%. The Morgan Stanley Capital International World Index fell 25.16% for the same period. According to Morningstar, the average return for the global fund category was -27.17%. U.S. Market: At this point last year, the domestic portion of the Fund was substantially more defensive with significant positions in healthcare, consumer staples, and select utility stocks. However, as technology stocks pulled back to perceived bargain levels, we became more aggressive and added to companies with management teams who were experienced in managing through economic downturns and were potentially positioned to benefit from an economic recovery. Growth stock investing has been clearly out of favor over the past twelve months, and the Fund's strategy has suffered as a result. However, valuations are compelling for growth stocks, and we have thus increased our weighting in technology, healthcare, and stocks that are sensitive to the early stages of an economic recovery. Foreign Markets: For most of the fiscal year the Fund maintained relatively large positions in high visibility companies such as Nestle, Diageo and Givaudan. Large financial company positions such as Fortis and Barclays acted defensively as well. The Fund maintained underweight positions in capital equipment, technology and telecom sectors, and benefited by avoiding economically sensitive stocks. Later in the year, defensive stocks were reduced since they had reached excessively high valuations. The Fund then selectively added to positions in technology and telecom as valuations became attractive. The focus has been very much on companies with strong balance sheets and cash generation, regardless of sector. As markets placed an increasingly high premium on financial strength, the Fund was able to avoid some notable disappointments. 2 Portfolio Managers' Report PILGRIM WORLDWIDE GROWTH FUND -------------------------------------------------------------------------------- Market Outlook: U.S. Market: While the current economic news is bleak, markets have a history of anticipating a recovery. Historically, the market has bottomed six to nine months before the economy turns. The best opportunities to invest in stocks often come when visibility is poor, because prices are reflective of the current environment rather than future opportunities. We remained focused on identifying the "best of the best." These are the companies best positioned to capitalize on the changes and dislocations that every cycle produces. We have focused on businesses with strong balance sheets and experienced management teams who are strengthening their companies' business models and gaining market share throughout the downturn. Foreign Markets: The recession environment became well priced into expectations after September 11th. The debate today centers around the shape, magnitude and timing of recovery, or whether markets face a lengthy Japan-style adjustment. The managers believe that, while much of this is unknowable, opportunities exist in financially sound companies that stand to benefit from recovery. Probabilities suggest the amount of economic stimulus in the system should spur an upturn, and that the portfolio should become more geared in that direction. Strict valuation discipline will be maintained in order to limit downside risk.
4/19/93 10/93 10/94 10/95 10/96 10/97 10/98 10/99 10/00 10/31/01 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Pilgrim Worldwide Growth Fund Class A With Sales Charge $ 9,425 $10,732 $11,689 $12,471 $14,296 $17,421 $19,728 $32,483 $37,336 $22,852 Pilgrim Worldwide Growth Fund Class A Without Sales Charge $10,000 $11,384 $12,400 $13,229 $15,165 $18,480 $20,927 $34,458 $39,606 $24,241 MSCI World Index $10,000 $10,970 $12,102 $12,964 $14,987 $17,346 $19,560 $24,725 $24,935 $18,662
Average Annual Total Returns for the Periods Ended October 31, 2001 ----------------------------------------------------- Since Inception Since Inception of Class A and C of Class B 1 Year 5 Year 4/19/93 5/31/95 ------ ------ ------- ------- Including Sales Charge: Class A (1) -42.32% 8.54% 10.16% -- Class B (2) -42.12% 8.88% -- 10.46% Class C (3) -39.78% 9.14% 10.23% -- Excluding Sales Charge: Class A -38.80% 9.83% 10.93% -- Class B -39.19% 9.16% -- 10.46% Class C -39.20% 9.14% 10.23% -- MSCI World Index -25.16% 4.48% 7.62%(4) 6.40%(5) Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim Worldwide Growth Fund against the MSCI World Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This report contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio managers, only through the end of the period as stated on the cover. The portfolio managers' views are subject to change at any time based on market and other conditions. Fund holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and 5 year returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. (4) Since inception performance for the index is shown from 05/01/93. (5) Since inception performance for the index is shown from 06/01/95. Principal Risk Factor(s): Price volatility and other risks that accompany an investment in growth-oriented foreign equities. Sensitivity to currency exchange rates, international, political and economic conditions and other risks that affect foreign securities. The Fund may also invest in small and medium sized companies, which may be more susceptible to price volatility than larger companies. Risks of foreign investing are generally intensified for investments in emerging markets. See accompanying index descriptions on page 26. 3 PILGRIM INTERNATIONAL VALUE FUND Portfolio Managers' Report -------------------------------------------------------------------------------- Portfolio Management Team: Brandes' LargeCap Investment Committee, Brandes Investment Partners, L.P. Goal: The International Value Fund (the "Fund") seeks long-term capital appreciation by investing primarily in non-U.S. companies with market capitalizations greater than $1 billion. The Fund may hold up to 25% of its assets in companies with smaller market capitalizations. Market Overview: Throughout much of the twelve month period ended October 31, 2001, returns for non-U.S. stock markets were dragged down by a variety of concerns. During the period, the MSCI EAFE Index fell 24.7%. Emerging markets had similar losses, falling 25.4%. International markets were consistently rattled by worries over economic sluggishness and prospects for declining corporate profits. Tumbling technology stocks also contributed to losses and weakened sentiment. Additional concerns, including the stability of the banking system in Japan, also weighed on market participants' resolve. Reflecting the difficult environment in Japan, the Nikkei Index sunk to a sixteen-year low in the first quarter of 2001. As central banks around the world cut short-term interest rates in the second quarter, markets responded with tepid advances. However, those gains were not sustained. Fresh signs of continued deceleration in global economic growth and eroding corporate profits surfaced in July and August, dragging down share prices further. In September, stocks fell sharply in the wake of terrorist attacks in the United States. The terrorist attacks appeared to exacerbate market participants' malaise and caution. Amid a crisis of confidence, emerging markets share prices slumped during the third quarter. Concerns over Argentina's financial woes also weighed on returns in Latin America and across many emerging markets, as well. Despite the difficult environment, international stocks did share in a modest rally following a sharp sell-off immediately following the terrorist attacks. Between September 11th and October 31st, performance for the MSCI EMF Index was essentially flat, while the MSCI EAFE Index gained 1.8%. Performance: For the fiscal year ended October 31, 2001, the Fund's Class A shares, excluding sales charges, fell 15.89% versus a 24.68% decline for the MSCI EAFE Index. Portfolio Specifics: The combination of negative returns among diversified telecom services companies and a significant weighting in this industry proved to be the greatest drag on the Fund's overall performance in the period. Examples of underperforming telecom stocks included British Telecom (United Kingdom; 1.4% portfolio weighting), NTT Corp. (Japan; 1.4%), and Deutsche Telekom (Germany; 1.0%). Similarly, slumping returns for holdings in Japan and significant exposure to this country also weighed on results. Weak returns for holdings in Brazil and France also contributed to the decline. While the Fund fell, it showed greater resilience than the MSCI EAFE Index. Contributing to better-than-benchmark performance were solid gains among tobacco holdings such as British American Tobacco (United Kingdom; 3.2% portfolio weighting) and Altadis (Spain; 1.9%). The complexion of the Fund did not change significantly during the period. With respect to countries, it retains its greatest exposure to the United Kingdom and Japan. It maintains its largest industry exposure in diversified telecom services and banks. During the period, sales of select holdings whose share prices had climbed to levels consistent with our estimation of their underlying business values reduced our exposure in the United Kingdom. Depreciation also lessened our U.K. weighting. Among the U.K. positions we sold were Safeway (food & drug retailing), Royal & Sun Alliance (insurance), Reckitt Benckiser (household products), and Cadbury Schweppes (food products). Reflecting our conviction in the Fund's diversified telecom services holdings, we took advantage of what we perceived as short-term price declines to add to a number of existing positions such as Deutsche Telekom and Telecom Italia (Italy; 1.1% of the portfolio). We also made select new purchases such as Zurich Financial Services (Switzerland -- diversified financials; 3.2%) and Repsol (Spain -- oil & gas; 2.3%). Our company-by-company analysis reinforced the promise of existing holdings in the banking industry. During the period, we purchased additional shares of banking holdings such as Bayerische Hypo Vereinsbank (Germany; 1.0%), Banco Bilbao Viz Argentaria (Spain; 2.1%), and Overseas Chinese Banking Corp. (Singapore; 1.5%). Market Outlook: In spite of share price declines during the period, we believe the Fund remains well positioned for future gains. We acknowledge problems with a number of telecom companies, but believe market participants have jumped to generalizations regarding the industry and, in the process, have dismissed attractive telecom candidates. We continue to hold what we believe to be select telecom businesses with strong fundamentals and long-term appreciation potential. Amid the emotionally charged environment surrounding international equity markets following the terrorist attacks in the United States, we remain focused on the objective, rational assessment of individual companies. We retain strict adherence to our value investment disciplines and maintain a long-term perspective. We continue to purchase and hold what we believe to be quality businesses trading at attractive prices. In our opinion, the fundamental strengths of these businesses will be recognized in the broader market over the long term, potentially rewarding patient investors with favorable results. 4 Portfolio Managers' Report PILGRIM INTERNATIONAL VALUE FUND --------------------------------------------------------------------------------
3/6/95 10/95 10/96 10/97 10/98 10/99 10/00 10/31/01 ------- ------- ------- ------- ------- ------- ------- ------- Pilgrim International Value Fund Class A With Sales Charge $ 9,425 $ 9,993 $11,216 $14,000 $15,381 $20,388 $24,171 $20,331 Pilgrim International Value Fund Class A Without Sales Charge $10,000 $10,600 $11,897 $14,851 $16,316 $21,627 $25,640 $21,566 MSCI EAFE Index $10,000 $10,870 $12,044 $12,636 $13,894 $17,141 $16,684 $12,567
Average Annual Total Returns for the Periods Ended October 31, 2001 ----------------------------------------------------- Since Inception Since Inception of Class A and C of Class B 1 Year 5 Year 03/06/95 04/18/97 ------ ------ -------- -------- Including Sales Charge: Class A (1) -20.74% 11.30% 11.24% -- Class B (2) -20.17% -- -- 9.55% Class C (3) -17.25% 11.85% 11.49% -- Excluding Sales Charge: Class A -15.89% 12.63% 12.23% -- Class B -16.48% -- -- 9.87% Class C -16.52% 11.85% 11.49% -- MSCI EAFE Index -24.68% 0.85% 3.49%(4) 0.57%(5) Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim International Value Fund against the MSCI EAFE Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This report contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio managers, only through the end of the period as stated on the cover. The portfolio managers' views are subject to change at any time based on market and other conditions. Fund holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. (4) Since inception performance for the index is shown from 03/01/95. (5) Since inception performance for the index is shown from 05/01/97. Principal Risk Factor(s): In exchange for higher growth potential, investing in stocks of smaller companies may entail greater price volatility than those of larger companies. International investing does pose special risks including currency fluctuation, economic and political risks not found in investments that are solely domestic. The risks of foreign investing are generally intensified for investing in emerging markets. Investing in funds that are concentrated in a smaller number of holdings poses greater risk than those funds with a larger number of holdings because each investment has a greater effect on the Fund's performance. See accompanying index descriptions on page 26. 5 PILGRIM INTERNATIONAL FUND Portfolio Managers' Report -------------------------------------------------------------------------------- Portfolio Management Team: Philip A. Schwartz, C.F.A., Portfolio Manager; Richard T. Saler, Portfolio Manager, ING Pilgrim Investments, LLC. Goal: The Pilgrim International Fund ( the "Fund") seeks to invest at least 65% of its assets in equity securities of issuers located in countries outside the U.S. The Fund generally invests at least 75% of its 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 portfolio managers believe they present attractive investment opportunities. Investment Strategy: The portfolio managers primarily use "bottom-up" fundamental analysis to identify stocks, which they believe offer good value relative to their peers in the same industry, sector or region. They also use "top-down" analysis to identify important themes or issues, which may affect the investment environment in regions or sectors, and to estimate regional market risks. The portfolio managers focus on various factors, including valuation of the companies, catalysts to stock price appreciation, quality of management and financial measures. Market Overview: The fiscal year ended October 31, 2001, proved one of the more difficult in memory, with only two counter-trend rallies offering relief. The deteriorating global economy darkened profit forecasts all year long, and then, any hope of quick recovery was dashed on September 11th. Key this year has been whether Federal Reserve rate cuts, as aggressive as they have been, can quickly restore economic confidence. The effects of the bursting technology bubble were felt worldwide, and the MSCI EAFE Index declined 24.7%. European economies suffered as well, where the MSCI Europe Index fell by 24.2%. The Euro's 4.7% gain versus the US Dollar reflects an improving opinion on the merits of the currency, and a relatively tighter monetary policy. Earnings visibility, however, remains weak given the business environment and the after-effects of the telecom spending spree. In Japan, hopes for reform were piqued earlier this year upon Prime Minister Koizumi's arrival. With strong popular support and promises of a final write-down of bad loans, Koizumi spurred a Japanese market rally that proved short-lived. The MSCI Japan Index fell 33.1% for the year, as a harder economic reality emerged. Progress in structural reform advanced with puzzling difficulty. Investors then grew concerned about Japan's ability to reform without first experiencing major financial stress. Outperforming sectors internationally were in the high earnings visibility areas of consumer non-durables, whereas, IT services, technology hardware and telecom sectors suffered the most. Performance: For the fiscal year ended October 31, 2001, the Fund's class A shares, excluding sales charges, provided a total return of -21.38% versus a decline in the MSCI EAFE Index of 24.68% for the same period. Portfolio Strategy: For most of the fiscal year the Fund maintained relatively large positions in high visibility companies such as Nestle, Diageo and Givaudan. Large insurance company positions such as Allianz and Swiss Re acted defensively as well. The Fund maintained underweight positions in capital equipment, technology and telecom sectors, and benefited by avoiding economically sensitive stocks. Later in the year, defensive stocks were reduced since they had reached excessively high valuations. The Fund then selectively added to positions in technology and telecom as valuations became attractive. The focus has been very much on companies with strong balance sheets and cash generation, regardless of sector. As markets placed an increasingly high premium on financial strength, the Fund was able to avoid some notable disappointments. Market Outlook: The recession environment became well priced into expectations after September 11th. The debate today centers around the shape, magnitude and timing of recovery, or whether markets face a lengthy Japan-style adjustment. The managers believe that while much of this is unknowable, opportunities exist in financially sound companies that stand to benefit from recovery. Probabilities suggest the amount of economic stimulus in the system should spur an upturn, and that the portfolio should become more geared in that direction. Strict valuation discipline will be maintained in order to limit downside risk. 6 Portfolio Managers' Report PILGRIM INTERNATIONAL FUND --------------------------------------------------------------------------------
1/3/94 10/94 10/95 10/96 10/97 10/98 10/99 10/00 10/31/01 ------- ------- ------- ------- ------- ------- ------- ------- ------- Pilgrim International Fund Class A With Sales Charge $ 9,425 $10,603 $10,113 $11,546 $12,395 $13,495 $17,410 $19,242 $15,128 Pilgrim International Fund Class A Without Sales Charge $10,000 $11,250 $10,730 $12,251 $13,151 $14,318 $18,471 $20,416 $16,050 MSCI EAFE Index $10,000 $11,276 $11,268 $12,485 $13,100 $14,403 $17,769 $17,295 $13,027 Average Annual Total Returns for the Periods Ended October 31, 2001 ---------------------------------------------------------------------- Since Inception Since Inception Since Inception of Class A of Class B of Class C 1 Year 5 Year 01/03/94 08/22/00 09/15/00 ------ ------ -------- -------- -------- Including Sales Charge: Class A (1) -25.88% 4.30% 5.43% -- -- Class B (2) -25.33% -- -- -27.31% -- Class C (3) -22.70% -- -- -- -21.81% Excluding Sales Charge: Class A -21.38% 5.55% 6.23% -- -- Class B -21.74% -- -- -24.99% -- Class C -21.98% -- -- -- -21.81% MSCI EAFE Index -24.68% 0.85% 3.43%(4) -26.35%(5) -26.35%(5)
Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim International Fund against the MSCI EAFE Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This report contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio managers, only through the end of the period as stated on the cover. The portfolio managers' views are subject to change at any time based on market and other conditions. Fund holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 4%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. (4) Since inception performance for the index is shown from 01/01/94. (5) Since inception performance for the index is shown from 09/01/00. Effective November 1, 2001, Class A shares liquidated within 30 days of purchase are subject to a 2% redemption fee. Principal Risk Factor(s): In exchange for higher growth potential, investing in stocks of smaller companies may entail greater price volatility than those of larger companies. Price volatility and other risks accompany an investment in growth-oriented foreign equities. Currency exchange rates, international, political and economic conditions and other risks affect foreign securities. The risks of foreign investing are generally intensified for investing in emerging markets. See accompanying index descriptions on page 26. 7 PILGRIM INTERNATIONAL CORE GROWTH FUND Portfolio Managers' Report -------------------------------------------------------------------------------- Portfolio Management Team: Philip A. Schwartz, C.F.A., Portfolio Manager; Richard T. Saler, Portfolio Manager, ING Pilgrim Investments, LLC. Goal: The Pilgrim International Core Growth Fund (the "Fund") seeks to invest at least 65% of its assets in equity securities of issuers located in countries outside the U.S. The Fund generally invests at least 75% of its 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 portfolio managers believe they present attractive investment opportunities. Investment Strategy: The portfolio managers primarily use "bottom-up" fundamental analysis to identify stocks which they believe will have earnings growth faster than that of the markets in which they are based, for at least 80% of the Fund's stock positions. They also use "top-down" analysis to identify important themes or issues which may affect the investment environment in the regions or sectors, and to estimate regional market risks. The portfolio managers focus on various factors, including valuation of the companies, catalysts to stock price appreciation, quality of management and financial measures. Market Overview: The fiscal year ended October 31, 2001, proved one of the more difficult in memory, with only two counter-trend rallies offering relief. The deteriorating global economy darkened profit forecasts all year long, and then, any hope of quick recovery was dashed on September 11th. Key this year has been whether Federal Reserve rate cuts, as aggressive as they have been, can quickly restore economic confidence. The effects of the bursting technology bubble were felt worldwide, and the MSCI EAFE Index declined 24.7%. European economies suffered as well, where the MSCI Europe Index fell by 24.2%. The Euro's 4.7% gain versus the US Dollar reflects an improving opinion on the merits of the currency, and a relatively tighter monetary policy. Earnings visibility, however, remains weak given the business environment and the after-effects of the telecom spending spree. In Japan, hopes for reform were piqued earlier this year upon Prime Minister Koizumi's arrival. With strong popular support and promises of a final write-down of bad loans, Koizumi spurred a Japanese market rally that proved short-lived. The MSCI Japan Index fell 33.1% for the year, as a harder economic reality emerged. Progress in structural reform advanced with puzzling difficulty. Investors then grew concerned about Japan's ability to reform without first experiencing major financial stress. Outperforming sectors internationally were in the high earnings visibility areas of consumer non-durables, whereas, IT services, technology hardware and telecom sectors suffered the most. Performance: For the fiscal year ended October 31, 2001, the Fund's Class A shares, excluding sales charges, provided a total return of -26.56% versus a decline in the MSCI EAFE Index of 24.68%. Portfolio Strategy: For most of the fiscal year, the Fund maintained relatively large positions in high visibility companies such as Nestle, Diageo and Givaudan. Large financial company positions such as Allianz and Barclays acted defensively as well. The Fund maintained underweight positions in capital equipment, technology and telecom sectors, and benefited by avoiding economically sensitive stocks. Later in the year, defensive stocks were reduced since they had reached excessively high valuations. The Fund then selectively added to positions in technology and telecom as valuations became attractive. The focus has been very much on companies with strong balance sheets and cash generation, regardless of sector. As markets placed an increasingly high premium on financial strength, the Fund was able to avoid some notable disappointments. Market Outlook: The recession environment became well priced into expectations after September 11th. The debate today centers around the shape, magnitude and timing of recovery, or whether markets face a lengthy Japan-style adjustment. The managers believe that, while much of this is unknowable, opportunities exist in financially sound companies that stand to benefit from recovery. Probabilities suggest the amount of economic stimulus in the system should spur an upturn, and that the portfolio should become more geared in that direction. Strict valuation discipline will be maintained in order to limit downside risk. 8 PILGRIM INTERNATIONAL Portfolio Managers' Report CORE GROWTH FUND --------------------------------------------------------------------------------
2/28/97 10/97 10/98 10/99 10/00 10/31/01 ------- ------- ------- ------- ------- ------- Pilgrim International Core Growth Fund Class A With Sales Charge $ 9,427 $11,139 $12,060 $16,598 $17,181 $12,619 Pilgrim International Core Growth Fund Class A Without Sales Charge $10,000 $11,816 $12,793 $17,607 $18,225 $13,386 MSCI EAFE Index $10,000 $10,412 $11,448 $14,124 $13,747 $10,354
Average Annual Total Returns for the Periods Ended October 31, 2001 -------------------------------------- Since Inception 1 Year 02/28/97 ------ -------- Including Sales Charge: Class A (1) -30.79% 5.11% Class B (2) -30.54% 5.39% Class C (3) -27.83% 5.63% Excluding Sales Charge: Class A -26.56% 6.44% Class B -27.14% 5.74% Class C -27.15% 5.63% MSCI EAFE Index -24.68% 0.75%(4) Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim International Core Growth Fund against the MSCI EAFE Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This report contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio managers, only through the end of the period as stated on the cover. The portfolio managers' views are subject to change at any time based on market and other conditions. Fund holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for 1 year return. (4) Since inception performance for the index is shown from 03/01/97. Effective November 1, 2001, Class A shares liquidated within 30 days of purchase are subject to a 2% redemption fee. Principal Risk Factor(s): Price volatility and other risks that accompany an investment in growth-oriented foreign equities. Currency exchange rates, international, political and economic conditions and other risks affect foreign securities. Risks of foreign investing are generally intensified for investments in emerging markets. See accompanying index descriptions on page 26. 9 PILGRIM INTERNATIONAL SMALLCAP GROWTH FUND Portfolio Managers' Report -------------------------------------------------------------------------------- Portfolio Management Team: Randall S. Kahn, Portfolio Manager; Loretta J. Morris, Portfolio Manager; Catherine Somhegyi Nicholas, Chief Investment Officer, Nicholas-Applegate Capital Management. Goal: The International SmallCap Growth Fund (the "Fund") seeks to maximize long-term capital appreciation through investments in small-capitalization, non-US securities. Market Overview: In late 2000 and through October 31, 2001, the international stock markets were marked by volatility amid slowing economic growth worldwide. The events of September 11th only served to further heighten investor worry and cloud the outlook for recovery. After ticking up slightly in January, stocks prices in developed non-US markets tumbled in February and March. European bourses led the market downturn. Negative news from many of the region's technology and telecommunications companies weighed on investor sentiment, as did the rapid deceleration in US GDP growth. In Japan, the MSCI Japan Index fell amid political uncertainty over the fate of Prime Minister Mori and concerns about the state of the domestic and US economies. The second quarter saw numerous interest rate cuts by central bankers worldwide attempting to rekindle sluggish economic growth. However, two crucial markets did not follow suit. Europe's small cap environment was not nearly as favorable, as the European Central Bank lowered rates just 25 basis points in the second quarter. Meanwhile, the euro continued to weaken, declining 3.2% in the second quarter. In Japan's zero-interest rate environment, monetary easing was not an option. However, investors were encouraged by the election of a charismatic leader who promised to reform the nation's financial system. As a result, the yen strengthened slightly during the quarter. During the third quarter, a period marked by economic malaise and the shock of terrorism in the United States, international small capitalization stocks were particularly affected by bearish sentiment. Even before the September 11th terrorist attacks, the US Federal Reserve Board was in the process of boosting liquidity throughout the world. In August, rates fell 25 basis points for a total of 300 basis points year-to-date. However, the global economy was not responding to this stimulus. In response to terrorist attacks, the U.S. Federal Reserve Board reduced short-term interest rates by 50 basis points when the market re-opened on September 17, 2001. It did so again on October 2, 2001 in an effort to restore confidence in global markets. However, small cap stocks in industries such as airlines, autos, luxury goods and other economic cyclical companies faced daunting challenges. Performance: For the fiscal year ended October 31, 2001, the Fund's Class A Shares, excluding sales charges, provided a total return of -34.30% compared to the Salomon EPAC EMI (Europe, Pacific Australasia Composite Extended Market Index), which declined 19.16% during the same period. Portfolio Specifics: The reporting period saw continued weakness in the global economy, which in turn pressured stock prices. During the reporting period, stock selection and an overweight position in technology stocks was the largest factor in the portfolio's underperformance. As a result, the portfolio management team sharply reduced exposure to this sector. Holdings in technology issues fell from 33.98% on October 31, 2000, to 12.54% on October 31, 2001. Instead, assets were shifted to energy, commercial/industrial, producers/manufacturing and healthcare companies as we identified more attractive opportunities in these areas based on bottom-up fundamental research. Energy holdings were then reduced later in the period amid declining demand and unattractive valuations. As of October 31, 2001, the portfolio was significantly overweight the energy and healthcare sectors and underweight financial services stocks. On a country basis, stock selection in the UK, Japan and Canada (which is not included in the benchmark index) negatively influenced returns. The decline in UK stocks came despite solid economic growth in that country. Japanese equities came under pressure throughout the period as its economy sank into recession and its banking and bad-debt woes worsened. At period's end, the portfolio was underweight stocks in Japan and the UK and overweight stocks in Denmark and Norway. Market Outlook: Companies with strong balance sheets and the ability to generate cash flow are the most likely to survive in the current difficult business environment. Defensive sectors such as food and pharmaceuticals are likely to perform best, since these companies make things that consumers must buy regardless of the economy. In addition, small cap companies will likely be acquired as their stock prices become increasingly attractive to larger companies. However, the asset class is likely to continue benefiting from a stronger local currency in relation to the dollar as well as continued efforts by central banks to boost global liquidity. International small-cap stocks will likely experience volatility given the environment. We counsel investors to remain patient and disciplined in the weeks and months ahead. We believe investors ultimately should be rewarded for staying the course. Finally, we thank you for your patience and understanding during this difficult period. 10 PILGRIM INTERNATIONAL Portfolio Managers' Report SMALLCAP GROWTH FUND --------------------------------------------------------------------------------
8/31/94 10/94 10/95 10/96 10/97 10/98 10/99 10/00 10/31/01 ------- ------- ------- ------- ------- ------- ------- ------- ------- Pilgrim International SmallCap Growth Fund Class A With Sales Charge $ 9,427 $ 9,374 $ 9,064 $10,556 $12,882 $14,898 $26,255 $33,506 $22,020 Pilgrim International SmallCap Growth Fund Class A Without Sales Charge $10,000 $ 9,944 $ 9,615 $11,198 $13,666 $15,803 $27,851 $35,543 $23,359 Salomon EPAC EMI $10,000 $ 9,882 $ 9,398 $10,529 $10,048 $10,161 $11,994 $11,734 $ 9,485
Average Annual Total Returns for the Periods Ended October 31, 2001 ------------------------------------------------------ Since Inception Since Inception of Class B of Class A & C 1 Year 5 Year 5/31/95 08/31/94 ------ ------ ------- -------- Including Sales Charge: Class A (1) -38.08% 14.49% -- 11.65% Class B (2) -37.62% 14.97% 14.43% -- Class C (3) -35.23% 15.15% -- 11.78% Excluding Sales Charge: Class A -34.30% 15.85% -- 12.57% Class B -34.59% 15.20% 14.43% -- Class C -34.62% 15.15% -- 11.78% Salomon EPAC EM Index -19.16% -2.07% 0.09%(4) -0.73%(5) Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim International SmallCap Growth Fund against the Salomon EPAC EM Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This report contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio managers, only through the end of the period as stated on the cover. The portfolio managers' views are subject to change at any time based on market and other conditions. Fund holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and 5 year returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. (4) Since inception performance for the index is shown from 06/01/95. (5) Since inception performance for the index is shown from 09/01/94. Principal Risk Factor(s): In exchange for higher growth potential, investing in stocks of smaller companies may entail greater price volatility than investing in larger companies. Price volatility and other risks accompany an investment in growth-oriented foreign equities. Currency exchange rates, international, political and economic conditions and other risks affect foreign securities. Risks of foreign investing are generally intensified for investments in emerging markets. See accompanying index descriptions on page 26. 11 PILGRIM EMERGING COUNTRIES FUND Portfolio Managers' Report -------------------------------------------------------------------------------- Portfolio Management Team: Richard Saler, Senior VP; Philip Schwartz, Senior VP; Jan Wim Derks, VP; Eric Anderson, VP; Bratin Sanyal, VP; ING Pilgrim Investments, LLC. Goal: The Pilgrim Emerging Countries Fund (the "Fund") seeks to maximize long-term capital appreciation through investments in Emerging Markets securities. Investment Strategy: The Fund invests at least 65% of its net assets in securities of issuers located in at least three countries with emerging securities markets. Countries with emerging securities markets are those countries which generally are considered to be emerging market countries by the international investment community. The Fund may invest up to 35% of its total assets in securities of US and other developed market issuers, including investment-grade debt securities of US issuers. Under normal conditions, the Fund invests at least 75% of its total assets in common and preferred stocks, warrants and convertible securities. Market Overview: During the reporting period emerging markets fell sharply. Using MSCI data, Latin America decreased by 22.6%, Asia by 23.3%, Europe and Middle East by 37.4% and South Africa by 16.3%. Over the same period the world's developed markets fell by 26.4%. In line with developed markets, emerging markets suffered from a poor sentiment for equities in general. Already since the middle of 2000 the equity markets started to discount a slowdown in global economic growth and disappointing earnings numbers. Because emerging markets are seen as a leveraged play on global growth, emerging markets were early in pricing in a serious slowdown. As a result, emerging markets underperformed developed markets in calendar year 2000. Since then, the global slowdown has materialized, and the markets are waiting for the first signs of a pick up in growth. Knowing that emerging markets will also be early in pricing in higher growth, emerging markets have outperformed developed markets in 2001. After investors started to be more risk averse following the September 11th attacks, emerging markets equities underperformed developed markets in September 2001, but partially regained lost ground in October 2001. Argentina and Turkey remained the main problem spots in emerging markets. Both countries are suffering from a financial and economic crisis and are heavily dependent on external financing. Over the period, Argentina's stock market was down 51.0% and Turkey's market by 66.5%. Amongst the better performing countries during the reporting period were South Korea (+0.4%), Poland (+0.1%) and South Africa (-3.5%). Performance: For the fiscal year ended October 31, 2001, the Fund's Class A shares, excluding sales charges, provided a total return of -27.31% compared to the MSCI Emerging Markets Free Index, which returned -23.46% for the same period. Portfolio Specifics: In the second half of the review period we reduced our overweight in Latin America initially to a neutral position and later on to an underweight. The situation in Argentina will probably continue to contaminate the rest of the South American region, including heavyweight Brazil. Within Latin America we are neutral Brazil, slightly underweight Mexico and underweight smaller markets like Argentina, Chile and Peru. In Asia we gradually upped the position to a slight overweight. Valuations have become very attractive and the region will be the first beneficiary from a recovery of global growth. We are overweight India, Korea and Thailand, neutral on China and Malaysia and underweight Taiwan, Philippines and Indonesia. We kept our overweight in the EMEA (Europe, Middle East, Africa) region all along. We remain overweight Eastern Europe and Russia. South Africa was reduced from an overweight to a slight underweight. In terms of sectors we are overweight TMT (technology, media, telecommunications), neutral on energy and underweight financials, industrials and food. Market Outlook: We think the negative economic outlook is already fully incorporated in emerging markets stock prices. Global emerging market's valuation are near historical lows with P/E's at single digits for 2001 and 2002 versus P/E multiples of approximately 20 in developed markets. Therefore, we remain constructive with regard to the medium to longer term outlook for emerging markets. We believe a recovery of global growth in the second half of 2002 will very likely be anticipated by a rally in emerging markets in early 2002. 12 Portfolio Managers' Report PILGRIM EMERGING COUNTRIES FUND --------------------------------------------------------------------------------
11/28/94 10/95 10/96 10/97 10/98 10/99 10/00 10/31/01 ------- ------- ------- ------- ------- ------- ------- ------- Pilgrim Emerging Countries Fund Class A With Sales Charge $ 9,425 $ 9,617 $11,641 $13,267 $ 9,825 $13,637 $13,562 $ 9,866 Pilgrim Emerging Countries Fund Class A Without Sales Charge $10,000 $10,202 $12,348 $14,074 $10,422 $14,466 $14,387 $10,466 MSCI EMF Index $10,000 $ 8,501 $ 9,052 $ 8,284 $ 5,717 $ 8,268 $ 7,540 $ 5,771
Average Annual Total Returns for the Periods Ended October 31, 2001 ----------------------------------------------------- Since Inception Since Inception of Class A and C of Class B 1 Year 5 Year 11/28/94 05/31/95 ------ ------ -------- -------- Including Sales Charge: Class A (1) -31.45% -4.40% -0.19% -- Class B (2) -31.34% -4.10% -- 0.16% Class C (3) -28.49% -3.74% -0.17% -- Excluding Sales Charge: Class A -27.31% -3.25% 0.66% -- Class B -27.79% -3.73% -- 0.16% Class C -27.83% -3.74% -0.17% -- MSCI EMF Index -23.46% -8.61% -7.64%(4) -6.48%(5) Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim Emerging Countries Fund against the MSCI EMF Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This report contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio managers, only through the end of the period as stated on the cover. The portfolio managers' views are subject to change at any time based on market and other conditions. Fund holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and 5 year returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. (4) Since inception performance for the index is shown from 12/01/94. (5) Since inception performance for the index is shown from 06/01/95. Principal Risk Factor(s): Sensitivity to currency exchange rates, international, political and economic conditions and other risks that affect foreign securities. Risks of foreign investing are generally intensified for investments in emerging markets. See accompanying index descriptions on page 26. 13 PILGRIM GLOBAL COMMUNICATIONS FUND Portfolio Manager's Report -------------------------------------------------------------------------------- Portfolio Management: Daniel Hayes, Portfolio Manager, ING Investment Management Advisors B.V. Goal: The Pilgrim Global Communications Fund (the "Fund") seeks long-term capital appreciation by investing in equity securities of communications companies located throughout the world, including the United States. Market Overview: The months leading into the final calendar quarter of 2000 were extremely challenging for technology investors. There were a number of issues that had conspired to crack sentiment towards the sector. At a macro level, a slowing US economy has been evidenced through softening consumption data pointing to GDP growth in the 2-3% range. Corporate bond markets' spreads were at levels last seen during the Russian crisis, pointing to a possibility of a credit crunch. Telecom carriers were experiencing downgrades on their debt ratings. At a sector level fears of a slowing economy and specifically reduced spending from cash strapped carriers has led to a huge de-rating of technology growth stocks. Inventory appeared to be building at the equipment manufacturers implying a slowdown of spending at the end user. The correction in high multiple communications infrastructure stocks (e.g., optical systems, IP data solutions, Communications IC, and optical components companies) was relentless in the last six weeks of the quarter. The big three: Cisco, Lucent and Nortel added to the fears of a slowdown in spending at the carrier level. Downgrades from Wall Street followed in both the Networking sector and the component and semi- conductor groups. Notably, however, the vast majority of the Infrastructure value chains were sticking to their strong guidance for the fourth calendar quarter of 2000. Even with the prospect of easier monetary policy, and a brand new president the year-end rally failed to materialize. Greenspan signaled to the markets in early January that the easing cycle would commence resulting in a short-lived relief rally for the technology market as a whole. As the company fundamentals deteriorated however, profit warnings came thick and fast from such heavyweight technology companies as Nortel, Cisco, JDS Uniphase and Ericsson. A lack of visibility replaced the once blue sky in the technology sector, with most technology companies refusing to give guidance. The deterioration of the sector balance sheet was at the root of the majority of technologies woes. The carriers capital constraints resulted in a clamp down on investment spending, and many of the issues relating to over leveraged balance sheets could not be resolved by a drop in short-term borrowing costs. The question for the investor, therefore, was at what point is the sector fully discounted from the negative news. March 2001 saw a low on the NASDAQ around 1600. Markets are forward looking and stock prices staged an impressive rally from the March lows. Telecomm remained a significant underperformer however. Continued easing and deteriorating fundamentals characterized the second calendar quarter of 2001. The pre-announcements and the restructuring programs became bolder and more aggressive. There were no safe havens during this route as telecom services companies cut back spending in an effort to preserve cash, and technology companies battled with supply chains full of inventory and a falling end demand picture. So as we exited the first half of 2001, Mr. Greenspan had sent rates to below 4% and the NASDAQ sat poised around 2000. If there were any doubts going into the third calendar quarter of 2001 that the US was heading for perhaps a prolonged economic slowdown, the events of September 11th provided the final tragic push for both the Market and world central banks (led of course by the Fed). Pre-announcements across all sectors of technology dominated the headlines, savage writedowns and layoffs were commonplace throughout the sector. In the communications semiconductor space, PMCS, AMCC and VTSS announced sequential declines to their top lines of 20-30%. JDS Uniphase, the optical components manufacturer, took its workforce to just 13,000 coming from a high of 39,000 and at the same time confirmed a write down of some $50 billion. Key support on the NASDAQ at 2000 eventually gave way as we moved into August. The Fed cut again, but the broader tech market remained immune to the monetary stimulus. At the time of this report, Fed Funds stand at 2%. Ciena, the last man standing in the world of communications tech, guided down the 2002 projections despite hitting numbers for the quarter. Lucent continues with their restructuring, the spin out Agere coming now in March 2002. Further capital expenditure cuts by major carriers added to the gloom in the communications technology space; WorldCom announced dramatic cuts to their budget from $7 billion to $5.5 billion. Balance sheet restructuring and the preservation of cash are the mantra of the communications space. Stock for debts swaps and rights issues are driving some value but mostly to the holders of bonds. The month of September will live long in the memory for all the wrong reasons. Once the markets finally reopened and despite concerted central bank intervention, the markets had only one direction and that was lower. Capitulation in the semiconductor market saw the Philadelphia Semiconductor Index break important support at 450. This was significant breakdown as the semiconductor group had generally outperformed the broader tech market throughput the summer. A by-product of the heightened market anxiety is that selectively telecom services companies benefited from the status of perceived safe haven. The logic being those telecom services companies are somewhat less prone to economic downturn! We can think of many reasons to buy this sector but the latter would not be one of them! Low valuations and a trend towards cash preservation and a focus on free cashflow generation may be more pertinent. Year over year comparisons make interesting if not disturbing reading. Capital expenditures by telecom services companies at the start of the year were set to grow some 15-20%. It looks like that this figure will in-fact be down 15% in 2001. Nortel and Lucent revenue run rate will have effectively halved in 2001 compared to that of 2000. They will have reduced their workforce by close to 50% in the period of just nine months. JDS Uniphase has reduced the total number of employees from 39,000 to just 13,000 and looks to break even with a revenue run rate per quarter of just $320 million. This compares to their peak revenue quarterly run rate of close to $920 million. The telecom services industry struggle with an over-leveraged balance sheet and capital markets that for all practical purposes are closed. Winstar, Covad, Northpoint Rythms are high profile victims of the collapse in the telecom sector. Level Three and Global Crossing, once the darlings of Wall Street are, in the process of redefining their business plans in the light of deteriorating industry and macroeconomic fundamentals. It has been a truly harrowing year for communications investors! Performance: For the fiscal year ended October 31, 2001, the Fund's Class A shares, excluding sales charges, provided a total return of -76.16% compared to the NASDAQ Telecom Index, which returned -66.09% for the same period. Portfolio Specifics: Telecom services remained a difficult investment space during the year. We exited all new entrant names during the first half of 2001 (i.e., Level Three, Global Crossing, UPC, Versatel) and increased weightings in the RBOCS, notably Verizon and SBC. We also added WorldCom and AT&T, but weightings on all these "defensive" names have varied considerably during the year as we have looked to accumulate technology issues on major sell off in the sector. In relative terms, the Fund stayed overweight wireless issues within the telecom 14 PILGRIM GLOBAL Portfolio Manager's Report COMMUNICATIONS FUND -------------------------------------------------------------------------------- services sector. Within technology issues we added in the second quarter of 2001 new theme: Electronic manufacturing services. EMS, Flextronics and Sanmina are the representatives within this group. In recent weeks we have added Lucent and Nortel to the portfolio. We currently have a bias towards technology issues and favor European telecomm over US telecom services. Market Outlook: A fundamental bottom in the buyer's of technology is a prerequisite of a strong technology sector. We are closer to that point and increased liquidity should go a long way to help the sector restructure its balance sheet. Stability of cash flow is becoming a metric that investors are increasingly seeking in these uncertain times. Expectations are almost universally bearish in the communications space, which is perhaps the best news we have had in a long time. Analysts rush to downgrade stocks that have rallied and refuse to upgrade stocks that are considered "cheap". We believe a stronger economy in 2002, and fundamental trough in sector fundamentals within the next couple of quarters improves the risk-reward trade-off for the technology investor. Demand in communications has never been the issue, making returns on that demand certainly has preoccupied investors in the last twelve months. The industry shakeout is certainly closer to a conclusion, cheaper technology platforms, regulatory stimulus, consolidation and a huge macrostimulus certainly tip the balance in favor of the growth investor. This is a very tough correction, but we believe definitely a pause on the road for a very important sector.
3/1/00 10/00 10/31/01 ------- ------- ------- Pilgrim Global Communications Fund Class A With Sales Charge $ 9,425 $ 6,880 $ 1,640 Pilgrim Global Communications Fund Class A Without Sales Charge $10,000 $ 7,300 $ 1,740 NASDAQ Telecom Index $10,000 $ 5,471 $ 1,855
Average Annual Total Returns for the Periods Ended October 31, 2001 -------------------------------------- Since Inception 1 Year 3/1/00 ------ ------ Including Sales Charge: Class A (1) -77.55% -66.13% Class B (2) -77.52% -65.99% Class C (3) -76.61% -65.15% Excluding Sales Charge: Class A -76.16% -64.91% Class B -76.34% -65.15% Class C -76.37% -65.15% NASDAQ Telecom Index -66.09% -63.51% Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim Global Communications Fund against the NASDAQ Telecom Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This report contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio manager, only through the end of the period as stated on the cover. The portfolio manager's views are subject to change at any time based on market and other conditions. Fund holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 4%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. Principal Risk Factor(s): Sensitivity to currency exchange rates, international, political and economic conditions and other risks that affect foreign securities. Risks of foreign investing are generally intensified for investments in emerging markets. Because the Fund concentrates its investments in global communications companies, it will tend to have greater volatility than Funds not concentrated in one industry. In exchange for higher growth potential, investing in stocks of smaller and mid-size companies may entail greater price volatility than investing in those of larger companies. See accompanying index descriptions on page 26. 15 PILGRIM GLOBAL INFORMATION TECHNOLOGY FUND Portfolio Manager's Report -------------------------------------------------------------------------------- Portfolio Management: Guy Uding, Portfolio Manager, ING Investment Management Advisors B.V. Goal: The Pilgrim Global Information Technology Fund (the "Fund") seeks long-term capital appreciation by investing in equity securities of information technology companies located throughout the world, including the United States. Market Overview: During the period, the technology-rich Nasdaq Index lost almost 50% of its value. The negative outlook for the US economy plagued the technology sector and the overall market throughout the year. In the spring, the US senate passed an 11-year, $1.35 trillion tax cut bill that reduces the top income tax rate to 35% and gave people a $300 refund in mid to late summer. Following the September 11th terrorist attacks, the FED lowered interest rates aggressively and provided additional liquidity in an effort to stabilize the further weakening US economy. More fiscal policies are under discussion and may include accelerated spending and additional tax cuts aimed at restoring consumer confidence. Although consumer confidence remained quite strong during most of the reporting period, in late October it plummeted to the lowest level in more than seven years, as job cuts, the war in Afghanistan and anthrax scares take their toll on the American consumer. Early on in the reporting period many technology companies were reporting no evidence of a slowdown in their businesses because they were selling strategically critical applications or products that offered compelling ROI's. In fact, many Tech companies increased guidance late 2000/early 2001 due to good visibility following better-than-expected fourth quarter results. When the slowdown continued, coupled with a dim outlook, companies began reducing payrolls and trimming costs to make up for the slowdown in sales. Generally companies postponed and cancelled IT initiatives after the attacks on the US. Hardware was under pressure throughout the period as PC and Server demand remained very weak due to the lack of a "killer" application to spur an upgrade cycle. Customers delayed their spending as the economy slowed and the number of start-ups going out of business grew. The component sector showed severe weakness because of a slowdown in orders, coupled with inventory issues, dampened the outlook even further, especially for the semiconductor companies. Utilization rates for the semiconductor companies fell quickly as demand weakened and the inventory issues continued. As a result, Semiconductor companies reduced capital spending budgets aggressively and cancelled orders. Outsourcing companies were relatively strong as the average lifetime of contracts is five years giving those companies greater visibility going forward. In addition, the number of deals is increasing as clients resort to outsourcing to cut costs. Performance: For the fiscal year ended October 31, 2001, the Fund's Class A shares, excluding sales charges, provided a total return of -67.57% compared to the Goldman Sachs Technology Industry Composite Index which returned -56.20% for the same period. Portfolio Specifics: Across the board, analysts and companies alike lowered estimates aggressively. This fuelled further volatility and led to an active trading environment. We increased the weighting in the outsourcing theme at the beginning of the year by adding EDS to the portfolio. Visibility was improving and research suggested a continuation of the underlying demand drivers. During the year we switched from the enterprise software companies toward the semiconductor companies. Evidence mounted that the inventory correction would be largely over by the third quarter if demand stabilized. Of course, demand plummeted after the attacks and the semiconductor sector came under selling pressure once again. More recently semiconductor companies are stating that the inventory issues are largely resolved. Companies like Texas Instruments are reporting book-to-bill figures above parity as parts of the business are slowly improving. We added the gaming software sector to the portfolio. These names came under pressure on investor fear that demand would fall following the terrorist attacks. Sell through figures on consoles like the playstation2 didn't support this fear and we added Activision, THQ and Nvidia to the portfolio. Market Outlook: The Federal Reserve is providing liquidity, interest rates are low and likely going lower, fiscal policy initiatives are under discussion and additional tax cuts could restore consumer confidence. We expect that the combination of these initiatives is likely to limit the duration and depth of an economic downturn. Although investors are already looking at the second half of next year for a recovery, the coming fourth quarter, traditionally the strongest quarter in technology, lacks visibility. The market appears to be pricing in a very dim set of figures and we expect investors to focus on the outlook from companies rather than the here and now. In many cases the stock market is proving immune to negative news pointing to a possible bottom for certain sub-sectors. Most notable is the semiconductor sector where investors appear to be warming up to it despite a continued lack of visibility. Corporate IT budgets for 2002 are currently being set and given the weak economic environment, it is likely that spending plans will be quite conservative. When the economy actually recovers these budgets will open up. On the hardware side, things are looking a bit brighter. Increasingly CIO's are pointing to Windows and the subsequent upgrade of PC's as a top priority. 16 PILGRIM GLOBAL INFORMATION Portfolio Manager's Report TECHNOLOGY FUND --------------------------------------------------------------------------------
12/15/98 10/99 10/00 10/31/01 ------- ------- ------- ------- Pilgrim Global Information Technology Fund Class A With Sales Charge $ 9,425 $16,381 $25,981 $ 8,426 Pilgrim Global Information Technology Fund Class A Without Sales Charge $10,000 $17,380 $27,566 $ 8,940 Goldman Sachs Technology Industry Composite Index $10,000 $16,032 $19,385 $ 8,491
Average Annual Total Returns for the Periods Ended October 31, 2001 -------------------------------------- Since Inception 1 Year 12/15/98 ------ -------- Including Sales Charge: Class A (1) -69.43% -5.77% Class B (2) -68.88% -5.07% Class C (3) -68.11% -4.53% Excluding Sales Charge: Class A -67.57% -3.82% Class B -67.81% -4.42% Class C -67.90% -4.53% Goldman Sachs Technology Industry Composite Index -56.20% -5.45%(4) Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim Global Information Technology Fund against the Goldman Sachs Technology Industry Composite Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This report contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio manager, only through the end of the period as stated on the cover. The portfolio manager's views are subject to change at any time based on market and other conditions. Fund holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 3%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. (4) Since inception performance for the index is shown from 12/01/98. Principal Risk Factor(s): International investing involves special risks including currency fluctuations, lower liquidity, political and economic uncertainties and differences in accounting standards. The Fund concentrates its investments in information technology-related companies and will tend to experience greater volatility than funds with more diversified portfolios. In exchange for higher growth potential, investing in stocks of smaller and mid-sized companies may entail greater price volatility than investing in stocks of larger companies. See accompanying index descriptions on page 26. 17 PILGRIM ASIA-PACIFIC EQUITY FUND Portfolio Managers' Report -------------------------------------------------------------------------------- Portfolio Management Team: Richard Saler, Portfolio Manager; Philip Schwartz, C.F.A., Portfolio Manager; ING Pilgrim Investments, LLC. Goal: The Pilgrim Asia-Pacific Fund (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 or Australia. The equity securities in which the Fund may invest include common stock, convertible securities, preferred stock, warrants, American Depository Receipts, European Depository Receipts and other depository receipts. Investment Strategy: The portfolio managers primarily use "bottom-up" fundamental analysis to identify stocks which they believe offer good value relative to their peers in the same industry, sector or market. They also use "top-down" analysis to identify important themes or issues which may affect the investment environment in different sectors or parts of the region, and to estimate local market risks. The portfolio managers focus on various factors, including valuation of the companies, catalysts to stock price appreciation, quality of management and financial measures. Market Overview: We made the point in our Semi-annual Report at the end of April 2001 that the region in which the Fund invests is dominated by the markets of Hong Kong, Singapore, South Korea and Taiwan which currently account for upwards of 80% of the value of stocks in which foreigners can invest. The mostly weak but varied returns which markets put in those six months were followed by a slump. The gain of just over 3% eked out in Korea in the six months to April 30, 2001 was followed by a loss of twice this size in the second six months. However, the other major markets in the region fell by between 23% to 28% in the latter period as the global economy slid towards recession. This global slowdown has been led by a sharp reduction in mainly US business investment spending after a period of over investment in technology in the later 1990s, exacerbated by the "Y2K" scare. In addition, the rest of the world's major economies have provided no compensating strength. A policy vacuum remains in Japan, now surely back in recession. Europe's business cycle was already peaking by the end of 2000 and the European Central Bank has shown no desire to move aggressively to shore up demand by reducing interest rates. Companies in Asia, outside Japan, suffer badly under such circumstances. A significant part of the GDP of many of these economies is the value of exports to the US. The sharp contraction in business investment, especially technology, has obviously hurt Asia's IT related firms, among the world's major producers of telecommunications equipment and semiconductors. In addition the region's large financial sector has found it difficult to maintain profits in the face of a global slowdown, while Hong Kong property prices are about half of the levels that existed before the 1997/8 crisis. The events of September 11th made this bad situation worse and most of Asia is now in recession. Performance: For the fiscal year ended October 31, 2001, the Fund's Class A shares, excluding sales charges, declined 33.64%. The MSCI Far East Free ex Japan Index lost 25.18% for the same period. Portfolio Strategy: As in the first six months of the year, the main feature of our strategy has been to remain overweight in the telecommunications and technology sectors. We believe that, while share prices in these sectors have been hit hard by the global slowdown, especially in the US, the companies involved are world class competitors. We feel that there is at least as much risk involved in being underweight in technology and telecommunications as there is in being overweight, as there is much bad news already in the market. The same is true in the financial stocks, although we did reduce weight in the second six months. Conversely, so-called defensive stocks, those with visible earnings, have become very expensive, and therefore not necessarily defensive any more. Market Outlook: The Federal Reserve has, at the time of writing, reduced interest rates ten times in 2001 and the Federal Funds rate is now at 2%, the lowest since 1961. The policy response to the September 11th attacks was to flood the system with liquidity, and although this might not be an immediate cure for an investment led slowdown, it could well make the recovery that much sharper when it arrives, potentially benefiting the kinds of companies that are in the portfolio. 18 Portfolio Managers' Report PILGRIM ASIA-PACIFIC EQUITY FUND --------------------------------------------------------------------------------
8/31/95 10/95 10/96 10/97 10/98 10/99 10/00 10/31/01 ------- ------- ------- ------- ------- ------- ------- ------- Pilgrim Asia-Pacific Equity Fund Class A With Sales Charge $ 9,425 $ 9,312 $ 9,597 $ 6,142 $ 4,713 $ 6,587 $ 4,723 $ 3,134 Pilgrim Asia-Pacific Equity Fund Class A Without Sales Charge $10,000 $ 9,880 $10,182 $ 6,517 $ 5,001 $ 6,989 $ 5,021 $ 3,325 MSCI Far East Free ex-Japan Index $10,000 $10,019 $11,010 $ 7,201 $ 5,541 $ 8,426 $ 6,624 $ 4,956
Average Annual Total Returns for the Periods Ended October 31, 2001 ------------------------------------------ Since Inception 1 Year 5 Year 09/01/95 ------ ------ -------- Including Sales Charge: Class A (1) -37.40% -21.00% -17.14% Class B (2) -37.14% -20.97% -16.96% Class M(3) -36.06% -21.04% -17.25% Excluding Sales Charge: Class A -33.64% -20.05% -16.34% Class B -33.87% -20.65% -16.96% Class M -33.69% -20.47% -16.78% MSCI Far East Free ex-Japan Index -25.18% -14.75% -10.76% Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim Asia-Pacific Equity Fund against the MSCI Far East Free ex-Japan Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charges and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This report contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio managers, only through the end of the period as stated on the cover. The portfolio managers' views are subject to change at any time based on market and other conditions. Fund holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 2%, respectively, for the 1 year and 5 year returns. (3) Reflects deduction of the maximum Class M sales charge of 3.50%. Effective November 1, 2001, Class A shares liquidated within 30 days of purchase are subject to a 2% redemption fee. Principal Risk Factor(s): Increased price volatility and other risks that accompany an investment in foreign equities and in securities of issuers in a single region. Currency exchange rates, international, political and economic conditions and other risks affect foreign securities. See accompanying index descriptions on page 26. 19 PILGRIM EUROPEAN EQUITY FUND Portfolio Managers' Report -------------------------------------------------------------------------------- Portfolio Management Team: Adrian van Tiggelen, Head of European Equities, leads an eight member team, ING Investment Management Advisors B.V. Goal: The Pilgrim European Equity Fund (the "Fund") seeks growth of capital through investment in a diversified portfolio of primarily European companies. Market Overview: The European markets declined 28% in Euro terms and 24% in USD terms in the reporting period. The European markets started weak in the reporting period with a 6% decline in November. The uncertainty around the outcome of the US presidential elections and a continuation of deteoriating economic data kept investors on the edge. While December was flat, the markets recovered in April, May and June only to fall again in July and August. This fall accelerated in September due to the terrorist attacks which caused investors to price in the increased risk of a US recession. During October the markets recovered from the lows on expectations that the FED easing during the year will help the economy to recover. The TMT (technology, media, telecommunications), sector underperformed most of the year due to earnings disappointments in technology, balance sheet problems of telecom operators and falling advertising revenues for media companies. The underperformance of the telecom sector reversed in September and October while technology and media started to outperform the market in October 2001. The best performing sectors in the reporting period were basic industries (like paper and steel), tobacco and building materials. Performance: For the fiscal year ended October 31, 2001, the Fund's Class A Shares, excluding sales charges, provided a total return of -26.38% compared to the FT Europe Index which returned -23.98% for the same period. Portfolio Specifics: At the start of the reporting period we positioned the portfolio for an economic slowdown by increasing our weight in defensives (Deutsche post, Interbrew, Iberdrola and Novartis) and reducing positions in banks and technology (Ericsson, Alcatel and Marconi). Going into 2001, we were neutrally weighted in TMT, 10% overweight in defensive sectors and 10% underweight in cyclical sectors. In the first quarter of 2001, we started to gradually increase weightings in technology and telecom and reduced it in financials. We reduced the weight in technology again after the rally in March and April and reinvested this in cyclicals and banks. Going into the summer we were still overweight defensives and underweight cyclicals. As markets were becoming relatively cheap we started to gradually add beta to the portfolio again in August by buying TMT and cyclicals. In the terrible September month we did a lot of transactions, as the immense volatility during the month caused regular opportunities to switch to very oversold stocks out of less oversold situations. Most of the transactions took place within sectors, so on the whole sector weightings didn't change a lot in September. In October, we started to position the portfolio gradually in a more cyclical way, as the sell off after September 11th brought valuation levels back in attractive territory. We sourced the purchase of a range of consumer and industrial cyclicals (BAE, Invensys, Volkswagen PPR, LVMH, Dixons and Lufthansa) mainly by reducing the overweight in defensives (we sold Rentokil, BG Group and topsliced Danone, Endesa and Nestle) and telecom (by reducing Deutsche Telekom, France Telecom and Telecom Italia), which both did extremely well in September. Market Outlook: Given the fall in bond yields, which occurred during the year, equities still look relatively cheap on yield related ratios, in spite of further earnings downgrades. We expect European earnings to fall by at least 10% this year. For next year, earnings will depend very much on the length and depth of the economic downturn, but in our central scenario of a moderate upturn in the second half, earnings should be about flat versus 2001. Unless one expects a very long global deflationary recession (which is certainly not our central scenario), the valuation of equities in relation to bond yields look attractive, with about 20% upside to fair value (assuming stable bond yields). Assuming an economic recovery sometime next year, we have a positive outlook for the next 12 months. 20 Portfolio Managers' Report PILGRIM EUROPEAN EQUITY FUND --------------------------------------------------------------------------------
12/15/98 10/99 10/00 10/31/01 ------- ------- ------- ------- Pilgrim European Equity Fund Class A With Sales Charge $ 9,425 $10,320 $10,622 $ 7,820 Pilgrim European Equity Fund Class A Without Sales Charge $10,000 $10,950 $11,270 $ 8,297 FT Europe Index $10,000 $10,930 $10,803 $13,394
Average Annual Total Returns for the Periods Ended October 31, 2001 -------------------------------------- Since Inception 1 Year 12/15/98 ------ -------- Including Sales Charge: Class A (1) -30.62% -8.18% Class B (2) -30.37% -7.83% Class C (3) -27.64% -7.07% Excluding Sales Charge: Class A -26.38% -6.28% Class B -26.88% -6.92% Class C -26.94% -7.07% FT Europe Index -23.98% -6.91%(4) Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim European Equity Fund against the FT Europe Index. The Index has an inherent performance advantage over the Fund since it has no cash in its portfolio, imposes no sales charge and incurs no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This report contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio managers, only through the end of the period as stated on the cover. The portfolio managers' views are subject to change at any time based on market and other conditions. Fund holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Reflects deduction of the Class B deferred sales charge of 5% and 3%, respectively, for the 1 year and since inception returns. (3) Reflects deduction of the Class C deferred sales charge of 1% for the 1 year return. (4) Since inception performance for the index is shown from 12/01/98. Principal Risk Factor(s): Price volatility and other risks that accompany an investment in equity securities of issuers in a single region. Currency exchange rates, international, political and economic conditions and other risks affect foreign securities. See accompanying index descriptions on page 26. 21 PILGRIM RUSSIA FUND Portfolio Managers' Report -------------------------------------------------------------------------------- Portfolio Management Team: Samuel Oubadia, Senior Investment Manager -- Emerging Markets Equities; Jan Wim Derks, Director -- Head of Emerging Markets Equities; Philip A. Schwartz, Portfolio Manager; Richard T. Sales, Portfolio Manager, ING Pilgrim Investments, LLC. Goal: The Pilgrim Russia Fund (the "Fund") seeks long-term capital appreciation through investments in Russian securities. Market Overview: With the local RTS Index having gained about 42% in US dollar terms since the start of the year, Russia has become one of the favorite markets of emerging market investors. The market actually peaked in late June, but has since given back some of its earlier gains. Nevertheless, the Russian economy has been proven quite resilient to the global economic slowdown. One of the biggest drivers of the Russian economy has been the growth in personal consumption. Consumption has been expanding at a rate of 10% year over year in each of the last six months. This expansion in consumer demand is being fuelled by the growth in personal incomes and real wages. Of course, also key to the performance of the Russian economy is the price of oil. The average price per barrel of Brent crude, at about US $26.00, has been higher than most analysts had forecasted at the start of the year. The price of oil fell sharply in mid-September and, not surprisingly, the market reaction was quite negative. Still, the half-year results of Russia's major oil companies point to another banner year for the sector. Performance: For the fiscal year ended October 31, 2001, the Fund's Class A shares, excluding sales charges, have provided a total return of 12.45%. In the same period the Russian Trading System Index has risen 8.35%. Portfolio Specifics: The most represented sector in the Russia Fund continues to be the oil and gas sector. This is to be expected given that the sector dominates the universe of Russian equities. The stocks in the sector have performed remarkably well largely due to the strength in the price of oil over most of 2001. Some of the better performing oil stocks that are held in the Fund include Yukos and Sibneft. Both stocks have seen their share price more than double in the period under review. Other oil stocks held by the Fund, such as Lukoil and Surgutneftegaz, have seen more moderate gains since the start of the year. The sector with second largest weighting in the Fund is the telecommunications sector. While the sector has suffered globally, Russian telecommunication stocks have outperformed their international peers. The Fund has positions in both MTS and Vimplecom - the number one and two mobile companies, based on market share, in Moscow. Both are expected to do well given Russia's strong growth in household consumption. With the mobile penetration rate in the total Moscow area expected to reach about 25% by the end of 2001, both companies have now turned their attention to regional expansion. Penetration rates vary from region to region, but the growth prospects across Russia are still very attractive. Another one of the Fund's strong performers is the mining company, GMK Norilsk Nickel. The stock has risen 60% in the period under review. The company has recently completed a complex restructuring of its shares, which also included the issuance of an ADR (American Depository Receipt.) However, as the news that has led to the jump in the share price is now widely known, the Fund has slowly been reducing its position in Norilsk Nickel shares in recent weeks. Market Outlook: As mentioned, the Russian economy remains quite robust in spite of the adverse, global, economic developments. Real growth is expected to reach 5% in 2001, and analysts forecast growth in the range of 3-5% in 2002. As was the case in 2000, the federal budget is expected to end up in a surplus in 2001. Forecasts range from 1.5% of GDP to as much as 2.5%. Once again, the current account should end up in a large surplus position. Perhaps one of the main negative economic developments is the fact that inflation will still be as high as 18 to 20% by the end of 2001. This implies a strong real appreciation of the ruble. It should be noted that the forecasts above assume an average price of US $20.00 - $22.00 per barrel of oil in 2002. However, the range of forecasts is quite wide, and most analysts agree that a price below US $15.00/barrel could prove critical to the Russian economy. We believe that the general trend has been for a gradual, improvement in the corporate governance of Russian companies. This can be seen from the fact that more Russian companies are reporting financial results according to IAS, and more are reporting these results on a regular (that is, quarterly basis). This can also be seen by improvements in dividend policy. Nevertheless, we would not be so naive as to rule out the possibility of negative surprises in corporate governance related matters as well. Quite paradoxically, at a time when equity investors are as risk averse as they have been for some time, Russian equities offer some very defensive qualities. The high oil price over the last couple of years has left many Russian companies in that sector with large cash positions. This, in turn, makes the prospect for higher dividends quite feasible. Furthermore, valuations for companies in the oil and gas sector are still well below their global peers. 22 Portfolio Managers' Report PILGRIM RUSSIA FUND --------------------------------------------------------------------------------
7/3/96 10/96 10/97 10/98 10/99 10/00 10/31/01 ------- ------- ------- ------- ------- ------- ------- Pilgrim Troika Dialog Russia Fund Class A With Sales Charge $ 9,425 $ 8,227 $16,951 $ 2,434 $ 3,860 $ 7,059 $ 7,937 Pilgrim Troika Dialog Russia Fund Class A Without Sales Charge $10,000 $ 8,729 $17,986 $ 2,583 $ 4,096 $ 7,490 $ 8,422 Moscow Times Index $10,000 $ 9,433 $23,697 $ 3,057 $ 5,736 $11,634 $13,305 Russian Trading Systems Index $10,000 $ 8,719 $20,685 $ 2,921 $ 4,964 $ 9,593 $10,394
Average Annual Total Returns for the Periods Ended October 31, 2001 ---------------------------------------- Since Inception 1 year 5 year 07/03/96 ------ ------ -------- Including Sales Charge: Class A (1) 5.93% -2.01% -4.35% Excluding Sales Charge: Class A 12.45% -0.84% -3.28% Moscow Times Index 14.36% 6.02% 4.48%(2) Russian Trading System Index 8.35% 2.77% -0.01%(2) Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim Russia Fund against the Moscow Times Index and Russian Tradings System Index. The indices have an inherent performance advantage over the Fund since they have no cash in their portfolio, impose no sales charge and incur no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of the maximum sales load. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This report contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "foward-looking" statements. The views expressed in this report reflect those of the portfolio managers, only through the end of the period as stated on the cover. The portfolio managers' views are subject to change at any time based on market and other conditions. Fund holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. (2) Since inception performance for the index is shown from 06/28/96. Redemptions on shares held less than 365 days are subject to a redemption fee of 2% of the redemption proceeds. Principal Risk Factor(s): Increased price volatility and other risks that accompany an investment in equity securities of issuers in a single region. Currency exchange rates, international, political and economic conditions and other risks affect foreign securities. See accompanying index descriptions on page 26. 23 Portfolio Manager's Report PILGRIM PRECIOUS METALS FUND -------------------------------------------------------------------------------- Portfolio Management: James A. Vail, C.F.A., Portfolio Manager, ING Pilgrim Investments, LLC. Goal: The Pilgrim Precious Metals Fund (the "Fund") seeks to attain capital appreciation and hedge against the loss of buying power of the US dollar as may be obtained through investment in gold bullion and in the securities of companies engaged in the mining or processing of gold and other precious metals and materials. Market Overview: The fundamentals for the gold sector continue to be positive, fostered by heightened international tensions, lower interest rates globally, and reduced producer hedging. Additionally, the volatility in equity markets in general has maintained interest in gold shares as a perceived safe haven. Performance: For the fiscal year ended October 31, 2001, the Fund's Class A shares, excluding sales charges, returned 34.56% compared to a 24.90% decline for the S&P 500 Index. In the same time frame, the Philadelphia Gold and Silver Index (XAU) returned 26.49%. The Fund's outperformance reflects its global structure and emphasis on unhedged producers. Portfolio Specifics: During the last year the Fund has decreased it holdings in platinum and palladium companies specifically those in South Africa. This move reflects the reality that slowing global economies are expected to reduce the demand for automobiles and in turn catalysts, which employ palladium to meet stringent emission standards. We have also reduced exposure to diversified metals producers in an effort to more position the Fund to rising gold prices. These included Grupo Mexico and Penoles. More recently, in the period the Fund added to its holdings in Australia as this region lagged other gold mining venues. New positions were established in Delta Gold, Normandy Mining and Sons of Gwalia. Market Outlook: Over the next two years, gold mine output is expected to decline as years of foregone exploration spending begin to be reflected. The low interest rate environment continues to limit producer hedging and central bank selling may have reached a plateaue. Industry consolidation continues and was a contributor to the Fund's performance during the last years. We expect this trend to proceed apace. 24 Portfolio Manager's Report PILGRIM PRECIOUS METALS FUND --------------------------------------------------------------------------------
10/31/91 10/92 10/93 10/94 10/95 10/96 ------- ------- ------- ------- ------- ------- Pilgrim Precious Metals Fund Class A With Sales Charge $ 9,425 $ 7,580 $11,578 $13,785 $11,421 $13,841 Pilgrim Precious Metals Fund Class A Without Sales Charge $10,000 $ 8,042 $12,283 $14,624 $12,116 $14,683 S&P 500 Index $10,000 $10,995 $12,639 $13,127 $16,598 $20,597 Gold Bullion $10,000 $ 9,491 $10,340 $10,739 $10,705 $10,618 Philadelphia Gold and Silver Index $10,000 $ 9,121 $14,891 $14,302 $13,180 $14,333 10/97 10/98 10/99 10/00 10/31/01 ------- ------- ------- ------- ------- Pilgrim Precious Metals Fund Class A With Sales Charge $ 8,869 $ 7,743 $ 7,743 $ 5,264 $ 7,084 Pilgrim Precious Metals Fund Class A Without Sales Charge $ 9,409 $ 8,214 $ 8,214 $ 5,584 $ 7,515 S&P 500 Index $27,212 $33,195 $41,715 $44,256 $33,236 Gold Bullion $ 8,713 $ 8,179 $ 8,369 $ 7,401 $ 7,800 Philadelphia Gold and Silver Index $11,000 $ 9,519 $ 8,941 $ 5,761 $ 7,287
Average Annual Total Returns for the Periods Ended October 31, 2001 -------------------------------------- 1 Year 5 Years 10 Years ------ ------- -------- Including Sales Charge: Class A (1) 26.75% -13.57% -3.39% Excluding Sales Charge: Class A 34.56% -12.54% -2.82% S&P 500 Index -24.90% 10.04% 12.76% Gold Bullion 5.39% -5.98% -2.45% Philadelphia Gold and Silver Index 26.49% -12.65% -4.10% Based on a $10,000 initial investment, the graph and table above illustrate the total return of Pilgrim Precious Metals Fund against the S&P 500 Index, Gold Bullion and Philadelphia Gold and Silver Index. The Indices have an inherent performance advantage over the Fund since they have no cash in their portfolio, impose no sales charges and incur no operating expenses. An investor cannot invest directly in an index. The Fund's performance is shown both with and without the imposition of sales charges. Total returns reflect the fact that the Investment Manager has waived certain fees and expenses otherwise payable by the Fund. Total returns would have been lower had there been no waiver to the Fund. Performance data represents past performance and is no assurance of future results. Investment return and principal value of an investment in the Fund will fluctuate. Shares, when sold, may be worth more or less than their original cost. This report contains statements that may be "forward-looking" statements. Actual results may differ materially from those projected in the "forward-looking" statements. The views expressed in this report reflect those of the portfolio manager, only through the end of the period as stated on the cover. The portfolio manager's views are subject to change at any time based on market and other conditions. Fund holdings are subject to change daily. (1) Reflects deduction of the maximum Class A sales charge of 5.75%. Principal Risk Factor(s): Price volatility due to non-diversification and concentration in the gold/precious metals industry. The market for gold and other 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. International investing does pose special risks including currency fluctuation, economic and political risks not found in investments that are solely domestic. Risks of foreign investing are generally intensified for investments in emerging markets. See accompanying index descriptions on page 26. 25 INDEX DESCRIPTIONS -------------------------------------------------------------------------------- The S&P 500 Index is a widely recognized index of 500 common stocks. The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders of their industry. The NASDAQ Composite Index is a broad-based capitalization-weighted index of all NASDAQ National Market & SmallCap stocks. The Russell 2000 Index consists of the smallest 2000 companies in the Russell 3000 Index. The Philadelphia Stock Exchange Gold and Silver Index (XAU) is a capitalization-weighted index which includes the leading companies involved in the mining of gold and silver. The MSCI EAFE Index consists of more than 1,000 securities taken from the largest market capitalization companies based in Europe, Australia and Asia (Australasia), and the Far East. The MSCI Emerging Markets Free (EMF) Index is comprised of companies representative of the market structure of 22 emerging countries in Europe, Latin America and the Pacific Rim Basin. The MSCI World Index consists of more than 1,400 securities of the largest publicly traded companies around the world based on market capitalization. The Salomon EPAC Extended Market Index measures the performance of securities of smaller-capitalized companies in 22 countries excluding the U.S. and Canada. The MSCI Far East Free ex-Japan Index measures performance of securities listed on exchanges in the Far East markets excluding Japan. The Moscow Times Index is an index that measures the performance of the 50 most liquid and highly capitalized Russian stocks. The Russian Trading System Index is a capitalization weighted index that is comprised of 100 stocks traded on the Russian Trading Systems. The Gold Bullion is a commodity traded on the New York Mercantile Exchange. The S&P MidCap Index is a market value-weighted index which measures the performance of the mid-size company segment of the U.S. market. The NASDAQ Telecom Index is a capitalization-weighted index designated to measure the performance of all NASDAQ stocks in the telecommunications sector. The Goldman Sachs Technology Industry Composite Index is a modified capitalization-weighted index of selected technology stock. The FT Europe Index is average weighted by the market value of the performance of securities listed on the Stock Exchange of Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Spain, Sweden, Switzerland and United Kingdom. The Nikkei Index is a market value-weighted index calculated using all stocks listed on Japan's eight equities exchanges. The Philadelphia Semiconductor Index is a price-weighted index of 16 companies that are involved in the design, distribution, manufacturing and sale of semiconductors. The MSCI Japan Index is a capitalization weighted index that monitors the performance of stocks from the country of Japan. The MSCI Europe Index is a capitalization weighted index that monitors the performance of stocks from all the countries that make up the continent of Europe. All indices are unmanaged. An investor cannot invest directly in an index. 26 REPORT OF INDEPENDENT ACCOUNTANTS -------------------------------------------------------------------------------- To the Shareholders and Trustees of Pilgrim Mayflower Trust and Pilgrim Funds Trust and the Shareholders and Boards of Directors of Pilgrim Mutual Funds, Pilgrim International Fund, Inc., Pilgrim Advisory Funds, Inc., Pilgrim Russia Fund, Inc. and Pilgrim Precious Metals Fund, Inc. In our opinion, the accompanying statements of assets and liabilities, including the portfolios of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Pilgrim Worldwide Growth Fund, Pilgrim International Core Growth Fund, Pilgrim International SmallCap Growth Fund, and Pilgrim Emerging Countries Fund, four of the twelve funds comprising Pilgrim Mutual Funds, Pilgrim International Value Fund, one of the three funds comprising Pilgrim Mayflower Trust, Pilgrim Global Communications Fund, Pilgrim Global Information Technology Fund and Pilgrim European Equity Fund, three of the twelve funds comprising Pilgrim Funds Trust, Pilgrim Asia-Pacific Equity Fund, the sole fund comprising Pilgrim Advisory Funds, Inc., Pilgrim International Fund, Inc., Pilgrim Russia Fund, Inc. and Pilgrim Precious Metals Fund, Inc. (each a "Fund" collectively, the "Funds") at October 31, 2001, the results of each of their operations for the year then ended and the changes in each of their net assets and financial highlights for each of the periods presented, except as described below, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2001 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. For all periods ended prior to and including December 31, 1999 for Pilgrim International Fund, Inc., Pilgrim Russia Fund, Inc. and Pilgrim Precious Metals Fund, Inc. the statements of changes in net assets and financial highlights were audited by other auditors whose reports dated February 17, 2000 expressed unqualified opinions on those financial statements and financial highlights. For all periods ended prior to and including June 30, 2000 for Pilgrim Worldwide Growth Fund, Pilgrim International Core Growth Fund, Pilgrim International SmallCap Growth Fund, Pilgrim Emerging Countries Fund and Pilgrim Asia-Pacific Equity Fund the statements of changes in net assets and financial highlights were audited by other auditors whose report dated August 4, 2000 expressed unqualified opinions on those financial statements and financial highlights. For all periods ended prior to and including October 31, 2000 for Pilgrim Global Communications Fund, Pilgrim Global Information Technology Fund and Pilgrim European Equity Fund the statements of changes in net assets and financial highlights were audited by other auditors whose report dated December 5, 2000 expressed unqualified opinions on those financial statements and financial highlights. /s/ PricewaterhouseCoopers LLP Denver, Colorado December 14, 2001 27 STATEMENTS OF ASSETS AND LIABILITIES as of October 31, 2001 --------------------------------------------------------------------------------
Pilgrim Pilgrim Pilgrim Pilgrim International International Worldwide International Pilgrim Core SmallCap Growth Value International Growth Growth Fund Fund Fund Fund Fund --------------- --------------- --------------- --------------- --------------- ASSETS: Investments in securities, at value* $ 315,144,292 $ 2,360,491,607 $ 36,839,004 $ 37,415,360 $ 376,619,147 Short-term investments, at amortized cost 9,000,000 -- 3,698,212 3,398,150 -- Cash 450,719 105,173,748 184,177 -- 11,457,418 Foreign currencies at value** -- -- 7,482 -- 373,604 Receivables: Investment securities sold 13,256,712 26,881,267 1,144,633 1,146,664 6,061,609 Fund shares sold 122,305 11,164,488 70,436 185,108 628,626 Dividends and interest 443,809 7,963,013 103,077 75,679 643,034 Other -- -- -- 202,333 164,071 Unrealized appreciation on forward foreign currency contracts -- -- -- -- 971,770 Prepaid expenses 92,706 153,127 33,343 18,220 59,099 Reimbursement due from manager 467,636 -- -- 80,369 15,793 --------------- --------------- --------------- --------------- --------------- Total assets 338,978,179 2,511,827,250 42,080,364 42,521,883 396,994,171 --------------- --------------- --------------- --------------- --------------- LIABILITIES: Payable for investment securities purchased 10,441,333 20,020,000 835,357 835,919 6,094,959 Unrealized depreciation on forward foreign currency contracts -- -- -- -- 186,304 Payable for fund shares redeemed 1,358,893 4,352,935 14,980 60,326 1,022,674 Payable to affiliates 489,031 3,457,369 59,554 61,760 530,441 Payable to custodian -- -- -- 211,098 -- Other accrued expenses and liabilities 496,413 1,255,373 199,830 153,785 406,264 --------------- --------------- --------------- --------------- --------------- Total liabilities 12,785,670 29,085,677 1,109,721 1,322,888 8,240,642 --------------- --------------- --------------- --------------- --------------- NET ASSETS 326,192,509 2,482,741,573 40,970,643 41,198,995 388,753,529 =============== =============== =============== =============== =============== NET ASSETS WERE COMPRISED OF: Paid-in capital $ 521,637,634 $ 2,868,481,473 $ 58,185,972 $ 55,337,069 $ 596,283,012 Accumulated net investment income (loss) -- 12,018,823 (24,777) (46,479) (1,288,353) Accumulated net realized gain (loss) on investments and foreign currencies (161,354,195) 52,732,560 (11,853,841) (10,013,553) (186,481,503) Net unrealized depreciation of investments and foreign currencies (34,090,930) (450,491,283) (5,336,711) (4,078,042) (19,759,627) --------------- --------------- --------------- --------------- --------------- NET ASSETS $ 326,192,509 $ 2,482,741,573 $ 40,970,643 $ 41,198,995 $ 388,753,529 =============== =============== =============== =============== =============== * Cost of securities $ 349,238,008 $ 2,811,042,422 $ 42,177,386 $ 41,493,927 $ 397,148,020 ** Cost of foreign currencies $ -- $ -- $ 7,270 $ -- $ 376,344
See Accompanying Notes to Financial Statements 28 STATEMENTS OF ASSETS AND LIABILITIES as of October 31, 2001 --------------------------------------------------------------------------------
Pilgrim Pilgrim Pilgrim Pilgrim International International Worldwide International Pilgrim Core SmallCap Growth Value International Growth Growth Fund Fund Fund Fund Fund ------------- -------------- ------------- ------------- ------------- Class A: Net assets $ 134,152,279 $1,195,760,216 $ 37,489,410 $ 8,706,853 $ 153,803,882 Shares authorized unlimited unlimited 200,000,000 unlimited unlimited Par value $ 0.00 $ 0.01 $ 0.001 $ 0.00 $ 0.00 Shares outstanding 8,684,840 96,990,223 4,636,056 610,284 7,037,699 Net asset value and redemption price per share $ 15.45 $ 12.33 $ 8.09 $ 14.27 $ 21.85 Maximum offering price per share (5.75%)(1) $ 16.39 $ 13.08 $ 8.58 $ 15.14 $ 23.18 Class B: Net assets $ 71,943,042 $ 421,883,800 $ 1,960,781 $ 11,619,840 $ 74,540,781 Shares authorized unlimited unlimited 100,000,000 unlimited unlimited Par value $ 0.00 $ 0.01 $ 0.001 $ 0.00 $ 0.00 Shares outstanding 4,184,602 34,777,041 244,185 818,211 3,233,090 Net asset value and redemption price per share(2) $ 17.19 $ 12.13 $ 8.03 $ 14.20 $ 23.06 Maximum offering price per share $ 17.19 $ 12.13 $ 8.03 $ 14.20 $ 23.06 Class C: Net assets $ 102,919,340 $ 603,228,883 $ 1,513,539 $ 13,213,120 $ 69,319,628 Shares authorized unlimited unlimited 50,000,000 unlimited unlimited Par value $ 0.00 $ 0.01 $ 0.001 $ 0.00 $ 0.00 Shares outstanding 6,731,898 49,840,390 188,663 927,632 3,279,060 Net asset value and redemption price per share(2) $ 15.29 $ 12.10 $ 8.02 $ 14.24 $ 21.14 Maximum offering price per share $ 15.29 $ 12.10 $ 8.02 $ 14.24 $ 21.14 Class I: Net assets n/a $ 226,066,944 n/a n/a n/a Shares authorized n/a unlimited n/a n/a n/a Par value n/a $ 0.01 n/a n/a n/a Shares outstanding n/a 18,301,364 n/a n/a n/a Net asset value and redemption price per share n/a $ 12.35 n/a n/a n/a Maximum offering price per share n/a $ 12.35 n/a n/a n/a Class Q: Net assets $ 17,177,848 $ 35,801,730 $ 6,913 $ 7,659,182 $ 91,089,238 Shares authorized unlimited unlimited 50,000,000 unlimited unlimited Par value $ 0.00 $ 0.01 $ 0.001 $ 0.00 $ 0.00 Shares outstanding 961,376 2,900,999 853 514,522 3,927,587 Net asset value and redemption price per share $ 17.87 $ 12.34 $ 8.10 $ 14.89 $ 23.19 Maximum offering price per share $ 17.87 $ 12.34 $ 8.10 $ 14.89 $ 23.19
---------- (1) Maximum offering price is computed at 100/94.25 of net asset value. On purchases of $50,000 or more, the offering price is reduced. (2) Redemption price per share may be reduced for any applicable contingent deferred sales charge. See Accompanying Notes to Financial Statements 29 STATEMENTS OF ASSETS AND LIABILITIES as of October 31, 2001 --------------------------------------------------------------------------------
Pilgrim Pilgrim Pilgrim Global Pilgrim Pilgrim Emerging Global Information Asia-Pacific European Pilgrim Countries Communications Technology Equity Equity Russia Fund Fund Fund Fund Fund Fund ------------ ------------ ------------ ------------ ------------ ------------ ASSETS: Investments in securities, at value* $117,985,399 $ 16,000,165 $ 40,668,059 $ 10,361,373 $ 19,915,691 $ 43,147,566 Short-term investments, at amortized cost 3,398,682 -- -- -- -- 3,798,769 Cash -- -- -- 25,863 75,781 1,886,358 Foreign currencies at value** 2,462,645 -- -- 41,525 236,136 -- Receivables: Investment securities sold 5,599,038 231,376 1,259,993 -- 273,641 211,451 Fund shares sold 224,927 1,885 3,492 425,000 1,471 28,868 Dividends and interest 263,666 8,734 25,872 -- 52,676 -- Other 96,590 46 277,058 8,911 160 329,864 Prepaid expenses 50,688 12,933 30,330 25,176 24,241 10,133 Reimbursement due from manager -- 43,141 225,989 54,617 191,138 -- ------------ ------------ ------------ ------------ ------------ ------------ Total assets 130,081,635 16,298,280 42,490,793 10,942,465 20,770,935 49,413,009 ------------ ------------ ------------ ------------ ------------ ------------ LIABILITIES: Payable for investment securities purchased 7,323,154 282,309 -- -- 286,337 -- Payable for fund shares redeemed 314,957 16,335 26,233 5,570 -- 26,241 Payable to affiliates 341,527 60,839 76,729 16,809 29,618 74,142 Payable to custodian 33,377 102,628 695,611 -- -- -- Other accrued expenses and liabilities 655,073 165,993 230,923 187,641 143,909 293,830 ------------ ------------ ------------ ------------ ------------ ------------ Total liabilities 8,668,088 628,104 1,029,496 210,020 459,864 394,213 ------------ ------------ ------------ ------------ ------------ ------------ NET ASSETS 121,413,547 15,670,176 41,461,297 10,732,445 20,311,071 49,018,796 ============ ============ ============ ============ ============ ============ NET ASSETS WERE COMPRISED OF: Paid-in capital 224,946,338 109,689,130 135,728,378 44,845,864 26,060,121 129,710,978 Accumulated net investment income (loss) -- -- -- -- -- -- Accumulated net realized loss on investments and foreign currencies(net of foreign tax on the sale of Indian investments of $1,197,118, $0, $0, $0, $0 and $0, respectively -- see note 2) (81,759,738) (77,765,244) (71,936,976) (25,917,423) (1,504,501) (73,676,147) Net unrealized depreciation of investments and foreign currencies (21,773,053) (16,253,710) (22,330,105) (8,195,996) (4,244,549) (7,016,035) ------------ ------------ ------------ ------------ ------------ ------------ NET ASSETS $121,413,547 $ 15,670,176 $ 41,461,297 $ 10,732,445 $ 20,311,071 $ 49,018,796 ============ ============ ============ ============ ============ ============ * Cost of securities $139,743,091 $ 32,253,212 $ 62,998,154 $ 18,557,385 $ 24,159,555 $ 50,163,601 ** Cost of foreign currencies $ 2,470,814 $ -- $ -- $ 41,510 $ 235,852 $ --
See Accompanying Notes to Financial Statements 30 STATEMENTS OF ASSETS AND LIABILITIES as of October 31, 2001 --------------------------------------------------------------------------------
Pilgrim Pilgrim Pilgrim Global Pilgrim Pilgrim Emerging Global Information Asia-Pacific European Pilgrim Countries Communications Technology Equity Equity Russia Fund Fund Fund Fund Fund Fund ------------ ------------ ------------ ------------ ------------ ------------ Class A: Net assets $ 67,247,246 $ 8,106,512 $ 25,358,539 $ 5,740,014 $ 19,055,994 $ 49,018,796 Shares authorized unlimited unlimited unlimited 24,000,000 unlimited 500,000,000 Par value $ 0.00 $ 0.001 $ 0.001 $ 0.01 $ 0.001 $ 0.001 Shares outstanding 5,664,793 4,649,427 4,394,888 1,768,324 2,476,172 6,100,125 Net asset value and redemption price per share $ 11.87 $ 1.74 $ 5.77 $ 3.25 $ 7.70 $ 8.04 Maximum offering price per share (5.75%)(1) $ 12.59 $ 1.85 $ 6.12 $ 3.45 $ 8.17 $ 8.53 Class B: Net assets $ 14,637,016 $ 6,144,753 $ 11,726,411 $ 3,777,756 $ 1,167,777 n/a Shares authorized unlimited unlimited unlimited 24,000,000 unlimited n/a Par value $ 0.00 $ 0.001 $ 0.001 $ 0.01 $ 0.001 n/a Shares outstanding 1,235,569 3,568,296 2,083,829 1,201,493 154,414 n/a Net asset value and redemption price per share(2) $ 11.85 $ 1.72 $ 5.63 $ 3.14 $ 7.56 n/a Maximum offering price per share $ 11.85 $ 1.72 $ 5.63 $ 3.14 $ 7.56 n/a Class C: Net assets $ 12,746,153 $ 1,418,911 $ 4,376,347 n/a $ 87,300 n/a Shares authorized unlimited unlimited unlimited n/a unlimited n/a Par value $ 0.00 $ 0.001 $ 0.001 n/a $ 0.001 n/a Shares outstanding 1,117,184 823,316 780,009 n/a 11,619 n/a Net asset value and redemption price per share(2) $ 11.41 $ 1.72 $ 5.61 n/a $ 7.51 n/a Maximum offering price per share $ 11.41 $ 1.72 $ 5.61 n/a $ 7.51 n/a Class M: Net assets n/a n/a n/a $ 1,214,675 n/a n/a Shares authorized n/a n/a n/a 12,000,000 n/a n/a Par value n/a n/a n/a $ 0.01 n/a n/a Shares outstanding n/a n/a n/a 383,851 n/a n/a Net asset value and redemption price per share n/a n/a n/a $ 3.16 n/a n/a Maximum offering price per share (3.50%)(3) n/a n/a n/a $ 3.27 n/a n/a Class Q: Net assets $ 26,783,132 n/a n/a n/a n/a n/a Shares authorized unlimited n/a n/a n/a n/a n/a Par value $ 0.00 n/a n/a n/a n/a n/a Shares outstanding 2,184,457 n/a n/a n/a n/a n/a Net asset value and redemption price per share $ 12.26 n/a n/a n/a n/a n/a Maximum offering price per share $ 12.26 n/a n/a n/a n/a n/a
---------- (1) Maximum offering price is computed at 100/94.25 of net asset value. On purchases of $50,000 or more, the offering price is reduced. (2) Redemption price per share may be reduced for any applicable contingent deferred sales charge. (3) Maximum offering price is computed at 100/96.50 of net asset value. On purchases of $50,000 or more, the offering price is reduced. See Accompanying Notes to Financial Statements 31 STATEMENTS OF ASSETS AND LIABILITIES as of October 31, 2001 -------------------------------------------------------------------------------- Pilgrim Precious Metals Fund --------------- ASSETS: Investments in securities, at value* $ 58,507,856 Short-term investments, at amortized cost 898,831 Cash 27,624 Receivables: Investment securities sold 1,784,669 Fund shares sold 133 Dividends and interest 26,458 Other -- Prepaid expenses 18,605 ------------- Total assets 61,264,176 ------------- LIABILITIES: Payable for investment securities purchased 338,297 Payable for fund shares redeemed 55,267 Payable to affiliates 65,520 Other accrued expenses and liabilities 241,770 ------------- Total liabilities 700,854 ------------- NET ASSETS 60,563,322 ============= NET ASSETS WERE COMPRISED OF: Paid-in capital 145,598,363 Accumulated net investment income 299,614 Accumulated net realized loss on investments and foreign currencies (91,203,163) Net unrealized appreciation of investments and foreign currencies 5,868,508 ------------- NET ASSETS $ 60,563,322 ============= * Cost of securities $ 52,639,226 Class A: Net Assets $ 60,563,322 Shares authorized 500,000,000 Par Value $ 0.001 Shares Outstanding 19,831,084 Net asset value and redemption price per share $ 3.05 Maximum offering price per share (5.75%)(1) $ 3.24 ---------- (1) Maximum offering price is computed at 100/94.25 of net asset value. On purchases of $50,000 or more, the offering price is reduced. See Accompanying Notes to Financial Statements 32 STATEMENTS OF OPERATIONS for the Year Ended October 31, 2001 --------------------------------------------------------------------------------
Pilgrim Pilgrim Pilgrim Pilgrim International Pilgrim Worldwide International Pilgrim International SmallCap Emerging Growth Value International Core Growth Growth Countries Fund Fund Fund Fund Fund Fund ------------- ------------- ------------ ------------ ------------- ------------ INVESTMENT INCOME: Dividends (net of foreign taxes)* $ 3,930,078 $ 57,386,783 $ 625,525 $ 598,696 $ 6,292,819 $ 3,414,471 Interest 1,791,847 3,093,743 129,188 176,341 1,851,071 69,384 ------------- ------------- ------------ ------------ ------------- ------------ Total investment income 5,721,925 60,480,526 754,713 775,037 8,143,890 3,483,855 ------------- ------------- ------------ ------------ ------------- ------------ EXPENSES: Investment advisory and management fees 4,723,391 23,993,859 421,204 569,246 5,329,734 1,924,552 Distribution and service fees: Class A 683,943 3,580,723 99,440 49,210 720,666 234,552 Class B 981,321 4,558,514 14,992 152,055 1,010,331 187,223 Class C 1,527,188 6,495,307 11,626 180,289 989,038 178,249 Class Q 70,824 76,556 17 24,049 332,599 126,004 Transfer agent fees and expenses: Class A 492,756 971,693 109,441 40,398 504,275 180,813 Class B 247,253 374,395 4,185 42,528 244,140 52,426 Class C 393,157 532,712 3,265 51,109 239,936 49,987 Class I -- 8,649 -- -- -- -- Class Q 4,643 17,119 1 2,417 19,223 7,556 Administrative and service fees 28,105 3,649,006 45,771 11,163 35,120 15,695 Custodian and fund accounting expenses 398,355 1,484,000 189,277 187,751 584,322 357,613 Printing and postage expenses 514,307 1,125,870 21,782 42,885 274,850 86,870 Registration fees 246,320 109,279 111,027 56,585 207,473 60,148 Professional fees 280,604 392,000 23,043 16,075 161,445 36,865 Trustee expenses 40,970 40,950 5,151 4,805 27,717 14,965 Merger expenses 56,074 -- 17,218 -- -- 107,439 Miscellaneous expenses 75,876 82,505 8,223 12,346 24,812 47,792 ------------- ------------- ------------ ------------ ------------- ------------ 10,765,087 47,493,137 1,085,663 1,442,911 10,705,681 3,668,749 Less: Waived and reimbursed fees 440,133 -- -- 148,124 -- 22,901 ------------- ------------- ------------ ------------ ------------- ------------ Total expenses 10,324,954 47,493,137 1,085,663 1,294,787 10,705,681 3,645,848 ------------- ------------- ------------ ------------ ------------- ------------ Net investment income (loss) (4,603,029) 12,987,389 (330,950) (519,750) (2,561,791) (161,993) ------------- ------------- ------------ ------------ ------------- ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES: Net realized loss on investments (net of foreign tax on the sale of Indian investments of $0, $0, $0, $0, $0 and $1,197,118, respectively -- Note 2) (147,361,520) 52,788,357 (9,674,525) (7,056,444) (146,155,871) (28,999,081) Net realized loss on foreign currencies (8,440,808) (281,345) (2,169,263) (2,319,463) (27,571,768) (7,774,168) Net change in unrealized depreciation of investments and foreign currencies (net of change in estimated tax liability on Indian investments of $0, $0, $0, $0, $0 and $273,581, respectively -- Note 2) (80,566,335) (513,633,123) (4,519,435) (6,404,908) (47,851,481) (27,496,017) ------------- ------------- ------------ ------------ ------------- ------------ Net realized and unrealized loss on investments and foreign currencies (236,368,663) (461,126,111) (16,363,223) (15,780,815) (221,579,120) (64,269,266) ------------- ------------- ------------ ------------ ------------- ------------ Decrease in net assets resulting from operations $(240,971,692) $(448,138,722) $(16,694,173) $(16,300,565) $(224,140,911) $(64,431,259) ============= ============= ============ ============ ============= ============ * Foreign taxes $ 462,979 $ 7,322,252 $ 100,383 $ 123,858 $ 914,538 $ 361,403
See Accompanying Notes to Financial Statements 33 STATEMENTS OF OPERATIONS for the Year Ended October 31, 2001 --------------------------------------------------------------------------------
Pilgrim Pilgrim Global Pilgrim Pilgrim Pilgrim Global Information Asia-Pacific European Pilgrim Precious Communications Technology Equity Equity Russia Metals Fund Fund Fund Fund Fund Fund ------------ ------------- ----------- ----------- ------------ ------------ INVESTMENT INCOME: Dividends (net of foreign taxes)* $ 44,152 $ 83,821 $ 233,667 $ 433,545 $ 484,017 $ 1,118,767 Interest 10,086 40,577 38,601 26,718 257,792 281,109 Other income -- -- -- -- 52,676 -- ------------ ------------- ----------- ----------- ------------ ------------ Total investment income 54,238 124,398 272,268 460,263 794,485 1,399,876 ------------ ------------- ----------- ----------- ------------ ------------ EXPENSES: Investment advisory and management fees 402,328 1,005,614 182,354 298,825 594,656 516,587 Distribution and service fees: Class A 75,774 168,208 17,594 85,095 118,931 133,239 Class B 150,284 232,492 53,982 15,554 -- -- Class C 34,646 88,147 -- 1,181 -- -- Class M -- -- 16,143 -- -- -- Transfer agent fees and expenses: Class A 37,772 125,838 13,883 41,289 94,886 118,260 Class B 25,762 60,368 11,507 2,651 -- -- Class C 5,906 23,143 -- 210 -- -- Class M -- -- 4,697 -- -- -- Administrative and service fees 41,467 80,049 6,935 26,835 47,476 72,946 Custodian and fund accounting expenses 88,850 129,380 118,240 225,554 272,281 37,555 Printing and postage expenses 34,001 60,414 13,520 23,454 67,486 45,317 Registration fees 97,240 68,500 41,303 38,141 37,093 47,463 Professional fees 24,991 33,503 18,103 36,370 50,559 17,479 Trustee expenses 8,020 5,695 2,439 4,220 20,744 3,863 Merger expenses -- 58,379 50,441 -- -- 45,422 Miscellaneous expenses 6,944 56,338 3,568 10,447 13,755 5,980 ------------ ------------- ----------- ----------- ------------ ------------ 1,033,985 2,196,068 554,709 809,826 1,317,867 1,044,111 Less: Waived and reimbursed fees 266,751 504,929 161,970 346,534 -- -- Redemption fee proceeds -- -- -- -- 256,305 -- ------------ ------------- ----------- ----------- ------------ ------------ Total expenses 767,234 1,691,139 392,739 463,292 1,061,562 1,044,111 ------------ ------------- ----------- ----------- ------------ ------------ Net investment income (loss) (712,996) (1,566,741) (120,471) (3,029) (267,077) 355,765 ------------ ------------- ----------- ----------- ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES: Net realized gain (loss) on investments (67,967,106) (69,738,004) (1,775,846) 1,254,925 (4,992,571) (6,363,683) Net realized gain (loss) on foreign currencies (1,489,607) (1,785,917) (353,075) (2,509,982) 26,586 (5,041,076) Net change in unrealized appreciation (depreciation) of investments and foreign currencies 8,667,180 (34,281,108) (3,198,125) (5,758,078) 10,156,063 19,399,682 ------------ ------------- ----------- ----------- ------------ ------------ Net realized and unrealized gain (loss) on investments and foreign currencies (60,789,533) (105,805,029) (5,327,046) (7,013,135) 5,190,078 7,994,923 ------------ ------------- ----------- ----------- ------------ ------------ Increase (decrease) in net assets resulting from operations $(61,502,529) $(107,371,770) $(5,447,517) $(7,016,164) $ 4,923,001 $ 8,350,688 ============ ============= =========== =========== ============ ============ * Foreign taxes $ 4,907 $ 5,326 $ 36,943 $ 68,063 $ 85,307 $ 23,920
See Accompanying Notes to Financial Statements 34 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
Pilgrim Worldwide Growth Fund ------------------------------------------------- Year Four Year Ended Months Ended Ended October 31, October 31, June 30, 2001 2000 2000 ------------- ------------- --------------- FROM OPERATIONS: Net investment income (loss) $ (4,603,029) $ (2,413,127) $ (5,140,001) Net realized gain (loss) on investments and foreign currencies (155,802,328) (4,709,606) 30,919,264 Net change in unrealized appreciation (depreciation) of investments and foreign currencies (80,566,335) (78,001,428) 91,792,764 ------------- ------------- --------------- Increase (decrease) in net assets resulting from operations (240,971,692) (85,124,161) 117,572,027 FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A -- -- -- Class B -- -- -- Class C -- -- -- Class Q -- -- -- Net realized gain from investments (18,225,255) -- (37,665,102) Tax return of capital (7,156,338) -- -- ------------- ------------- --------------- Total distributions (25,381,593) -- (37,665,102) ------------- ------------- --------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 403,025,732 187,453,816 664,789,596 Net asset value of shares issued to shareholders in reinvestment of dividends 13,156,284 -- 33,052,649 Net assets received in connection with reorganization (Note 14) 55,730,423 -- -- ------------- ------------- --------------- 471,912,439 187,453,816 697,842,245 Cost of shares redeemed (511,257,476) (130,618,094) (337,872,684) ------------- ------------- --------------- Net increase (decrease) in net assets derived from capital share transactions (39,345,037) 56,835,722 359,969,561 ------------- ------------- --------------- Net increase (decrease) in net assets (305,698,322) (28,288,439) 439,876,486 NET ASSETS: Beginning of period 631,890,831 660,179,270 220,302,784 ------------- ------------- --------------- End of period $ 326,192,509 $ 631,890,831 $ 660,179,270 ============= ============= =============== Accumulated net investment income (loss) $ -- $ (587,286) $ -- ============= ============= =============== Pilgrim International Value Fund ---------------------------------- Year Year Ended Ended October 31, October 31, 2001 2000 --------------- --------------- FROM OPERATIONS: Net investment income (loss) $ 12,987,389 $ 12,215,889 Net realized gain (loss) on investments and foreign currencies 52,507,012 238,656,525 Net change in unrealized appreciation (depreciation) of investments and foreign currencies (513,633,123) (41,147,980) --------------- --------------- Increase (decrease) in net assets resulting from operations (448,138,722) 209,724,434 FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A (8,788,538) (3,809,622) Class B (739,366) (593,913) Class C (1,348,847) (828,109) Class Q (219,484) -- Net realized gain from investments (238,927,590) (53,012,739) Tax return of capital -- -- --------------- --------------- Total distributions (250,023,825) (58,244,383) --------------- --------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 2,784,350,826 1,843,922,647 Net asset value of shares issued to shareholders in reinvestment of dividends 178,600,219 44,206,140 Net assets received in connection with reorganization (Note 14) -- -- --------------- --------------- 2,962,951,045 1,888,128,787 Cost of shares redeemed (1,770,962,879) (1,091,605,981) --------------- --------------- Net increase (decrease) in net assets derived from capital share transactions 1,191,988,166 796,522,806 --------------- --------------- Net increase (decrease) in net assets 493,825,619 948,002,857 NET ASSETS: Beginning of period 1,988,915,954 1,040,913,097 --------------- --------------- End of period $ 2,482,741,573 $ 1,988,915,954 =============== =============== Accumulated net investment income (loss) $ 12,018,823 $ 10,143,582 =============== ===============
See Accompanying Notes to Financial Statements 35 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
Pilgrim International Fund --------------------------------------------- Year Ten Year Ended Months Ended Ended October 31, October 31, December 31, 2001 2000 1999 ------------- ------------ ------------ FROM OPERATIONS: Net investment loss $ (330,950) $ (52,323) $ (46,900) Net realized gain (loss) on investments and foreign currencies (11,843,788) 2,566,236 6,719,640 Net change in unrealized appreciation (depreciation) of investments and foreign currencies (4,519,435) (5,596,890) 2,440,717 ------------- ------------ ------------ Increase (decrease) in net assets resulting from operations (16,694,173) (3,082,977) 9,113,457 FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A -- (1,681,140) (46,770) Class B -- -- -- Class C -- -- -- Class Q -- -- -- Net realized gain from investments (2,522,861) (159,635) (5,598,256) ------------- ------------ ------------ Total distributions (2,522,861) (1,840,775) (5,645,026) ------------- ------------ ------------ FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 105,520,916 22,887,629 5,619,698 Net asset value of shares issued to shareholders in reinvestment of dividends 2,042,018 1,011,365 4,382,040 Net assets received in connection with reorganization (Note 14) 39,847,064 -- -- ------------- ------------ ------------ 147,409,998 23,898,994 10,001,738 Cost of shares redeemed (118,040,395) (13,461,366) (12,165,686) ------------- ------------ ------------ Net increase (decrease) in net assets derived from capital share transactions 29,369,603 10,437,628 (2,163,948) ------------- ------------ ------------ Net increase (decrease) in net assets 10,152,569 5,513,876 1,304,483 NET ASSETS: Beginning of period 30,818,074 25,304,198 23,999,715 ------------- ------------ ------------ End of period $ 40,970,643 $ 30,818,074 $ 25,304,198 ============= ============ ============ Accumulated net investment income (loss) $ (24,777) $ (44,363) $ 220,248 ============= ============ ============ Pilgrim International Core Growth Fund ----------------------------------------------- Year Four Year Ended Months Ended Ended October 31, October 31, June 30, 2001 2000 2000 ------------- ------------- ------------- FROM OPERATIONS: Net investment loss $ (519,750) $ (241,784) $ (802,903) Net realized gain (loss) on investments and foreign currencies (9,375,907) (435,838) 7,893,481 Net change in unrealized appreciation (depreciation) of investments and foreign currencies (6,404,908) (10,007,118) 7,236,744 ------------- ------------- ------------- Increase (decrease) in net assets resulting from operations (16,300,565) (10,684,740) 14,327,322 FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A (383,671) -- -- Class B (282,575) -- -- Class C (377,838) -- -- Class Q (252,790) -- (1,678) Net realized gain from investments (3,786,278) -- (2,936,042) ------------- ------------- ------------- Total distributions (5,083,152) -- (2,937,720) ------------- ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 250,950,815 66,836,057 192,088,330 Net asset value of shares issued to shareholders in reinvestment of dividends 3,679,161 -- 2,747,516 Net assets received in connection with reorganization (Note 14) -- -- -- ------------- ------------- ------------- 254,629,976 66,836,057 194,835,846 Cost of shares redeemed (274,199,878) (61,845,481) (164,147,202) ------------- ------------- ------------- Net increase (decrease) in net assets derived from capital share transactions (19,569,902) 4,990,576 30,688,644 ------------- ------------- ------------- Net increase (decrease) in net assets (40,953,619) (5,694,164) 42,078,246 NET ASSETS: Beginning of period 82,152,614 87,846,778 45,768,532 ------------- ------------- ------------- End of period $ 41,198,995 $ 82,152,614 $ 87,846,778 ============= ============= ============= Accumulated net investment income (loss) $ (46,479) $ 742,176 $ -- ============= ============= =============
See Accompanying Notes to Financial Statements 36 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
Pilgrim International SmallCap Growth Fund ----------------------------------------------------- Year Four Year Ended Months Ended Ended October 31, October 31, June 30, 2001 2000 2000 --------------- --------------- --------------- FROM OPERATIONS: Net investment loss $ (2,561,791) $ (2,532,082) $ (4,264,398) Net realized gain (loss) on investments and foreign currencies (173,727,639) (13,387,681) 58,803,599 Net change in unrealized appreciation (depreciation) of investments and foreign currencies (47,851,481) (73,243,053) 73,844,281 --------------- --------------- --------------- Increase (decrease) in net assets resulting from operations (224,140,911) (89,162,816) 128,383,482 FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A (1,698,448) -- -- Class B (237,496) -- -- Class C (352,852) -- -- Class Q (1,030,266) -- -- Net realized gain from investments (47,336,342) -- (17,147,337) --------------- --------------- --------------- Total distributions (50,655,404) -- (17,147,337) --------------- --------------- --------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 1,226,761,083 443,296,214 1,305,859,725 Net asset value of shares issued to shareholders in reinvestment of dividends 37,962,104 -- 15,848,417 Net assets received in connection with reorganization (Note 14) -- -- -- --------------- --------------- --------------- 1,264,723,187 443,296,214 1,321,708,142 Cost of shares redeemed (1,302,975,931) (370,749,870) (832,581,584) --------------- --------------- --------------- Net increase (decrease) in net assets derived from capital share transactions (38,252,744) 72,546,344 489,126,558 --------------- --------------- --------------- Net increase (decrease) in net assets (313,049,059) (16,616,472) 600,362,703 NET ASSETS: Beginning of period 701,802,588 718,419,060 118,056,357 --------------- --------------- --------------- End of period $ 388,753,529 $ 701,802,588 $ 718,419,060 =============== =============== =============== Accumulated net investment income (loss) $ (1,288,353) $ (3,454,110) $ -- =============== =============== =============== Pilgrim Emerging Countries Fund ----------------------------------------------- Year Four Year Ended Months Ended Ended October 31, October 31, June 30, 2001 2000 2000 ------------- ------------- ------------- FROM OPERATIONS: Net investment loss $ (161,993) $ (1,024,857) $ (2,952,138) Net realized gain (loss) on investments and foreign currencies (36,773,249) (12,916,101) 39,495,656 Net change in unrealized appreciation (depreciation) of investments and foreign currencies (27,496,017) (33,354,364) (3,851,223) ------------- ------------- ------------- Increase (decrease) in net assets resulting from operations (64,431,259) (47,295,322) 32,692,295 FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A -- -- -- Class B -- -- -- Class C -- -- -- Class Q -- -- -- Net realized gain from investments -- -- -- ------------- ------------- ------------- Total distributions -- -- -- ------------- ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 217,556,814 66,531,341 250,385,738 Net asset value of shares issued to shareholders in reinvestment of dividends -- -- -- Net assets received in connection with reorganization (Note 14) 79,404,743 -- -- ------------- ------------- ------------- 296,961,557 66,531,341 250,385,738 Cost of shares redeemed (304,714,477) (80,132,252) (211,768,273) ------------- ------------- ------------- Net increase (decrease) in net assets derived from capital share transactions (7,752,920) (13,600,911) 38,617,465 ------------- ------------- ------------- Net increase (decrease) in net assets (72,184,179) (60,896,233) 71,309,760 NET ASSETS: Beginning of period 193,597,726 254,493,959 183,184,199 ------------- ------------- ------------- End of period $ 121,413,547 $ 193,597,726 $ 254,493,959 ============= ============= ============= Accumulated net investment income (loss) $ -- $ (58,147) $ -- ============= ============= =============
See Accompanying Notes to Financial Statements 37 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
Pilgrim Global Pilgrim Global Information Communications Fund Technology Fund ------------------------------ ------------------------------ Year Period Year Year Ended Ended Ended Ended October 31, October 31, October 31, October 31, 2001 2000 (1) 2001 2000 ------------- ------------- ------------- ------------- FROM OPERATIONS: Net investment loss $ (712,996) $ (953,958) $ (1,566,741) $ (2,387,470) Net realized gain (loss) on investments and foreign currencies (69,456,713) (8,461,691) (71,523,921) 51,345,417 Net change in unrealized appreciation (depreciation) of investments and foreign currencies 8,667,180 (24,920,890) (34,281,108) (7,560,553) ------------- ------------- ------------- ------------- Increase (decrease) in net assets resulting from operations (61,502,529) (34,336,539) (107,371,770) 41,397,394 FROM DIVIDENDS TO SHAREHOLDERS: Net realized gain from investments -- -- (49,214,503) (3,661,253) ------------- ------------- ------------- ------------- Total distributions -- -- (49,214,503) (3,661,253) ------------- ------------- ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 23,102,759 150,314,667 83,127,198 158,060,941 Net asset value of shares issued to shareholders in reinvestment of dividends -- -- 45,777,717 3,325,715 Net assets received in connection with reorganization (Note 14) -- -- 5,497,157 -- ------------- ------------- ------------- ------------- 23,102,759 150,314,667 134,402,072 161,386,656 Cost of shares redeemed (41,755,847) (20,159,835) (109,727,837) (91,159,037) ------------- ------------- ------------- ------------- Net increase (decrease) in net assets derived from capital share transactions (18,653,088) 130,154,832 24,674,235 70,227,619 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets (80,155,617) 95,818,293 (131,912,038) 107,963,760 NET ASSETS: Beginning of period 95,825,793 7,500 173,373,335 65,409,575 ------------- ------------- ------------- ------------- End of period $ 15,670,176 $ 95,825,793 $ 41,461,297 $ 173,373,335 ============= ============= ============= ============= Accumulated net investment income (loss) $ -- $ -- $ -- $ -- ============= ============= ============= =============
---------- (1) Commenced operations on March 1, 2000. See Accompanying Notes to Financial Statements 38 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
Pilgrim Asia-Pacific Equity Fund Pilgrim European Equity Fund ---------------------------------------------- ---------------------------- Year Four Months Year Year Year Ended Ended Ended Ended Ended October 31, October 31, June 30, October 31, October 31, 2001 2000 2000 2001 2000 ------------ ------------- ------------- ------------ ------------ FROM OPERATIONS: Net investment income (loss) $ (120,471) $ 297,360 $ (325,867) $ (3,029) $ (40,025) Net realized gain (loss) on investments and foreign currencies (2,128,921) (83,184) 7,499,044 (1,255,057) 1,260,197 Net change in unrealized appreciation (depreciation) of investments and foreign currencies (3,198,125) (8,020,905) (5,113,014) (5,758,078) (232,864) ------------ ------------- ------------- ------------ ------------ Increase (decrease) in net assets resulting from operations (5,447,517) (7,806,729) 2,060,163 (7,016,164) 987,308 FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A (134,215) -- -- -- (137,855) Class B (79,361) -- -- -- (2,147) Class C -- -- -- -- (249) Class M (85,615) -- -- -- -- Class X -- -- -- -- (1,176) Net realized gain from investments -- -- -- (1,426,021) (795,703) ------------ ------------- ------------- ------------ ------------ Total distributions (299,191) -- -- (1,426,021) (937,130) ------------ ------------- ------------- ------------ ------------ FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 74,999,492 20,603,558 103,757,205 74,498,593 21,072,178 Net asset value of shares issued to shareholders in reinvestment of dividends 207,237 -- -- 1,425,459 921,727 Net assets received in connection with reorganization (Note 14) 2,738,406 -- -- -- -- ------------ ------------- ------------- ------------ ------------ 77,945,135 20,603,558 103,757,205 75,924,052 21,993,905 Cost of shares redeemed (80,326,072) (21,639,119) (110,675,525) (81,305,974) (18,272,413) ------------ ------------- ------------- ------------ ------------ Net increase (decrease) in net assets derived from capital share transactions (2,380,937) (1,035,561) (6,918,320) (5,381,922) 3,721,492 ------------ ------------- ------------- ------------ ------------ Net increase (decrease) in net assets (8,127,645) (8,842,290) (4,858,157) (13,824,107) 3,771,670 NET ASSETS: Beginning of period 18,860,090 27,702,380 32,560,537 34,135,178 30,363,508 ------------ ------------- ------------- ------------ ------------ End of period $ 10,732,445 $ 18,860,090 $ 27,702,380 $ 20,311,071 $ 34,135,178 ============ ============= ============= ============ ============ Accumulated net investment income (loss) $ -- $ 296,231 $ -- $ -- $ (1,262) ============ ============= ============= ============ ============
See Accompanying Notes to Financial Statements 39 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
Pilgrim Russia Fund -------------------------------------------- Year Ten Months Year Ended Ended Ended October 31, October 31, December 31, 2001 2000 1999 ------------ ------------ ------------ FROM OPERATIONS: Net investment income (loss) $ (267,077) $ (534,377) $ 1,563,372 Net realized gain (loss) on investments and foreign currencies (4,965,985) 8,178,368 (35,464,744) Net change in unrealized appreciation (depreciation) of investments and foreign currencies 10,156,063 (4,834,914) 66,709,158 ------------ ------------ ------------ Increase (decrease) in net assets resulting from operations 4,923,001 2,809,077 32,807,786 FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A -- -- (586,463) ------------ ------------ ------------ Total distributions -- -- (586,463) ------------ ------------ ------------ FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 17,289,158 54,557,755 43,183,175 Net asset value of shares issued to shareholders in reinvestment of dividends -- -- 554,553 Redemption fee proceeds -- 390,342 167,637 Net assets received in connection with reorganization (Note 14) -- -- -- ------------ ------------ ------------ 17,289,158 54,948,097 43,905,365 Cost of shares redeemed (26,829,915) (63,131,621) (36,262,949) ------------ ------------ ------------ Net increase (decrease) in net assets derived from capital share transactions (9,540,757) (8,183,524) 7,642,416 ------------ ------------ ------------ Net increase (decrease) in net assets (4,617,756) (5,374,447) 39,863,739 NET ASSETS: Beginning of period 53,636,552 59,010,999 19,147,260 ------------ ------------ ------------ End of period $ 49,018,796 $ 53,636,552 $ 59,010,999 ============ ============ ============ Accumulated net investment income (loss) $ -- $ -- $ (70,843) ============ ============ ============ Pilgrim Precious Metals Fund -------------------------------------------- Year Ten Months Year Ended Ended Ended October 31, October 31, December 31, 2001 2000 1999 ------------ ------------ ------------ FROM OPERATIONS: Net investment income (loss) $ 355,765 $ 125,474 $ (15,134) Net realized gain (loss) on investments and foreign currencies (11,404,759) (10,512,720) (25,588,891) Net change in unrealized appreciation (depreciation) of investments and foreign currencies 19,399,682 (10,053,228) 32,389,359 ------------ ------------ ------------ Increase (decrease) in net assets resulting from operations 8,350,688 (20,440,474) 6,785,334 FROM DIVIDENDS TO SHAREHOLDERS: Net investment income: Class A (59,614) (15,287) -- ------------ ------------ ------------ Total distributions (59,614) (15,287) -- ------------ ------------ ------------ FROM CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares 21,463,292 15,323,872 31,794,471 Net asset value of shares issued to shareholders in reinvestment of dividends 54,487 13,994 -- Redemption fee proceeds -- -- -- Net assets received in connection with reorganization (Note 14) 14,557,739 -- 17,841,616 ------------ ------------ ------------ 36,075,518 15,337,866 49,636,087 Cost of shares redeemed (23,933,244) (27,268,213) (34,746,635) ------------ ------------ ------------ Net increase (decrease) in net assets derived from capital share transactions 12,142,274 (11,930,347) 14,889,452 ------------ ------------ ------------ Net increase (decrease) in net assets 20,433,348 (32,386,108) 21,674,786 NET ASSETS: Beginning of period 40,129,974 72,516,082 50,841,296 ------------ ------------ ------------ End of period $ 60,563,322 $ 40,129,974 $ 72,516,082 ============ ============ ============ Accumulated net investment income (loss) $ 299,614 $ 49,339 $ 12,833 ============ ============ ============
See Accompanying Notes to Financial Statements 40 FINANCIAL HIGHLIGHTS PILGRIM WORLDWIDE GROWTH FUND -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A ----------------------------------------------------------------------------------- Four Three Year Months Year Months Ended Ended Ended Ended October 31, October 31, June 30, June 30, Year Ended March 31, 2001 2000(5)(6) 2000 1999(1) 1999 1998 1997 ------- ------- ------- ------ ------ ------ ------ Per Share Operating Performance: Net asset value, beginning of period $ 26.36 29.98 23.58 21.39 19.33 16.88 16.57 Income from investment operations: Net investment income (loss) $ (0.11) (0.07) (0.15) -- (0.02) 0.04 (0.16) Net realized and unrealized gain (loss) on investments $ (9.73) (3.55) 9.62 2.19 5.78 5.33 2.20 Total from investment operations $ (9.84) (3.62) 9.47 2.19 5.76 5.37 2.04 Less distributions from: Net investment income $ -- -- -- -- 0.06 -- -- Net realized gain on investments $ 0.77 -- 3.07 -- 3.64 2.92 1.73 Tax return of capital $ 0.30 -- -- -- -- -- -- Total distributions $ 1.07 -- 3.07 -- 3.70 2.92 1.73 Net asset value, end of period $ 15.45 26.36 29.98 23.58 21.39 19.33 16.88 Total Return(2): % (38.80) (12.07) 42.43 10.24 33.56 34.55 12.51 Ratios/Supplemental Data: Net assets, end of period (000's) $ 134,152 246,590 235,341 66,245 49,134 38,647 24,022 Ratios to average net assets: Net expenses after expense reimbursement(recoupment)(3)(4) % 1.85 1.61 1.67 1.75 1.86 1.86 1.85 Gross expenses prior to expense reimbursement(recoupment)(3) % 1.95 1.61 1.67 1.75 2.02 2.21 2.17 Net investment loss after expense reimbursement(recoupment)(3)(4) % (0.65) (0.71) (0.79) (0.03) (0.62) (0.69) (0.93) Portfolio turnover rate % 302 71 169 57 247 202 182 Class B ----------------------------------------------------------------------------------- Four Three Year Months Year Months Ended Ended Ended Ended October 31, October 31, June 30, June 30, Year Ended March 31, 2001 2000(5)(6) 2000 1999(1) 1999 1998 1997 ------- ------- ------- ------ ------ ------ ------ Per Share Operating Performance: Net asset value, beginning of period $ 29.52 33.66 26.64 24.21 20.10 16.02 14.34 Income from investment operations: Net investment income (loss) $ (0.31) (0.15) (0.28) (0.03) (0.08) (0.17) (0.14) Net realized and unrealized gain (loss) on investments $ (10.82) (3.99) 10.76 2.46 6.25 5.44 1.82 Total from investment operations $ (11.13) (4.14) 10.48 2.43 6.17 5.27 1.68 Less distributions from: Net investment income $ -- -- -- -- 0.01 -- -- Net realized gain on investments $ 0.86 -- 3.46 -- 2.05 1.19 -- Tax return of capital $ 0.34 -- -- -- -- -- -- Total distributions $ 1.20 -- 3.46 -- 2.06 1.19 -- Net asset value, end of period $ 17.19 29.52 33.66 26.64 24.21 20.10 16.02 Total Return(2): % (39.19) (12.27) 41.54 10.04 32.74 34.03 11.72 Ratios/Supplemental Data: Net assets, end of period (000's) $ 71,943 126,756 130,988 27,938 18,556 10,083 5,942 Ratios to average net assets: Net expenses after expense reimbursement(recoupment)(3)(4) % 2.51 2.26 2.32 2.40 2.51 2.51 2.50 Gross expenses prior to expense reimbursement(recoupment)(3) % 2.61 2.26 2.32 2.40 2.67 2.70 4.81 Net investment loss after expense reimbursement(recoupment)(3)(4) % (1.31) (1.37) (1.44) (0.68) (1.31) (1.37) (1.62) Portfolio turnover rate % 302 71 169 57 247 202 182 Class C ----------------------------------------------------------------------------------- Four Three Year Months Year Months Ended Ended Ended Ended October 31, October 31, June 30, June 30, Year Ended March 31, 2001 2000(5)(6) 2000 1999(1) 1999 1998 1997 ---- ---------- ---- ------- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 26.26 29.92 23.69 21.52 19.05 16.92 16.76 Income from investment operations: Net investment loss $ (0.40) (0.13) (0.33) (0.04) (0.20) (0.19) (0.28) Net realized and unrealized gain (loss) on investments $ (9.50) (3.53) 9.65 2.21 5.83 5.41 2.23 Total from investment operations $ (9.90) (3.66) 9.32 2.17 5.63 5.22 1.95 Less distributions from: Net investment income $ -- -- -- -- 0.01 -- -- Net realized gain on investments $ 0.77 -- 3.09 -- 3.15 3.09 1.79 Tax return of capital $ 0.30 -- -- -- -- -- -- Total distributions $ 1.07 -- 3.09 -- 3.16 3.09 1.79 Net asset value, end of period $ 15.29 26.26 29.92 23.69 21.52 19.05 16.92 Total Return(2): % (39.20) (12.23) 41.48 10.08 32.73 33.72 11.81 Ratios/Supplemental Data: Net assets, end of period (000's) $ 102,919 213,843 239,432 111,250 98,470 84,292 70,345 Ratios to average net assets: Net expenses after expense reimbursement(recoupment)(3)(4) % 2.51 2.26 2.32 2.40 2.51 2.51 2.50 Gross expenses prior to expense reimbursement(recoupment)(3) % 2.60 2.26 2.32 2.40 2.67 2.77 2.61 Net investment loss after expense reimbursement (recoupment)(3)(4) % (1.30) (1.37) (1.44) (0.68) (1.28) (1.34) (1.57) Portfolio turnover rate % 302 71 169 57 247 202 182
---------- (1) Effective May 24, 1999, ING Pilgrim Investments, LLC. became the Investment Manager of the Fund, concurrently Nicholas-Applegate Capital Management was appointed as sub-advisor and the Fund changed its fiscal year-end to June 30. (2) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. (4) The Investment Manager has agreed to limit expenses excluding interest, taxes, brokerage and extraordinary expenses, subject to possible reimbursement to ING Pilgrim Investments, LLC within three years. (5) Effective October 1, 2000, ING Pilgrim Investments, LLC became the Investment Manager of the Fund, replacing Nicholas-Applegate Capital Management. (6) The Fund changed its fiscal year-end from June 30 to October 31. See Accompanying Notes to Financial Statements 41 PILGRIM INTERNATIONAL VALUE FUND FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A ------------------------------------------------------ Year Ended October 31, 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 16.68 14.75 11.88 10.90 9.05 Income from investment operations: Net investment income (loss) $ 0.11 0.15 0.08 0.11 (0.09) Net realized and unrealized gain (loss) on investments $ (2.44) 2.58 3.58 0.96 2.30 Total from investment operations $ (2.33) 2.73 3.66 1.07 2.21 Less distributions from: Net investment income $ 0.14 0.11 0.12 -- 0.14 Net realized gain on investments $ 1.88 0.69 0.67 0.09 0.22 Total distributions $ 2.02 0.80 0.79 0.09 0.36 Net asset value, end of period $ 12.33 16.68 14.75 11.88 10.90 Total Return(2): % (15.89) 18.56 32.55 9.86 27.59 Ratios/Supplemental Data: Net assets, end of period (000's) $ 1,195,760 920,591 451,815 211,018 60,539 Ratios to average net assets: Net expenses after expense reimbursement (3)(4) % 1.67 1.64 1.68 1.74 1.80 Gross expenses prior to expense reimbursement(3) % 1.67 1.64 1.68 1.74 2.07 Net investment income (loss) after expense reimbursement(3)(4) % 0.88 1.14 0.92 1.62 0.46 Portfolio turnover rate % 15 34 29 32 26 Class B ------------------------------------------------------- Year Ended October 31, 2001 2000 1999 1998 1997(1) ---- ---- ---- ---- ------- Per Share Operating Performance: Net asset value, beginning of period $ 16.43 14.57 11.76 10.87 10.00 Income from investment operations: Net investment income (loss) $ 0.02 0.07 0.01 0.07 (0.02) Net realized and unrealized gain (loss) on investments $ (2.41) 2.51 3.51 0.91 0.89 Total from investment operations $ (2.39) 2.58 3.52 0.98 0.87 Less distributions from: Net investment income $ 0.03 0.03 0.04 -- -- Net realized gain on investments $ 1.88 0.69 0.67 0.09 -- Total distributions $ 1.91 0.72 0.71 0.09 -- Net asset value, end of period $ 12.13 16.43 14.57 11.76 10.87 Total Return(2): % (16.48) 17.69 31.55 9.16 8.70 Ratios/Supplemental Data: Net assets, end of period (000's) $ 421,884 437,765 278,871 145,976 59,185 Ratios to average net assets: Net expenses after expense reimbursement (3)(4) % 2.37 2.34 2.41 2.47 2.50 Gross expenses prior to expense reimbursement(3) % 2.37 2.34 2.41 2.47 2.58 Net investment income (loss) after expense reimbursement(3)(4) % 0.16 0.45 0.18 0.69 (0.71) Portfolio turnover rate % 15 34 29 32 26 Class C ----------------------------------------------------- Year Ended October 31, 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 16.41 14.55 11.75 10.86 8.93 Income from investment operations: Net investment income (loss) $ 0.02 0.07 -- 0.06 (0.06) Net realized and unrealized gain (loss) on investments $ (2.41) 2.52 3.51 0.92 2.20 Total from investment operations $ (2.39) 2.59 3.51 0.98 2.14 Less distributions from: Net investment income $ 0.04 0.04 0.04 -- 0.04 Net realized gain on investments $ 1.88 0.69 0.67 0.09 0.17 Total distributions $ 1.92 0.73 0.71 0.09 0.21 Net asset value, end of period $ 12.10 16.41 14.55 11.75 10.86 Total Return(2): % (16.52) 17.76 31.50 9.07 25.92 Ratios/Supplemental Data: Net assets, end of period (000's) $ 603,229 605,678 310,227 137,651 62,103 Ratios to average net assets: Net expenses after expense reimbursement (3)(4) % 2.37 2.34 2.41 2.47 2.50 Gross expenses prior to expense reimbursement(3) % 2.37 2.34 2.41 2.47 2.74 Net investment income (loss) after expense reimbursement(3)(4) % 0.16 0.46 0.19 0.68 (0.23) Portfolio turnover rate % 15 34 29 32 26
---------- (1) Class B commenced operations on April 17, 1997. (2) Total return is calculated assuming reinvestment of all dividends and capital gains distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. (4) Expenses calculated net of advisor reimbursement See Accompanying Notes to Financial Statements 42 FINANCIAL HIGHLIGHTS PILGRIM INTERNATIONAL FUND -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A ----------------------------------------------------------------- Year Ten Months Ended Ended October 31, October 31, Year Ended December 31, 2001 2000(4)(6) 1999 1998 1997 1996 ---- ---------- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 11.22 13.45 11.61 10.10 10.86 10.60 Income from investment operations: Net investment income (loss) $ (0.05) 0.19 (0.01) 0.17 0.07 (0.02) Net realized and unrealized gain (loss) on investments $ (2.14) (1.48) 5.46 1.74 0.10 1.45 Total from investment operations $ (2.19) (1.29) 5.45 1.91 0.17 1.43 Less distributions from: Net investment income $ -- 0.86 0.03 0.06 0.13 0.20 Net realized gain on investments $ 0.94 0.08 3.58 0.34 0.80 0.97 Total distributions $ 0.94 0.94 3.61 0.40 0.93 1.17 Net asset value, end of period $ 8.09 11.22 13.45 11.61 10.10 10.86 Total Return(2): % (21.38) (10.22) 47.85 19.02 1.61 13.57 Ratios/Supplemental Data: Net assets, end of period (000's) $ 37,489 30,653 25,304 24,000 19,949 18,891 Ratios to average net assets: Net expenses after expense reimbursement(3)(5) % 2.51 2.23 1.98 1.75 1.75 2.45 Gross expenses prior to expense reimbursement(3) % 2.51 2.23 1.98 2.25 2.15 2.45 Net investment income (loss) after expense reimbursement(3)(5) % (0.74) (0.23) (0.21) 0.35 0.53 (0.39) Portfolio turnover rate % 169 113 144 144 123 114 Class B Class C ------------------------- ------------------------- Year August 22, Year September 15, Ended 2000(1) to Ended 2000(1) to October 31, October 31, October 31, October 31, 2001 2000(4) 2001 2000(4) ---- ------- ---- ------- Per Share Operating Performance: Net asset value, beginning of period $ 11.19 12.28 11.21 11.67 Income from investment operations: Net investment income (loss) $ (0.62) (0.05) (0.62) (0.04) Net realized and unrealized gain (loss) on investments $ (1.60) (1.04) (1.63) (0.42) Total from investment operations $ (2.22) (1.09) (2.25) (0.46) Less distributions from: Net investment income $ -- -- -- -- Net realized gain on investments $ 0.94 -- 0.94 -- Total distributions $ 0.94 -- 0.94 -- Net asset value, end of period $ 8.03 11.19 8.02 11.21 Total Return(2): % (21.74) (8.88) (21.98) (3.94) Ratios/Supplemental Data: Net assets, end of period (000's) $ 1,961 80 1,514 85 Ratios to average net assets: Net expenses after expense reimbursement(3)(5) % 3.32 2.76 3.31 2.96 Gross expenses prior to expense reimbursement(3) % 3.32 2.76 3.31 2.96 Net investment income (loss) after expense reimbursement(3)(5) % (1.40) (7.02) (1.46) (3.97) Portfolio turnover rate % 169 113 169 113
---------- (1) Commencement of offering of shares. (2) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. (4) The Fund changed its fiscal year-end from December 31 to October 31. (5) The Investment Manager has agreed to limit expenses excluding interest, taxes, brokerage and extraordinary expenses. (6) Effective July 26, 2000 Pilgrim Investments, LLC became the Investment Manager of the Fund. See Accompanying Notes to Financial Statements 43 PILGRIM INTERNATIONAL CORE GROWTH FUND FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A -------------------------------------------------------------------------------- Four Three Year Months Year Months February 28, Ended Ended Ended Ended 1997(1) to Oct. 31, Oct. 31, June 30, June 30, Year Ended March 31, March 31, 2001 2000(6)(7) 2000 1999(2) 1999 1998 1997 ---- ---------- ---- ------- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 20.92 23.84 18.92 17.71 17.01 12.73 12.50 Income from investment operations: Net investment income (loss) $ (0.13) (0.03) (0.17) 0.04 (0.01) (0.02) -- Net realized and unrealized gain (loss) on investments $ (5.07) (2.89) 6.25 1.17 1.02 4.56 0.23 Total from investment operations $ (5.20) (2.92) 6.08 1.21 1.01 4.54 0.23 Less distributions from: Net investment income $ 0.41 -- -- -- 0.18 -- -- Net realized gain on investments $ 1.04 -- 1.16 -- 0.13 0.26 -- Total distributions $ 1.45 -- 1.16 -- 0.31 0.26 -- Net asset value, end of period $ 14.27 20.92 23.84 18.92 17.71 17.01 12.73 Total Return(3): % (26.56) (12.25) 32.83 6.83 5.90 36.10 1.76 Ratios/Supplemental Data: Net assets, end of period (000's) $ 8,707 23,588 23,003 12,409 21,627 12,664 2 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 1.94 1.76 1.85 1.77 1.89 1.96 1.95 Gross expenses prior to expense reimbursement(4) % 2.20 1.90 2.16 1.86 2.13 3.02 4,579.78 Net investment income (loss) after expense reimbursement(4)(5) % (0.59) (0.48) (0.83) 0.50 (0.51) (0.45) -- Portfolio turnover rate % 198 73 200 67 214 274 76 Class B -------------------------------------------------------------------------------- Four Three Year Months Year Months February 28, Ended Ended Ended Ended 1997(1) to Oct. 31, Oct. 31, June 30, June 30, Year Ended March 31, March 31, 2001 2000(6)(7) 2000 1999(2) 1999 1998 1997 ---- ---------- ---- ------- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 20.88 23.83 19.08 17.89 17.10 12.68 12.50 Income from investment operations: Net investment income (loss) $ (0.27) (0.09) (0.30) -- (0.16) (0.11) -- Net realized and unrealized gain (loss) on investments $ (5.05) (2.86) 6.21 1.19 1.05 4.66 0.18 Total from investment operations $ (5.32) (2.95) 5.91 1.19 0.89 4.55 0.18 Less distributions from: Net investment income $ 0.32 -- -- -- 0.03 -- -- Net realized gain on investments $ 1.04 -- 1.16 -- 0.07 0.13 -- Total distributions $ 1.36 -- 1.16 -- 0.10 0.13 -- Net asset value, end of period $ 14.20 20.88 23.83 19.08 17.89 17.10 12.68 Total Return(3): % (27.14) (12.38) 31.62 6.65 5.24 35.31 1.44 Ratios/Supplemental Data: Net assets, end of period (000's) $ 11,620 19,116 21,543 12,034 11,033 7,942 1 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 2.62 2.41 2.50 2.36 2.53 2.61 2.59 Gross expenses prior to expense reimbursement(4) % 2.88 2.56 2.81 2.45 2.77 3.04 16,000.25 Net investment income (loss) after expense reimbursement(4)(5) % (1.27) (1.16) (1.48) (0.09) (1.13) (1.32) -- Portfolio turnover rate % 198 73 200 67 214 274 76 Class C ------------------------------------------------------------------------------------ Four Three Year Months Year Months February 28, Ended Ended Ended Ended 1997(1) to October 31, October 31, June 30, June 30, Year Ended March 31, March 31, 2001 2000(6)(7) 2000 1999(2) 1999 1998 1997 ---- ---------- ---- ------- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 20.96 23.93 19.14 17.94 17.16 12.68 12.50 Income from investment operations: Net investment loss $ (0.28) (0.08) (0.27) -- (0.05) (0.07) -- Net realized and unrealized gain (loss) on investments $ (5.06) (2.89) 6.22 1.20 0.94 4.55 0.18 Total from investment operations $ (5.34) (2.97) 5.95 1.20 0.89 4.48 0.18 Less distributions from: Net investment income $ 0.33 -- -- -- 0.11 -- -- Net realized gain on investments $ 1.05 -- 1.16 -- -- -- -- Total distributions $ 1.38 -- 1.16 -- 0.11 -- -- Net asset value, end of period $ 14.24 20.96 23.93 19.14 17.94 17.16 12.68 Total Return(3): % (27.15) (12.41) 31.73 6.69 5.22 35.25 1.44 Ratios/Supplemental Data: Net assets, end of period (000's) $ 13,213 25,501 26,734 11,936 10,400 3,517 43 Ratios to average net assets: Net expenses after expense reimbursement(4)(5) % 2.61 2.41 2.50 2.36 2.55 2.61 2.41 Gross expenses prior to expense reimbursement(4) % 2.87 2.56 2.81 2.45 2.79 5.10 25.55 Net investment income (loss) after expense reimbursement(4)(5) % (1.20) (1.16) (1.48) (0.09) (1.19) (1.27) (0.07) Portfolio turnover rate % 198 73 200 67 214 274 76
---------- (1) Commencement of operations. (2) Effective May 24, 1999, ING Pilgrim Investments, LLC became the Investment Manager of the Fund, concurrently Nicholas-Applegate Capital Management was appointed as sub-advisor and the Fund changed its fiscal year-end to June 30. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses, excluding, interest, taxes, brokerage and extraordinary expenses, subject to possible reimbursement to ING Pilgrim Investments, LLC within three years. (6) Effective October 1, 2000, ING Pilgrim Investments, LLC became the Investment Manager of the Fund, replacing Nicholas-Applegate Capital Management. (7) The Fund changed its fiscal year-end from June 30 to October 31. See Accompanying Notes to Financial Statements FINANCIAL HIGHLIGHTS PILGRIM INTERNATIONAL SMALLCAP GROWTH FUND -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A ---------------------------------------------------------------------------------- Four Three Year Months Year Months Ended Ended Ended Ended October 31, October 31, June 30, June 30, Year Ended March 31, 2001 2000(1) 2000 1999(2) 1999 1998 1997 ---- ------- ---- ------- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 36.08 40.94 23.80 21.03 19.29 14.92 13.15 Income from investment operations: Net investment income (loss) $ (0.11) (0.10) (0.18) (0.03) 0.02 (0.15) 0.04 Net realized and unrealized gain (loss) on investments $ (11.39) (4.76) 19.38 2.80 3.21 5.36 1.88 Total from investment operations $ (11.50) (4.86) 19.20 2.77 3.23 5.21 1.92 Less distributions from: Net investment income $ 0.24 -- -- -- -- -- 0.01 Net realized gain on investments $ 2.49 -- 2.06 -- 1.49 0.84 0.14 Total distributions $ 2.73 -- 2.06 -- 1.49 0.84 0.15 Net asset value, end of period $ 21.85 36.08 40.94 23.80 21.03 19.29 14.92 Total Return(3): % (34.30) (11.90) 82.89 13.17 17.26 36.31 14.67 Ratios/Supplemental Data: Net assets, end of period (000's) $ 153,804 273,393 278,480 37,490 25,336 11,183 5,569 Ratios to average net assets: Net expenses after expense reimbursement (recoupment)(4)(5) % 1.83 1.67 1.67 1.84 1.94 1.96 1.95 Gross expenses prior to expense reimbursement (recoupment)(4) % 1.83 1.67 1.67 1.86 2.08 2.75 3.76 Net investment loss after expense reimbursement (recoupment)(4)(5) % (0.33) (0.80) (0.76) (0.69) (0.82) (1.56) (1.05) Portfolio turnover rate % 143 56 164 44 146 198 206 Class B ---------------------------------------------------------------------------------- Four Three Year Months Year Months Ended Ended Ended Ended October 31, October 31, June 30, June 30, Year Ended March 31, 2001 2000(1) 2000 1999(2) 1999 1998 1997 ---- ------- ---- ------- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 38.05 43.27 25.33 22.43 20.16 15.89 13.96 Income from investment operations: Net investment income (loss) $ (0.32) (0.20) (0.37) (0.07) (0.20) (0.15) (0.15) Net realized and unrealized gain (loss) on investments $ (11.98) (5.02) 20.50 2.97 3.46 5.56 2.09 Total from investment operations $ (12.30) (5.22) 20.13 2.90 3.26 5.41 1.94 Less distributions from: Net investment income $ 0.07 -- -- -- -- -- 0.01 Net realized gain on investments $ 2.62 -- 2.19 -- 0.99 1.14 -- Total distributions $ 2.69 -- 2.19 -- 0.99 1.14 0.01 Net asset value, end of period $ 23.06 38.05 43.27 25.33 22.43 20.16 15.89 Total Return(3): % (34.59) (12.05) 81.63 12.93 16.55 35.73 13.96 Ratios/Supplemental Data: Net assets, end of period (000's) $ 74,541 126,861 132,028 19,331 16,158 12,033 5,080 Ratios to average net assets: Net expenses after expense reimbursement (recoupment)(4)(5) % 2.48 2.32 2.32 2.49 2.59 2.61 2.60 Gross expenses prior to expense reimbursement (recoupment)(4) % 2.48 2.32 2.32 2.51 2.73 2.98 4.89 Net investment loss after expense reimbursement (recoupment)(4)(5) % (0.98) (1.46) (1.41) (1.34) (1.45) (2.20) (1.66) Portfolio turnover rate % 143 56 164 44 146 198 206 Class C --------------------------------------------------------------------------------- Four Three Year Months Year Months Ended Ended Ended Ended October 31, October 31, June 30, June 30, Year Ended March 31, 2001 2000(1) 2000 1999(2) 1999 1998 1997 ---- ------- ---- ------- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 34.93 39.71 23.34 20.60 18.53 14.87 13.05 Income from investment operations: Net investment loss $ (0.38) (0.18) (0.31) (0.06) (0.10) (0.11) (0.16) Net realized and unrealized gain (loss) on investments $ (10.91) (4.60) 18.69 2.80 3.09 5.09 1.98 Total from investment operations $ (11.29) (4.78) 18.38 2.74 2.99 4.98 1.82 Less distributions from: Net investment income $ 0.09 -- -- -- -- -- -- Net realized gain on investments $ 2.41 -- 2.01 -- 0.92 1.32 -- Total distributions $ 2.50 -- 2.01 -- 0.92 1.32 -- Net asset value, end of period $ 21.14 34.93 39.71 23.34 20.60 18.53 14.87 Total Return(3): % (34.62) (12.04) 80.89 13.31 16.55 35.63 13.98 Ratios/Supplemental Data: Net assets, end of period (000's) $ 69,320 136,830 144,068 18,354 13,226 8,014 3,592 Ratios to average net assets: Net expenses after expense reimbursement (recoupment)(4)(5) % 2.48 2.32 2.32 2.49 2.59 2.61 2.60 Gross expenses prior to expense reimbursement (recoupment)(4) % 2.48 2.32 2.32 2.51 2.73 3.38 3.95 Net investment loss after expense reimbursement (recoupment)(4)(5) % (0.98) (1.46) (1.41) (1.34) (1.45) (2.18) (1.67) Portfolio turnover rate % 143 56 164 44 146 198 206
---------- (1) The Fund changed its fiscal year-end from June 30 to October 31. (2) Effective May 24, 1999, ING Pilgrim Investments, LLC became the Investment Manager of the Fund, concurrently Nicholas-Applegate Capital Management was appointed as sub-advisor and the Fund changed its fiscal year-end to June 30. (3) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (4) Annualized for periods less than one year. (5) The Investment Manager has agreed to limit expenses excluding interest, taxes, brokerage and extraordinary expenses, subject to possible reimbursement to ING Pilgrim Investments, LLC within three years. See Accompanying Notes to Financial Statements 45 FINANCIAL HIGHLIGHTS PILGRIM EMERGING COUNTRIES FUND -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A ------------------------------------------------------------------------------- Four Three Year Months Year Months Ended Ended Ended Ended October 31, October 31, June 30, June 30, Year Ended March 31, 2001 2000(5)(6) 2000 1999(1) 1999 1998 1997 ---- ---------- ---- ------- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 16.33 20.17 16.74 13.43 17.39 17.20 14.03 Income from investment operations: Net investment income (loss) $ (0.02) (0.24) (0.20) (0.05) (0.06) 0.03 (0.06) Net realized and unrealized gain (loss) on investments (net of Indian tax) $ (4.44) (3.60) 3.63 3.36 (3.81) 1.22 3.51 Total from investment operations $ (4.46) (3.84) 3.43 3.31 (3.87) 1.25 3.45 Less distributions from: Net investment income $ -- -- -- -- 0.02 -- -- Net realized gain on investments $ -- -- -- -- 0.07 1.06 0.28 Total distributions $ -- -- -- -- 0.09 1.06 0.28 Net asset value, end of period $ 11.87 16.33 20.17 16.74 13.43 17.39 17.20 Total Return(2): % (27.31) (19.04) 20.49 24.65 (22.23) 8.06 24.79 Ratios/Supplemental Data: Net assets, end of period (000's) $ 67,247 59,541 75,311 53,483 47,180 71,014 38,688 Ratios to average net assets: Net expenses after expense reimbursement(3)(4) % 2.32 2.23 2.19 2.13 2.27 2.26 2.25 Gross expenses prior to expense reimbursement(3) % 2.33 2.38 2.34 2.66 2.56 2.48 3.08 Net investment income (loss) after expense reimbursement(3)(4) % (0.16) (1.31) (1.15) (1.30) (0.25) 0.55 (1.14) Portfolio turnover rate % 74 94 211 67 213 243 176 Class B ------------------------------------------------------------------------------- Four Three Year Months Year Months Ended Ended Ended Ended October 31, October 31, June 30, June 30, Year Ended March 31, 2001 2000(5)(6) 2000 1999(1) 1999 1998 1997 ---- ---------- ---- ------- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 16.41 20.30 16.98 13.64 17.64 17.29 14.02 Income from investment operations: Net investment income (loss) $ (0.11) (0.23) (0.35) (0.07) (0.22) (0.07) (0.11) Net realized and unrealized gain (loss) on investments (net of Indian tax) $ (4.45) (3.66) 3.67 3.41 (3.70) 1.26 3.47 Total from investment operations $ (4.56) (3.89) 3.32 3.34 (3.92) 1.19 3.36 Less distributions from: Net investment income $ -- -- -- -- -- -- -- Net realized gain on investments $ -- -- -- -- 0.08 0.84 0.09 Total distributions $ -- -- -- -- 0.08 0.84 0.09 Net asset value, end of period $ 11.85 16.41 20.30 16.98 13.64 17.64 17.29 Total Return(2): % (27.79) (19.16) 19.55 24.49 (22.23) 7.47 24.00 Ratios/Supplemental Data: Net assets, end of period (000's) $ 14,637 22,707 30,322 26,342 22,338 38,796 24,558 Ratios to average net assets: Net expenses after expense reimbursement(3)(4) % 2.99 2.98 2.84 2.75 2.91 2.91 2.90 Gross expenses prior to expense reimbursement(3) % 3.00 3.12 2.99 3.28 3.20 3.06 3.66 Net investment income (loss) after expense reimbursement(3)(4) % (0.72) (1.01) (1.80) (1.92) (0.80) (0.20) (1.77) Portfolio turnover rate % 74 94 211 67 213 243 176 Class C -------------------------------------------------------------------------------- Four Three Year Month Year Months Ended Ended Ended Ended October 31, October 31, June 30, June 30, Year Ended March 31, 2001 2000(5)(6) 2000 1999(1) 1999 1998 1997 ---- ---------- ---- ------- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 15.81 19.56 16.35 13.14 16.98 16.81 13.71 Income from investment operations: Net investment loss $ (0.12) (0.22) (0.32) (0.07) (0.27) (0.12) (0.10) Net realized and unrealized gain (loss) on investments (net of Indian tax) $ (4.28) (3.53) 3.53 3.28 (3.49) 1.26 3.37 Total from investment operations $ (4.40) (3.75) 3.21 3.21 (3.76) 1.14 3.27 Less distributions from: Net investment income $ -- -- -- -- -- -- -- Net realized gain on investments $ -- -- -- -- 0.08 0.97 0.17 Total distributions $ -- -- -- -- 0.08 0.97 0.17 Net asset value, end of period $ 11.41 15.81 19.56 16.35 13.14 16.98 16.81 Total Return(2): % (27.83) (19.17) 19.63 24.43 (22.21) 7.47 23.94 Ratios/Supplemental Data: Net assets, end of period (000's) $ 12,746 22,456 29,610 24,230 19,246 36,986 29,376 Ratios to average net assets: Net expenses after expense reimbursement(3)(4) % 2.99 2.98 2.84 2.75 2.90 2.91 2.90 Gross expenses prior to expense reimbursement(3) % 3.00 3.09 2.99 3.28 3.19 3.09 3.12 Net investment loss after expense reimbursement(3)(4) % (0.73) (0.95) (1.80) (1.92) (0.77) (0.26) (1.75) Portfolio turnover rate % 74 94 211 67 213 243 176
---------- (1) Effective May 24, 1999, ING Pilgrim Investments, LLC became the Investment Manager of the Fund, concurrently Nicholas-Applegate Capital Management was appointed as sub-advisor and the Fund changed its fiscal year-end to June 30. (2) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. (4) The Investment Manager has agreed to limit expenses excluding interest, taxes, brokerage and extraordinary expenses, subject to possible reimbursement to ING Pilgrim Investments, LLC within three years. (5) Effective October 1, 2000, ING Pilgrim Investments, LLC became the Investment Manager of the Fund, replacing Nicholas-Applegate Capital Management. (6) The Fund changed its fiscal year-end from June 30 to October 31. See Accompanying Notes to Financial Statements 46 FINANCIAL HIGHLIGHTS PILGRIM GLOBAL COMMUNICATIONS FUND -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A Class B Class C ------------------------ ------------------------ ------------------------ Year Period Year Period Year Period Ended Ended Ended Ended Ended Ended October 31, October 31, October 31, October 31, October 31, October 31, 2001(5) 2000(1) 2001(5) 2000(1) 2001(5) 2000(1) ------- ------- ------- ------- ------- ------- Per Share Operating Performance: Net asset value, beginning of period $ 7.30 10.00 7.27 10.00 7.28 10.00 Income from investment operations: Net investment loss $ (0.07) (0.06) (0.09) (0.09) (0.09) (0.09) Net realized and unrealized loss on investments $ (5.49) (2.64) (5.46) (2.64) (5.47) (2.63) Total from investment operations $ (5.56) (2.70) (5.55) (2.73) (5.56) (2.72) Net asset value, end of period $ 1.74 7.30 1.72 7.27 1.72 7.28 Total Return(2) % (76.16) (27.00) (76.34) (27.30) (76.37) (27.20) Ratios/Supplemental Data: Net assets, end of period (000's) $ 8,107 55,459 6,145 31,035 1,419 7,603 Ratios to average net assets: Net expenses after expense reimbursement (3)(4) % 1.59 1.37 2.30 2.01 2.30 2.01 Gross expenses prior to expense reimbursement(3) % 2.24 2.56 2.98 2.81 2.99 2.81 Net investment loss after expense reimbursement(3)(4) % (1.45) (1.02) (2.16) (1.67) (2.16) (1.68) Portfolio turnover rate % 118 60 118 60 118 60
---------- (1) The Fund commenced operations on March 1, 2000. (2) Total return is calculated assuming reinvestment of all dividend and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. (4) The Investment Manager has agreed to limit expenses excluding interest, taxes, brokerage and extraordinary expenses. (5) Effective April 30, 2001, ING Pilgrim Investments, LLC became the Investment Manager of the Fund. See Accompanying Notes to Financial Statements 47 FINANCIAL HIGHLIGHTS PILGRIM GLOBAL INFORMATION TECHNOLOGY FUND -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A Class B -------------------------------- ------------------------------- Year Ended October 31, Year Ended October 31, 2001(5) 2000 1999(1) 2001(5) 2000 1999(1) ------- ---- ------- ------- ---- ------- Per Share Operating Performance: Net asset value, beginning of period $ 26.62 17.38 10.00 26.33 17.28 10.00 Income from investment operations: Net investment loss $ (0.18) (0.33) (0.13) (0.27) (0.41) (0.08) Net realized and unrealized gain (loss) on investments $ (13.05) 10.41 7.51 (12.81) 10.30 7.36 Total from investment operations $ (13.23) 10.08 7.38 (13.08) 9.89 7.28 Less distributions from: Net realized gain on investments $ 7.62 0.84 -- 7.62 0.84 -- Total distributions $ 7.62 0.84 -- 7.62 0.84 -- Net asset value, end of period $ 5.77 26.62 17.38 5.63 26.33 17.28 Total Return(2) % (67.57) 58.61 73.80 (67.81) 57.82 72.80 Ratios/Supplemental Data: Net assets, end of period (000's) $ 25,359 108,763 54,798 11,726 37,915 5,964 Ratios to average net assets: Net expenses after expense reimbursement(3)(4) % 1.83 1.53 1.57 2.54 2.17 2.25 Gross expenses prior to expense reimbursement(3) % 2.47 2.65 2.95 3.16 2.89 3.22 Net investment loss after expense reimbursement(3)(4) % (1.66) (1.30) (1.29) (2.44) (1.94) (2.04) Portfolio turnover rate % 126 77 57 126 77 57 Class C -------------------------------- Year Ended October 31, 2001(5) 2000 1999(1) ------- ---- ------- Per Share Operating Performance: Net asset value, beginning of period $ 26.32 17.28 10.00 Income from investment operations: Net investment loss $ (0.26) (0.42) (0.05) Net realized and unrealized gain (loss) on investments $ (12.83) 10.30 7.33 Total from investment operations $ (13.09) 9.88 7.28 Less distributions from: Net realized gain on investments $ 7.62 0.84 -- Total distributions $ 7.62 0.84 -- Net asset value, end of period $ 5.61 26.32 17.28 Total Return(2) % (67.90) 57.77 72.80 Ratios/Supplemental Data: Net assets, end of period (000's) $ 4,376 18,486 2,102 Ratios to average net assets: Net expenses after expense reimbursement(3)(4) % 2.54 2.17 2.24 Gross expenses prior to expense reimbursement(3) % 3.16 2.89 3.20 Net investment loss after expense reimbursement(3)(4) % (2.33) (1.94) (2.05) Portfolio turnover rate % 126 77 57
---------- (1) The Fund commenced operations on December 15, 1998. (2) Total return is calculated assuming reinvestment of all dividend and capital gain distribution at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. (4) The Investment Manager has agreed to limit expenses excluding interest, taxes, brokerage and extraordinary expenses. (5) Effective April 30, 2001, ING Pilgrim Investments LLC became the Investment Manager of the Fund. See Accompanying Notes to Financial Statements 48 FINANCIAL HIGHLIGHTS PILGRIM ASIA-PACIFIC EQUITY FUND -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A ------------------------------------------------------------------- Four Year Months Ended Ended October 31, October 31, Year Ended June 30, 2001 2000(4) 2000 1999 1998 1997 ---- ------- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 4.99 7.23 7.22 4.46 10.93 10.35 Income from investment operations: Net investment income (loss) $ (0.01) 0.08 (0.05) -- 0.03 0.02 Net realized and unrealized gain (loss) on investments $ (1.64) (2.32) 0.06 2.76 (6.50) 0.58 Total from investment operations $ (1.65) (2.24) 0.01 2.76 (6.47) 0.60 Less distributions from: Net investment income $ 0.09 -- -- -- -- -- Tax return of capital $ -- -- -- -- -- 0.02 Total distributions $ 0.09 -- -- -- -- 0.02 Net asset value, end of period $ 3.25 4.99 7.23 7.22 4.46 10.93 Total Return(1): % (33.64) (30.98) 0.14 61.88 (59.29) 5.78 Ratios/Supplemental Data: Net assets, end of period (000's) $ 5,740 8,471 11,726 14,417 11,796 32,485 Ratios to average net assets: Net expenses after expense reimbursement(2)(3) % 2.30 2.05 2.11 2.00 2.00 2.00 Gross expenses prior to expense reimbursement(2) % 3.42 2.71 2.55 2.98 2.80 2.54 Net investment income (loss) after expense reimbursement(2)(3) % (0.42) 4.28 (0.56) 0.01 0.38 0.00 Portfolio turnover rate % 26 13 138 111 81 38 Class B ------------------------------------------------------------------ Four Year Months Ended Ended October 31, October 31, Year Ended June 30, 2001 2000(4) 2000 1999 1998 1997 ---- ------- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 4.80 6.97 7.02 4.37 10.83 10.31 Income from investment operations: Net investment income (loss) $ (0.10) 0.07 (0.11) (0.04) (0.03) (0.07) Net realized and unrealized gain (loss) on investments $ (1.51) (2.24) 0.06 2.69 (6.43) 0.59 Total from investment operations $ (1.61) (2.17) (0.05) 2.65 (6.46) 0.52 Less distributions from: Net investment income $ 0.05 -- -- -- -- -- Tax return of capital $ -- -- -- -- -- -- Total distributions $ 0.05 -- -- -- -- -- Net asset value, end of period $ 3.14 4.80 6.97 7.02 4.37 10.83 Total Return(1): % (33.87) ( (31.13) (0.71) 60.64 (59.65) 5.04 Ratios/Supplemental Data: Net assets, end of period (000's) $ 3,778 7,678 12,228 12,959 9,084 30,169 Ratios to average net assets: Net expenses after expense reimbursement(2)(3) % 3.17 2.80 2.86 2.75 2.75 2.75 Gross expenses prior to expense reimbursement(2) % 4.28 3.45 3.30 3.73 3.55 3.29 Net investment income (loss) after expense reimbursement(2)(3) % (1.30) 3.48 (1.31) (0.74) (0.39) (0.79) Portfolio turnover rate % 26 13 138 111 81 38 Class M ------------------------------------------------------------------ Four Year Months Ended Ended October 31, October 31, Year Ended June 30, 2001 2000(4) 2000 1999 1998 1997 ---- ------- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 4.85 7.04 7.07 4.40 10.86 10.32 Income from investment operations: Net investment income (loss) $ (0.19) 0.07 (0.11) (0.02) -- (0.05) Net realized and unrealized gain (loss) on investments $ (1.41) (2.26) 0.08 2.69 (6.46) 0.59 Total from investment operations $ (1.60) (2.19) (0.03) 2.67 (6.46) 0.54 Less distributions from: Net investment income $ 0.09 -- -- -- -- -- Total distributions $ 0.09 -- -- -- -- -- Net asset value, end of period $ 3.16 4.85 7.04 7.07 4.40 10.86 Total Return(1): % (33.69) (31.11) (0.42) 60.68 (59.48) 5.26 Ratios/Supplemental Data: Net assets, end of period (000's) $ 1,215 2,711 3,749 5,184 4,265 11,155 Ratios to average net assets: Net expenses after expense reimbursement(2)(3) % 2.78 2.53 2.61 2.50 2.50 2.50 Gross expenses prior to expense reimbursement(2) % 3.89 3.18 3.05 3.48 3.30 3.04 Net investment income (loss) after expense reimbursement(2)(3) % (0.97) 3.72 (1.06) (0.49) (0.07) (0.55) Portfolio turnover rate % 26 13 138 111 81 38
---------- (1) 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. (2) Annualized for periods less than one year. (3) The Investment Manager has agreed to limit expenses excluding interest, taxes, brokerage and extraordinary expenses, subject to possible reimbursement to ING Pilgrim Investments, LLC within three years. (4) The Fund changed it fiscal year-end from June 30 to October 31. See Accompanying Notes to Financial Statements 49 PILGRIM EUROPEAN EQUITY FUND FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A ---------------------------------- Year Ended October 31, 2001(5) 2000 1999(1) ------- ---- ------- Per Share Operating Performance: Net asset value, beginning of period $ 10.95 10.95 10.00 Income from investment operations: Net investment income (loss) $ 0.00(6) (0.01) 0.04 Net realized and unrealized gain (loss) on investments $ (2.76) 0.34 0.91 Total from investment operations $ (2.76) 0.33 0.95 Less distributions from: Net investment income $ -- 0.05 -- Net realized gain on investments $ 0.49 0.28 -- Total distributions $ 0.49 0.33 -- Net asset value, end of period $ 7.70 10.95 10.95 Total Return(2) % (26.38) 2.93 9.50 Ratios/Supplemental Data: Net assets, end of period (000's) $ 19,056 31,985 28,746 Ratios to average net assets: Net expenses after expense reimbursement(3)(4) % 1.74 1.63 1.61 Gross expenses prior to expense reimbursement(3) % 3.07 2.83 3.06 Net investment income (loss) after expense reimbursement(3)(4) % 0.03 (0.09) 0.48 Portfolio turnover rate % 79 61 63 Class B Class C ------------------------------- -------------------------- Year Ended October 31, Year Ended October 31, 2001(5) 2000 1999(1) 2001(5) 2000 1999(1) ------- ---- ------- ------- ---- ------- Per Share Operating Performance: Net asset value, beginning of period $ 10.83 10.89 10.00 10.77 10.89 10.00 Income from investment operations: Net investment income (loss) $ (0.08) (0.08) 0.00(6) (0.05) (0.06) (0.01) Net realized and unrealized gain (loss) on investments $ (2.70) 0.33 0.89 (2.72) 0.27 0.90 Total from investment operations $ (2.78) 0.25 0.89 (2.77) 0.21 0.89 Less distributions from: Net investment income $ -- 0.03 -- -- 0.05 -- Net realized gain on investments $ 0.49 0.28 -- 0.49 0.28 -- Total distributions $ 0.49 0.31 -- 0.49 0.33 -- Net asset value, end of period $ 7.56 10.83 10.89 7.51 10.77 10.89 Total Return(2) % (26.88) 2.14 8.90 (26.94) 1.76 8.90 Ratios/Supplemental Data: Net assets, end of period (000's) $ 1,168 1,117 849 87 188 62 Ratios to average net assets: Net expenses after expense reimbursement(3)(4) % 2.46 2.28 2.27 2.48 2.28 2.26 Gross expenses prior to expense reimbursement(3) % 3.75 3.08 3.35 3.74 3.08 3.34 Net investment income (loss) after expense reimbursement(3)(4) % (0.66) (0.75) (0.08) (0.74) (0.68) (0.15) Portfolio turnover rate % 79 61 63 79 61 63
---------- (1) The Fund commenced operations on December 15, 1998. (2) Total return is calculated assuming reinvestment of all dividend and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. (4) The Investment Manager has agreed to limit expenses excluding interest, taxes, brokerage and extraordinary expenses. (5) Effective April 30, 2001, ING Pilgrim Investments LLC became the Investment Manager of the Fund. (6) Amount represents less than $0.01 per share. See Accompanying Notes to Financial Statements 50 FINANCIAL HIGHLIGHTS PILGRIM RUSSIA FUND -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A ------------------------------------------------------------------------ Ten Year Months Ended Ended October 31, October 31, Year Ended December 31, 2001 2000(4)(6) 1999 1998 1997 1996(1) ---- ---------- ---- ---- ---- ------- Per Share Operating Performance: Net asset value, beginning of period $ 7.15 6.74 2.64 17.50 11.24 12.12 Income from investment operations: Net investment income (loss) $ (0.04) (0.07) 0.18 0.15 (0.01) (0.05) Net realized and unrealized gain (loss) on investments $ 0.93 0.48 3.99 (14.70) 7.57 (0.51) Total from investment operations $ 0.89 0.41 4.17 (14.55) 7.56 (0.56) Less distributions from: Net investment income $ -- -- 0.07 0.07 -- -- Net realized gain on investments $ -- -- -- 0.24 1.30 0.32 Total distributions $ -- -- 0.07 0.31 1.30 0.32 Net asset value, end of period $ 8.04 7.15 6.74 2.64 17.50 11.24 Total Return(2): % 12.45 6.08 159.76 (82.99) 67.50 (9.01) Ratios/Supplemental Data: Net assets, end of period (000's) $ 49,019 53,637 59,011 19,147 137,873 13,846 Ratios to average net assets: Net expenses after redemption fee proceeds and expense reimbursement(3)(5) % 2.23 1.40 2.23 1.84 1.85 2.65 Gross expenses prior to redemption fee proceeds and expense reimbursement(3) % 2.77 2.85 3.32 2.64 2.89 5.07 Net investment income (loss) after redemption fee proceeds and expense reimbursement(3)(5) % (0.56) (0.90) 4.39 1.36 (0.11) (1.27) Portfolio turnover rate % 28 52 91 66 67 116
---------- (1) 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. (2) Total return is calculated assuming reinvestment of all dividends and capital gain distributions at net asset value and excluding the deduction of sales charges. Total return for less than one year is not annualized. (3) Annualized for periods less than one year. (4) The Fund changed its fiscal year-end from December 31 to October 31. (5) The Investment Manager has agreed to limit expenses excluding, interest, taxes, brokerage and extraordinary expenses. Redemption fee proceeds are offset against custody and redemption services. (6) Effective July 26, 2000 Pilgrim Investments, LLC became the Investment Manager of the Fund. See Accompanying Notes to Financial Statements 51 FINANCIAL HIGHLIGHTS PILGRIM PRECIOUS METALS FUND -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period.
Class A -------------------------------------------------------------------------- Ten Year Months Ended Ended October 31, October 31, Year Ended December 31, 2001 2000(3)(4) 1999 1998 1997 1996 ---- ---------- ---- ---- ---- ---- Per Share Operating Performance: Net asset value, beginning of period $ 2.27 3.29 3.03 3.24 5.97 6.24 Income from investment operations: Net investment income (loss) $ 0.02 0.01 (0.01) -- -- 0.02 Net realized and unrealized gain (loss) on investments $ 0.76 (1.03) 0.27 (0.21) (2.52) 0.50 Total from investment operations $ 0.78 (1.02) 0.26 (0.21) (2.52) 0.52 Less distributions from: Net investment income $ 0.00(5) -- -- -- 0.21 0.79 Total distributions $ 0.00(5) -- -- -- 0.21 0.79 Net asset value, end of period $ 3.05 2.27 3.29 3.03 3.24 5.97 Total Return(1): % 34.56 (30.98) 8.58 (6.39) (42.98) 7.84 Ratios/Supplemental Data: Net assets, end of period (000's) $ 60,563 40,130 72,516 50,841 53,707 109,287 Ratios to average net assets: Expenses (2) % 1.96 2.18 1.94 1.74 1.65 1.60 Net investment income (loss) (2) % 0.67 0.28 (0.02) 0.08 0.17 (0.32) Portfolio turnover rate % 83 27 79 29 38 31
---------- (1) 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. (2) Annualized for periods less than one year. (3) The Fund changed its fiscal year-end from December 31 to October 31. (4) Effective July 26, 2000, ING Pilgrim Investments, LLC became the Investment Manager of the Fund. (5) Amount represents less than $0.01 per share. See Accompanying Notes to Financial Statements 52 NOTES TO FINANCIAL STATEMENTS as of October 31, 2001 -------------------------------------------------------------------------------- NOTE 1 -- ORGANIZATION Organization. The Pilgrim Funds are comprised of Pilgrim Mutual Funds ("PMF"), Pilgrim Advisory Funds, Inc. ("PAF"), Pilgrim Mayflower Trust ("PMT"), Pilgrim Funds Trust ("PFT"), Pilgrim International Fund ("International"), Pilgrim Russia Fund ("Russia") and Pilgrim Precious Metals Fund ("Precious Metals"), all of which are open-end investment management companies registered under the Investment Company Act of 1940, as amended. PMF is a Delaware business trust organized in 1992 with twelve separate series (Portfolios). The four Portfolios in this annual report are Pilgrim Worldwide Growth Fund ("Worldwide Growth"), Pilgrim International Core Growth Fund ("International Core Growth"), Pilgrim International SmallCap Growth Fund ("International SmallCap Growth"), and Pilgrim Emerging Countries Fund ("Emerging Countries"). PAF is a Maryland Corporation organized in 1995 with one Portfolio in this annual report, Pilgrim Asia-Pacific Equity Fund. PMT is a Massachusetts business trust organized in 1992 with three separate series (Portfolios). The one Portfolio in this annual report is Pilgrim International Value Fund. PFT is a Delaware business trust established July 30, 1998 and consists of twelve separately managed portfolios. Three of the Portfolios in this report are Pilgrim Global Communications Fund ("Global Communications"), Pilgrim Global Information Technology Fund ("Global Information Technology") and Pilgrim European Equity Fund ("European Equity"). The investment objective of each Fund is described in each Fund's prospectus. Each Fund offers one or more of the following classes of shares: Class A, Class B, Class C, Class I, Class M and Class Q (Classes I & Q are presented in a different annual report). The separate classes of shares differ principally in the applicable sales charges (if any), distribution fees and shareholder servicing fees and transfer agent fees. Shareholders of each class also bear certain expenses that pertain to that particular class. All shareholders bear the common expenses of the Fund and earn income from the portfolio pro rata based on the average daily net assets of each class, without distinction between share classes. Dividends are determined separately for each class based on income and expenses allocable to each class. Realized gains are allocated to each class pro rata based on the net assets of each class on the date of distribution. No class has preferential dividend rights. Differences in per share dividend rates generally result from the relative weighting of pro rata income and realized gain allocations and from differences in separate class expenses, including distribution, and shareholder servicing fees. Class B shares, along with their pro rata reinvested dividend shares, automatically convert to Class A shares approximately eight years after purchase. On September 1, 2000, ING Groep N.V. (NYSE: ING) acquired ReliaStar, the indirect parent company of Pilgrim Investments, Inc., Adviser to the Funds, Pilgrim Securities, Inc., Distributor to the Funds and Pilgrim Group, Inc., Administrator to the Funds. In conjunction with the acquisition the Adviser, Distributor and Administrator changed their names to ING Pilgrim Investments, Inc., ING Pilgrim Securities, Inc., and ING Pilgrim Group, Inc., respectively, effective September 8, 2000. Effective February 26, 2001, ING Pilgrim Investments, Inc. was merged into the newly formed ING Pilgrim Investments, LLC. Effective February 27, 2001, ING Pilgrim Group, Inc. was merged into the newly formed ING Pilgrim Group, LLC ("IPG"). NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES The following significant accounting policies are consistently followed by the Funds in the preparation of their financial statements, and such policies are in conformity with generally accepted accounting principles for investment companies. A. Security Valuation. Investments in equity securities traded on a national securities exchange or included on the NASDAQ National Market System are valued at the last reported sale price. Securities traded on an exchange or NASDAQ for which there has been no sale, securities traded in the over-the-counter-market and gold and silver bullion are valued at the mean between the last reported bid and ask prices. All investments quoted in foreign currencies will be valued daily in U.S. dollars on the basis of the foreign currency exchange rates prevailing at the time such valuation is determined by each Fund's custodian. Securities for which market quotations are not readily available are valued at their respective fair values as determined in good faith and in accordance with policies set by the Board of Directors. Investments in securities maturing in 53 NOTES TO FINANCIAL STATEMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- less than 60 days are valued at amortized cost, which, when combined with accrued interest, approximates market value. B. Security Transactions and Revenue Recognition. Securities transactions are accounted for on the trade date. Realized gains and losses are reported on the basis of identified cost of securities delivered. Interest income is recorded on an accrual basis. Dividend income is recorded on the ex-dividend date, or for certain foreign securities, when the information becomes available to the Funds. Premium amortization and discount accretion are determined by the effective yield method. C. Foreign Currency Translation. The books and records of the Funds are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis: (1) Market value of investment securities, other assets and liabilities -- at the exchange rates prevailing at the end of the day. (2) Purchases and sales of investment securities, income and expenses -- at the rates of exchange prevailing on the respective dates of such transactions. Although the net assets and the market values are presented at the foreign exchange rates at the end of the day, the Funds do not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gains or losses from investments. For securities which are subject to foreign withholding tax upon disposition, liabilities are recorded on the statement of assets and liabilities for the estimated tax withholding based on the securities current market value. Upon disposition, realized gains or losses on such securities are recorded net of foreign withholding tax. Reported net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate. Foreign security and currency transactions may involve certain considerations and risks not typically associated with investing in U.S. companies and the U.S. Government. These risks include but are not limited to re-evaluation of currencies and future adverse political and economic developments which could cause securities and their markets to be less liquid and prices more volatile than those of comparable U.S. companies and the U.S. Government. D. Foreign Currency Transactions. Certain funds may enter into foreign currency exchange transactions to convert to and from different foreign currencies and to and from the U.S. dollar in connection with the planned purchases or sales of securities. The Funds either enter into these transactions on a spot basis at the spot rate prevailing in the foreign currency exchange market or use forward foreign currency contracts to purchase or sell foreign currencies. When the contract is fulfilled or closed, gains or losses are realized. Until then, the gain or loss is included in unrealized appreciation or depreciation. Risks may arise upon entering into forward contracts from the potential inability of counterparties to meet the terms of their forward contracts and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar. Each Fund may enter into futures contracts involving foreign currency, interest rates, securities and securities indices, for hedging purposes only. A futures contract obligates the seller of the contract to deliver and the purchaser of the contract to take delivery of the type of foreign currency, financial instrument or security called for in the contract at a specified future time for a specified price. Upon entering into such a contract, a Fund is required to deposit and maintain as collateral such initial margin as required by the exchange on which the contract is traded. Pursuant to the contract, a Fund agrees to receive from or pay to the broker an amount equal to the daily fluctuations 54 NOTES TO FINANCIAL STATEMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- in the value of the contract. Such receipts or payments are known as variation margin and are recorded as unrealized gains or losses by the Fund. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. E. Distributions to Shareholders. The Funds record distributions to their shareholders on ex-date. Each Fund pays dividends and capital gains, if any annually. The amount of distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. Key differences are the treatment of short-term capital gains, foreign currency transactions, organization costs and other temporary differences. To the extent that these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassifications. Distributions which exceed net investment income and net realized capital gains for financial reporting purposes but not for tax purposes, are reported as distributions in excess of net investment income and/or net realized capital gains. To the extent they exceed net investment income and/or net realized capital gains for tax purposes, they are reported as distributions of paid-in capital. Accordingly, amounts as of October 31, 2001 have been increased (decreased) through reclassification as follows:
Accumulated net Undistributed realized gain (loss) Paid-in net investment on investments capital income (loss) and foreign currencies ------- ------------- ---------------------- Worldwide Growth $(12,207,554) $ 5,190,315 $ 7,017,239 International Value -- (15,913) 15,913 International (323,005) 350,536 (27,531) International Core Growth (355,581) 1,027,969 (672,388) International SmallCap Growth $ (8,266,787) $ 8,046,610 $ 220,177 Emerging Countries (4,362,051) 220,140 4,141,911 Global Communications (715,391) 712,996 2,395 Global Information Technology (1,555,543) 1,566,741 (11,198) Asia-Pacific Equity (132,436) 123,431 9,005 European Equity (69,399) 4,291 65,108 Russia (240,491) 267,077 (26,586) Precious Metals (3,033,975) (45,876) 3,079,851
F. Federal Income Taxes. It is the policy of the Funds, to comply with the requirements of the Internal Revenue Code that are applicable to regulated investment companies and to distribute substantially all of their net investment income and any net realized capital gains to their shareholders. Therefore, a federal income tax provision is not required. Certain Funds may utilize earnings and profits on redemption of shares as part of the dividends paid deduction. In addition, by distributing during each calendar year substantially all of its net investment income and net realized capital gains, each Fund intends not to be subject to any federal excise tax. The Board of Directors/Trustees intends to offset any net capital gains with any available capital loss carryforward until each carryforward has been fully utilized or expires. In addition, no capital gain distribution shall be made until the capital loss carryforward has been fully utilized or expires. Capital loss carryforwards were as follows at October 31, 2001: Amount Expiration Dates ------ ---------------- Worldwide Growth $149,013,843 2008 to 2009 International 11,054,933 2009 International Core Growth 9,678,221 2009 International SmallCap Growth 180,545,805 2008 to 2009 Emerging Countries 80,186,243 2006 to 2009 Global Communications 64,104,971 2008 to 2009 Global Information Technology 61,991,041 2009 Asia-Pacific Equity 25,917,423 2006 to 2009 European Equity 673,633 2009 Russia 72,439,571 2006 to 2009 Precious Metals 89,116,544 2002 to 2009 55 NOTES TO FINANCIAL STATEMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- Under the applicable foreign tax law, a withholding tax may be imposed on interest, dividends and capital gains at various rates. Indian tax regulations require that taxes be paid on capital gains realized by the Fund. In May 2001, Emerging Countries Fund wrote off $1,168,786 of estimated tax liability on Indian investments. G. Use of Estimates. Management of the Funds has made certain estimates and assumptions relating to the reporting of assets, liabilities, income, and expenses to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from these estimates. H. Repurchase Agreements. Each Fund may invest in repurchase agreements only with government securities dealers recognized by the Board of Governors of the Federal Reserve System or with member banks of the Federal Reserve System. Under such agreements, the seller of the security agrees to repurchase it at a mutually agreed upon time and price. The resale price is in excess of the purchase price and reflects an agreed upon interest rate for the period of time the agreement is outstanding. The period of the repurchase agreements is usually short, from overnight to one week, while the underlying securities generally have longer maturities. Each Fund will always receive as collateral securities acceptable to it whose market value is equal to at least 100% of the amount being invested by the Fund. If the seller defaults, a Fund might incur a loss or delay in the realization of proceeds if the value of security collateralizing the repurchase agreement declines, and it might incur disposition costs in liquidating the collateral. I. Securities Lending. Each Fund has the option to temporarily loan 33 1/3% of its total assets to brokers, dealers or other financial institutions in exchange for a negotiated lender's fee. The borrower is required to fully collateralize the loans with cash, letters of credit or U.S. Government securities. J. Recently Issued Accounting Standards. In November 2000, a revised AICPA Audit and Accounting Guide (the "Guide"), Audits of Investment Companies, was issued, and is effective for fiscal years beginning after December 15, 2000. The effective date for the Funds will be November 1, 2001. The Funds expect that the impact of the adoption will not be material to the Funds. K. Other. Certain prior year amounts have been reclassified to conform with the current year presentation. NOTE 3 -- INVESTMENT TRANSACTIONS For the year ended October 31, 2001, the cost of purchases and proceeds from the sales of securities, excluding short-term securities, were as follows: Purchases Sales --------- ----- Worldwide Growth 1,327,211,350 1,401,561,085 International Value 1,272,108,116 361,939,680 International 67,989,827 88,242,352 International Core Growth 106,898,826 125,123,262 International SmallCap Growth 749,051,681 799,926,047 Emerging Countries 112,197,782 195,846,864 Global Communications 48,356,340 66,650,580 Global Information Technology 100,546,546 135,631,694 Asia-Pacific Equity 3,507,205 7,633,773 European Equity 20,270,411 25,128,223 Russia 11,923,880 21,985,362 Precious Metals 38,271,839 38,892,173 NOTE 4 -- REDEMPTION FEE INCOME -- RUSSIA A fee is charged on the redemption of shares equal to 2% of the redemption price of shares of the Russia Fund held less than 365 days that are being redeemed. Redemption fee proceeds will be applied to the Fund's aggregate expenses allocable to providing custody and redemption services, including transfer agent fees, postage, printing, telephone costs and employment costs relating to the handling and processing of redemptions. Any excess fee proceeds will be added to the Fund's capital. Total redemption fee proceeds for the year ended October 31, 2001 were $256,305, for Russia. The amount available for offset against Fund expenses was $256,305, for Russia and is set forth in the statement of operations. NOTE 5 -- INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES Each of the Funds, except Global Communications, Global Information Technology and European Equity has entered into an Investment Management Agreement with ING Pilgrim Investments, LLC (the "Manager", the "Investment Manager", or the 56 NOTES TO FINANCIAL STATEMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- "Adviser"), a wholly-owned subsidiary of ING Groep N.V. Global Communications, Global Information Technology and European Equity had entered into an Investment Management Agreement with ING Mutual Funds Management, LLC. On April 30, 2001, ING Mutual Funds Management, LLC merged into ING Pilgrim Investments, LLC. All contracts, obligations and assets of ING Mutual Funds Management, LLC were assumed by ING Pilgrim Investments, LLC pursuant to the merger. The investment management agreements compensate the Manager with a fee, computed daily and payable monthly, based on the average daily net assets of each Fund, at the following annual rates: As a percent of average net assets ---------------------------------- Worldwide Growth 1.00% on first $500 million; 0.90% on next $500 million; and 0.85% in excess of $1 billion International Value 1.00% International 1.00% International Core Growth 1.00% on first $500 million; 0.90% on next $500 million; and 0.85% in excess of $1 billion International SmallCap Growth 1.00% on first $500 million; 0.90% on next $500 million; and 0.85% in excess of $1 billion Emerging Countries 1.25% Global Communications 1.00% Global Information Technology 1.25% Asia-Pacific Equity 1.25% European Equity 1.15% Russia 1.25% Precious Metals 1.00% on first $50 million; 0.75% thereafter The fees payable to the Manager were discounted for the Global Communications Fund, Global Information Technology Fund and European Equity Fund by 75% in each Fund's first year of operations and by 50% in each Fund's second year of operations. On November 3, 2000, ING Pilgrim Investments, LLC notified HSBC Asset Management (America) Inc. and HSBC Asset Management (Hong Kong) Limited (collectively, HSBC) of its intention to terminate HSBC as sub-advisor to the Asia-Pacific Equity fund effective January 1, 2001. Beginning January 2, 2001, ING Pilgrim Investments, LLC began advising the Fund directly. On November 3, 2000, ING Pilgrim Investments, LLC notified Troika Dialog Asset Management ("Troika") of its intention to terminate Troika as sub-advisor to the Troika Dialog Asset Management Fund effective January 1, 2001. Beginning January 2, 2001, ING Pilgrim Investments, LLC began advising the Fund directly. IPG (the "Administrator") serves as administrator to the Funds. International Value, International, Global Communications, Global Information Technology, European Equity, Russia and Precious Metals Funds paid the Administrator a fee calculated at an annual rate of 0.10% of each Fund's average daily net assets. In addition, Worldwide Growth, International Core Growth, International SmallCap Growth, Emerging Countries, and Asia-Pacific Equity have entered into a Service Agreement with IPG whereby IPG will act as Shareholder Service Agent for each Fund. The agreement provides that IPG will be compensated for incoming and outgoing shareholder telephone calls and letters, and all reasonable out-of-pocket expenses incurred in connection with the performance of such services. International Value also pays an annual shareholder account servicing fee of $5.00, payable semi-annually, for each account of beneficial owners of shares. NOTE 6 -- DISTRIBUTION AND SERVICE FEES Each share class of the Funds has adopted a Plan pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plans"), whereby ING Pilgrim Securities, Inc. (the "Distributor") is reimbursed or compensated (depending on the class of shares) by the Funds for expenses incurred in the distribution of each Funds' shares ("Distribution Fees"). Pursuant to the 12b-1 Plans, the Distributor is entitled to a payment each month for actual expenses incurred in the distribution and promotion of each Fund's shares, including expenses incurred in printing prospectuses and reports used for sales purposes, expenses incurred in preparing and printing sales literature and other such distribution related expenses, including any distribution or shareholder servicing fees ("Service Fees") paid to securities dealers who have executed a distribution agreement with the Distributor. Under the 12b-1 Plans, each class of shares of the Fund pays the Distributor a combined Distribution and Service Fee based on average daily net assets at the following annual rates:
Class A Class B Class C Class I Class M Class Q ------- ------- ------- ------- ------- ------- Worldwide Growth 0.35% 1.00% 1.00% N/A N/A 0.25% International Value 0.30 1.00 1.00 N/A N/A 0.25 International 0.25 1.00 1.00 N/A N/A 0.25 International Core Growth 0.35 1.00 1.00 N/A N/A 0.25 International SmallCap Growth 0.35 1.00 1.00 N/A N/A 0.25 Emerging Countries 0.35 1.00 1.00 N/A N/A 0.25 Global Communications 0.35 1.00 1.00 N/A N/A N/A Global Information Technology 0.35 1.00 1.00 N/A N/A N/A Asia-Pacific Equity 0.25 1.00 N/A N/A 0.75% N/A European Equity 0.35 1.00 1.00 N/A N/A N/A Russia 0.25 N/A N/A N/A N/A N/A Precious Metals 0.25 N/A N/A N/A N/A N/A
57 NOTES TO FINANCIAL STATEMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- Effective March 1, 2001, the Distributor waived 0.10% of the Distribution fee for Global Communications Fund, Global Information Technology Fund and European Equity Fund for Class A only. Fees paid to the Distributor by class during the year ended October 31, 2001 are shown in the accompanying Statements of Operations. The Distributor also receives the proceeds of the initial sales charge paid by shareholders upon the purchase of Class A shares, and the contingent deferred sales charge paid by shareholders upon certain redemptions for Class A, Class B, and Class C shares. For the year ended October 31, 2001, the Distributor earned the following amounts in sales charges: Class A Class B Class C Class M Shares Shares Shares Shares ------ ------ ------ ------ Initial Sales Charges $491,945 N/A N/A $ 440 Contingent deferred sales charges $367,989 $ 0 $684,096 N/A NOTE 7 -- OTHER TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES At October 31, 2001, the Funds had the following amounts recorded in payable to affiliates on the accompanying Statements of Assets and Liabilities (See Notes 5 and 6):
Accrued Accrued Shareholder Recoupment Investment Accrued Services and of Management Administrative Distribution Waived Fees Fees Fees Fees Total ---- ---- ---- ---- ----- Worldwide Growth $ 289,089 $ -- $ 199,942 $ -- $ 489,031 International Value 2,078,358 207,836 1,171,175 -- 3,457,369 International 35,702 10,022 13,830 -- 59,554 International Core Growth 35,985 -- 25,775 -- 61,760 International SmallCap Growth 338,826 -- 191,615 -- 530,441 Emerging Countries 139,735 -- 50,033 151,759 341,527 Global Communications 49,391 2,665 8,783 -- 60,839 Global Information Technology 43,321 13,565 19,843 -- 76,729 Asia-Pacific Equity 11,533 -- 5,276 -- 16,809 European Equity 20,232 2,617 6,769 -- 29,618 Russia 46,547 18,286 9,309 -- 74,142 Precious Metals 49,343 8,286 7,891 -- 65,520
At October 31, 2001, Lion Connecticut Holdings, Inc., a wholly-owned indirect subsidiary of ING Groep N.V., held 8.5%, 12.9% and 87.1% of the shares outstanding of Global Communications, Global Information Technology and European Equity, respectively. At October 31, 2001, ING America Holdings, Inc., a wholly-owned indirect subsidiary of ING Groep N.V. held 45.0% of the shares outstanding of International. At October 31, 2001, one shareholder held 11.8% of the shares outstanding of Russia. Investment activities of these shareholders could have a material impact on the Funds. NOTE 8 -- EXPENSE LIMITATIONS For the following Funds, the Investment Manager has voluntarily agreed to limit expenses, excluding interest, taxes, brokerage and extraordinary expenses to the levels listed below: Maximum Operating Expense Limit (as a percentage of average net assets) ---------------------------------------------------- Class A Class B Class C Class I Class M Class Q ------- ------- ------- ------- ------- ------- Worldwide Growth(1) 1.85% 2.50% 2.50% N/A N/A 1.60% International Value N/A N/A N/A N/A N/A N/A International 2.75 3.50 3.50 N/A N/A 2.75 International Core Growth(2) 1.95 2.60 2.60 N/A N/A 1.65 International SmallCap Growth(2) 1.95 2.60 2.60 N/A N/A 1.65 Emerging Countries(3) 2.25 2.90 2.90 N/A N/A 1.90 Global Communications(4) 1.70 2.45 2.45 N/A N/A N/A Global Information Technology(5) 1.95 2.70 2.70 N/A N/A N/A Asia-Pacific Equity 2.00 2.75 N/A N/A 2.50 N/A European Equity(6) 1.90 2.65 2.65 N/A N/A N/A Russia 3.35 N/A N/A N/A N/A N/A Precious Metals 2.75 N/A N/A N/A N/A N/A Each Fund will at a later date reimburse the Investment Manager for management fees waived and other expenses assumed by the Investment Manager during the previous 36 months, but only if, after such reimbursement, the Fund's expense ratio does not exceed the percentage described above.Waived and reimbursed fees and any recoupment by the Investment Manager of such waived and reimbursed fees are reflected on the accompanying Statements of Operations for each Fund. (1) Effective November 1, 2001, the expense limitation rate for Class Q is 1.75%. (2) Effective November 1, 2001, the expense limitation rate for Class Q is 1.85%. (3) Effective November 1, 2001, the expense limitation rate for Class Q is 2.15%. (4) Prior to March 1, 2001, the expense limitation rates for Class A, Class B and Class C were 1.53%, 2.18% and 2.18%, respectively. (5) Prior to March 1, 2001, the expense limitation rates for Class A, Class B and Class C were 1.59%, 2.24% and 2.24%, respectively. (6) Prior to March 1, 2001, the expense limitation rates for Class A, Class B and Class C were 1.62%, 2.27% and 2.27%, respectively. 58 NOTES TO FINANCIAL STATEMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- NOTE 9 -- LINE OF CREDIT All of the Funds included in this report, in addition to certain other funds managed by the Adviser, have entered into an unsecured committed revolving line of credit agreement (the "Credit Agreement") with State Street Bank and Trust Company for an aggregate amount of $125,000,000. The proceeds may be used only to: (1) temporarily finance the purchase and sale of securities; (2) finance the redemption of shares of an investor in the Funds; and (3) enable the Funds to meet other emergency expenses as defined in the Credit Agreement. The Funds to which the line of credit is available pay a commitment fee equal to 0.08% per annum on the daily unused portion of the committed line amount payable quarterly in arrears. During the year ended October 31, 2001, the Funds did not have any loans outstanding. NOTE 10 -- CAPITAL SHARES Transactions in capital shares and dollars were as follows:
Class A Shares Class B Shares --------------------------------------------- --------------------------------------------- Year Four Months Year Four Months Ended Ended Year Ended Ended Ended Year Ended October 31, October 31, June 30, October 31, October 31, June 30, 2001 2000 2000 2001 2000 2000 ------------- ------------- ------------- ------------- ------------- ------------- Worldwide Growth Fund (Number of Shares) Shares sold 14,154,594 4,005,399 14,001,807 855,611 631,926 2,987,911 Shares issued in merger 1,796,396 -- -- 309,706 -- -- Shares issued as reinvestment of dividends 229,876 -- 422,437 113,034 -- 192,099 Shares redeemed (16,851,100) (2,499,778) (9,384,459) (1,387,035) (230,519) (336,704) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (670,234) 1,505,621 5,039,785 (108,684) 401,407 2,843,306 ============= ============= ============= ============= ============= ============= Worldwide Growth Fund ($) Shares sold $ 280,069,792 $ 116,318,819 $ 404,667,268 $ 20,740,917 $ 20,649,472 $ 95,993,252 Shares issued in merger 36,578,702 -- -- 7,048,872 -- -- Shares issued as reinvestment of dividends 5,578,485 -- 10,797,545 3,071,140 -- 5,534,613 Shares redeemed (327,284,495) (73,218,592) (273,872,546) (29,793,190) (7,450,350) (10,888,095) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) $ (5,057,516) $ 43,100,227 $ 141,592,267 $ 1,067,739 $ 13,199,122 $ 90,639,770 ============= ============= ============= ============= ============= ============= Class C Shares Class Q Shares --------------------------------------------- --------------------------------------------- Year Four Months Year Four Months Ended Ended Year Ended Ended Ended Year Ended October 31, October 31, June 30, October 31, October 31, June 30, 2001 2000 2000 2001 2000 2000 ------------- ------------- ------------- ------------- ------------- ------------- Worldwide Growth Fund (Number of Shares) Shares sold 3,264,179 1,218,370 3,546,660 1,521,737 458,143 1,816,105 Shares issued in merger 597,885 -- -- -- -- -- Shares issued as reinvestment of dividends 126,940 -- 554,745 51,494 -- 85,463 Shares redeemed (5,401,816) (1,075,019) (797,116) (2,083,680) (562,214) (873,920) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (1,412,812) 143,351 3,304,289 (510,449) (104,071) 1,027,648 ============= ============= ============= ============= ============= ============= Worldwide Growth Fund ($) Shares sold $ 68,275,479 $ 34,976,677 $ 103,794,801 $ 33,939,544 $ 15,506,281 $ 60,334,275 Shares issued in merger 12,102,849 -- -- -- -- -- Shares issued as reinvestment of dividends 3,066,876 -- 14,207,022 1,439,783 -- 2,513,469 Shares redeemed (107,297,591) (31,067,826) (22,853,219) (46,882,200) (18,881,326) (30,258,824) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) $ (23,852,387) $ 3,908,851 $ 95,148,604 $ (11,502,873) $ (3,375,045) $ 32,588,920 ============= ============= ============= ============= ============= =============
59 NOTES TO FINANCIAL STATEMENTS as of October 31, 2001 (Continued) --------------------------------------------------------------------------------
Class A Shares Class B Shares --------------------------------- --------------------------------- Year Year Year Year Ended Ended Ended Ended October 31, October 31, October 31, October 31, 2001 2000 2001 2000 --------------- --------------- --------------- --------------- International Value Fund (Number of Shares) Shares sold 139,418,862 83,175,007 11,159,464 9,796,492 Shares issued as reinvestment of dividends 6,121,206 1,328,930 2,432,358 622,312 Shares redeemed (103,751,144) (59,935,901) (5,457,791) (2,916,805) --------------- --------------- --------------- --------------- Net increase in shares outstanding 41,788,924 24,568,036 8,134,031 7,501,999 =============== =============== =============== =============== International Value Fund ($) Shares sold $ 1,987,454,751 $ 1,354,284,766 $ 157,664,420 $ 157,186,306 Shares issued as reinvestment of dividends 89,795,792 21,993,188 35,342,287 10,213,421 Shares redeemed (1,461,321,837) (975,073,293) (75,247,514) (46,780,828) --------------- --------------- --------------- --------------- Net increase $ 615,928,706 $ 401,204,661 $ 117,759,193 $ 120,618,899 =============== =============== =============== =============== Class C Shares Class I Shares Class Q Shares ----------------------------- -------------- ----------------------------- Year Year Period Year Year Ended Ended Ended Ended Ended October 31, October 31, October 31, October 31, October 31, 2001 2000 2001(1) 2001 2000 ------------- ------------- ------------- ------------- ------------- International Value Fund (Number of Shares) Shares sold 25,120,811 19,178,129 19,267,313 1,572,970 1,548,084 Shares issued as reinvestment of dividends 3,490,818 732,571 -- 194,697 -- Shares redeemed (15,687,139) (4,309,599) (965,949) (358,279) (56,473) ------------- ------------- ------------- ------------- ------------- Net increase in shares outstanding 12,924,490 15,601,101 18,301,364 1,409,388 1,491,611 ============= ============= ============= ============= ============= International Value Fund ($) Shares sold $ 355,012,713 $ 307,905,636 $ 262,398,688 $ 21,820,254 $ 24,545,939 Shares issued as reinvestment of dividends 50,605,929 11,999,531 -- 2,856,211 -- Shares redeemed (216,919,756) (68,808,206) (12,540,659) (4,933,113) (943,654) ------------- ------------- ------------- ------------- ------------- Net increase $ 188,698,886 $ 251,096,961 $ 249,858,029 $ 19,743,352 $ 23,602,285 ============= ============= ============= ============= ============= Class A Shares Class B Shares --------------------------------------------- ----------------------------- Year Ten Months Year Year Period Ended Ended Ended Ended Ended October 31, October 31, December 31, October 31, October 31, 2001 2000 1999 2001 2000(2) ------------- ------------- ------------- ------------- ------------- International Fund (Number of Shares) Shares sold 10,370,001 1,779,250 416,856 169,710 17,961 Shares issued in merger 3,637,387 -- -- 238,867 -- Shares issued as reinvestment of dividends 196,293 81,693 329,564 270 -- Shares redeemed (12,300,204) (1,009,539) (933,028) (171,842) (10,781) ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding 1,903,477 851,404 (186,608) 237,005 7,180 ============= ============= ============= ============= ============= International Fund ($) Shares sold $ 102,367,167 $ 22,592,548 $ 5,619,698 $ 1,963,065 $ 206,897 Shares issued in merger 35,904,902 -- -- 2,348,731 -- Shares issued as reinvestment of dividends 2,031,659 1,011,365 4,382,040 2,787 -- Shares redeemed (115,739,447) (13,336,314) (12,165,686) (1,617,213) (125,052) ------------- ------------- ------------- ------------- ------------- Net increase (decrease) $ 24,564,281 $ 10,267,599 $ (2,163,948) $ 2,697,370 $ 81,845 ============= ============= ============= ============= ============= Class C Shares Class Q Shares ------------------------- -------------- Year Period Period Ended Ended Ended October 31, October 31, October 31, 2001 2000(3) 2001(4) ----------- ----------- ----------- International Fund (Number of Shares) Shares sold 90,224 7,588 2,434 Shares issued in merger 161,005 -- 1,110 Shares issued as reinvestment of dividends 733 -- -- Shares redeemed (70,887) -- (2,691) ----------- ----------- ----------- Net increase (decrease) in shares outstanding 181,075 7,588 853 =========== =========== =========== International Fund ($) Shares sold $ 1,082,305 $ 88,184 $ 108,379 Shares issued in merger 1,582,478 -- 10,953 Shares issued as reinvestment of dividends 7,572 -- -- Shares redeemed (657,559) -- (26,176) ----------- ----------- ----------- Net increase (decrease) $ 2,014,796 $ 88,184 $ 93,156 =========== =========== ===========
---------- (1) Commenced operations on June 18, 2001. (2) Commenced operations on August 22, 2000. (3) Commenced operations on September 15, 2000. (4) Commenced operations on February 26, 2001. 60 NOTES TO FINANCIAL STATEMENTS as of October 31, 2001 (Continued) --------------------------------------------------------------------------------
Class A Shares Class B Shares --------------------------------------------- --------------------------------------------- Year Four Months Year Year Four Months Year Ended Ended Ended Ended Ended Ended October 31, October 31, June 30, October 31, October 31, June 30, 2001 2000 2000 2001 2000 2000 ------------- ------------- ------------- ------------- ------------- ------------- International Core Growth Fund (Number of Shares) Shares sold 7,557,378 1,609,319 5,045,863 249,346 177,101 458,137 Shares issued as reinvestment of dividends 51,993 -- 33,304 49,923 -- 30,801 Shares redeemed (8,126,749) (1,446,511) (4,770,319) (396,727) (165,362) (215,896) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (517,378) 162,808 308,848 (97,458) 11,739 273,042 ============= ============= ============= ============= ============= ============= International Core Growth Fund ($) Shares sold $ 130,576,455 $ 35,660,867 $ 121,096,575 $ 4,356,931 $ 4,037,626 $ 11,335,788 Shares issued as reinvestment of dividends 985,770 -- 740,357 949,044 -- 689,313 Shares redeemed (141,345,380) (32,390,856) (114,696,068) (6,792,058) (3,765,765) (5,138,991) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) $ (9,783,155) $ 3,270,011 $ 7,140,864 $ (1,486,083) $ 271,861 $ 6,886,110 ============= ============= ============= ============= ============= ============= Class C Shares Class Q Shares --------------------------------------------- --------------------------------------------- Year Four Months Year Year Four Months Year Ended Ended Ended Ended Ended Ended October 31, October 31, June 30, October 31, October 31, June 30, 2001 2000 2000 2001 2000 2000 ------------- ------------- ------------- ------------- ------------- ------------- International Core Growth Fund (Number of Shares) Shares sold 6,276,282 1,025,108 1,618,402 381,350 165,852 780,577 Shares issued as reinvestment of dividends 44,991 -- 33,214 44,971 -- 24,738 Shares redeemed (6,610,145) (925,675) (1,158,306) (552,680) (193,498) (615,038) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (288,872) 99,433 493,310 (126,359) (27,646) 190,277 ============= ============= ============= ============= ============= ============= International Core Growth Fund ($) Shares sold $ 109,636,025 $ 23,241,494 $ 39,015,970 $ 6,381,404 $ 3,896,070 $ 20,639,997 Shares issued as reinvestment of dividends 857,981 -- 745,659 886,366 -- 572,187 Shares redeemed (116,359,406) (21,161,483) (27,691,220) (9,703,034) (4,527,377) (16,620,923) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) $ (5,865,400) $ 2,080,011 $ 12,070,409 $ (2,435,264) $ (631,307) $ 4,591,261 ============= ============= ============= ============= ============= =============
61 NOTES TO FINANCIAL STATEMENTS as of October 31, 2001 (Continued) --------------------------------------------------------------------------------
Class A Shares Class B Shares --------------------------------------------- --------------------------------------------- Year Four Months Year Year Four Months Year Ended Ended Ended Ended Ended Ended October 31, October 31, June 30, October 31, October 31, June 30, 2001 2000 2000 2001 2000 2000 ------------- ------------- ------------- ------------- ------------- ------------- International SmallCap Growth Fund (Number of Shares) Shares sold 33,782,706 7,284,746 18,367,774 1,092,119 647,440 2,668,131 Shares issued as reinvestment of dividends 433,341 -- 169,910 189,033 -- 85,395 Shares redeemed (34,756,699) (6,508,231) (13,311,135) (1,382,154) (364,779) (465,407) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (540,652) 776,515 5,226,549 (101,002) 282,661 2,288,119 ============= ============= ============= ============= ============= ============= International SmallCap Growth Fund ($) Shares sold $ 906,308,851 $ 281,224,096 $ 753,445,372 $ 33,089,408 $ 27,240,137 $ 110,600,703 Shares issued as reinvestment of dividends 13,864,436 -- 5,544,302 6,411,987 -- 2,953,812 Shares redeemed (938,355,263) (252,360,434) (552,362,495) (39,029,966) (15,204,196) (20,315,971) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) $ (18,181,976) $ 28,863,662 $ 206,627,179 $ 471,429 $ 12,035,941 $ 93,238,544 ============= ============= ============= ============= ============= ============= Class C Shares Class Q Shares --------------------------------------------- --------------------------------------------- Year Four Months Year Year Four Months Year Ended Ended Ended Ended Ended Ended October 31, October 31, June 30, October 31, October 31, June 30, 2001 2000 2000 2001 2000 2000 ------------- ------------- ------------- ------------- ------------- ------------- International SmallCap Growth Fund (Number of Shares) Shares sold 3,312,219 1,025,749 4,361,314 6,794,336 2,318,401 6,375,425 Shares issued as reinvestment of dividends 207,388 -- 80,888 331,546 -- 154,058 Shares redeemed (4,157,849) (736,411) (1,600,661) (7,512,106) (1,788,278) (4,450,408) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding (638,242) 289,338 2,841,541 (386,224) 530,123 2,079,075 ============= ============= ============= ============= ============= ============= International SmallCap Growth Fund ($) Shares sold $ 89,263,930 $ 38,976,927 $ 174,228,168 $ 198,098,894 $ 95,855,054 $ 267,585,482 Shares issued as reinvestment of dividends 6,452,890 -- 2,568,991 11,232,791 -- 4,781,312 Shares redeemed (111,213,151) (28,136,442) (63,584,070) (214,377,551) (75,048,798) (196,319,048) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) $ (15,496,331) $ 10,840,485 $ 113,213,089 $ (5,045,866) $ 20,806,256 $ 76,047,746 ============= ============= ============= ============= ============= =============
62 NOTES TO FINANCIAL STATEMENTS as of October 31, 2001 (Continued) --------------------------------------------------------------------------------
Class A Shares Class B Shares --------------------------------------------- --------------------------------------------- Year Four Months Year Year Four Months Year Ended Ended Ended Ended Ended Ended October 31, October 31, June 30, October 31, October 31, June 30, 2001 2000 2000 2001 2000 2000 ------------- ------------- ------------- ------------- ------------- ------------- Emerging Countries Fund (Number of Shares) Shares sold 9,885,556 2,018,292 7,123,710 117,804 72,083 261,876 Shares issued in merger 5,116,118 -- -- 262,850 -- -- Shares issued as reinvestment of dividends -- -- -- -- -- -- Shares redeemed (12,983,659) (2,106,144) (6,583,130) (528,765) (181,835) (320,122) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in shares outstanding 2,018,015 (87,852) 540,580 (148,111) (109,752) (58,246) ============= ============= ============= ============= ============= ============= Emerging Countries Fund ($) Shares sold $ 157,053,986 $ 37,136,028 $ 142,495,750 $ 2,704,425 $ 1,296,696 $ 5,287,628 Shares issued in merger 71,829,257 -- -- 3,700,055 -- -- Shares issued as reinvestment of dividends -- -- -- -- -- -- Shares redeemed (185,127,818) (39,399,667) (131,430,829) (7,454,159) (3,310,448) (6,237,718) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) $ 43,755,425 $ (2,263,639) $ 11,064,921 $ (1,049,679) $ (2,013,752) $ (950,090) ============= ============= ============= ============= ============= ============= Class C Shares Class Q Shares ------------------------------------------ ------------------------------------------ Year Four Months Year Year Four Months Year Ended Ended Ended Ended Ended Ended October 31, October 31, June 30, October 31, October 31, June 30, 2001 2000 2000 2001 2000 2000 ------------ ------------ ------------ ------------ ------------ ------------ Emerging Countries Fund (Number of Shares) Shares sold 1,037,359 80,835 395,139 2,972,540 1,364,617 4,383,749 Shares issued in merger 286,653 -- -- -- -- -- Shares issued as reinvestment of dividends -- -- -- -- -- -- Shares redeemed (1,627,250) (174,804) (363,300) (6,076,490) (1,825,785) (3,235,471) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (303,238) (93,969) 31,839 (3,103,950) (461,168) 1,148,278 ============ ============ ============ ============ ============ ============ Emerging Countries Fund ($) Shares sold $ 14,634,410 $ 1,412,550 $ 7,854,682 $ 43,163,993 $ 26,686,067 $ 94,747,678 Shares issued in merger 3,875,431 -- -- -- -- -- Shares issued as reinvestment of dividends -- -- -- -- -- -- Shares redeemed (22,140,324) (3,092,478) (6,755,539) (89,992,176) (34,329,659) (67,344,187) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) $ (3,630,483) $ (1,679,928) $ 1,099,143 $(46,828,183) $ (7,643,592) $ 27,403,491 ============ ============ ============ ============ ============ ============
63 NOTES TO FINANCIAL STATEMENTS as of October 31, 2001 (Continued) --------------------------------------------------------------------------------
Class A Shares Class B Shares --------------------------- ------------------------------ Year Period Year Period Ended Ended Ended Ended October 31, October 31, October 31, October 31, 2001 2000(1) 2001 2000(1) ------------ ------------ ------------ ------------ Global Communications Fund (Number of Shares) Shares sold 4,443,108 9,006,166 634,944(3) 4,936,462 Shares issued as reinvestment of dividends -- -- -- -- Shares redeemed (7,388,961) (1,413,239) (1,336,329) (667,032) ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (2,945,853) 7,592,927 (701,385) 4,269,430 ============ ============ ============ ============ Global Communications Fund ($) Shares sold $ 18,723,492 $ 86,861,183 $ 3,914,528(3) $ 47,927,080 Shares issued as reinvestment of dividends -- -- -- -- Shares redeemed (32,806,341) (11,731,420) (5,425,723) (5,583,505) ------------ ------------ ------------ ------------ Net increase (decrease) $(14,082,849) $ 75,129,763 $ (1,511,195) $ 42,343,575 ============ ============ ============ ============ Class C Shares Class X Shares(2) --------------------------- ------------------------------ Year Period Year Period Ended Ended Ended Ended October 31, October 31, October 31, October 31, 2001 2000(1) 2001 2000(1) ------------ ------------ ------------ ------------ Global Communications Fund (Number of Shares) Shares sold 120,155 1,370,070 327 252,896 Shares issued as reinvestment of dividends -- -- -- -- Shares redeemed (340,645) (326,514) (237,608)(3) (15,870) ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (220,490) 1,043,556 (237,281) 237,026 ============ ============ ============ ============ Global Communications Fund ($) Shares sold $ 462,352 $ 13,221,011 $ 2,387 $ 2,305,393 Shares issued as reinvestment of dividends -- -- -- -- Shares redeemed (1,346,798) (2,714,001) (2,176,985)(3) (130,909) ------------ ------------ ------------ ------------ Net increase (decrease) $ (884,446) $ 10,507,010 $ (2,174,598) 2,174,484 ============ ============ ============ ============
---------- (1) Fund commenced operations on March 1, 2000. (2) Effective November 17, 2000, Class X shares are no longer being offered for sale. (3) Amounts include 237,383 of Class X shares, valued at $1,508,875, that were converted into Class B shares on November 17, 2000.
Class A Shares Class B Shares ---------------------------------- ----------------------------------------- Year Year Year Year Ended Ended Ended Ended October 31, October 31, October 31, October 31, 2001 2000 2001 2000 ------------ ------------ ------------ ------------ Global Information Technology Fund (Number of Shares) Shares sold 5,572,388 3,430,072 649,338(2) 1,321,762 Shares issued in merger 614,620 -- -- -- Shares issued as reinvestment of dividends 1,834,157 115,782 791,178 15,652 Shares redeemed (7,711,747) (2,613,877) (796,526) (242,629) ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding 309,418 931,977 643,990 1,094,785 ============ ============ ============ ============ Global Information Technology Fund ($) Shares sold $ 71,172,900 $ 95,688,028 $ 10,071,165(2) $ 36,086,827 Shares issued in merger 5,497,157 -- -- -- Shares issued as reinvestment of dividends 28,703,042 2,671,739 12,115,539 369,198 Shares redeemed (91,476,650) (77,708,627) (6,137,863) (6,737,097) ------------ ------------ ------------ ------------ Net increase (decrease) $ 13,896,449 $ 20,651,140 $ 16,048,841 $ 29,718,928 ============ ============ ============ ============ Class C Shares Class X Shares(1) --------------------------- ------------------------------ Year Year Year Year Ended Ended Ended Ended October 31, October 31, October 31, October 31, 2001 2000 2001 2000 ------------ ------------ ------------ ------------ Global Information Technology Fund (Number of Shares) Shares sold 144,833 769,591 -- 210,415 Shares issued in merger -- -- -- -- Shares issued as reinvestment of dividends 323,794 7,474 -- 5,015 Shares redeemed (391,012) (196,294) (311,818)(2) (50,855) ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding 77,615 580,771 (311,818) 164,575 ============ ============ ============ ============ Global Information Technology Fund ($) Shares sold $ 1,883,133 $ 20,725,083 $ -- $ 5,561,003 Shares issued in merger -- -- -- -- Shares issued as reinvestment of dividends 4,959,136 166,554 -- 118,224 Shares redeemed (4,309,151) (5,276,898) (7,804,173)(2) (1,436,415) ------------ ------------ ------------ ------------ Net increase (decrease) $ 2,533,118 $ 15,614,739 $ (7,804,173) $ 4,242,812 ============ ============ ============ ============
---------- (1) Effective November 17, 2000, Class X Shares are no longer being offered for sale. (2) Amounts include 310,202 of Class X Shares, valued at $7,287,146 that were converted into Class B shares on November 17, 2000. 64 NOTES TO FINANCIAL STATEMENTS as of October 31, 2001 (Continued) --------------------------------------------------------------------------------
Class A Shares Class B Shares ------------------------------------------ ------------------------------------------ Year Four Months Year Year Four Months Year Ended Ended Ended Ended Ended Ended October 31, October 31, June 30, October 31, October 31, June 30, 2001 2000 2000 2001 2000 2000 ------------ ------------ ------------ ------------ ------------ ------------ Asia-Pacific Equity Fund (Number of Shares) Shares sold 13,924,794 2,793,903 9,625,972 603,862 286,379 2,243,981 Shares issued in merger 654,788 -- -- -- -- -- Shares issued as reinvestment of dividends 22,377 -- -- 12,550 -- -- Shares redeemed (14,531,504) (2,717,440) (10,000,540) (1,013,571) (441,432) (2,335,887) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding 70,455 76,463 (374,568) (397,159) (155,053) (91,906) ============ ============ ============ ============ ============ ============ Asia-Pacific Equity Fund ($) Shares sold $ 57,836,760 $ 17,553,287 $ 71,934,635 $ 2,372,035 $ 1,779,638 $ 16,295,675 Shares issued in merger 2,738,406 -- -- -- -- -- Shares issued as reinvestment of dividends 110,543 -- -- 60,115 -- -- Shares redeemed (60,248,332) (17,612,355) (75,845,503) (4,207,292) (2,748,440) (17,125,978) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) $ 437,377 $ (59,068) $ (3,910,868) $ (1,775,142) $ (968,802) $ (830,303) ============ ============ ============ ============ ============ ============ Class M Shares ------------------------------------------ Year Four Months Year Ended Ended Ended October 31, October 31, June 30, 2001 2000 2000 ------------ ------------ ------------ Asia-Pacific Equity Fund (Number of Shares) Shares sold 3,439,910 263,666 2,025,542 Shares issued in merger -- -- -- Shares issued as reinvestment of dividends 7,605 -- -- Shares redeemed (3,622,216) (237,827) (2,226,145) ------------ ------------ ------------ Net increase (decrease) in shares outstanding (174,701) 25,839 (200,603) ============ ============ ============ Asia-Pacific Equity Fund ($) Shares sold $ 14,790,697 $ 1,270,633 $ 15,526,895 Shares issued in merger -- -- -- Shares issued as reinvestment of dividends 36,579 -- -- Shares redeemed (15,870,448) (1,278,324) (17,704,044) ------------ ------------ ------------ Net increase (decrease) $ (1,043,172) $ (7,691) $ (2,177,149) ============ ============ ============
65 NOTES TO FINANCIAL STATEMENTS as of October 31, 2001 (Continued) --------------------------------------------------------------------------------
Class A Shares Class B Shares --------------------------- ------------------------------ Year Year Year Year Ended Ended Ended Ended October 31, October 31, October 31, October 31, 2001 2000 2001 2000 ------------ ------------ ------------ ------------ European Equity Fund (Number of Shares) Shares sold 7,719,989 1,758,487 192,944(2) 50,379 Shares issued as reinvestment of dividends 127,559 76,223 8,297 1,839 Shares redeemed (8,293,341) (1,537,388) (150,031) (27,021) ------------ ------------ ------------ ------------ Net increase (decrease) in shares outstanding (445,793) 297,322 51,210 25,197 ============ ============ ============ ============ European Equity Fund ($) Shares sold $ 72,652,569 $ 20,170,939 $ 1,781,871(2) $ 529,521 Shares issued as reinvestment of dividends 1,332,992 878,229 85,626 21,091 Shares redeemed (79,072,632) (17,910,649) (1,276,696) (260,463) ------------ ------------ ------------ ------------ Net increase (decrease) $ (5,087,071) $ 3,138,519 $ 590,801 $ 290,149 ============ ============ ============ ============ Class C Shares Class X Shares(1) ----------------------- ------------------------ Year Year Year Year Ended Ended Ended Ended October 31, October 31, October 31, October 31, 2001 2000 2001 2000 --------- --------- --------- --------- European Equity Fund (Number of Shares) Shares sold 8,510 15,141 -- 16,513 Shares issued as reinvestment of dividends 666 214 -- 1,740 Shares redeemed (15,032) (3,557) (77,908)(2) (5,259) --------- --------- --------- --------- Net increase (decrease) in shares outstanding (5,856) 11,798 (77,908) 12,994 ========= ========= ========= ========= European Equity Fund ($) Shares sold $ 64,153 $ 177,212 $ -- $ 194,506 Shares issued as reinvestment of dividends 6,841 2,455 -- 19,952 Shares redeemed (130,767) (40,853) (825,879)(2) (60,448) --------- --------- --------- --------- Net increase (decrease) $ (59,773) $ 138,814 $(825,879) $ 154,010 ========= ========= ========= =========
---------- (1) Effective November 17, 2000, Class X shares are no longer being offered for sale. (2) Amounts include 77,908 of Class X shares, valued at $825,879, that were converted into Class B shares on November 17, 2000. 66 NOTES TO FINANCIAL STATEMENTS as of October 31, 2001 (Continued) --------------------------------------------------------------------------------
Class A Shares ---------------------------------------------- Year Ten Months Year Ended Ended Ended October 31, October 31, December 31, 2001 2000 1999 ------------ ------------ ------------ Russia Fund (Number of Shares) Shares sold 2,343,779 6,948,006 9,870,288 Shares issued as reinvestment of dividends -- -- 146,380 Shares redeemed (3,740,914) (8,205,646) (8,524,306) ------------ ------------ ------------ Net increase (decrease) in shares outstanding (1,397,135) (1,257,640) 1,492,362 ============ ============ ============ Russia Fund ($) Shares sold $ 17,289,158 $ 54,557,755 $ 43,183,175 Shares issued as reinvestment of dividends -- -- 554,533 Redemption fee proceeds -- 390,342 167,637 Shares redeemed (26,829,915) (63,131,621) (36,262,949) ------------ ------------ ------------ Net increase (decrease) $ (9,540,757) $ (8,183,524) $ 7,642,396 ============ ============ ============ Class A Shares ---------------------------------------------- Year Ten Months Year Ended Ended Ended October 31, October 31, December 31, 2001 2000 1999 ------------ ------------ ------------ Precious Metals Fund (Number of Shares) Shares sold 5,158,331 5,296,727 10,050,258 Shares issued in merger 5,620,303 -- -- Shares issued as reinvestment of dividends 24,110 5,467 6,190,600 Shares redeemed (8,684,451) (9,603,010) (10,982,141) ------------ ------------ ------------ Net increase (decrease) in shares outstanding 2,118,293 (4,300,816) 5,258,717 ============ ============ ============ Precious Metals Fund ($) Shares sold $ 21,463,292 $ 15,323,872 $ 31,794,471 Shares issued in merger 14,557,739 -- -- Shares issued as reinvestment of dividends 54,487 13,994 17,841,616 Shares redeemed (23,933,244) (27,268,213) (34,746,635) ------------ ------------ ------------ Net increase (decrease) $ 12,142,274 $(11,930,347) $ 14,889,452 ============ ============ ============
67 NOTES TO FINANCIAL STATEMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- NOTE 11 -- SECURITIES LENDING Under an agreement with Brown Brothers Harriman ("BBH"), International Value can lend its securities to approved brokers, dealers and other financial institutions. Loans are collateralized by cash, U.S. Government securities or irrevocable performance letters of credit issued by banks approved by the Fund. The collateral must be in an amount equal to at least 105% of the market value of non-U.S. securities loaned and 102% of the market value of U.S. securities loaned. The cash collateral received is invested in Brown Brothers Investment Trust. A portion of the income generated by the investment of the collateral, net of any rebates paid by BBH to borrowers, is remitted to BBH as lending agent, and the remainder is paid to the Fund. Generally, in the event of counterparty default, the Fund has the right to use the collateral to offset losses incurred. There would be a potential loss to the Fund in the event the Fund is delayed or prevented from exercising its right to dispose of the collateral. The Fund bears the risk of loss with respect to the investment of collateral. During the year ended October 31, 2001, the Funds did not have any securities on loan. NOTE 12 -- CHANGE IN FUND'S YEAR-END Effective October 31, 2000 Worldwide Growth, International Core Growth, International SmallCap Growth, Emerging Countries and Asia-Pacific Equity changed their fiscal year-end from June 30 to October 31. Effective October 31, 2000, International, Russia, and Precious Metals changed their fiscal year-end from December 31 to October 31. This change was done to facilitate the administration of the Funds. NOTE 13 -- ILLIQUID SECURITIES Pursuant to guidelines adopted by the Fund's Board of Directors, the following securities have been deemed to be illiquid. The Funds currently limit investment in illiquid securities to 15% of the Fund's net assets, at market value, at time of purchase.
Initial Percent Acquisition of Net Fund Security Shares Date Cost Value Assets ---- -------- ------ ---- ---- ----- ------ Asia-Pacific Asia World Online 124,700 12/15/99 $ 321,700 $ -- 0.00% ========== ========= ==== Russia Bashinformsvyaz 6,831,400 06/09/97 2,036,189 402,055 0.82% Novosibirsk Region Electrosv 18,510,200 04/29/97 2,026,653 274,858 0.56% Moscow Region Electrosvyaz 1,100 03/29/00 353,600 154,000 0.31% Slavneft-Megionneftegaz 145,982 04/06/00 345,981 481,741 0.98% Trade House GUM 235,000 02/16/00 1,017,250 329,000 0.67% Trade House GUM ADR 10,000 02/16/00 18,000 28,000 0.06% Tyumentelecom 214,000 03/05/97 758,429 212,609 0.43% Tyumentelecom Pfd 279,099 02/06/97 478,064 110,631 0.23% ---------- ---------- ---- $7,033,666 $1,922,894 4.06% ========== ========== ==== Precious Metals Silver Standard Resources 300,000 09/06/95 $ 940,992 $ 591,000 0.86% ========== ========== ====
NOTE 14 -- REORGANIZATIONS On February 23, 2001, March 23, 2001 and April 27, 2001, certain Funds, as listed below (each an :"Acquiring Fund"), acquired the assets and certain liabilities of other Funds, also listed below (each an "Acquired Fund"), in a tax-free reorganization in exchange for shares of the Acquiring Fund, pursuant to a plan of reorganization approved by the Acquired Fund's shareholders. The number and value of shares issued by the Acquiring Fund are presented in Note 10 -- Capital Shares. The Adviser and the Funds split the cost associated with the Reorganization equally, Net assets and unrealized appreciation/(depreciation) as of the reorganization date were as follows:
Acquired Fund Total net Total net Unrealized assets of assets of appreciation/ Acquiring Acquired Acquired Fund Acquiring Fund (depreciation) Fund Fund (000's) (000's) (000's) ---- ---- ------- ------- ------- Worldwide Growth Global Corporate Leaders $10,838 $489,351 $ 1,710 Global Brand Names 44,892 489,351 (1,860) International International Equity 39,847 16,254 (6,927) Emerging Countries Emerging Markets Value 10,380 121,887 (1,352) Emerging Markets Equity 6,473 134,612 (1,893) Worldwide Emerging Markets 62,552 121,887 (15,060) Global Information Technology Global Technology 5,497 63,045 (7,103) Asia-Pacific Equity SmallCap Asia Growth 2,738 11,985 (1,237) Precious Metals Silver 14,558 41,263 (7,171)
68 NOTES TO FINANCIAL STATEMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- The net assets of Worldwide Growth, International, Emerging Countries, Global Information Technology, Asia-Pacific Equity and Precious Metals after the acquisitions were approximately $545,081,000, $56,101,000, $194,819,000, $68,542,000, $14,723,000 and $55,821,000, respectively. NOTE 15 -- FORWARD FOREIGN CURRENCY CONTRACTS At October 31, 2001 the following forward foreign currency contracts were outstanding for the Pilgrim International SmallCap Growth Fund.
In Net Unrealized Settlement Exchange Appreciation/ Currency Buy / Sell Date For Value $ (Depreciation) ------------------- ------------ ------------ ------------ ------------ --------------- Japanese Yen USD JPY 2,536,784,689 Sell 11/21/01 21,700,467 20,728,697 971,770 Japanese Yen USD JPY 1,102,161,446 Buy 11/21/01 9,192,339 9,006,035 (186,304) ---------- $ 785,466 ==========
NOTE 16 -- CONCENTRATION OF RISKS Foreign Securities (All Funds). Investments in foreign securities may entail risks not present in domestic investments. Since investments of securities are denominated in foreign currencies, changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Funds. Foreign investments may also subject the Funds to foreign government exchange restrictions, expropriation, taxation or other political, social or economic developments, as well as from movements in currency, security value and interest rate, all of which could affect the market and/or credit risk of the investments. Emerging Markets Investments (All Funds). Because of less developed markets and economies and, in some countries, less mature govenments 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. Industry Concentration (Global Communications and Global Information Technology Funds). As a result of the Funds concentrating their assets in securities related to a particular industry, the Funds may be subject to greater market fluctuation than a fund which has securities representing a broader range of investment alternatives. Region Concentration (Asia-Pacific Equity and Russia Funds). As a result of the Funds concentrating their assets in a single region of the world, each Fund's performance may be more volatile than that of a fund that invests globally. If securities in the region that the Fund is concentrated fall out of favor, it may cause the Fund to underperform in relation to funds that focus on other types of stocks. Non-Diversified (Russia and Precious Metals Funds). There is additional risk associated with being non-diversified, since the Fund is not limited in the proportion of its assets in a single issuer. The investment of a large percentage of a Fund's assets in the securities of a small number of issuers may cause that Fund's share price to fluctuate more than that of a diversified fund. NOTE 17 -- SUBSEQUENT EVENTS Subsequent to October 31, 2001, the following Funds declared dividends of:
Per Share Payable Record Fund Type Amount Date Date ---- ---- ------ ---- ---- International Value All Classes STCG $ 0.0352 November 20,2001 November 15, 2001 All Classes LTCG $ 0.2221 November 20,2001 November 15, 2001 Class A NII $ 0.0913 November 20,2001 November 15, 2001 Class B NII $ 0.0028 November 20,2001 November 15, 2001 Class C NII $ 0.0024 November 20,2001 November 15, 2001 Class Q NII $ 0.0822 November 20,2001 November 15, 2001 Class I NII $ 0.1366 November 20,2001 November 15, 2001 Emerging Countries Class A NII $ 0.0003 November 20,2001 November 15, 2001 Class Q NII $ 0.0005 November 20,2001 November 15, 2001 Precious Metals Class A NII $ 0.0154 November 20,2001 November 15, 2001
---------- NII -- Net Investment Income STCG -- Short-term capital gain LTCG -- Long-term capital gain 69 NOTES TO FINANCIAL STATEMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- Effective November 1, 2001, Asia-Pacific Equity, International and International Core Growth began imposing a 2.00% redemption fee on Class A shares redeemed (including in connection with an exchange) within 30 days or less from their date of purchase. On November 2, 2001, the Board of Directors/Trustees of the Pilgrim Funds approved proposals to reorganize the following "Disappearing Funds" into the following "Surviving Funds" (each a "Reoganization" and collectively, the "Reorganizations"):
Disappearing Funds Surviving Funds ------------------ --------------- Pilgrim International Core Growth Fund Pilgrim International Fund Pilgrim Global Communications Fund Pilgrim Global Information Technology Fund Pilgrim Internet Fund Pilgrim Global Information Technology Fund
Each proposed Reorganization is subject to approval by shareholders of the Disappearing Fund. If shareholder approval is obtained, it is expected that the Reorganizations would take place during the first half of 2002. Effective March 1, 2002, the following changes to the names of the Funds and Series will occur:
Old Name New Name -------- -------- Pilgrim Mutual Funds ING Mutual Funds Pilgrim Advisory Funds, Inc. ING Advisory Funds, Inc. Pilgrim Mayflower Trust ING Mayflower Trust Pilgrim Funds Trust ING Funds Trust Pilgrim Worldwide Growth Fund ING Worldwide Growth Fund Pilgrim International Value Fund ING International Value Fund Pilgrim International Fund, Inc. ING International Fund, Inc. Pilgrim International Core Growth Fund ING International Core Growth Fund Pilgrim International SmallCap Growth Fund ING International SmallCap Growth Fund Pilgrim Emerging Countries Fund ING Emerging Countries Fund Pilgrim Global Communications Fund ING Global Communications Fund Pilgrim Global Information Technology Fund ING Global Technology Fund Pilgrim Asia-Pacific Equity Fund ING Asia-Pacific Equity Fund Pilgrim European Equity Fund ING European Equity Fund Pilgrim Russia Fund, Inc. ING Pilgrim Russia Fund, Inc. Pilgrim Precious Metals Fund, Inc. ING Precious Metals Fund, Inc.
Effective March 1, 2002, the Adviser, Distributor and Administrator will change their names as follows:
Old Name New Name -------- -------- ING Pilgrim Investments, LLC ING Investments, LLC ING Pilgrim Securities, Inc. ING Distributors, Inc. ING Pilgrim Group, LLC ING Funds, LLC
70 Pilgrim Worldwide Growth Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 -------------------------------------------------------------------------------- Shares Value -------------------------------------------------------------------------------- COMMON STOCK: 95.53% AUSTRALIA: 0.05% 21,800 News Corp. Ltd. $ 149,977 ------------ Total Australia 149,977 ------------ BELGIUM: 0.64% 88,300 Fortis (B) 2,080,841 ------------ Total Belgium 2,080,841 ------------ BERMUDA: 0.47% 101,050 @ Tycom Ltd. 1,548,086 ------------ Total Bermuda 1,548,086 ------------ BRAZIL: 0.15% 19,300 Telecomunicacoes Brasileiras SA ADR 500,063 ------------ Total Brazil 500,063 ------------ CANADA: 1.61% 56,000 Alberta Energy Co. Ltd. 2,205,697 48,800 Cameco Corp. 1,090,192 28,500 @ C-Mac Industries, Inc. 607,050 117,600 Placer Dome, Inc. 1,341,816 ------------ Total Canada 5,244,755 ------------ CHINA: 1.15% 107,942 @ China Mobile Hong Kong Ltd. ADR 1,642,877 10,700,000 PetroChina Co. Ltd. 2,016,538 5,000 PetroChina Co. Ltd. ADR 93,700 ------------ Total China 3,753,115 ------------ DENMARK: 1.61% 32,800 Novo-Nordisk A/S 1,329,130 84,500 TDC A/S 2,898,519 60,200 TDC A/S ADR 1,035,440 ------------ Total Denmark 5,263,089 ------------ FINLAND: 2.63% 180,620 Nokia OYJ 3,773,913 146,300 Nokia OYJ ADR 3,000,613 149,300 Stora Enso OYJ 1,793,014 ------------ Total Finland 8,567,540 ------------ FRANCE: 4.50% 44,100 Aventis SA 3,242,673 89,830 Axa 1,963,381 820 Cap Gemini SA 46,097 105,100 @ Infogrames Entertainment 1,012,439 18,500 Louis Vuitton Moet Hennessy 651,782 77,356 Societe Television Francaise 1 1,736,663 21,370 TotalFinaElf SA 2,998,513 31,000 Valeo SA 1,059,552 42,194 Vivendi Universal SA 1,969,676 ------------ Total France 14,680,776 ------------ GERMANY: 2.66% 9,800 Adidas-Salomon AG 552,676 7,100 Allianz AG 1,671,879 1,711 DaimlerChrysler AG 59,635 30,454 Deutsche Bank AG 1,692,542 52,800 E.ON AG 2,749,725 3,600 Muenchener Rueckversicherungs AG 950,358 1,200 SAP AG 124,124 22,800 Volkswagen AG 873,617 ------------ Total Germany 8,674,556 ------------ HONG KONG: 1.24% 476,000 Cheung Kong Holdings Ltd. 4,027,692 ------------ Total Hong Kong 4,027,692 ------------ IRELAND: 1.18% 32,450 @ Elan Corp. PLC ADR 1,481,343 258,945 @ Ryanair Holdings PLC 2,375,661 ------------ Total Ireland 3,857,004 ------------ ISRAEL: 1.57% 89,300 @ Check Point Software Technologies 2,636,136 40,250 Teva Pharmaceutical Industries ADR 2,487,450 ------------ Total Israel 5,123,586 ------------ ITALY: 1.16% 407,700 Banca Fideuram S.p.A 2,511,933 120,200 Sanpaolo IMI S.p.A 1,261,689 ------------ Total Italy 3,773,622 ------------ JAPAN: 9.78% 18,700 Advantest Corp. 961,361 98,000 Dai Nippon Printing Co. Ltd. 1,042,817 40,600 Fanuc Ltd. 1,689,665 13,000 Fuji Photo Film Co. Ltd. 428,577 28,000 Honda Motor Co. Ltd. 1,003,060 5,000 Ito-Yokado Co. Ltd. 220,327 118,000 Marui Co. Ltd. 1,595,545 120,000 Matsushita Electric Industrial Co. Ltd. 1,419,887 127 Mitsubishi Tokyo Financial Group, Inc. 943,082 15,000 Murata Manufacturing Co. Ltd. 940,063 1,604,000 Nippon Steel Corp. 2,146,607 160 Nippon Telegraph & Telephone Corp. 658,044 322,000 Nomura Holdings, Inc. 4,230,446 244 NTT Docomo, Inc. 3,305,235 23,300 Otsuka Kagu Ltd. 1,264,393 140,000 Sekisui House Ltd. 1,126,443 21,000 Shohkoh Fund 2,577,339 89,300 Sony Corp. 3,373,936 450,000 The Bank of Yokohama Ltd. 1,601,045 25,700 Tokyo Electron Ltd. 1,054,886 13,200 Toyota Motor Corp. 319,915 ------------ Total Japan 31,902,673 ------------ NETHERLANDS: 2.32% 3,100 Aegon NV 77,793 151,800 @ ASM Lithography Holding NV 2,184,583 54,000 @ ASM Lithography Holding NV ADR 776,520 58,780 Koninklijke Ahold NV 1,652,705 56,800 Royal Dutch Petroleum Co. 2,886,514 ------------ Total Netherlands 7,578,115 ------------ SINGAPORE: 0.66% 108,700 @ Flextronics Intl. Ltd. 2,163,130 ------------ Total Singapore 2,163,130 ------------ SOUTH KOREA: 0.31% 64,720 Korea Electric Power Corp. 1,022,686 ------------ Total South Korea 1,022,686 ------------ SPAIN: 0.48% 70,000 @ Sogecable SA 1,574,037 ------------ Total Spain 1,574,037 ------------ See Accompanying Notes to Financial Statements 71 Pilgrim Worldwide Growth Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 -------------------------------------------------------------------------------- Shares Value -------------------------------------------------------------------------------- SWEDEN: 1.07% 283,000 Europolitan Holdings AB $ 1,697,963 348,200 Swedish Match AB 1,795,367 ------------ Total Sweden 3,493,330 ------------ SWITZERLAND: 3.27% 5,100 Givaudan 1,559,347 5,570 Nestle SA 1,154,669 80,280 Novartis AG 3,001,970 39,500 Roche Holding AG 2,735,507 264 @ Syngenta AG ADR 13,480 47,460 UBS AG 2,204,236 ------------ Total Switzerland 10,669,209 ------------ TAIWAN: 1.58% 212,300 @ Taiwan Semiconductor Manufacturing Co. Ltd. ADR 2,740,793 420,400 @ United Microelectronics 2,396,280 ------------ Total Taiwan 5,137,073 ------------ UNITED KINGDOM: 10.63% 214,300 BAA PLC 1,710,669 89,200 Barclays PLC 2,682,325 214,800 BP PLC 1,731,823 163,100 @ British Sky Broadcasting PLC 1,824,403 171,300 Cable & Wireless PLC 773,916 458,752 Cadbury Schweppes PLC 2,852,318 410,400 Capita Group PLC 2,593,420 995,800 Corus Group PLC 799,246 220,314 Diageo PLC 2,197,145 268,000 HSBC Holdings PLC 2,903,333 157,600 Pearson PLC 1,884,223 137,800 Pizza Express PLC 1,546,187 225,900 Provident Financial PLC 2,093,693 88,500 Reckitt Benckiser PLC 1,234,215 164,000 Reed Intl. PLC 1,341,308 87,600 Rio Tinto PLC 1,420,184 64,525 Royal Bank of Scotland Group PLC 1,541,949 1,526,730 Vodafone Group PLC 3,526,432 ------------ Total United Kingdom 34,656,789 ------------ UNITED STATES: 44.81% 161,100 @ Altera Corp. 3,254,220 44,600 AmerisourceBergen Corp. 2,834,776 43,800 Anadarko Petroleum Corp. 2,498,790 72,200 @ Analog Devices, Inc. 2,743,600 75,500 @ AOL Time Warner, Inc. 2,356,355 37,300 AON Corp. 1,418,892 77,400 @ Applied Materials, Inc. 2,640,114 101,800 Baker Hughes, Inc. 3,647,494 29,600 Bristol-Myers Squibb Co. 1,582,120 62,500 @ Brocade Communications System 1,534,375 87,200 @ CIENA Corp. 1,417,872 223,300 @ Cisco Systems, Inc. 3,778,236 93,215 Citigroup, Inc. 4,246,407 68,300 @ Costco Wholesale Corp. 2,583,789 43,000 Deere & Co. 1,590,570 46,100 @ Dell Computer Corp. 1,105,478 66,900 Dynegy, Inc. 2,401,710 47,800 @ eBay, Inc. 2,508,544 30,500 @ Genentech, Inc. 1,593,625 48,600 General Dynamics Corp. 3,965,760 27,100 General Electric Co. 986,711 40,000 @ Gilead Sciences, Inc. 2,516,000 47,100 Goldman Sachs Group, Inc. 3,681,336 33,000 @ Guidant Corp. 1,369,830 132,000 @ Immunex Corp. 3,153,480 206,800 Intel Corp. 5,050,056 16,500 International Business Machines Corp. 1,783,155 30,500 Johnson & Johnson 1,766,255 123,900 @ Juniper Networks, Inc. 2,761,731 36,600 @ King Pharmaceuticals, Inc. 1,427,034 32,100 @ Kla-Tencor Corp. 1,311,606 40,500 Lehman Brothers Holdings, Inc. 2,529,630 76,600 Lockheed Martin Corp. 3,735,782 37,800 Lowe's Cos. 1,288,980 33,100 Marsh & McLennan Cos. 3,202,425 112,500 Mattel, Inc. 2,129,625 52,900 @ Maxim Integrated Products 2,420,175 59,300 McDonald's Corp. 1,545,951 36,100 McKesson Corp. 1,335,339 84,400 @ Micron Technology, Inc. 1,920,944 40,900 @ Microsoft Corp. 2,378,335 20,700 Morgan Stanley Dean Witter & Co. 1,012,644 97,800 Motorola, Inc. 1,600,987 63,700 @ National Semiconductor Corp. 1,654,926 23,700 Northrop Grumman Corp. 2,368,815 88,400 @ Oracle Corp. 1,198,704 149,700 @ Peoplesoft, Inc. 4,456,569 34,100 Pepsi Bottling Group, Inc. 1,584,968 72,300 Pfizer, Inc. 3,029,370 23,400 Procter & Gamble Co. 1,726,452 56,700 @ Qualcomm, Inc. 2,785,104 106,100 Raytheon Co. 3,421,725 11,000 Schlumberger Ltd. 532,620 267,600 @ Siebel Systems, Inc. 4,369,909 182,100 @ Solectron Corp. 2,239,830 105,400 Southwest Airlines 1,675,860 106,200 @ Sprint Corp-PCS Group 2,368,260 40,600 @ ST Jude Medical, Inc. 2,882,600 113,500 Texas Instruments, Inc. 3,176,865 34,000 UnitedHealth Group, Inc. 2,235,500 44,900 US Bancorp 798,322 107,500 @ Veritas Software Corp. 3,050,850 ------------ Total United States 146,167,987 ------------ Total Common Stock (Cost $345,094,377) 311,609,731 ------------ PREFERRED STOCK: 1.08% GERMANY: 1.08% 21,159 Henkel KGaA 1,250,938 49,900 Rhoen Klinikum AG 2,283,623 ------------ Total Germany 3,534,561 ------------ Total Preferred Stock (Cost $4,143,631) 3,534,561 ------------ Total Long-Term Investments (Cost $349,238,008) 315,144,292 ------------ See Accompanying Notes to Financial Statements 72 Pilgrim Worldwide Growth Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- Principal Amount Value -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 2.76% Commercial Paper: 2.76% $9,000,000 FHLMC Discount Note, 3.530% due 11/01/01 $ 9,000,000 ------------ Total Short-Term Investments (Cost $9,000,000) 9,000,000 ------------ Total Investments in Securities (Cost $358,238,008)* 99.37% $324,144,292 Other Assets and Liabilities-Net 0.63% 2,048,217 ------ ------------ Net Assets 100.00% $326,192,509 ====== ============ @ Non-income producing security ADR American Depository Receipt * Cost for federal income tax purposes is $370,578,360. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 11,835,144 Gross Unrealized Depreciation (58,269,212) ------------ Net Unrealized Depreciation $(46,434,068) ============ See Accompanying Notes to Financial Statements 73 Pilgrim Worldwide Growth Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- Percentage of Industry Net Assets -------------------------------------------------------------------------------- Aerospace/Defense 4.14% Agriculture 0.55% Airlines 1.24% Apparel 0.17% Auto Manufacturers 0.69% Auto Parts & Equipment 0.32% Banks 4.79% Beverages 1.16% Biotechnology 1.46% Chemicals 0.48% Commercial Services 1.52% Computers 2.31% Cosmetics/Personal Care 0.53% Diversified Financial Services 7.65% Electric 1.16% Electronics 2.64% Engineering & Construction 0.52% Food 1.74% Forest Products & Paper 0.55% Healthcare-Services 3.23% Holding Companies-Diversified 0.20% Home Builders 0.35% Home Furnishings 1.47% Household Products/Wares 0.76% Insurance 2.85% Internet 1.58% Iron/Steel 0.90% Machinery-Diversified 0.49% Media 3.94% Mining 1.18% Miscellaneous Manufacturing 0.43% Oil & Gas 4.42% Oil & Gas Services 1.28% Pharmaceuticals 7.87% Pipelines 0.74% Real Estate 1.23% Retail 3.08% Semiconductors 10.22% Software 4.15% Telecommunications 11.97% Toys/Games/Hobbies 0.65% Short-Term Investments 2.76% Other Assets and Liabilities, Net 0.63% ------ Net Assets 100.00% ====== See Accompanying Notes to Financial Statements 74 Pilgrim International Value Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 -------------------------------------------------------------------------------- Shares Value -------------------------------------------------------------------------------- COMMON STOCK: 95.08% BERMUDA: 0.79% 17,970,585 First Pacific Co. $ 1,866,176 3,160,236 Jardine Matheson Holdings Ltd. 17,697,326 ------------- Total Bermuda 19,563,502 ------------- BRAZIL: 7.94% 4,802,400 Banco Bradesco SA ADR 17,528,760 8,577,700 Centrais Eletricas Brasileiras SA ADR 55,833,965 1,224,200 Companhia de Bebidas das Americas ADR 19,881,008 2,429,300 Petroleo Brasileiro SA ADR 46,896,179 1,208,600 Telecomunicacoes Brasileiras SA ADR 31,314,826 2,532,786 Tele Norte Leste Participacoes SA ADR 25,733,106 ------------- Total Brazil 197,187,844 ------------- CHINA: 0.84% 110,680,000 PetroChina Co. Ltd. 20,858,923 ------------- Total China 20,858,923 ------------- FRANCE: 6.49% 3,940,400 Alcatel SA 59,436,088 1,485,000 Alstom 22,679,892 225,800 @ Cereol 5,404,377 1,463,100 Michelin (C.G.D.E.) 45,177,756 225,800 @ Provimi SA 3,154,077 179,492 TotalFinaElf SA 25,185,266 ------------- Total France 161,037,456 ------------- GERMANY: 5.50% 805,500 BASF AG 27,241,451 808,000 Bayerische Hypo-und Vereinsbank AG 24,905,904 1,664,300 Deutsche Telekom 25,732,640 1,124,988 E.ON AG 58,587,275 ------------- Total Germany 136,467,270 ------------- HONG KONG: 1.03% 6,146,000 Swire Pacific Ltd. 25,608,333 ------------- Total Hong Kong 25,608,333 ------------- IRELAND: 2.62% 2,727,800 Allied Irish Banks PLC 26,375,326 4,322,900 Bank of Ireland PLC 38,610,132 ------------- Total Ireland 64,985,458 ------------- ITALY: 2.74% 3,355,650 ENI-Ente Nazionale Idrocarburi S.p.A. 42,013,875 3,129,200 Telecom Italia S.p.A. 26,090,951 ------------- Total Italy 68,104,826 ------------- JAPAN: 17.51% 654,000 Daiichi Pharmaceutical Co. Ltd. 15,343,344 3,937,000 Daiwa House Industry Co. Ltd. 26,536,881 4,183,900 Hitachi Ltd. 28,508,357 6,910 Japan Tobacco, Inc. 45,109,960 9,584,000 Komatsu Ltd. 29,249,793 3,415,000 Matsushita Electric Industrial Co. Ltd. 40,407,606 10,636,000 Mitsubishi Heavy Industries Ltd. 35,758,555 6,110 Mitsubishi Tokyo Financial Group, Inc. 45,371,905 7,603,000 Nippon Mitsubishi Oil Corp. 40,451,720 8,125 Nippon Telegraph & Telephone Corp. 33,416,297 792,000 Ono Pharmaceutical Co. Ltd. 25,205,435 3,328,000 Sumitomo Mitsui Banking Corp. 20,558,130 302,000 TDK Corp. 13,406,341 4,343,500 The Tokio Marine & Fire Insurance Co. Ltd. 35,479,567 ------------- Total Japan 434,803,891 ------------- MEXICO: 3.83% 1,275,060 America Movil SA de C.V. ADR 19,125,900 2,233,160 Telefonos de Mexico SA ADR 76,061,430 ------------- Total Mexico 95,187,330 ------------- NETHERLANDS: 1.72% 945,000 Akzo Nobel NV 38,716,584 350,000 European Aeronautic Defense and Space Co. 4,061,015 ------------- Total Netherlands 42,777,599 ------------- NEW ZEALAND: 1.47% 19,047,466 Telecom Corp. of New Zealand Ltd. 36,365,055 ------------- Total New Zealand 36,365,055 ------------- PORTUGAL: 1.50% 4,689,976 @ Portugal Telecom SGPS SA 37,121,895 ------------- Total Portugal 37,121,895 ------------- SINGAPORE: 2.29% 3,652,191 DBS Group Holdings Ltd. 20,834,747 6,239,000 Oversea-Chinese Banking Corp. 35,934,012 ------------- Total Singapore 56,768,759 ------------- SOUTH KOREA: 3.78% 3,669,900 Korea Electric Power Corp. ADR 31,964,829 1,310,000 Korea Telecom ADR 27,300,400 2,015,000 Pohang Iron & Steel Co. ADR 34,557,250 ------------- Total South Korea 93,822,479 ------------- SPAIN: 8.27% 2,873,000 Altadis SA 47,160,168 4,643,533 Banco Bilbao Vizcaya Argentaria SA 51,915,437 3,887,800 Repsol YPF SA 56,299,772 4,165,518 @ Telefonica SA 49,980,626 ------------- Total Spain 205,356,003 ------------- SWITZERLAND: 4.17% 91,700 Swisscom AG 25,430,166 341,676 Zurich Financial Services AG 78,142,741 ------------- Total Switzerland 103,572,907 ------------- UNITED KINGDOM: 21.90% 980,000 Allied Domecq PLC 4,982,764 9,765,900 BAE Systems PLC 47,384,347 1,265,000 BOC Group PLC 17,182,182 9,121,200 British American Tobacco PLC 79,502,247 6,983,730 British Telecommunications PLC 35,305,540 43,633,700 Corus Group PLC 35,021,157 4,612,212 Diageo PLC 45,996,626 2,945,600 HSBC Holdings PLC 31,910,667 8,158,800 Imperial Chemical Industries PLC 38,401,436 5,429,000 Innogy Holdings PLC 16,128,327 30,391,298 Invensys PLC 27,814,161 14,994,750 Marks & Spencer PLC 62,516,880 1,330,000 Rolls-Royce PLC 2,888,478 6,616,400 South African Breweries PLC 40,945,627 7,959,000 Unilever PLC 57,752,418 ------------- Total United Kingdom 543,732,857 ------------- VENEZUELA: 0.69% 759,700 Compania Anonima Nacional Telefonos de Venezuela ADR 17,169,220 ------------- Total Venezuela 17,169,220 ------------- Total Common Stock (Cost $2,811,042,422) 2,360,491,607 ------------- Total Long-Term Investments (Cost $2,811,042,422) 2,360,491,607 ------------- See Accompanying Notes to Financial Statements 75 Pilgrim International Value Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- Value -------------------------------------------------------------------------------- Total Investments in Securities (Cost $2,811,042,422)* 95.08% $2,360,491,607 Other Assets and Liabilities-Net 4.92% 122,249,966 ------ -------------- Net Assets 100.00% $2,482,741,573 ====== ============== @ Non-income producing security ADR American Depository Receipt * Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 124,449,595 Gross Unrealized Depreciation (575,000,410) -------------- Net Unrealized Depreciation $ (450,550,815) ============== See Accompanying Notes to Financial Statements 76 Pilgrim International Value Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- Percentage of Industry Net Assets -------------------------------------------------------------------------------- Aerospace/Defense 2.19% Agriculture 7.26% Auto Parts & Equipment 1.82% Banks 12.65% Beverages 4.50% Chemicals 4.90% Computers 0.54% Electric 6.54% Electrical Components & Equipment 1.15% Food 2.34% Holding Companies-Diversified 1.81% Home Builders 1.07% Home Furnishings 1.63% Insurance 4.57% Iron/Steel 2.80% Machinery-Construction & Mining 1.18% Machinery-Diversified 0.91% Miscellaneous Manufacturing 2.56% Oil & Gas 9.33% Pharmaceuticals 1.64% Retail 2.52% Telecommunications 21.17% Other Assets and Liabilities-Net 4.92% ------ Net Assets 100.00% ====== See Accompanying Notes to Financial Statements 77 Pilgrim International Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 -------------------------------------------------------------------------------- Shares Value -------------------------------------------------------------------------------- COMMOM STOCK: 83.32% BELGIUM: 1.79% 31,050 Fortis (B) $ 731,711 ------------ Total Belgium 731,711 ------------ CANADA: 1.44% 12,000 Cameco Corp. 268,080 28,200 Placer Dome, Inc. 321,762 ------------ Total Canada 589,842 ------------ DENMARK: 2.94% 8,000 Novo-Nordisk A/S 320,000 13,200 TDC A/S 452,786 25,200 TDC A/S ADR 433,440 ------------ Total Denmark 1,206,226 ------------ FINLAND: 2.20% 17,440 Nokia OYJ 364,395 6,800 Nokia OYJ ADR 139,468 29,600 Stora Enso OYJ Class R 355,192 3,400 Stora Enso OYJ, Class A 41,118 ------------ Total Finland 900,173 ------------ FRANCE: 7.82% 6,650 Aventis SA 487,736 3,800 Aventis SA ADR 277,970 27,000 @ Infogrames Entertainment 260,094 10,700 Schneider Electric SA 428,080 10,300 Societe Television Francaise 1 231,238 2,115 TotalFinaElf SA 296,764 6,144 TotalFinaElf SA ADR 428,483 8,900 Valeo SA 304,194 10,536 Vivendi Universal SA ADR 491,294 ------------ Total France 3,205,853 ------------ GERMANY: 3.72% 2,620 Allianz AG 616,947 6,889 Deutsche Bank AG 382,870 1,980 Muenchener Rueckversicherungs AG 522,697 ------------ Total Germany 1,522,514 ------------ HONG KONG: 2.35% 14,200 @ China Mobile Hong Kong Ltd. ADR 216,124 580,000 Cosco Pacific Ltd. 304,872 2,346,000 PetroChina Co. Ltd. 442,131 ------------ Total Hong Kong 963,127 ------------ IRELAND: 0.88% 39,400 @ Ryanair Holdings PLC 361,471 ------------ Total Ireland 361,471 ------------ ISRAEL: 2.09% 7,900 @ Check Point Software Technologies 233,208 10,100 Teva Pharmaceutical Industries ADR 624,180 ------------ Total Israel 857,388 ------------ ITALY: 2.16% 98,400 Banca Fideuram S.p.A. 606,265 26,500 Sanpaolo IMI S.p.A. 278,159 ------------ Total Italy 884,424 ------------ JAPAN: 15.83% 4,700 Advantest Corp. 241,626 112,000 Bank of Yokohama Ltd. 398,482 23,000 Dai Nippon Printing Co. Ltd. 244,743 1,800 Jafco Co. Ltd. 116,186 117,000 Japan Securities Finance Co. Ltd. 393,358 29,000 Marui Co. Ltd. 392,125 29,000 Matsushita Electric Co. Ltd. 343,139 28 Mitsubishi Tokyo Finance Group, Inc. 207,924 3,500 Murata Manufacturing Co. Ltd. 219,348 66,000 Nikko Cordial Corp. 356,000 254,000 Nippon Steel Corp. 339,924 32,000 Nomura Securities Co. Ltd. 420,417 33 NTT Docomo, Inc. 447,020 5,700 Otsuka Kagu Ltd. 309,315 33,000 Sekisui House Ltd. 265,519 4,700 Shohkoh Fund 576,833 17,800 Sony Corp. 672,520 34,000 Tokio Marine & Fire Insurance Co. Ltd. 277,727 6,400 Tokyo Electron Ltd. 262,695 ------------ Total Japan 6,484,901 ------------ NETHERLANDS: 5.22% 11,900 @ ASML Holding NV 171,255 26,000 @ ASML Holding NV ADR 373,880 14,650 Koninklijke Ahold NV 411,911 17,090 Royal Dutch Petroleum Co. ADR 863,216 16,380 TPG NV 320,000 ------------ Total Netherlands 2,140,262 ------------ NEW ZEALAND: 0.63% 232,000 Fletcher Building Ltd. 258,296 ------------ Total New Zealand 258,296 ------------ PHILIPPINES: 0.46% 293,500 Manila Electric Co. 186,439 ------------ Total Philippines 186,439 ------------ SPAIN: 2.25% 17,750 Banco Popular Espanol 595,503 14,600 @ Sogecable SA 328,299 ------------ Total Spain 923,802 ------------ SWEDEN: 2.63% 68,800 Europolitan Holdings AB 412,791 23,180 Foreningssparbanken 232,519 83,922 Swedish Match AB 432,713 ------------ Total Sweden 1,078,023 ------------ SWITZERLAND: 8.20% 1,210 Givaudan 369,963 2,250 Nestle SA 466,428 27,200 Novartis AG ADR 1,023,536 9,100 Roche Holding AG 630,205 3,480 Swiss Reinsurance 357,512 11,028 UBS AG 511,368 ------------ Total Switzerland 3,359,012 ------------ TAIWAN: 1.06% 33,700 @ Taiwan Semiconductor Manufacturing Co. Ltd. ADR 435,067 ------------ Total Taiwan 435,067 ------------ UNITED KINGDOM: 18.49% 15,900 Barclays PLC 478,127 87,100 BP PLC 702,243 40,800 @ British SKY Broadcasting PLC 456,380 29,135 Cable & Wireless PLC 131,629 75,983 Cadbury Schweppes PLC 472,429 57,600 Capita Group PLC 363,989 206,400 Corus Group PLC 165,660 48,778 Diageo PLC 486,453 24,325 GlaxoSmithKline PLC 653,734 45,000 Matalan PLC 236,645 39,500 Pearson PLC 472,251 27,600 Pizzaexpress PLC 309,686 39,400 Provident Financial PLC 365,168 19,900 Reckitt Benckiser PLC 277,524 37,000 Reed Intl. PLC 302,612 14,680 Rio Tinto PLC 237,994 3,800 Rio Tinto PLC ADR 246,392 15,625 Royal Bank of Scotland Group PLC 373,390 345,972 Vodafone Group PLC 799,124 1,900 Vodafone Group PLC ADR 43,928 ------------ Total United Kingdom 7,575,358 ------------ See Accompanying Notes to Financial Statements 78 Pilgrim International Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- Shares Value -------------------------------------------------------------------------------- UNITED STATES: 1.16% 9,000 @ Mercury Interactive Corp. $ 214,380 5,400 Schlumberger Ltd. 261,468 ------------ Total United States 475,848 ------------ Total Common Stock (Cost $39,376,329) 34,139,737 ------------ PREFERRED STOCK: 1.16% GERMANY: 1.16% 4,996 Henkel KGaA 295,368 3,930 Rhoen Klinikum AG 179,853 ------------ Total Germany 475,221 ------------ Total Preferred Stock (Cost $473,035) 475,221 ------------ MUTUAL FUNDS: 5.43% UNITED STATES: 5.43% 34,600 iShares, Inc. (MSCI Germany Index Fund) 454,990 62,200 iShares, Inc. (MSCI Japan Index Fund) 521,858 87,400 iShares, Inc. (MSCI United Kingdom Index Fund) 1,247,198 ------------ Total Mutual Funds (Cost $2,328,022) 2,224,046 ------------ Total Long-Term Investments (Cost $42,177,386) 36,839,004 ------------ Principal Amount Value -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 9.03% U.S. Government Obligations: 9.03% $2,000,000 Federal Home Loan Mortgage Corporation, 2.460, due 11/01/01 $ 2,000,000 1,000,000 U.S. Treasury Bills, 2.260%, due 11/15/01 999,121 700,000 U.S. Treasury Bills, 3.340%, due 11/15/01 699,091 ------------ 3,698,212 ------------ Total Short-Term Investments (Cost $3,698,212) 3,698,212 ------------ Total Investments in Securities (Cost$ 45,875,598)* 98.94% $ 40,537,216 Other Assets and Liabilities-Net 1.06% 433,427 ------ ------------ Net Assets 100.00% $ 40,970,643 ====== ============ @ Non-income producing security ADR American Depository Receipt * Cost for federal income tax purposes is $46,699,283. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 846,506 Gross Unrealized Depreciation (7,008,573) ------------ Net Unrealized Depreciation $ (6,162,067) ============ See Accompanying Notes to Financial Statements 79 Pilgrim International Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- Percentage of Industry Net Assets -------------------------------------------------------------------------------- Agriculture 1.05% Airlines 0.88% Auto Parts & Equipment 0.74% Banks 8.44% Beverages 1.19% Building Materials 0.63% Chemicals 0.90% Commercial Services 2.23% Diversified Financial Services 8.42% Electric 0.45% Electronics 1.13% Equity Fund 5.43% Food 3.30% Forest Products & Paper 0.97% Hand/Machine Tools 1.04% Healthcare-Services 0.44% Home Builders 0.65% Home Furnishings 2.48% Household Products/Wares 1.40% Insurance 4.33% Internet 0.57% Iron/Steel 1.23% Media 5.57% Mining 2.62% Oil & Gas Services 7.31% Pharmaceuticals 9.81% Retail 3.05% Semiconductors 3.03% Software 1.16% Telecommunications 8.40% Transportation 0.78% Venture Capital 0.28% Short-Term Investments 9.03% Other Assets and Liabilities, Net 1.06% ------ Net Assets 100.00% ====== See Accompanying Notes to Financial Statements 80 Pilgrim International Core Growth Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 -------------------------------------------------------------------------------- Shares Value -------------------------------------------------------------------------------- COMMON STOCK: 83.85% BELGIUM: 2.35% 41,000 Fortis (B) $ 966,189 ------------ Total Belgium 966,189 ------------ CANADA: 3.18% 19,500 Alberta Energy Co. Ltd. 766,417 10,700 Cameco Corp. 239,038 26,600 Placer Dome, Inc. 303,506 ------------ Total Canada 1,308,961 ------------ DENMARK: 2.80% 7,800 Novo-Nordisk A/S ADR 312,000 17,900 TDC A/S 614,006 13,200 TDC A/S ADR 227,040 ------------ Total Denmark 1,153,046 ------------ FINLAND: 2.93% 17,600 Nokia OYJ 367,738 6,500 Nokia OYJ ADR 133,315 58,700 Stora Enso OYJ 704,732 ------------ Total Finland 1,205,785 ------------ FRANCE: 9.13% 12,400 Aventis SA 911,772 8,493 AXA 185,628 41,600 @ Infogrames Entertainment 400,737 10,700 Schneider Electric SA 428,081 9,900 Societe Television Francaise 1 222,258 3,574 Total Fina Elf SA 501,483 14,500 Valeo SA 495,597 13,224 Vivendi Universal SA ADR 616,635 ------------ Total France 3,762,191 ------------ GERMANY: 3.67% 2,900 Allianz AG 682,880 6,850 Deutsche Bank AG 380,702 1,700 Muenchener Rueckversicherungs AG 448,780 ------------ Total Germany 1,512,362 ------------ HONG KONG: 2.49% 12,800 @ China Mobile Hong Kong Ltd. ADR 194,816 586,000 Cosco Pacific Ltd. 308,026 2,770,000 Petrochina Co. Ltd. 522,039 ------------ Total Hong Kong 1,024,881 ------------ IRELAND: 2.73% 11,400 @ Elan Corp. PLC ADR 520,410 65,805 @ RyanAir Holdings PLC 603,721 ------------ Total Ireland 1,124,131 ------------ ISRAEL: 2.77% 7,900 @ Check Point Software Technologies 233,208 14,700 Teva Pharmaceutical Industries ADR 908,460 ------------ Total Israel 1,141,668 ------------ ITALY: 2.18% 96,800 Banca Fideuram S.p.A. 596,407 28,600 Sanpaolo IMI S.p.A. 300,202 ------------ Total Italy 896,609 ------------ JAPAN: 14.43% 4,600 Advantest Corp. 236,485 111,000 Bank of Yokohama Ltd. 394,924 24,000 Dai Nippon Printing Co. Ltd. 255,384 29,000 Marui Co. Ltd. 392,125 34,000 Matsushita Electric Industrial Co. Ltd. 402,301 27 Mitsubishi Tokyo Financial Group Inc. 200,498 3,300 Murata Manufacturing Co. Ltd. 206,814 33,000 Nikko Cordial Corp. 178,000 264,000 Nippon Steel Corp. 353,307 55,000 Nomura Holdings Inc. 722,592 32 NTT Docomo Inc. 433,473 5,100 Otsuka Kagu Ltd. 276,756 35,000 Sekisui House Ltd. 281,611 4,700 Shohkoh Fund 576,833 17,700 Sony Corp. 668,742 2,700 Sony Corp. ADR 103,140 6,400 Tokyo Electron Ltd. 262,695 ------------ Total Japan 5,945,680 ------------ NETHERLANDS: 3.32% 11,500 @ ASML Holding NV 165,499 25,100 @ ASML Holding NV ADR 360,938 14,670 Koninklijke Ahold NV 412,473 8,500 Royal Dutch Petroleum Co. ADR 429,335 ------------ Total Netherlands 1,368,245 ------------ SPAIN: 2.16% 17,500 Banco Popular Espanol 587,116 13,400 @ Sogecable SA 301,316 ------------ Total Spain 888,432 ------------ SWEDEN: 2.18% 70,700 Europolitan Holdings AB 424,191 91,800 Swedish Match AB 473,333 ------------ Total Sweden 897,524 ------------ SWITZERLAND: 7.38% 1,250 Givaudan 382,193 2,250 Nestle SA 466,428 28,980 Novartis AG ADR 1,090,517 8,700 Roche Holdings AG 602,504 10,800 UBS AG 500,796 ------------ Total Switzerland 3,042,438 ------------ TAIWAN: 1.04% 33,300 @ Taiwan Semiconductor Manufacturing Co. Ltd. ADR 429,903 ------------ Total Taiwan 429,903 ------------ UNITED KINGDOM: 18.30% 56,500 BAA PLC 451,016 17,900 Barclays PLC 538,269 55,900 BP PLC 450,693 40,100 @ British SKY Broadcasting PLC 448,550 34,200 Cable & Wireless PLC 154,512 78,579 Cadbury Schweppes PLC 488,570 88,100 Capita Group PLC 556,726 258,100 Corus Group PLC 207,156 48,277 Diageo PLC 481,456 39,100 Pearson PLC 467,469 29,600 Pizzaexpress PLC 332,127 65,400 Provident Financial PLC 606,142 20,800 Reckitt & Benckiser PLC 290,075 34,600 Reed International PLC 282,983 20,700 Rio Tinto PLC 335,591 3,600 Rio Tinto PLC ADR 233,424 14,399 Royal Bank of Scotland Group PLC 344,092 378,000 Vodaphone Group PLC 873,102 ------------ Total United Kingdom 7,541,953 ------------ UNITED STATES: 0.81% 9,000 @ Mercury Interactive Corp. 214,380 2,500 Schlumberger Ltd. 121,050 ------------ Total United States 335,430 ------------ Total Common Stock (Cost $38,519,560) 34,545,428 ------------ See Accompanying Notes to Financial Statements 81 Pilgrim International Core Growth Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- Shares Value -------------------------------------------------------------------------------- PREFERRED STOCK: 1.86% GERMANY: 1.86% 4,661 Henkel KGAA $ 275,562 10,700 Rhoen Klinikum AG 489,675 ------------ Total Germany 765,237 ------------ Total Preferred Stock (Cost $896,234) 765,237 ------------ MUTUAL FUNDS: 5.11% UNITED STATES: 5.11% 33,900 iShares, Inc. (MSCI Germany Index Fund) 445,785 45,500 iShares, Inc. (MSCI Japan Index Fund) 381,745 89,500 iShares, Inc. (MSCI United Kingdom Index Fund) 1,277,165 ------------ Total United States 2,104,695 ------------ Total Mutual Funds (Cost $2,078,133) 2,104,695 ------------ Total Long-Term Investments (Cost $41,493,927) 37,415,360 ------------ Principal Amount Value -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 8.24% U.S. Government Obligations: 8.24% $1,300,000 Federal Home Loan Mortgage Corporation, 2.460%, due 11/01/01 1,300,000 2,100,000 U.S. Treasury Bills, 2.265%, due 11/15/01 2,098,150 ------------ 3,398,150 ------------ Total Short-Term Investments (Cost $3,398,150) 3,398,150 ------------ Total Investments in Securities (Cost $44,892,077)* 99.06% $ 40,813,510 Other Assets and Liabilities-Net 0.94% 385,485 ------ ------------ Net Assets 100.00% $ 41,198,995 ====== ============ @ Non-income producing security ADR American Depository Receipt * Cost for federal income tax purposes is $45,273,888. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 1,550,892 Gross Unrealized Depreciation (6,011,270) ------------ Net Unrealized Depreciation $ (4,460,378) ============ See Accompanying Notes to Financial Statements 82 Pilgrim International Core Growth Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- Percentage of Industry Net Assets -------------------------------------------------------------------------------- Agriculture 1.15% Airlines 1.46% Auto Parts & Equipment 1.20% Banks 7.88% Beverages 1.17% Chemicals 0.93% Commercial Services 2.72% Diversified Financial Services 8.85% Electronics 1.08% Engineering & Construction 1.09% Equity Fund 5.11% Food 3.32% Forest Products & Paper 1.71% Hand/Machine Tools 1.04% Healthcare-Services 1.19% Home Builders 0.68% Home Furnishings 2.85% Household Products/Wares 1.37% Insurance 3.20% Internet 0.57% Iron/Steel 1.36% Media 5.68% Mining 2.70% Oil & Gas Services 6.77% Pharmaceuticals 10.55% Retail 2.43% Semiconductors 2.96% Software 1.49% Telecommunications 8.31% Short-Term Investments 8.24% Other Assets and Liabilities, Net 0.94% ------ Net Assets 100.00% ====== See Accompanying Notes to Financial Statements 83 Pilgrim International SmallCap Growth Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 -------------------------------------------------------------------------------- Shares Value -------------------------------------------------------------------------------- COMMON STOCK: 95.73% AUSTRALIA: 2.10% 1,186,863 Boral Ltd. $ 1,951,776 531,850 Computershare Ltd. 1,345,628 782,300 Mayne Nickless Ltd. 2,930,969 326,500 @ Resmed, Inc. ADR 1,921,267 ------------ Total Australia 8,149,640 ------------ BELGIUM: 0.38% 34,900 Omega Pharma SA 1,461,241 ------------ Total Belgium 1,461,241 ------------ CANADA: 6.77% 249,800 Abitibi-Consolidated, Inc. 1,527,010 31,400 @ Angiotech Pharmaceuticals, Inc. 1,497,780 60,700 @ Ballard Power Systems, Inc. 1,629,795 217,400 @ Cott Corp. 3,052,296 111,400 Finning International, Inc. 1,242,614 166,100 @ Global Thermoelectric, Inc. 861,484 144,400 Industrial-Alliance Life Insurance Co. 3,603,630 78,100 @ Penn West Petroleum Ltd. 1,953,977 200,500 Petro-Canada 5,161,599 235,800 Teck Cominco Ltd. 1,530,590 294,900 @ Tesco Corp. 1,830,580 461,900 @ Turbo Genset, Inc. 939,404 143,100 @ Westjet Airlines Ltd. 1,487,995 ------------ Total Canada 26,318,754 ------------ DENMARK: 5.64% 107,400 Carlsberg A/S 4,566,128 43,600 Coloplast A/S 3,185,980 95,100 Danisco A/S 3,514,820 71,300 @ ISS A/S 3,358,577 57,100 NEG Micon A/S 1,558,640 130,000 Novozymes A/S 2,622,171 98,800 Vestas Wind Systems A/S 3,102,640 ------------ Total Denmark 21,908,956 ------------ FINLAND: 1.79% 392,000 Perlos OYJ 3,910,159 537,200 Sonera OYJ 3,053,725 ------------ Total Finland 6,963,884 ------------ FRANCE: 8.46% 68,100 Altran Technologies SA 3,123,879 54,400 @ Atos Origin 3,963,335 68,300 Bouygues Offshore 2,386,649 77,200 @ Business Objects SA 2,145,619 95,600 CNP Assurances 2,957,966 55,900 Ingenico 1,204,188 36,300 Pechiney SA 1,665,151 26,000 Pernod-Ricard 1,818,237 51,600 Rexel SA 2,538,715 36,083 Technip-Coflexip SA 4,076,328 78,400 @ UBI Soft Entertainment 2,664,832 39,000 Union du Credit-Bail Immobilier 2,018,770 38,600 Vinci SA 2,326,157 ------------ Total France 32,889,826 ------------ GERMANY: 3.22% 59,360 Altana AG 2,776,349 33,500 AMB Generali Holding AG 3,600,722 32,500 Epcos AG 1,398,464 47,300 Gehe AG 1,769,829 48,400 Stada Arzneimittel AG 1,340,828 60,000 Tecis Holding AG 1,629,803 ------------ Total Germany 12,515,995 ------------ GREECE: 0.47% 134,900 Coca Cola Hellenic Bottling Company SA 1,822,463 ------------ Total Greece 1,822,463 ------------ HONG KONG: 1.32% 999,000 Cheung Kong Infrastructure Holdings Ltd. 1,620,173 2,164,000 China Resources Enterprise 2,164,000 1,628,000 Hang Lung Development Co. 1,367,103 ------------ Total Hong Kong 5,151,276 ------------ INDIA: 1.60% 114,600 Dr. Reddy's Laboratories Ltd. ADR 2,853,540 55,500 X Infosys Technologies Ltd. Warrants 3,370,361 ------------ Total India 6,223,901 ------------ IRELAND: 2.82% 1,186,900 Anglo Irish Bank Corp. PLC 3,597,666 265,100 Irish Life & Permanent PLC 2,782,427 152,800 @ Riverdeep Group PLC ADR 2,835,968 182,000 @ Ryanair Holdings PLC 1,669,738 83,980 @ Tullow Oil PLC 94,548 ------------ Total Ireland 10,980,347 ------------ ISRAEL: 0.42% 38,500 @ Taro Pharmaceuticals Industries 1,620,850 ------------ Total Israel 1,620,850 ------------ ITALY: 3.56% 259,500 Autogrill S.p.A. 2,077,324 2,282,800 Parmalat Finanziaria S.p.A. 6,098,193 110,500 Recordati S.p.A. 2,065,307 728,300 Saipem S.p.A. 3,596,330 ------------ Total Italy 13,837,154 ------------ See Accompanying Notes to Financial Statements 84 Pilgrim International SmallCap Growth Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- Shares Value -------------------------------------------------------------------------------- JAPAN: 15.19% 6,320 (1) Bellsystem 24, Inc. $ 2,588,959 81,000 (1) Capcom Co. Ltd. 2,214,289 359,000 Central Glass Co. Ltd. 1,942,283 82,000 Credit Saison Co. Ltd. 1,960,586 69,000 Daiichi Pharmaceutical Co. Ltd. 1,618,793 77,500 FamilyMart 1,587,376 18,200 Goldcrest Co. Ltd. 1,027,737 29,500 (1) Hirose Electric Co. Ltd. 2,161,737 49,400 (1) Hokuto Corporation 2,136,521 150,000 Isetan Co. Ltd. 1,594,924 268,000 JSR Corp. 1,635,840 172,000 Kaneka Corp. 1,191,628 1,465,000 Kawasaki Steel Corp. 1,470,439 720,000 (1) Keio Electric Railway Co. Ltd. 4,148,027 59,000 Kyorin Pharmaceutical Co. Ltd. 1,588,804 573,000 Mitsui O.S.K. Lines Ltd. 1,379,371 163,500 (1) Mitsumi Electric Co. Ltd. 1,981,293 35,700 Nichii Gakkan Company 1,791,628 54,800 (1) Nippon System Development Co. Ltd. 2,812,779 53,300 Nitto Denko Corp. 904,680 10,000 (1) Obic Co. Ltd. 2,203,272 149,000 Onward Kashiyama Co. Ltd. 1,484,589 72,900 Ryohin Keikaku Co. Ltd. 1,737,060 146,000 @ Sega Corp. 2,841,487 187,100 (1) Shikoku Electric Power Co., Inc. 3,152,813 41,900 (1) Shimamura Co. Ltd. 2,519,915 162,000 Shiseido Co. Ltd. 1,600,898 183,000 Sumitomo Realty & Development 1,242,450 165,000 (1) Taiyo Yuden Co. Ltd. 2,229,712 172,200 (1) THK Co. Ltd. 2,298,904 ------------ Total Japan 59,048,794 ------------ NETHERLANDS: 1.47% 62,100 IHC Caland NV 3,097,205 109,500 Moolen Holding (van Der) 2,634,600 ------------ Total Netherlands 5,731,805 ------------ NORWAY: 4.27% 168,200 Gjensidige NOR Sparebank 4,715,429 501,300 Smedvig A/S 3,661,303 237,700 @ Tandberg ASA 4,260,048 282,400 @ TGS Nopec Geophysical Co. ASA 3,966,426 ------------ Total Norway 16,603,206 ------------ SINGAPORE: 0.50% 1,718,000 Singapore Technologies Engineering Ltd. 1,941,296 ------------ Total Singapore 1,941,296 ------------ SOUTH AFRICA: 0.78% 318,800 Gold Fields Ltd. 1,428,968 271,300 Harmony Gold Mining Co. Ltd. ADR 1,589,818 ------------ Total South Africa 3,018,786 ------------ SPAIN: 5.83% 115,700 Acciona SA 4,109,579 50,800 Acerinox SA 1,589,626 172,100 Altadis SA 2,825,014 676,500 Corporacion Mapfre Compania Internacional de Reaseguros 3,693,459 117,200 Fomento de Construcciones Y Contratas SA 2,524,701 340,000 Grupo Dragados SA 4,125,416 169,100 @ Sogecable SA 3,802,423 ------------ Total Spain 22,670,218 ------------ SWEDEN: 2.41% 16,175 @ Karo Bio AB 503,436 46,800 @ PerBio Science AB 623,011 228,300 Svenska Cellulosa AB 5,158,040 599,100 Swedish Match AB 3,089,042 ------------ Total Sweden 9,373,529 ------------ SWITZERLAND: 4.18% 3,000 Disetronic Holding AG 2,265,639 8,200 Givaudan 2,507,185 176,700 @ Logitech International SA 5,402,678 4,500 Lonza AG 2,586,681 5,320 Synthes-Stratec, Inc. 3,487,458 ------------ Total Switzerland 16,249,641 ------------ UNITED KINGDOM: 21.66% 200,000 Alliance Unichem PLC 1,547,126 319,600 Allied Domecq PLC 1,624,991 816,400 Amey PLC 3,658,763 960,700 BBA Group PLC 3,063,363 554,600 British Energy PLC 1,961,801 94,000 @ Cambridge Antibody Technology Group PLC 2,296,836 633,800 Capita Group PLC 4,005,140 532,500 @ Eidos PLC 1,639,954 1,236,000 Electronics Boutique PLC 2,028,958 802,200 FKI PLC 1,794,649 958,500 @ Friends Provident PLC 2,548,117 543,400 Iceland Group PLC 1,172,255 773,200 Innogy Holdings PLC 2,297,002 556,300 @ International Power PLC 1,785,984 149,600 Johnson Matthey PLC 1,970,042 5,231,100 Kidde PLC 4,179,573 463,500 Matalan PLC 2,437,443 2,038,400 MFI Furniture PLC 3,286,916 1,108,767 Morrison (Wm.) Supermarkets PLC 3,253,628 397,200 Nestor Healthcare Group PLC 3,043,742 187,100 Next PLC 2,361,945 528,900 Northern Rock PLC 4,417,917 250,900 @ Oxford Glycosciences PLC 1,640,172 630,600 Pace Micro Technology PLC 2,949,755 2,669,300 @ PHS Group PLC 3,315,429 200,000 @ Powderject Pharmaceuticals 1,217,363 276,300 Rexam PLC 1,473,069 670,300 Safeway PLC 3,408,109 267,977 Severn Trent Water PLC 2,777,587 2,227,600 @ Skyepharma PLC 1,731,279 398,000 Smith & Nephew PLC 2,236,091 175,800 Smiths Group PLC 1,741,724 158,900 @ Stolt Offshore SA ADR 1,263,255 452,800 United Utilities PLC 4,091,410 ------------ Total United Kingdom 84,221,388 ------------ UNITED STATES: 0.89% 113,800 @ Utstarcom, Inc. 2,672,024 103,700 @ Xoma Ltd. 774,639 ------------ Total United States 3,446,663 ------------ Total Common Stock (Cost $392,627,113) 372,149,613 ------------ See Accompanying Notes to Financial Statements 85 Pilgrim International SmallCap Growth Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- Shares Value ---------- ------------ PREFERRED STOCK: 1.15% GERMANY: 1.15% 75,600 Henkel KGaA $ 4,469,534 ------------ Total Germany 4,469,534 ------------ Total Preferred Stock (Cost $4,520,907) 4,469,534 ------------ Total Long-Term Investments (Cost $397,148,020) 376,619,147 ------------ Total Investments in Securities (Cost $ 397,148,020)* 96.88% $376,619,147 Other Assets and Liabilities-Net 3.12% 12,134,382 ------ ------------ Net Assets 100.00% $388,753,529 ====== ============ @ Non-income producing security ADR American Depository Receipt (1) Security is designated as collateral for forward foreign currency contracts. X Fair value as determined by Pilgrim Valuation Committee as appointed by the Fund's Board of Directors. * Cost for federal income tax purposes is $403,586,605. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 26,247,210 Gross Unrealized Depreciation (53,214,668) ------------ Net Unrealized Depreciation $(26,967,458) ============ See Accompanying Notes to Financial Statements 86 Pilgrim International SmallCap Growth Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- Percentage of Industry Net Assets -------------------------------------------------------------------------------- Agriculture 2.07% Airlines 0.81% Apparel 0.38% Applications Software 0.87% Banks 3.28% Beverages 3.31% Biotechnology 2.05% Building Materials 1.00% Chemicals 2.27% Commercial Services 7.44% Computers 3.63% Cosmetics/Personal Care 0.41% Diversified Financial Services 2.32% Electric 2.37% Electrical Components & Equipment 1.44% Electronics 3.16% Energy-Alternate Sources 0.42% Engineering & Construction 6.13% Food 4.49% Forest Products & Paper 1.72% Hand/Machine Tools 0.91% Healthcare-Products 2.79% Healthcare-Services 0.78% Holding Companies-Diversified 0.56% Home Furnishings 1.60% Household Products/Wares 1.15% Insurance 4.22% Iron/Steel 0.79% Machinery-Diversified 0.22% Media 0.98% Mining 1.60% Miscellaneous Manufacturing 1.70% Oil & Gas 1.85% Oil & Gas Services 4.30% Packaging & Containers 0.38% Pharmaceuticals 6.65% Real Estate 1.45% Retail 4.20% Semiconductors 1.01% Software 3.68% Telecommunications 2.57% Toys/Games/Hobbies 0.73% Transportation 1.42% Water 1.77% Other Assets and Liabilities, Net 3.12% ------ Net Assets 100.00% ====== See Accompanying Notes to Financial Statements 87 Pilgrim Emerging Countries Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 -------------------------------------------------------------------------------- Shares Value -------------------------------------------------------------------------------- COMMMON STOCK: 95.22% BELGIUM: 1.76% 90,900 Fortis (B) $ 2,142,111 ------------ Total Belgium 2,142,111 ------------ BERMUDA: 0.52% 63,000 @ Asia Global Crossing Ltd. 54,180 2,600,000 @ Euro-Asia Agricultural Holdings Co. Ltd. 580,000 ------------ Total Bermuda 634,180 ------------ BRAZIL: 6.30% 22,360 Brasil Telecom Participacoes SA ADR 626,080 133,402 Cia Paranaense de Energia ADR 640,330 36,075 Companhia de Bebidas das Americas ADR 585,858 34,660 Empresa Bras de Aeronautica ADR 594,766 79,560 Gerdau SA ADR 541,008 139,860 Petroleo Brasileiro SA ADR 2,685,312 86,230 Souza Cruz SA 395,726 70,459 Tele Norte Leste Participacoes SA ADR 715,863 18,965 Telemig Celular Participacoes SA ADR 454,591 28,400 Votorantim Celulose e Papel SA ADR 411,800 ------------ Total Brazil 7,651,334 ------------ CHILE: 1.31% 20,000 Cervecerias Unidas SA (CIA) ADR 316,400 48,450 @ Compania Telecomunicaciones de Chile SA ADR 499,035 88,500 Empresa Nacional de Electricidad SA/Chile ADR 769,950 ------------ Total Chile 1,585,385 ------------ CHINA: 1.61% 2,240,000 Beijing Capital Intl. Airport Co. Ltd. 548,513 3,100,000 Beijing North Star Co. 635,897 4,960,000 China Petroleum & Chemical Corp. 769,436 ------------ Total China 1,953,846 ------------ GREECE: 0.27% 1,200 Alpha Bank A.E. 21,652 1,700 Coca Cola Hellenic Bottling Co. SA 22,967 3,500 Cosmote Mobile Communications SA 32,299 13,900 Hellenic Telecommunications Organization SA 225,042 1,000 National Bank Of Greece SA 25,652 ------------ Total Greece 327,612 ------------ HONG KONG: 4.44% 840,900 @ China Mobile Hong Kong Ltd. 2,549,652 430,000 @ China Unicom 402,436 700,000 CNOOC Ltd. 686,538 1,800,000 Denway Motors Ltd. 600,000 1,160,000 Huaneng Power Intl., Inc. 713,846 1,400,000 Yanzhou Coal Mining Co. Ltd. 435,256 ------------ Total Hong Kong 5,387,728 ------------ HUNGARY: 1.27% 29,500 Opt Bank Rt. GDR 1,547,275 ------------ Total Hungary 1,547,275 ------------ INDIA: 3.82% 93,700 HCL Technologies Ltd. 320,794 120,000 Hindustan Lever Ltd. 538,487 240,000 Larsen & Toubro Ltd. 825,661 330,000 Mahanagar Telephone Nigam 891,186 65,000 Ranbaxy Laboratories Ltd. GDR 1,056,250 188,000 Reliance Industries Ltd. 1,000,525 ------------ Total India 4,632,903 ------------ ISRAEL: 1.78% 35,000 Teva Pharmaceutical Industries ADR 2,163,000 ------------ Total Israel 2,163,000 ------------ ITALY: 0.36% 56,800 Mediolanum S.p.A. 439,874 ------------ Total Italy 439,874 ------------ JAPAN: 4.79% 139,000 Marui Co. Ltd. 1,879,497 213,000 Nomura Holdings, Inc. 2,798,401 30,200 Sony Corp. 1,141,018 ------------ Total Japan 5,818,916 ------------ MALAYSIA: 4.89% 356,000 Gamuda Bhd 417,832 316,000 Genting Bhd 773,368 578,399 MAA Holdings Bhd 602,753 580,000 Malayan Banking Berhad 1,083,684 225,000 Nestle (Malaysia) Berhad 1,190,132 730,000 Sime Darby Bhd 837,579 450,000 Tenaga Nasional Bhd 1,024,342 ------------ Total Malaysia 5,929,690 ------------ MEXICO: 8.28% 233,200 Alfa SA 208,273 59,510 America Movil SA de C.V. ADR 892,650 45,335 Cemex SA ADR 1,042,705 12,825 Coca-Cola Femsa SA ADR 257,654 16,050 Fomento Economico Mexicano SA ADR 497,550 1,208,000 @ Grupo Financiero BBVA Bancomer 914,697 153,800 @ Grupo Financiero Inbursa SA 381,555 229,900 @ Grupo Iusacell S.A de C.V. ADR 600,039 259,000 Grupo Modelo SA 595,049 29,100 @ Grupo Televisa SA ADR 886,095 78,560 Telefonos de Mexico SA ADR 2,675,754 15,910 TV Azteca SA DE C.V. ADR 76,686 429,400 Walmart de Mexico/Mexico City 1,023,594 ------------ Total Mexico 10,052,301 ------------ NETHERLANDS: 1.50% 126,580 @ ASML Holding NV 1,821,637 ------------ Total Netherlands 1,821,637 ------------ PERU: 0.78% 47,000 Buenaventura SA ADR 952,220 ------------ Total Peru 952,220 ------------ POLAND: 2.08% 90,000 Bank Polska Kasa Opieki SA GDR 1,637,100 242,100 Telekomunikacja Polska SA GDR 883,665 ------------ Total Poland 2,520,765 ------------ RUSSIA: 5.13% 41,000 Lukoil-Holding ADR 1,807,075 45,000 @ Mobile Telesystems ADR 1,274,400 165,000 Surgutneftegaz ADR 2,083,125 110,000 @ Unified Energy System GDR 1,067,000 ------------ Total Russia 6,231,600 ------------ See Accompanying Notes to Financial Statements 88 Pilgrim Emerging Countries Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- Shares Value -------------------------------------------------------------------------------- SOUTH AFRICA: 8.18% 403,000 ABSA Group Ltd. $ 1,417,774 27,500 Anglo American Platinum Corp. 898,109 1,800,000 FirstRand Ltd. 1,461,050 100,000 Nedcor Ltd. 1,424,174 899,286 Pick'n Pay Stores Ltd. 1,057,754 989,000 Sanlam Ltd. 922,237 155,000 Sappi Ltd. 1,445,367 150,000 Sasol Ltd. 1,308,142 ------------ Total South Africa 9,934,607 ------------ SOUTH KOREA: 17.02% 10,000 Cheil Communications, Inc. 890,782 57,000 Daishin Securities Co. 514,369 32,000 X H & CB 789,713 12,000 Hankuk Electric Glass 599,535 130,000 Hotel Shilla Co. 638,420 91,000 X Kookmin Bank/Old 1,330,813 118,000 Korea Electric Power Corp. 1,864,601 31,980 Korea Electric Power Corp. ADR 278,546 63,300 Korea Telecom ADR 1,319,172 320,000 Korean Air Co. Ltd. 1,166,228 12,000 Nong Shim Co. Ltd. 543,765 40,000 Samsung Electro-Mechanics 898,528 44,500 Samsung Electronics 5,980,442 61,000 Samsung Securities Co. Ltd. 1,585,244 9,250 Shinsegae Co. Ltd. 658,462 8,430 SK Telecom 1,603,071 ------------ Total South Korea 20,661,691 ------------ SWITZERLAND: 3.01% 66,160 Novartis AG 2,473,971 17,010 Roche Holding AG 1,177,999 ------------ Total Switzerland 3,651,970 ------------ TAIWAN: 5.89% 428,825 Asustek Computer, Inc. GDR 1,479,446 416 # China Steel Corp. ADR 3,267 180,500 HON HAI Precision Industry GDR 1,416,925 15,612 # HON HAI Precision Industry GDR 122,554 9,500 Synnex Technology Intl. Corp. GDR 33,250 257,256 @ Taiwan Semiconductor Manufacturing Co. Ltd. ADR 3,321,175 58,335 @ United Microelectronics ADR 332,510 56,000 Via Technologies, Inc. 139,594 102,000 @ Yageo Corp. GDR 300,900 ------------ Total Taiwan 7,149,621 ------------ THAILAND: 2.35% 735,000 Advanced Info Service Public Co. Ltd. 682,230 700,000 @ Land & House Pub Co. Ltd. 524,491 45,000 @ Siam Cement 487,139 3,107,000 @ Thai Farmers Bank 1,163,996 ------------ Total Thailand 2,857,856 ------------ TURKEY: 2.62% 52,000,000 Anadolu Efes Biracilik Ve Malt Sanayii AS 1,026,959 35,833,332 KOC Holding AS 640,282 185,333,327 Sabanci Holding 592,602 83,333,338 Turkcell Iletisim Hizmet AS 412,748 276,750,000 Yapi VE Kredi Bankasi 503,182 ------------ Total Turkey 3,175,773 ------------ UNITED KINGDOM: 5.26% 128,000 Pearson PLC 1,530,333 183,900 Provident Financial PLC 1,704,428 219,000 South African Breweries PLC 1,362,551 774,500 Vodafone Group PLC 1,788,936 ------------ Total United Kingdom 6,386,248 ------------ Total Common Stock (Cost $136,889,698) 115,610,143 ------------ PREFERRED STOCK: 1.96% BRAZIL: 1.96% 17,140,054 Banco Itau SA 1,087,905 25,939 CVRD -- Companhia Vale do Rio Doce 540,572 31,000,100 Eletropaulo Metropolitana de Sao Paulo SA 746,779 ------------ Total Brazil 2,375,256 ------------ Total Preferred Stock (Cost $2,853,393) 2,375,256 ------------ Total Long-Term Investments (Cost $139,743,091) 117,985,399 ------------ See Accompanying Notes to Financial Statements 89 Pilgrim Emerging Countries Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- Principal Amount Value -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 2.80% Commercial Paper: 1.57% $1,900,000 FHLMC Discount Note, 3.530% due 11/01/01 $ 1,900,000 ------------ U.S. Government Obligations: 1.23% 1,500,000 United States Treasury Bill, 2.260%, due 11/15/2001 1,498,682 ------------ Total Short-Term Investments (Cost $3,398,682) 3,398,682 ------------ Total Investments in Securities (Cost $143,141,773)* 99.98% $121,384,081 Other Assets and Liabilities-Net 0.02% 29,466 ------ ------------ Net Assets 100.00% $121,413,547 ====== ============ @ Non-income producing security ADR American Depository Receipt GDR Global Depository Receipt # Securities with purchases pursuant to Rule 144A, under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. X Fair value as determined by Pilgrim Valuation Committee as appointed by the Fund's Board of Directors. * Cost for federal income tax purposes is $144,715,268. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 5,536,492 Gross Unrealized Depreciation (28,867,679) ------------ Net Unrealized Depreciation $(23,331,187) ============ See Accompanying Notes to Financial Statements 90 Pilgrim Emerging Countries Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- Percentage of Industry Net Assets -------------------------------------------------------------------------------- Advertising 0.73% Aerospace/Defense 0.49% Agriculture 0.80% Airlines 0.96% Auto Manufacturers 0.49% Banks 9.91% Beverages 3.84% Building Materials 1.27% Chemicals 0.82% Computers 2.23% Diversified Financial Services 9.47% Electric 5.85% Electrical Components & Equipment 0.25% Electronics 6.44% Engineering & Construction 0.80% Food 1.44% Forest Products & Paper 1.53% Holding Companies-Diversified 2.56% Home Builders 0.43% Home Furnishings 0.94% Household Products/Wares 0.44% Insurance 1.62% Iron/Steel 0.45% Lodging 1.16% Media 2.05% Mining 2.33% Oil & Gas 7.69% Pharmaceuticals 5.67% Real Estate 0.52% Retail 3.80% Semiconductors 4.62% Software 0.26% Telecommunications 15.32% Short-Term Investments 2.80% Other Assets and Liabilities, Net 0.02% ------ Net Assets 100.00% ====== See Accompanying Notes to Financial Statements 91 Pilgrim Global Communications Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 -------------------------------------------------------------------------------- Shares Value -------------------------------------------------------------------------------- COMMMON STOCK: 102.11% CANADA: 1.68% 45,300 Nortel Networks Corp. $ 263,193 ------------- Total Canada 263,193 ------------ FINLAND: 4.78% 35,850 Nokia OYJ 749,058 ------------ Total Finland 749,058 ------------ GERMANY: 3.86% 39,100 Deutsche Telekom 604,546 ------------ Total Germany 604,546 ------------ HONG KONG: 1.13% 58,220 @ China Mobile Hong Kong Ltd. 176,526 ------------ Total Hong Kong 176,526 ------------ JAPAN: 3.02% 35 NTT Docomo, Inc. 474,112 ------------ Total Japan 474,112 ------------ NETHERLANDS: 2.19% 14,800 @ Equant NV 153,752 6,700 STMicroelectronics NV 189,226 ------------ Total Netherlands 342,978 ------------ SINGAPORE: 1.40% 11,000 @ Flextronics Intl. Ltd. 218,900 ------------ Total Singapore 218,900 ------------ SPAIN: 1.13% 14,700 @ Telefonica SA 176,380 ------------ Total Spain 176,380 ------------ UNITED KINGDOM: 11.24% 177,342 @ Colt Telecom Group PLC 302,709 21,290 Logica PLC 230,104 532,154 Vodafone Group PLC 1,229,166 ------------ Total United Kingdom 1,761,979 ------------ UNITED STATES: 71.68% 2,200 Alltel Corp. 125,708 18,430 @ Amdocs Ltd. 481,207 38,100 @ Applied Micro Circuits Corp. 420,243 9,500 @ AT&T Wireless Services, Inc. 137,180 31,780 @ CIENA Corp. 516,743 31,500 @ Cisco Systems, Inc. 532,980 8,000 @ Comverse Technology, Inc. 150,480 22,140 @ Convergys Corp. 622,134 10,040 @ CSG Systems Intl. 313,850 25,200 @ Extreme Networks 294,588 39,060 @ JDS Uniphase Corp. 312,089 36,210 @ Juniper Networks, Inc. 807,121 31,500 Lucent Technologies, Inc. 211,050 52,100 @ Micromuse, Inc. 481,925 20,100 @ Micron Technology, Inc. 457,476 9,800 Motorola, Inc. 160,426 28,000 @ Nextel Communications, Inc. 222,600 32,260 @ Openwave Systems, Inc. 249,370 25,240 @ PMC - Sierra, Inc. 409,645 9,050 Qwest Communications Intl. 117,198 17,940 @ RF Micro Devices, Inc. 366,694 28,400 @ Riverstone Networks, Inc. 361,248 26,800 @ Sanmina Corp. 405,752 18,600 Scientific-Atlanta, Inc. 388,182 18,990 @ Sprint Corp. (PCS Group) 423,477 28,660 @ Sycamore Networks, Inc. 126,391 20,900 Texas Instruments, Inc. 584,991 38,220 @ Vitesse Semiconductor Corp. 360,797 45,800 @ WorldCom, Inc. 616,010 18,900 @ Xilinx, Inc. 574,938 ------------ Total United States 11,232,493 ------------ Total Common Stock (Cost $32,253,212) 16,000,165 ------------ Total Investments in Securities (Cost $32,253,212)* 102.11% $ 16,000,165 Other Assets and Liabilities-Net -2.11% (329,989) ------ ------------ Net Assets 100.00% $ 15,670,176 ====== ============ @ Non-income producing security * Cost for federal income tax purposes is $45,913,485. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 147,711 Gross Unrealized Depreciation (30,061,031) ------------ Net Unrealized Depreciation $(29,913,320) ============ See Accompanying Notes to Financial Statements 92 Pilgrim Global Communications Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- Percentage of Industry Net Assets -------------------------------------------------------------------------------- Commercial Services 3.96% Computers 2.45% Electronics 3.99% Internet 3.90% Semiconductors 19.13% Software 5.08% Telecommunications 63.60% Other Assets and Liabilities, Net -2.11% ------ Net Assets 100.00% ====== See Accompanying Notes to Financial Statements 93 Pilgrim Global Information Technology Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 -------------------------------------------------------------------------------- Shares Value -------------------------------------------------------------------------------- COMMON STOCK 98.09% CANADA: 2.66% 32,100 @ Celestica Inc. $ 1,101,672 ------------ Total Canada 1,101,672 ------------ IRELAND: 1.31% 33,105 @ SmartForce PLC ADR 544,908 ------------ Total Ireland 544,908 ------------ ISRAEL: 2.00% 28,100 @ Check Point Software Technologies 829,512 ------------ Total Israel 829,512 ------------ JAPAN: 0.91% 13 NTT Data Corp. 56,755 13 NTT Docomo, Inc. 176,099 3,800 Sony Corp. 143,572 ------------ Total Japan 376,426 ------------ UNITED KINGDOM: 5.57% 48,310 @ Amdocs Ltd. 1,261,374 124,692 CMG PLC 397,026 60,044 Logica PLC 648,961 ------------ Total United Kingdom 2,307,361 ------------ UNITED STATES: 85.64% 41,100 @ Activision, Inc. 1,485,765 72,300 @ Advanced Micro Devices 711,432 36,400 @ Analog Devices, Inc. 1,383,200 26,575 @ AOL Time Warner, Inc. 829,406 37,700 @ Broadcom Corp. 1,297,257 71,600 @ Brocade Communications System 1,757,780 35,518 @ CIENA Corp. 577,523 95,982 @ Cisco Systems, Inc. 1,624,015 12,293 @ Computer Sciences Corp. 441,442 24,009 @ Convergys Corp. 674,653 23,500 @ Electronic Arts, Inc. 1,209,310 36,500 Electronic Data Systems Corp. 2,349,505 30,271 Intel Corp. 739,218 23,592 International Business Machines Corp. 2,549,587 63,300 @ Jabil Circuit, Inc. 1,341,960 90,388 @ JDS Uniphase Corp. 722,200 6,000 @ Lucent Technologies, Inc. 40,200 43,700 @ Micromuse, Inc. 404,225 61,440 @ Micron Technology, Inc. 1,398,374 36,644 @ Microsoft Corp. 2,130,849 42,300 @ Nvidia Corp. 1,812,978 33,979 @ Openwave Systems, Inc. 262,658 41,692 @ Oracle Corp. 565,343 56,502 @ RF Micro Devices, Inc. 1,154,901 25,000 @ SAFLINK Corp. 6,500 79,000 @ Sanmina Corp. 1,196,060 123,116 @ Sun Microsystems, Inc. 1,249,627 29,800 @ THQ, Inc. 1,484,040 64,700 Texas Instruments, Inc. 1,810,953 51,840 @ Veritas Software Corp. 1,471,219 87,500 @ Vitesse Semiconductor Corp. 826,000 ------------ Total United States 35,508,180 ------------ Total Common Stock (Cost $62,998,154) 40,668,059 ------------ Total Investments in Securities (Cost $62,998,154)* 98.09% $ 40,668,059 Other Assets and Liabilities-Net 1.91% 793,238 ------ ------------ Net Assets 100.00% $ 41,461,297 ====== ============ @ Non-income producing security ADR American Depository Receipt * Cost for federal income tax purposes is $72,944,089. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 1,447,428 Gross Unrealized Depreciation (33,723,458) ------------ Net Unrealized Depreciation $(32,276,030) ============ See Accompanying Notes to Financial Statements 94 Pilgrim Global Information Technology Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- Percentage of Industry Net Assets -------------------------------------------------------------------------------- Commercial Services 1.63% Computers 26.21% Electronics 8.79% Home Furnishings 0.35% Internet 2.63% Media 2.00% Semiconductors 24.07% Software 18.87% Telecommunications 13.54% Other Asset and Liabilities, Net 1.91% ------ Net Assets 100.00% ====== See Accompanying Notes to Financial Statements 95 Pilgrim Asia-Pacific Equity Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 -------------------------------------------------------------------------------- Shares Value -------------------------------------------------------------------------------- COMMON STOCK: 95.62% HONG KONG: 29.49% 295,000 APT Satellite Holdings Ltd. $ 91,715 124,700 @,X Asia World Online -- 126,000 Bank of East Asia 252,000 214,000 Beijing Datang Power Generation Co. Ltd. 78,192 19,000 Cheung Kong Holdings Ltd. 160,769 276,000 China Everbright Ltd. 191,077 92,000 China Merchants Holdings International Co. Ltd. 58,385 115,000 @ China Mobile Hong Kong Ltd. 348,686 450,000 China National Aviation 66,346 850,000 China Petroleum & Chemical Corp. 131,859 180,000 @ China Unicom 168,462 156,000 Citic Pacific Ltd. 320,000 440,000 Cosco Pacific Ltd. 231,282 84,000 Hong Kong Exchanges and Clearing Ltd. 113,077 200 HSBC Holdings PLC 2,166 45,900 Hutchison Whampoa Ltd. 370,731 495,872 @ Pacific Century CyberWorks Ltd. 131,915 44,000 Sun Hung Kai Properties Ltd. 270,769 60,000 Television Broadcasts Ltd. 176,923 ------------ Total Hong Kong 3,164,354 ------------ INDONESIA: 0.72% 90,000 Gudang Garam Tbk PT 77,327 ------------ Total Indonesia 77,327 ------------ MALAYSIA: 5.04% 127,500 Malayan Banking Berhad 238,224 103,000 Resorts World Berhad 140,947 71,000 Tenaga Nasional Berhad 161,618 ------------ Total Malaysia 540,789 ------------ SINGAPORE: 16.02% 117,000 City Developments Ltd. 265,698 52,035 DBS Group Holdings Ltd. 296,845 127,000 @ Neptune Orient Lines 55,034 17,650 Oversea-Chinese Banking Corp. 101,657 51,000 Singapore Airlines Ltd. 236,389 28,500 Singapore Press Holdings 247,004 545,000 Singapore Telecommunications 517,183 ------------ Total Singapore 1,719,810 ------------ SOUTH KOREA: 22.00% 13,500 X H&CB 333,160 34,000 Korea Electric Power Corp. 537,258 2,500 Korea Telecom 92,951 11,530 Korea Telecom ADR 240,285 2,415 LG Home Shopping, Inc. 85,021 3,360 Samsung Electronics 451,557 9,000 SK Corp. 80,519 2,840 SK Telecom 540,062 ------------ Total South Korea 2,360,813 ------------ TAIWAN: 16.59% 110,123 Acer, Inc. 33,516 25,300 Asustek Computer, Inc. 86,533 62,298 Asustek Computer, Inc. GDR 214,928 22,498 China Steel Corp. GDR 176,609 116,537 Far Eastern Textile Co. Ltd. 33,779 29,469 @ Far Eastern Textile Co. Ltd. GDR 85,165 38,547 HON HAI Precision Industry GDR 302,594 21,027 Synnex Technology International Corp. GDR 73,595 22,960 @ Taiwan Semiconductor Manufacturing Co. Ltd 40,596 35,669 @ Taiwan Semiconductor Manufacturing Co. Ltd. ADR 460,492 69,000 United Microelectronics 56,800 37,950 @ United Microelectronics ADR 216,315 ------------ Total Taiwan 1,780,922 ------------ THAILAND: 5.76% 499,000 Advanced Info Service Public Co. Ltd. 463,174 33,600 PTT Exploration & Production Public Co. Ltd. 74,023 7,500 @ Siam Cement 81,190 ------------ Total Thailand 618,387 ------------ Total Common Stocks (Cost $18,302,877) 10,262,402 ------------ THAILAND: 0.92% 300,000 @ Siam Commercial Bank Ltd. 98,971 ------------ Total Thailand 98,971 ------------ Total Preferred Stock (Cost $254,508) 98,971 ------------ Total Long Term Investments (Cost $18,557,385) 10,361,373 ------------ Total Investments in Securities (Cost $18,557,385)* 96.54% $ 10,361,373 Other Assets and Liabilities-Net 3.46% 371,072 ------ ------------ Net Assets 100.00% $ 10,732,445 ====== ============ @ Non-income producing security X Fair Value as determined by Pilgrim Valuation Committee appointed by the Fund's Board of Directors. ADR American Depository Receipt GDR Global Depository Receipt * Cost for federal income tax purposes is the same as for financial statement purposes. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 117,964 Gross Unrealized Depreciation (8,313,976) ------------ Net Unrealized Depreciation $ (8,196,012) ============ See Accompanying Notes to Financial Statements 96 Pilgrim Asia-Pacific Equity Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- Percentage of Industry Net Assets -------------------------------------------------------------------------------- Agriculture 0.72% Airlines 2.20% Banks 12.33% Building Materials 0.76% Chemicals 0.54% Commercial Services 2.15% Computers 1.00% Diversified Financial Services 2.83% Diversified Telecommunications 10.01% Electric Utilities 7.24% Electronics 9.84% Entertainment 1.31% Holding Companies-Diversified 6.44% Iron/Steel 1.65% Media 3.95% Oil & Gas 2.67% Real Estate 7.11% Retail 0.79% Semiconductors 7.21% Textiles 1.11% Transportation 0.51% Wireless Telecommunications Service 14.17% Other Assets and Liabilities, Net 3.46% ------ Net Assets 100.00% ====== See Accompanying Notes to Financial Statements 97 Pilgrim European Equity Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 -------------------------------------------------------------------------------- Shares Value -------------------------------------------------------------------------------- COMMMON STOCK: 98.05% BELGIUM: 0.44% 3,449 Interbrew $ 89,468 ------------ Total Belgium 89,468 ------------ FINLAND: 3.03% 24,240 Nokia OYJ 506,476 9,035 Stora Enso OYJ 109,708 ------------ Total Finland 616,184 ------------ FRANCE: 13.15% 9,753 Alcatel SA 147,112 3,986 Aventis SA 293,091 4,976 AXA 108,759 2,850 BNP Paribas 236,861 1,560 Bouygues 47,707 1,020 Cap Gemini SA 57,340 3,518 Carrefour SA 179,887 818 Cie de Saint-Gobain 113,673 1,567 France Telecom 58,449 451 Groupe Danone 52,125 1,380 L'OREAL 95,203 1,392 Louis Vuitton Moet Hennessy 49,042 8,561 @ Orange SA 69,302 431 Pinault-Printemps-Redoute 49,582 496 Sanofi-Synthelabo SA 32,678 2,269 Schneider Electric SA 90,777 1,717 Societe Assurances Generales de France 79,225 4,696 Suez Lyonnaise des Eaux SA 147,538 4,227 TotalFinaElf SA 593,108 3,633 Vivendi Universal SA 169,594 ------------ Total France 2,671,053 ------------ GERMANY: 11.22% 970 Allianz AG 228,412 5,042 BASF AG 170,517 4,002 Bayer AG 118,787 1,411 Bayerische Hypo-und Vereinsbank AG 43,492 2,230 Commerzbank AG 37,007 4,815 DaimlerChrysler AG 167,820 3,104 Deutsche Bank AG 172,511 4,516 Deutsche Lufthansa AG 47,524 9,245 Deutsche Telekom 142,942 5,032 E. On AG 262,057 3,083 Infineon Technologies AG 46,447 681 Muenchener Rueckversicherungs AG 179,776 2,024 RWE AG 79,919 1,464 SAP AG 151,431 1,690 Schering AG 87,175 4,609 Siemens AG 223,156 6,475 ThyssenKrupp AG 69,887 1,320 Volkswagen AG 50,578 ------------ Total Germany 2,279,438 ------------ IRELAND: 1.55% 11,106 Bank of Ireland 99,194 3,991 CRH PLC 61,743 3,338 @ Elan Corp. PLC 153,121 ------------ Total Ireland 314,058 ------------ ITALY: 5.50% 4,618 Assicurazioni Generali 126,479 26,972 Banca Nazionale Del Lavoro S.p.A. 59,437 24,928 Enel S.p.A. 140,358 20,079 ENI-Ente Nazionale Idrocarburi S.p.A. 251,396 20,509 IntesaBci S.p.A. 47,962 10,205 Sanpaolo IMI S.p.A. 107,118 10,631 Telecom Italia S.p.A.-RNC 51,444 20,006 Telecom Italia S.p.A. 166,807 12,906 TIM S.p.A. 70,230 26,152 Unicredito Italiano S.p.A. 96,442 ------------ Total Italy 1,117,673 ------------ NETHERLANDS: 9.30% 8,035 ABN Amro Holding NV 122,571 13,347 Aegon NV 334,938 2,080 Akzo Nobel NV 85,217 4,397 @ ASML Holding NV 63,278 9,157 Elsevier 106,330 10,666 Fortis (NL) 252,310 3,966 Heineken Holding NV 105,233 9,084 Koninklijke Ahold NV 255,413 8,801 Koninklijke Philips Electronics NV 199,801 3,265 @ Libertel NV 24,991 4,882 Royal KPN NV 18,882 3,798 STMicroelectronics NV 107,266 8,152 TPG NV 159,258 1,844 VNU NV 53,738 ------------ Total Netherlands 1,889,226 ------------ PORTUGAL: 0.61% 15,658 @ Portugal Telecom SGPS SA 123,936 ------------ Total Portugal 123,936 ------------ SPAIN: 4.89% 13,080 Banco Bilbao Vizcaya Argentaria SA 146,236 3,009 Banco Popular Espanol 100,950 23,356 Banco Santander Central Hispano SA 179,615 9,050 Endesa SA 138,380 27,939 @ Telefonica SA 335,231 6,671 @ Terra Networks 43,502 3,286 Union Fenosa SA 48,797 ------------ Total Spain 992,711 ------------ SWEDEN: 2.47% 23,463 Nordea AB 103,831 5,543 Nordea AB ADR 24,629 7,315 Securitas AB 121,724 11,157 Skandia Forsakrings AB 66,941 3,840 SKF AB 64,439 27,762 Telefonaktiebolaget LM Ericsson 120,242 ------------ Total Sweden 501,806 ------------ See Accompanying Notes to Financial Statements 98 Pilgrim European Equity Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- Shares Value -------------------------------------------------------------------------------- SWITZERLAND: 10.18% 5,024 ABB Ltd. $ 42,704 5,631 Credit Suisse Group 205,571 1,960 Nestle SA 406,311 11,770 Novartis AG 440,124 4,645 Roche Holding AG 321,682 993 Swiss Reinsurance 102,014 1,829 @ Syngenta AG 93,391 6,705 UBS AG 311,408 630 Zurich Financial Services AG 144,084 ------------ Total Switzerland 2,067,289 ------------ UNITED KINGDOM: 35.71% 8,903 Abbey National PLC 132,309 6,676 AstraZeneca PLC 300,742 12,640 BAE Systems PLC 61,330 8,407 Barclays PLC 252,806 101,290 BP PLC 816,650 32,875 British Telecommunications PLC 166,196 13,195 CGNU PLC 158,139 19,291 CMG PLC 61,424 72,992 @ Colt Telecom Group PLC 124,592 24,824 Compass Group PLC 180,850 21,660 Diageo PLC 216,011 17,010 Dixons Group PLC 52,294 21,651 GlaxoSmithKline PLC 581,870 6,654 HBOS PLC 74,914 39,409 HSBC Holdings PLC 431,375 37,244 @ International Power PLC 119,571 35,744 Invensys PLC 32,713 50,017 Lattice Group PLC 112,441 28,352 Lloyds TSB Group PLC 285,837 15,785 National Grid Group PLC 111,903 9,382 Pearson PLC 112,169 7,367 Prudential PLC 77,055 9,681 Reuters Group PLC 91,554 10,580 Royal & Sun Alliance Insurance Group 57,482 14,949 Royal Bank of Scotland Group PLC 357,235 15,815 Scottish Power PLC 90,749 98,871 Shell Transport & Trading Co. PLC 739,694 9,781 Standard Chartered PLC 97,615 42,445 Tesco PLC 149,525 26,412 Unilever PLC 191,652 409,319 Vodafone Group PLC 945,443 7,598 WPP Group PLC 68,709 ------------ Total United Kingdom 7,252,849 ------------ Total Common Stock (Cost $24,159,555) 19,915,691 ------------ Total Investments in Securities (Cost $24,159,555)* 98.05% $ 19,915,691 Other Assets and Liabilities-Net 1.95% 395,380 ------ ------------ Net Assets 100.00% $ 20,311,071 ====== ============ @ Non-income producing security ADR American Depository Receipt * Cost for federal income tax purposes is $24,990,423. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 319,838 Gross Unrealized Depreciation (5,394,570) ------------ Net Unrealized Depreciation $ (5,074,732) ============ See Accompanying Notes to Financial Statements 99 Pilgrim European Equity Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- Percentage of Industry Net Assets -------------------------------------------------------------------------------- Advertising 0.34% Aerospace/Defense 0.31% Airlines 0.23% Auto Manufacturers 1.08% Banks 18.35% Beverages 2.02% Building Materials 0.86% Chemicals 2.30% Commercial Services 0.60% Computers 0.58% Cosmetics/Personal Care 0.47% Diversified Financial Services 1.24% Electric 4.88% Electronics 0.98% Engineering & Construction 0.45% Food 6.08% Food Service 0.89% Forest Products & Paper 0.54% Gas 0.55% Hand/Machine Tools 0.45% Holding Companies-Diversified 0.24% Insurance 8.19% Internet 0.21% Iron/Steel 0.34% Media 2.63% Metal Fabricate/Hardware 0.32% Miscellaneous Manufacturing 1.26% Oil & Gas 11.82% Pharmaceuticals 10.88% Retail 0.50% Semiconductors 1.07% Software 0.75% Telecommunications 15.13% Transportation 0.78% Water 0.73% Other Assets and Liabilities-Net 1.95% ------ Net Assets 100.00% ====== See Accompanying Notes to Financial Statements 100 Pilgrim Russia Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 -------------------------------------------------------------------------------- Shares Value -------------------------------------------------------------------------------- COMMON STOCK: 66.19% Airlines: 1.36% 2,446,350 Aeroflot $ 667,853 ------------ Beverages: 4.13% 750,000 @ Sun Interbrew Ltd. GDR 2,025,000 ------------ Electric: 5.39% 40,050,000 Mosenergo 1,269,585 159,000 Mosenergo ADR 494,490 9,000,000 Unified Energy System 880,200 ------------ 2,644,275 ------------ Engineering & Construction: 0.97% 135,000 @ United Heavy Machinery Uralmash-Izhora Group ADR 472,500 ------------ Gas: 0.96% 55,000 Gazprom OAO ADR 473,000 ------------ Iron/Steel: 1.44% 20,000 Cherepovets MK Severstal 705,000 ------------ Mining: 5.33% 220,000 JSC Mining & Smelting Co. ADR 2,611,994 ------------ Oil & Gas: 28.88% 2,000 Lukoil-Holding 22,020 55,000 Lukoil-Holding ADR 2,424,125 3,150,000 Sibneft 2,047,500 145,982 Slavneft-Megionneftegaz 481,741 185,000 Surgutneftegaz ADR 2,335,625 223,700 Tatneft ADR 2,221,341 1,250,000 YUKOS 4,625,000 ------------ 14,157,352 ------------ Retail: 0.73% 235,000 Trade House GUM 329,000 10,000 Trade House GUM ADR 28,000 ------------ 357,000 ------------ Telecommunications: 17.00% 6,831,400 Bashinformsvyaz 402,055 24,610 Chelyabinsksvyazinform 180,646 129,600 @ Golden Telecom Inc. 1,562,976 36,000 @ Mobile Telesystems ADR 994,320 1,100 @ Moscow Region Electrosvyaz 154,000 656,000 Nizhnosvyazinform 459,200 18,510,200 X Novosibirsk Region Electrosv 274,858 1,098,882 Rostelecom 663,725 20,000 Rostelecom ADR 73,000 238,125 Rostov Region Electrosvyaz 83,344 28,000 Samarasvyazinform 420,000 384,424 St. Petersburg Telephone 135,702 214,000 Tyumentelecom 212,609 10,000,000 Uralsvyazinform 68,000 42,500 Uralsvyazinform ADR 59,249 110,000 @ Vimpel-Communications ADR 2,172,500 85,300 Yuzhnaya Telecommunication Co. 415,838 ------------ 8,332,022 ------------ Total Common Stock (Cost $40,372,706) 32,445,996 ------------ PREFERRED STOCK: 21.83% Electric: 2.06% 16,000,000 @ Unified Energy System 1,009,600 ------------ Oil & Gas: 18.42% 263,750 Lukoil-Holding 2,843,225 70,000 Lukoil-Holding ADR 1,472,100 21,570,000 Surgutneftegaz 3,440,415 80,000 Surgutneftegaz ADR 1,276,000 ------------ 9,031,740 ------------ Telecommunications: 1.35% 189,500 @ Moscow City Telephone 293,725 427,000 Nizhnosvyazinform 154,972 50,000 Rostelecom 13,425 9,300 Samarasvyazinform 70,680 110,000 St Petersburg Telephone 16,797 279,099 Tyumentelecom 110,631 ------------ 660,230 ------------ Total Preferred Stock (Cost $9,790,895) 10,701,570 ------------ Total Long-Term Investments (Cost $50,163,601) 43,147,566 ------------ Principal Amount Value -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 7.75% U.S. Government Obligations: 7.75% $2,400,000 Federal Home Loan Mortgage Corporation, 2.460%, due 11/01/01 $ 2,400,000 1,400,000 U.S. Treasury Bills 2.260%, due 11/15/01 1,398,769 ------------ Total Short-term Investments (Cost $3,798,769) 3,798,769 ------------ Total Investments in Securities (Cost $53,962,370)* 95.77% $ 46,946,335 Other Assets and Liabilities-Net 4.23% 2,072,461 ------ ------------ Net Assets 100.00% $ 49,018,796 ====== ============ @ Non-income producing security ADR American Depository Receipt GDR Global Depository Receipt X Fair value as determined by Pilgrim Valuation Committee as appointed by the Fund's Board of Directors. * Cost for federal income tax purposes is $55,198,946. Net unrealized depreciation consists of: Gross Unrealized Appreciation $ 10,407,109 Gross Unrealized Depreciation (18,659,720) ------------ Net Unrealized Depreciation $ (8,252,611) ============ See Accompanying Notes to Financial Statements 101 Pilgrim Precious Metals Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 -------------------------------------------------------------------------------- Shares Value -------------------------------------------------------------------------------- COMMMON STOCK: 96.61% AUSTRALIA: 17.66% 3,000,000 XX Delta Gold Ltd. $ 3,454,923 5,000,000 @ Lihir Gold Ltd. 2,967,110 2,000,000 Normandy Mining Ltd. 1,408,120 800,000 Sons of Gwalia Ltd. 2,864,518 ------------ Total Australia 10,694,671 ------------ CANADA: 38.46% 318,000 Agnico-Eagle Mines Ltd. 3,094,140 180,000 Barrick Gold Corp. 2,806,200 543,900 @ Glamis Gold Ltd. 1,903,650 301,400 Goldcorp, Inc. 3,544,464 1,248,600 @ Iamgold Corp. 2,714,690 1,144,900 @ Kinross Gold Corp. 984,614 383,000 @ Meridian Gold, Inc. 4,193,850 96,000 @ North American Palladium Ltd. 508,800 258,500 Placer Dome, Inc. 2,949,485 300,000 @ Silver Standard Resources 591,000 ------------ Total Canada 23,290,893 ------------ MEXICO: 0.92% 565,400 Industrias Penoles SA 558,021 ------------ Total Mexico 558,021 ------------ PERU: 7.62% 157,009 Buenaventura SA 1,574,882 150,000 Buenaventura SA ADR 3,039,000 ------------ Total Peru 4,613,882 ------------ SOUTH AFRICA: 16.58% 95,000 Anglogold Ltd. ADR 1,576,050 477,900 Gold Fields Ltd. 2,142,107 200,000 Gold Fields Ltd. ADR 916,000 306,656 Harmony Gold Mining Co. Ltd. 1,780,720 200,000 Harmony Gold Mining Co. Ltd. ADR 1,172,000 68,960 Impala Platinum Holdings Ltd. 2,452,353 ------------ Total South Africa 10,039,230 ------------ UNITED KINGDOM: 1.15% 200,000 @ Brancote Holdings PLC 414,310 59,328 @ Randgold Resources Ltd. GDR 281,808 ------------ Total United Kingdom 696,118 ------------ UNITED STATES: 14.22% 95,000 @ Apex Silver Mines Ltd. 900,600 204,600 @ Freeport-McMoran Copper & Gold, Inc. 2,048,046 247,070 Homestake Mining Co. 2,025,974 75,000 Newmont Mining Corp. 1,740,000 121,900 @ Stillwater Mining Co. 1,900,421 ------------ Total United States 8,615,041 ------------ Total Common Stock (Cost $52,639,226) 58,507,856 ------------ Principal Amount Value -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS: 1.48% U.S. Government Obligations: 1.48% $ 900,000 United States Treasury Bill, 2.260%, due 11/15/2001 $ 898,831 ------------ Total Short-Term Investments (Cost $898,831) 898,831 ------------ Total Investments in Securities (Cost $53,538,057)* 98.09% $ 59,406,687 Other Assets and Liabilities-Net 1.91% 1,156,635 ------ ------------ Net Assets 100.00% $ 60,563,322 ====== ============ @ Non-income producing security ADR American Depository Receipt GDR Global Depository Receipt XX The Investment Company Act of 1940 defines Affiliates as those companies in which a fund holds 5% or more of the outstanding voting securities. The fund held over 5% of the outstanding voting securities of this security at October 31, 2001. Following is a summary of the transactions with this affiliate for the year ended October 31, 2001: Market value at 10/31/00 $ -- Purchases at cost 2,541,927 Sales at cost -- Change in unrealized appreciation 912,996 Market value at 10/31/01 3,454,923 Dividend income 39,412 Realized gain/loss -- * Cost for federal income tax purposes is $55,624,706. Net unrealized appreciation consists of: Gross Unrealized Appreciation $ 10,450,559 Gross Unrealized Depreciation (6,668,578) ------------ Net Unrealized Appreciation $ 3,781,981 ============ See Accompanying Notes to Financial Statements 102 Pilgrim Precious Metals Fund PORTFOLIO OF INVESTMENTS as of October 31, 2001 (Continued) -------------------------------------------------------------------------------- Percentage of Industry Net Assets -------------------------------------------------------------------------------- Gold Mining 74.19% Metal-Diversified 3.38% Non-Ferrous Metals 0.92% Platinum 7.19% Precious Metals 0.84% Silver Mining 10.09% Short-Term Investments 1.48% Other Assets and Liabilities, Net 1.91% ------ Net Assets 100.00% ====== See Accompanying Notes to Financial Statements 103 SHAREHOLDER MEETING (Unaudited) -------------------------------------------------------------------------------- A special meeting of shareholders of the ING Emerging Markets Equity, ING Global Brand Names and ING International Funds, held February 22, 2001, at the offices of ING Pilgrim, 7337 East Doubletree Ranch Road, Scottsdale, AZ 85258. A brief description of each matter voted upon as well as the results are outline below: Shares voted Shares against or Shares Broker Total voted for withheld abstained non-vote Voted --------- -------- --------- -------- ----- ING Emerging Markets Equity Fund 1. To approve an Agreement and Plan of Reorganization Providing For The Acquisition of All of the Assets and Liabilities of ING Emerging Markets Equity Fund by Pilgrim Emerging Countries Fund 1,013,888 -- 2,804 -- 1,016,692 ING Global Brand Names Fund 1. To approve an Agreement and Plan of Reoganization providing for the acquisition of all of the assets and liabilities of ING Global Brand Names Fund by Pilgrim Worldwide Growth Fund 2,680,425 5,759 30,144 -- 2,716,328 ING International Equity Fund 1. To approve an Agreement and Plan of Reorganization providing for the acquisition of all of the assets and liabilities of ING International Equity Fund by Pilgrim International Fund 2,948,830 2,005 7,167 -- 2,958,002 A special meeting of shareholders of the Pilgrim Global Corporate Leaders and Pilgrim Silver Funds, held February 23, 2001, at the offices of ING Pilgrim, 7337 East Doubletree Ranch Road, Scottsdale, AZ 85258. A brief description of each matter voted upon as well as the results are outline below: Pilgrim Global Corporate Leaders Fund 1. To approve an Agreement and Plan of Reorganization providing for the acquisition of all of the assets of Pilgrim Global Corporate Leaders Fund by Pilgrim Worldwide Growth 1,186,462 8,842 19,457 -- 1,214,761 Pilgrim Silver Fund 1. To approve an Agreement and Plan of Reorganization providing for the acquisition of all of the assets of Pilgrim Silver Fund by Pilgrim Gold Fund 3,224,879 648,368 138,652 -- 4,011,899 A special meeting of shareholders of the Pilgrim Global Technology and Pilgrim SmallCap Asia Growth Funds, held March 15, 2001, at the offices of ING Pilgrim, 7337 East Doubletree Ranch Road, Scottsdale, AZ 85258. A brief description of each matter voted upon as well as the results are outline below: Pilgrim Global Technology Fund 1. To approve an Agreement and Plan of Reorganization providing for the acquisition of all of the assets of Pilgrim Global Technology Fund by Pilgrim Global Information Technology Fund 922,823 1,564 1,289 -- 925,676 SmallCap Asia Growth 1. To approve an Agreement and Plan of Reorganization providing for the acquisition of all of the assets of Pilgrim SmallCap Asia Growth Fund by Pilgrim Asia-Pacific Equity Fund 336,508 67,620 12,052 -- 416,180 See Accompanying Notes to Financial Statements 104 SHAREHOLDER MEETING (Unaudited) -------------------------------------------------------------------------------- A special meeting of shareholders of the Pilgrim Worldwide Emerging Markets and Pilgrim Emerging Markets Value Funds held April 12, 2001 at ING Pilgrim, 7337 East Doubletree Ranch Road, Scottsdale, AZ 85258. A brief description of each matter voted upon as well as the results are outline below:
Shares voted Shares against or Shares Broker Total voted for withheld abstained non-vote Voted --------- -------- --------- -------- ----- Pilgrim Worldwide Emerging Markets Fund 1. To approve an Agreement and Plan of Reorganization providing for the acquisition of all of the assets of Pilgrim Worldwide Emerging Markets Fund by Pilgrim Emerging Countries Fund 4,555,446 338,827 248,824 -- 5,143,097 Pilgrim Emerging Markets Value Fund 1. To approve an Agreement and Plan of Reorganization providing for the acquisition of all of the assets of Pilgrim Emerging Markets Value Fund by Pilgrim Emerging Countries Fund 839,915 34,840 36,462 -- 911,217 A special meeting of shareholders of the Pilgrim International SmallCap Growth Fund held April 19, 2001 at ING Pilgrim, 7337 East Doubletree Ranch Road, Scottsdale, AZ 85258. A brief description of each matter voted upon as well as the results are outline below: Pilgrim International SmallCap Fund 1. To approve a new Sub-Avisory Agreement between ING Pilgrim Investments, LLC and Nicholas-Applegate Capital Management ("NACM"), to reflect the acquisition of NACM by Allianz of America, Inc., with no change in the sub-advisory fee 16,679,209 100,683 239,319 -- 17,019,211 A special meeting of shareholders of the Pilgrim Funds Trust held March 20, 2001 at ING Pilgrim, 7337 East Doubletree Ranch Road, Scottsdale, AZ 85258. Pilgrim Global Brand Names Pilgrim International Equity Pilgrim Emerging Markets Equity Pilgrim Global Communications Pilgrim Global Information Technology Pilgrim European Equity 1. Vote on Trustees/Directors Paul S. Doherty 427,604,900 -- 2,059,716 -- 429,664,616 Alan L. Gosule 427,678,938 -- 1,985,678 -- 429,664,616 Walter H. May 427,672,061 -- 1,992,555 -- 429,664,616 Thomas J. McInerney 427,652,027 -- 2,012,589 -- 429,664,616 Jock Patton 427,622,933 -- 2,041,683 -- 429,664,616 David W.C.Putnam 427,676,810 -- 1,987,806 -- 429,664,616 Blaine E. Rieke 427,585,125 -- 2,079,491 -- 429,664,616 John G. Turner 427,662,516 -- 2,002,100 -- 429,664,616 Richard A. Wedemeyer 427,652,125 -- 2,012,491 -- 429,664,616 2. To ratify the appointment of Ernst & Young LLP as Independent Auditors of the Funds for the fiscal year ending October 31, 2001 424,894,887 514,512 4,255,217 -- 429,664,616
See Accompanying Notes to Financial Statements 105 TAX INFORMATION (Unaudited) -------------------------------------------------------------------------------- Dividends paid during the fiscal year ended October 31, 2001 were as follows: Fund Name Type Per Share Amount --------- ---- ---------------- Worldwide Growth Fund Class A STCG $ 0.5190 Class B STCG $ 0.5811 Class C STCG $ 0.5168 Class Q STCG $ 0.5980 Class A LTCG $ 0.2542 Class B LTCG $ 0.2846 Class C LTCG $ 0.2531 Class Q LTCG $ 0.2929 Class A ROC $ 0.3006 Class B ROC $ 0.3367 Class C ROC $ 0.2993 Class Q ROC $ 0.3464 International Value Fund All Classes STCG $ 0.5311 All Classes LTCG $ 1.3496 -------- $ 1.8807 ======== Class A NII $ 0.1419 Class B NII $ 0.0278 Class C NII $ 0.0366 Class Q NII $ 0.1446 International Fund All Classes STCG $ 0.4583 All Classes LTCG $ 0.4764 -------- $ 0.9347 ======== International Core Growth Fund Class A STCG $ 0.1544 Class B STCG $ 0.1540 Class C STCG $ 0.1546 Class Q STCG $ 0.1606 Class A LTCG $ 0.8903 Class B LTCG $ 0.8881 Class C LTCG $ 0.8915 Class Q LTCG $ 0.9529 Class A NII $ 0.4099 Class B NII $ 0.3146 Class C NII $ 0.3320 Class Q NII $ 0.4177 International SmallCap Growth Fund Class A NII $ 0.2335 Class B NII $ 0.0716 Class C NII $ 0.0916 Class Q NII $ 0.2461 Class A LTCG $ 1.4849 Class B LTCG $ 1.5661 Class C LTCG $ 1.4375 Class Q LTCG $ 1.5724 Class A STCG $ 0.9984 Class B STCG $ 1.0530 Class C STCG $ 0.9665 Class Q STCG $ 1.0572 Global Information Technology Fund All Classes STCG $ 3.0335 All Classes LTCG $ 4.5832 -------- $ 7.6167 ======== Asia-Pacific Equity Fund Class A NII $ 0.0932 Class B NII $ 0.0523 Class M NII $ 0.0854 European Equity Fund All Classes STCG $ 0.0193 All Classes LTCG $ 0.4712 -------- $ 0.4905 ======== Precious Metals Fund NII $ 0.0034 NII -- Net investment income STCG -- Short-term capital gain LTCG -- Long-term capital gain ROC -- Return of Capital The above figures may differ from those cited elsewhere in this report due to differences in the calculation of income and gains for Securities and Exchange Commissions (book) purposes and Internal Revenue Service (tax) purposes. For the fiscal year ended October 31, 2001, 13.63%, 0.03%, 10.00% and 100.00% of the ordinary income distributions declared by International Value Fund, International SmallCap Growth Fund, Asia-Pacific Equity Fund and Precious Metals Fund, respectively, qualified for the dividends received deduction available to corporate shareholders. For federal income tax purposes, the Funds designated the following amounts as capital gains dividends for the year ended October 31, 2001: Fund Amount ---- ------ Worldwide Growth Fund $ 6,046,730 International Value Fund 171,620,623 International Fund 1,318,660 International Core Growth Fund 4,032,951 International SmallCap Growth Fund 28,498,503 Global Information Technology Fund 29,613,440 European Equity Fund 1,368,663 During the fiscal year ended October 31, 2001, the foreign taxes paid or withheld were, $462,979, $7,322,252, $100,383, $123,858, $914,538 and $1,558,521 in total on $2,929,568, $51,013,408, $608,562, $655,048, $7,063,285 and $2,127,501 of foreign source income for the Worldwide Growth Fund, International Value Fund, International Fund, International Core Growth Fund, International SmallCap Growth Fund and Emerging Countries Fund, respectively. Foreign taxes paid or withheld should be included in taxable income with an offsetting deduction from gross income or as a credit for taxes paid to foreign governments. You should consult your tax advisor regarding the appropriate treatment of foreign taxes paid. Shareholders are strongly advised to consult their own tax advisers with respect to the tax consequences of their Investments in the Funds. In January 2002, shareholders, excluding corporate shareholders, will receive an IRS Form 1099 DIV regarding the federal tax status of the dividends distributions received by them in calendar 2001. 106 Investment Manager ING Pilgrim Investments, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 Administrator ING Pilgrim Group, LLC 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 Distributor ING Pilgrim Securities, Inc. 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 1-800-334-3444 Transfer Agent DST Systems, Inc. P.O. Box 419368 Kansas City, Missouri 64141-6368 Custodian Brown Brothers Harriman 40 Water Street Boston, Massachusetts 02109-3661 Legal Counsel Dechert 1775 Eye Street, N.W. Washington, D.C. 20006 Independent Accountants PricewaterhouseCoopers LLP 1670 Broadway, Suite 1000 Denver, Colorado 80202 Prospectus containing more complete information regarding the Funds, including charges and expenses, may be obtained by calling ING Pilgrim Securities, Inc., Distributor, at 1-800-334-3444. Please read the prospectus carefully before you invest or send money. [LOGO] ING PILGRIM INTLANN103101-122101