Pilgrim America Prime Rate Trust
FIRST QUARTER REPORT
MAY 31, 1998
<PAGE>
Pilgrim America Prime Rate Trust
FIRST QUARTER REPORT
May 31, 1998
--------
Table of Contents
Chairman's Message .......................... 2
Letter to Shareholders ...................... 3
Shareholder Letter Footnotes ................ 6
Statistics and Performance .................. 7
Performance Footnotes ....................... 9
Additional Notes and Information ............ 10
Portfolio of Investments .................... 11
Statement of Assets and Liabilities ......... 20
Statement of Operations ..................... 21
Statements of Changes in Net Assets ......... 22
Statement of Cash Flows ..................... 23
Financial Highlights ........................ 24
Notes to Financial Statements ............... 26
Fund Advisors and Agents .................... 33
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Pilgrim America Prime Rate Trust
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CHAIRMAN'S MESSAGE
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Dear Shareholder:
We are pleased to present the First Quarter Report for Pilgrim America Prime
Rate Trust (the "Trust").
On the following pages, the Portfolio Manager will discuss the Trust's
milestones and performance, as well as recent market developments. A leader in
its class, the Trust has continued to increase shareholder value through strong
management and innovative approaches.
We believe you will find this quarter's results a reflection of Pilgrim
America's philosophy to provide core holdings which seek to meet the three key
needs of the serious investor:
1. Preservation of capital
2. Participation in rising markets
3. Outperformance in falling markets
Thank you for selecting Pilgrim America Prime Rate Trust. We appreciate the
confidence you have placed in us in serving your investment needs.
Sincerely,
/s/ Robert W. Stallings
Robert W. Stallings
Chairman and Chief Executive Officer
Pilgrim America Group, Inc.
July 16, 1998
2
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Pilgrim America Prime Rate Trust
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LETTER TO SHAREHOLDERS
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Dear Fellow Shareholders,
For the quarter ended May 31, 1998, Pilgrim America Prime Rate Trust (the
"Trust") continued to be ranked first in the Loan Participation Fund category
established by Lipper Analytical Services, Inc. ("Lipper"). For the one, three,
five and ten year periods ended May 31, 1998, the Trust ranked first among
eight, six, five and one funds, respectively(1). Dividends declared during the
quarter totaled $0.209 which, based on quarter ending net asset value ("NAV")
equated to a rate of 8.86% per annum. During the period the Prime Rate was
8.50% and 60-day LIBOR averaged 5.618%. The Trust's dividend adjusted month-end
NAV during the quarter ranged between $9.27 and $9.29. Thus, the Trust
accomplished its objectives of delivering a high current yield consistent with
the preservation of capital.
Market Place
Merger and acquisition activity has continued at a high level for most of the
past twelve months. Consequently, the past quarter has produced a large number
of new transactions for the Trust to consider as potential investments.
Continued robust supply has been more than matched by new institutional
investors entering the market. At this time last year, we highlighted the
development of Collateralized Loan Obligations. These structured vehicles
continue to be a factor. We have also witnessed the advent of several new funds
and other marketing strategies which facilitate the more rapid growth of
existing funds in the senior floating rate asset class. Alternatively, the
continued amalgamation of North American banks and the retreat by foreign banks
from the U.S. corporate finance market has mitigated the impact that increased
demand might otherwise have produced.
The result has been gradual reductions in spreads. At the margin, returns have
fallen by about 30 basis points. This decline does not flow immediately to
shareholders as lower investment income since only part of the Trust's
portfolio turns over in a given period. We estimate re-pricing as a result of
turnover to affect about 30% of the portfolio each year.
Asset Quality
We continue to focus on asset quality. Credit risk is the critical factor
determining NAV stability. The distinguishing characteristic of Senior Floating
Rate Loans compared to other forms of comparable debt is the rates of recovery
experienced in the event of default. Defaults are an inevitable consequence of
making loans. The Trust has and will suffer defaults. As of May 31, 1998,
non-performing assets
3
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Pilgrim America Prime Rate Trust
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LETTER TO SHAREHOLDERS
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represented 0.82% of total assets compared to 0.97% as of February 28, 1998.
Historically, recoveries have been more than double the recoveries found in
more junior parts of the capital structure. We pass on to the market regular
information on the level of non-performing assets in the portfolio as an
indicator of potential losses. The asset values set out in the Portfolio of
Investments give management's view of likely recoveries. Generally, we have
seen no major deterioration in credit quality, but there has been some isolated
evidence of stress, such as Boston Chicken, Inc., Centennial Resources and
Clarity Telecommunications. It is possible that one or more of these
investments may become non-performing. As we have pointed out before, the
diversification practiced by the Trust seeks to ensure that the impact of
non-performance would not be measurable in income terms. Of course, there can
be no guarantees. Historically, high eventual recovery rates have allowed
investors in the senior floating rate asset class to achieve relatively high
returns even on defaulted transactions.
To further illustrate diversification, the following chart compares the Trust's
ten largest industries as a % of total senior loans at May 31, 1998, to the
same industries of the primary market, for new transactions during the current
quarter.
TOP TEN INDUSTRIES
Industry % Portfolio % Primary Market
-------- ----------- ----------------
Healthcare, Education & Childcare ........... 12.5 15.3
Media* ...................................... 9.6 6.8
Beverage, Food & Tobacco .................... 7.1 4.0
Automobile .................................. 6.6 6.7
Buildings & Real Estate ..................... 6.3 1.5
Telecommunications .......................... 5.7 8.5
Personal, Food & Miscellaneous Services ..... 5.5 1.7
Chemicals, Plastics & Rubber ................ 4.8 6.7
Electronics ................................. 4.1 6.0
Diversified/Conglomerate Services ........... 3.5 1.7
- ------------
* Includes the broadcast, and printing and publishing industries to more
closely resemble the syndicate loan market.
4
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Pilgrim America Prime Rate Trust
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LETTER TO SHAREHOLDERS
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Portfolio Changes
During the quarter new investments have included New Piper Aircraft, Federal
Mogul, Capstar Radio Broadcasting, and Purina Mills, Inc. Transactions sold or
repaid include American Axle & Manufacturing, Amscan Holdings, Behr Process
Corp., Intesys Technologies, Inc., Koppers Industries, Inc., PSC Incorporated
and Telex Communications Group.
Outlook
We expect spreads and fees earned on investments to continue to be soft,
although we believe that we may have reached a low point for the time being. We
expect to be able to maintain investment income by remaining fully leveraged
and by marginally lowering the cost of borrowing by the Trust. This latter
benefit will be experienced at least in part during the quarter ending August
31, 1998.
We believe the prospects for a change in short-term interest rates are mixed.
Inflation remains subdued and Asia's woes have rippled into the North American
economies. Asia has clearly slowed growth rates for many American and Canadian
companies. Asia has also delivered somewhat lower raw materials prices to
several businesses. As a result, a rise in interest rates is unlikely in the
near term. It is also too early to forecast a slowing of the economy
sufficiently great to persuade the Federal Reserve to ease monetary policy.
Please contact us with your questions and comments.
Yours sincerely,
/s/ Howard Tiffen
Howard Tiffen
President
Chief Operating Officer
Senior Portfolio Manager
Pilgrim America Prime Rate Trust
5
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Pilgrim America Prime Rate Trust
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SHAREHOLDER LETTER FOOTNOTES
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(1) Lipper ranked the Trust for total return, without deducting sales charges
and assuming reinvestment of all dividends and capital gains distributions
but not reflecting the January 1995 and November 1996 rights offerings.
The Trust's expenses were partially waived for the fiscal year ended
February 29, 1992. As part of the rights offering, the Investment Manager
has voluntarily reduced its management fee for the period from November
1996 through November 1999. For the one, three, five and ten-year periods
ended June 30, 1998, Lipper ranked the Trust first among eight, six, five
and one funds, respectively.
6
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Pilgrim America Prime Rate Trust
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STATISTICS AND PERFORMANCE as of May 31, 1998
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PORTFOLIO CHARACTERISTICS
Net Assets $1,101,574,674
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Assets Invested in Senior Loans $1,486,495,714
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Total Number of Senior Loans 140
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Average Amount Outstanding per Loan $ 10,617,827
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Total Number of Industries 29
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Portfolio Turnover Rate 28%
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Average Loan Amount per Industry $ 51,258,473
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Weighted Average Days to Interest Rate Reset 43 days
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Average Loan Maturity 69 months
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Average Age of Loans Held in Portfolio 10 months
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* Includes loans and other debt received through restructures
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TOP 10 INDUSTRIES AS A % OF
NET ASSETS TOTAL ASSETS
Healthcare, Education and Childcare 16.8% 11.9%
Beverage, Food and Tobacco 9.5% 6.7%
Automobile 8.9% 6.3%
Buildings & Real Estate 8.4% 6.0%
Broadcasting 8.1% 5.7%
Telecommunications 7.7% 5.5%
Personal, Food and Misc. Services 7.5% 5.3%
Chemicals, Plastics and Rubber 6.4% 4.5%
Electronics 5.5% 3.9%
Printing and Publishing 4.8% 3.4%
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TOP 10 SENIOR LOANS AS A % OF
NET ASSETS TOTAL ASSETS
Laidlaw Environmental Services, Inc. 3.6% 2.6%
MAFCO Financial Corp. 3.3% 2.4%
Integrated Health Services 2.7% 1.9%
Nextel Finance Co. 2.4% 1.7%
Community Health Systems 2.2% 1.6%
Federal Mogul 2.2% 1.5%
Ventas, Inc. 2.1% 1.5%
Papa Gino's, Inc. 1.9% 1.3%
24-Hour Fitness, Inc. 1.8% 1.3%
Florida Panthers Holdings 1.8% 1.3%
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7
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Pilgrim America Prime Rate Trust
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STATISTICS AND PERFORMANCE as of May 31, 1998
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DISTRIBUTION RATES*
<TABLE>
<CAPTION>
SEC 30-Day SEC 30-Day Annualized Annualized
Prime Yield at Yield at Distribution Distribution
Quarter-ended Rate NAV A,D MKT A,D Rate at NAV C,D Rate at MKT C,D
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
May 31, 1998 8.50% 9.67% 8.82% 8.86% 8.09%
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February 28, 1998* 8.50% 8.60% 7.77% 8.75% 7.92%
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November 30, 1997 8.50% 9.72% 9.15% 8.82% 8.08%
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August 31, 1997 8.50% 8.58% 7.95% 8.82% 8.19%
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</TABLE>
This table sets forth the Trust's monthly dividend performance which is
summarized quarterly.
* Distribution Rates exclude the special dividend of $0.02875/share declared
December 19, 1997.
Including the special dividend results in a distribution rate @ NAV of 10.00%,
and a distribution rate @ MKT of 9.05%.
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AVERAGE ANNUAL TOTAL RETURNS
NAV MKT
------------------------------------------------------------------------
1 Year 8.54% 11.97%
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3 Years 8.37% 14.20%
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5 Years 8.15% 11.14%
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10 Years 8.55% N/A
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Since Trust Inception G,I 8.50% N/A
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Since Initial Trading on NYSE H N/A 11.45%
------------------------------------------------------------------------
Assumes rights were exercised and excludes sales charges and commissions
C,D,E,F
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Performance data represents past performance and is no guarantee of future
results.
See performance footnotes on page 9.
8
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Pilgrim America Prime Rate Trust
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PERFORMANCE FOOTNOTES
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(A) Yield is calculated by dividing the Trust's net investment income per share
for the most recent thirty days by the net asset value (in the case of NAV)
or the NYSE Composite closing price (in the case of market) at quarter-end.
Yield calculations do not include any commissions or sales charges, and are
compounded for six months and annualized for a twelve month period to
derive the Trust's yield consistent with the SEC standardized yield formula
for open-end investment companies.
(B) The distribution rate is calculated by annualizing the dividend declared
each month and dividing the resulting annualized dividend amount by the
Trust's net asset value (in the case of NAV) or the NYSE Composite closing
price (in the case of Market) at the end of the period.
(C) Calculation of total return assumes a hypothetical initial investment at
the net asset value (in the case of NAV) or the NYSE Composite closing
price (in the case of Market) on the last business day before the first day
of the stated period, with all dividends and distributions reinvested at
the actual reinvestment price. The Trust's average annual returns on an NAV
basis and assuming rights were exercised through May 31, 1998 were 8.54%
and 8.15% for the one and five year periods, respectively. The Trust's
average annual total return on an NAV basis with a 3% sales charge and
assuming rights were exercised through May 31, 1998, was 8.22% for the
ten-year period. The average annual total returns based on market price
assuming rights were exercised with a brokerage commission are not
presented.
(D) As part of the rights offering, the Investment Manager has voluntarily
reduced its management fee for the period from November 1996 through
November 1999.
(E) On December 27, 1994, the Trust issued to its shareholders transferable
rights which entitled the holders to subscribe for 17,958,766 shares of the
Trust's common stock at the rate of one share of common stock for each four
rights held. The offering was completed on January 27, 1995.
(F) On October 18, 1996, the Trust issued to its shareholders non-transferable
rights which entitled the holders to subscribe for 18,122,963 shares of the
Trust's common stock at the rate of one share of common stock for each five
rights held. On November 12, 1996, the offering expired and was fully
subscribed. The Trust issued 18,122,963 shares of its common stock to
exercising rights holders at a subscription price of $9.09. Offering costs
of $5,926,209 were charged against the offering proceeds.
(G) Inception Date -- May 12, 1988.
(H) Initial Trading on NYSE -- March 9, 1992.
(I) Reflects Partial Waiver of Fees.
Performance data represents past performance and is no guarantee of future
results. Investment return and principal value of an investment in the
Trust will fluctuate. Shares, when sold, may be worth more or less than
their original cost.
9
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Pilgrim America Prime Rate Trust
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ADDITIONAL NOTES AND INFORMATION
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SHAREHOLDER INVESTMENT PROGRAM
The Trust offers a Shareholder Investment Program (the "Program", formerly
known as the Dividend Reinvestment and Cash Purchase Plan) which allows
shareholders a simple way to reinvest dividends and capital gains
distributions, if any, in additional shares of the Trust. The Program also
offers Trust shareholders the ability to make optional cash investments in any
amount from $100 to $5,000 on a monthly basis. Amounts in excess of $5,000
require prior approval of the Trust. DST Systems, Inc., the Trust's Transfer
Agent, is the Administrator for the Program.
For dividend reinvestment purposes, the Administrator will purchase shares of
the Trust on the open market when the market price plus estimated commissions
is less than the net asset value on the valuation date. The Trust may issue new
shares when the market price plus estimated commissions is equal to or exceeds
the net asset value on the valuation date. New shares may be issued at the
greater of (i) net asset value or (ii) the market price of the shares during
the pricing period, minus a discount of 5%.
For optional cash investments, shares will be purchased on the open market by
the Administrator when the market price plus estimated commissions is less than
the net asset value on the valuation date. New shares may be issued by the
Trust when the market price plus estimated commissions is equal to or exceeds
the net asset value on the valuation date.
There is no charge to participate in the Program. Participants may elect to
discontinue participation in the Program at any time. Participants will share,
on a pro-rata basis, in the fees or expenses of any shares acquired in the open
market.
Participation in the Program is not automatic. If you would like to receive
more information about the Program or if you desire to participate, please
contact your broker or our Shareholder Services Department at (800) 992-0180.
KEY FINANCIAL DATES -- Calendar 1998 Dividends:
DECLARATION DATE EX-DATE PAYABLE DATE
January 30 February 6 February 24
February 27 March 6 March 23
March 26 April 8 April 22
April 30 May 7 May 22
May 29 June 8 June 22
June 30 July 8 July 22
July 31 August 6 August 24
August 31 September 8 September 22
September 30 October 8 October 22
October 30 November 6 November 23
November 30 December 8 December 22
December 21 December 29 January 13, 1999
Record date will be two business days after each Ex-Date. These
dates are subject to change.
STOCK DATA
The Trust's shares are traded on the New York Stock Exchange (Symbol: PPR). The
Trust's name changed to Pilgrim America Prime Rate Trust and its cusip number
changed to 720906 10 6 effective April 12, 1996. The Trust's NAV and market
price are published weekly under the "Closed-End Funds" feature in Barron's,
The New York Times, The Wall Street Journal and many other regional and
national publications.
10
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Pilgrim America Prime Rate Trust
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PORTFOLIO OF INVESTMENTS as of May 31, 1998 (Unaudited)
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SENIOR LOANS*
(Dollar weighted portfolio interest reset period is 43 days)
<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
- ------- ----------------- ---- -------- -----
<S> <C> <C> <C> <C>
Aerospace and Defense: 3.1%
$ 8,910 Erickson Air-Crane Co. (heavy lift helicopters) Term B 12/31/04 $ 8,910,000
10,000 New Piper Aircraft (aircraft manufacturer) Term 04/15/05 10,000,000
6,015 Technetics Corp. (aircraft engine components) Term 06/20/02 6,015,152
9,355 Tri Star/Odyssey, Inc. (aerospace hardware distributor) Term 09/30/03 9,355,000
-----------
34,280,152
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Automobile: 8.9%
15,000 Breed Technologies (airbags/seatbelts) Term B 04/27/06 15,000,000
9,975 Cambridge Industries, Inc. (automotive plastics) Term B 06/30/05 9,975,000
9,426 Capital Tool & Design (brake backing plates) Term B 07/19/03 9,425,944
9,193 Federal Mogul (automotive parts) Term 06/30/99 9,192,784
14,907 Federal Mogul Term 12/31/05 14,907,216
10,000 Global Metal Technologies (automotive parts) Term B 03/12/05 10,000,000
2,757 Hayes Wheels International (automotive wheels) Term B 07/31/04 2,757,405
2,230 Hayes Wheels International Term C 07/31/05 2,230,127
12,500 Keystone Automotive (automotive aftermarket specialty parts) Term B 03/31/04 12,500,000
6,250 Safelite Glass Corp. (automobile windshield replacement) Term B 12/23/04 6,250,000
6,250 Safelite Glass Corp. Term C 12/23/05 6,250,000
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98,488,476
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Beverage, Food and Tobacco: 9.5%
6,950 Arrowhead Mills, Inc. (natural foods) Term B 10/31/04 6,950,000
3,625 Aurora Foods (pancake mixes, syrups) Term B 12/31/05 3,625,000
3,625 Aurora Foods Term C 06/30/06 3,625,000
2,025 Del Monte Corp. (food manufacturing and distribution) Term B 03/31/05 2,025,000
8,080 Del Monte Corp. Term B 03/31/05 8,080,190
2,593 Edward's Baking Co. (food service bakery) Term A 09/30/03 2,592,577
3,317 Edward's Baking Co. Term B 09/30/05 3,316,667
3,317 Edward's Baking Co. Term C 09/30/05 3,316,667
13,895 Empire Kosher Poultry (kosher chicken and poultry) Term B 07/31/04 13,895,000
12,500 Favorite Brands International (confectionary manufacturer) Term B 05/19/05 12,500,000
9,477 Imperial Holly Corp. (sugar producer) Term A 12/31/05 9,476,635
8,280 Imperial Holly Corp. Term B 12/31/05 8,280,079
8,603 Snapple Beverage Co. (soft drink manufacturer) Term B 06/01/04 8,603,233
8,603 Snapple Beverage Co. Term C 06/01/05 8,603,233
6,088 Van De Kamp's (frozen foods) Term B 04/30/03 6,088,299
3,825 Van De Kamp's Term C 09/30/03 3,824,924
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104,802,504
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</TABLE>
See Accompanying Notes to Financial Statements.
11
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Pilgrim America Prime Rate Trust
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PORTFOLIO OF INVESTMENTS as of May 31, 1998 (Unaudited)
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<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
- ------- ----------------- ---- -------- -----
<S> <C> <C> <C> <C>
Broadcasting: 8.1%
$ 10,163 Benedek Broadcasting Television Corp. (broadcasting) Axel A (A) 12/31/04 $10,162,679
4,759 Benedek Broadcasting Television Corp. Axel B (A) 12/31/04 4,759,310
5,000 Capstar Radio Broadcasting (radio broadcasting) Term B 05/29/05 5,000,000
903 Classic Cable (rural cable system operator) Revolver 06/30/05 902,534
1,701 Classic Cable Term A 03/31/05 1,700,973
15,273 Classic Cable Term B 06/30/03 15,273,476
7,463 Entravision (Spanish broadcast television) Term B 12/31/04 7,462,500
10,000 FrontierVision (cable television) Term B 03/31/06 10,000,000
10,000 Intermedia Partners IV (cable television) Term 01/01/05 10,000,000
5,000 Intermedia Partners VI (cable television) Hybrid 03/23/08 5,000,000
1,776 Liberman Broadcasting, Inc. (broadcasting) Revolver 03/31/05 1,776,000
8,000 Liberman Broadcasting, Inc. Term B 09/30/05 8,000,000
9,250 Retlaw Broadcasting, LLC (television stations) Term B 04/30/06 9,250,000
-----------
89,287,472
-----------
Buildings and Real Estate: 8.4%
6,000 Dayton Superior (concrete/masonry accessories) Term 09/29/05 6,000,000
10,969 Falcon Building Products (building products) Term B 06/30/05 10,968,571
3,584 Goodman Manufacturing Co., L.P.
(air conditioning manufacturer) Term B 09/30/04 3,583,630
3,584 Goodman Manufacturing Co., L.P. Term C 09/30/05 3,583,630
6,600 Home Decor Group (home accessories) Term B 03/12/04 6,600,000
3,400 Home Decor Group Term C 03/12/05 3,400,000
7,980 Kevco, Inc. (manufactured home components) Term B 02/02/05 7,980,000
4,000 The Presley Companies (homebuilder) Revolver 05/30/98 4,000,000
13,895 Tree Island Industries (nail and wire products) Term B 03/31/03 13,895,000
794 United Building Materials, Inc. (stone and concrete
products)(1) Term 12/31/99 794,153
23,333 Ventas, Inc. (real estate investment trust) Term D 05/05/03 23,333,333
4,040 Werner Holding Co. (ladders) Term B 11/30/04 4,039,875
4,938 Werner Holding Co. Term C 11/30/05 4,937,625
-----------
93,115,817
-----------
Cargo Transport: 3.3%
12,058 Atlas Freighter Leasing (air cargo carrier) Term 05/29/04 12,057,835
4,732 Evergreen International (air cargo carrier) Term B 05/31/03 4,731,993
10,000 Omnitrax, Inc. (rail operator) Term 05/12/05 10,000,000
4,620 Oshkosh Trucking (specialized truck manufacturer) Term B 03/01/04 4,620,000
4,620 Oshkosh Trucking Term C 03/01/04 4,620,000
-----------
36,029,828
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
12
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Pilgrim America Prime Rate Trust
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PORTFOLIO OF INVESTMENTS as of May 31, 1998 (Unaudited)
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<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
- ------- ----------------- ---- -------- -----
<S> <C> <C> <C> <C>
Chemicals, Plastics and Rubber: 6.4%
$ 10,000 Acadia Elastomers Corp. (specialty chemicals) Term 03/21/04 $10,000,000
11,311 Cedar Chemical Corp. (specialty chemicals) Term B 10/30/03 11,311,415
3,572 Foamex, L.P. (polyurethane foam) Term B 06/30/05 3,571,865
3,247 Foamex, L.P. Term C 06/30/06 3,247,150
4,583 GEO Specialty Chemicals (specialty chemicals) Term A 09/25/02 4,583,333
9,900 GEO Specialty Chemicals Term B 03/25/04 9,900,000
1,944 Huntsman Chemical (specialty chemicals) Term B 03/15/04 1,944,286
1,944 Huntsman Chemical Term C 03/15/04 1,944,286
2,138 Huntsman Corp. (industrial chemicals) Revolver 12/31/02 2,137,609
684 Huntsman Corp. Term A 12/31/02 683,823
5,000 Huntsman Corp. Term B 12/31/05 5,000,000
5,102 NEN Life Sciences Products (biochemicals) Term B 12/31/04 5,102,041
6,500 Sunbelt Manufacturing LLC (plastics manufacturer) Term B 09/30/04 6,500,000
4,807 Texas Petrochemical Corp. (industrial chemicals) Term B 06/30/04 4,806,732
-----------
70,732,540
-----------
Containers, Packaging and Glass: 0.4%
2,786 Calmar, Inc. (non-aerosol fluid dispensing systems) Term A 09/15/03 2,785,714
2,089 Calmar, Inc. Term B 03/15/04 2,089,286
-----------
4,875,000
-----------
Diversified/Conglomerate Manufacturing: 0.0%
276 @ KDI Corp. (defense and leisure products) (2) Term A N/A 16,791
13 @ KDI Corp. (2) Term B N/A 13,187
-----------
29,978
-----------
Diversified/Conglomerate Services: 4.8%
36,750 MAFCO Financial Corp. (diversified services and
entertainment) Term A 04/16/00 36,750,000
8,814 Outsourcing Solutions (accounts receivable management) Term B 11/06/03 8,813,641
6,918 Outsourcing Solutions Term C 10/15/04 6,918,087
-----------
52,481,728
-----------
Ecological: 4.5%
4,861 Clean Harbors (environmental services) Term 05/08/00 4,860,698
20,000 Laidlaw Environmental Services, Inc. (waste management) Term B 04/03/05 20,000,000
20,000 Laidlaw Environmental Services, Inc. Term C 04/03/06 20,000,000
4,875 Rumpke (waste management) Term 09/25/02 4,875,000
-----------
49,735,698
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
13
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Pilgrim America Prime Rate Trust
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PORTFOLIO OF INVESTMENTS as of May 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
- ------- ----------------- ---- -------- -----
<S> <C> <C> <C> <C>
Electronics: 5.5%
$ 5,676 Anacomp, Inc. (document storage and imaging) Term 02/28/01 $5,676,466
7,406 Celestica (diversified electronic device manufacturer) Term B 06/30/03 7,406,250
7,000 Details, Inc. (circuit board manufacturer) Term B 10/27/04 7,000,000
5,000 Dictaphone Acquisition, Inc. (dictation and recording
equipment) Term C 06/30/03 5,000,000
10,294 Fairchild Semiconductor Corp. (electronic equipment) Term C 03/11/03 10,293,781
5,674 Intri-Plex Technologies, Inc. (disk drive component
manufacturer) Term 09/30/02 5,673,913
9,357 OK Industries, Inc. (circuit board manufacturing systems) Term 10/31/02 9,357,143
9,841 Sarcom, Inc. (systems integration) Term 11/20/02 9,841,270
----------
60,248,823
----------
Farming and Agriculture: 0.8%
9,000 Purina Mills, Inc. (food products) Term 03/10/07 9,000,000
----------
Finance: 3.5%
8,000 Bridge Information Systems (news services) Term B 05/29/05 8,000,000
7,467 National Partnership Investments Corp. (asset management) Term 06/30/01 7,466,667
8,069 Neff Corp. (equipment rental) Revolver 05/01/03 8,069,017
10,000 Value Asset Management, Inc. (money management) Sub. Term 04/28/99 10,000,000
5,000 Value Asset Management, Inc. Term B 04/28/03 5,000,000
----------
38,535,684
----------
Grocery: 2.6%
16,797 Schwegmann Giant Supermarket (Louisiana supermarkets) Term B 01/31/04 16,797,216
9,316 Star Markets Co., Inc. (Boston area supermarkets) Term B 12/31/02 9,316,040
2,890 Star Markets Co., Inc. Term C 12/31/03 2,889,885
----------
29,003,141
----------
Healthcare, Education and Childcare: 16.8%
4,103 Alaris Medical Systems (infusion pumps) Term B 11/30/03 4,102,525
4,103 Alaris Medical Systems Term C 11/30/04 4,102,525
3,861 Alaris Medical Systems Term D 05/31/05 3,861,200
1,995 Alliance Imaging, Inc. (diagnostic services) Term A 12/18/03 1,995,000
9,476 Alliance Imaging, Inc. Term C 08/09/04 9,476,250
8,938 Community Health Systems (hospitals) Term B 12/31/03 8,938,356
8,938 Community Health Systems Term C 12/31/04 8,938,356
6,712 Community Health Systems Term D 12/31/05 6,712,329
6,000 Covenant Care, Inc. (long-term healthcare facilities) Term 06/30/99 6,000,000
2,926 Dade International (medical testing equipment manufacturer) Term B 12/31/04 2,925,857
2,926 Dade International Term C 12/31/04 2,925,857
10,009 Dade International Term D 12/31/04 10,009,298
9,770 Graphic Controls Corp. (industrial and medical charts) Term B 09/28/03 9,769,855
</TABLE>
See Accompanying Notes to Financial Statements.
14
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of May 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
- ------- ----------------- ---- -------- -----
<S> <C> <C> <C> <C>
Healthcare, Education and Childcare (continued)
$ 2,762 Hanger Orthopedics Group
(orthopedic and prosthetic services) Term B 12/31/01 $ 2,761,612
12,500 Healthcare America, Inc. (youth psychiatric care) Term B 06/30/04 12,500,000
10,000 Integrated Health Services (long-term subacute care) Term B 09/30/04 10,000,000
20,000 Integrated Health Services Term C 12/31/05 20,000,000
6,250 Magellan Health Services (managed behavioral care) Term B 02/12/05 6,250,000
6,250 Magellan Health Services Term C 02/12/06 6,250,000
5,000 Paragon Health Network, Inc. (nursing homes) Term B 03/31/05 5,000,000
5,000 Paragon Health Network, Inc. Term C 03/31/06 5,000,000
9,950 SMT Health (mobile MRI systems) Term 08/31/03 9,950,000
5,593 Sun Healthcare (nursing homes) Term B 10/01/04 5,592,526
5,593 Sun Healthcare Term C 10/01/05 5,592,526
16,667 Vencor, Inc. (long-term care facility operator) Term A 05/05/05 16,666,667
-----------
185,320,739
-----------
Home and Office Furnishings, Housewares and
Durable Consumer Products: 4.3%
4,500 All Clad (pots and pans) Term A 03/18/04 4,500,000
3,000 All Clad Term C 03/18/05 3,000,000
6,965 Desa International (heaters and fireplaces) Term 11/26/04 6,965,000
15,802 ICON Health & Fitness Co. (exercise equipment) Term B 11/14/01 15,801,874
1,436 Panolam (design and manufacture wood paneling) Term A 01/31/03 1,436,063
8,515 Panolam Term B 01/31/03 8,514,713
4,866 Panolam Term C 01/31/03 4,865,550
2,000 Panolam Term D 01/31/03 2,000,000
-----------
47,083,200
-----------
Hotels, Motels, Inns and Gaming: 1.7%
6,961 Interstate Hotels Corp. (hotel management and ownership) Term C 06/25/04 6,961,111
2,186 Palace Station (gaming) Revolver A 09/30/00 2,185,699
9,244 Palace Station Revolver B 09/30/00 9,244,433
-----------
18,391,243
-----------
Insurance: 0.6%
6,338 TRG Holdings Corp. (insurance run-off) Term 01/31/03 6,337,500
-----------
Leisure, Amusement, Motion Pictures and
Entertainment: 4.5%
3,750 AMFAC Parks and Resorts (park services operator) Term B 09/04/04 3,750,000
3,750 AMFAC Parks and Resorts Term C 09/30/04 3,750,000
20,000 Florida Panthers Holdings, Inc. (investment holding) Bridge 07/23/98 20,000,000
9,975 Four Media Co. (film services) Term B 09/10/04 9,975,000
5,000 SFX Entertainment (live entertainment management) Term 03/01/04 5,000,000
7,157 Worldwide Sports & Recreation Corp.
(optics, sports products) Term B 03/31/01 6,977,665
-----------
49,452,665
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
15
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of May 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
- ------- ----------------- ---- -------- -----
<S> <C> <C> <C> <C>
Machinery (Nonagriculture, Nonconstruction,
Nonelectronic): 0.7%
$ 7,474 Clearing - Niagara (metal stamping press manufacturer) Term 10/18/04 $7,473,571
----------
Mining, Steel, Iron and Nonprecious Metals: 3.2%
5,925 Cable Systems International (cable wire manufacturer) Term B 10/04/02 5,925,000
3,269 Centennial Resources (coal mining) Term A 03/31/02 3,105,769
8,510 Centennial Resources Term B 03/31/04 8,084,134
9,750 GS Technologies (metal products) Term 09/30/02 9,750,000
408 National Refractories, Inc. (kiln lining materials) Term B 09/30/99 407,771
3,270 National Refractories, Inc. Term C 09/30/99 3,269,726
5,000 Scovill Fasteners, Inc. (fasteners) Term A 11/26/03 5,000,000
----------
35,542,400
----------
Oil and Gas: 1.8%
11,500 Cardinal Services, Inc. (oil field services) Term B 03/10/05 11,500,000
1,496 Perf-O-Log (oil field services) Term 08/11/03 1,496,250
3,980 Perf-O-Log Term B 08/11/03 3,980,000
2,500 Perf-O-Log Term C 08/11/04 2,500,000
----------
19,476,250
----------
Personal, Food and Miscellaneous Services: 7.5%
14,678 Boston Chicken, Inc. (home meal replacement) Lease/ 12/12/01 14,678,222
Term C
4,992 Brickman Group, Inc. (landscaping) Term B 12/31/05 4,992,308
19,000 Coinmach Laundry Corp. (laundry) Term B 06/30/05 19,000,000
389 Denamerica Corp. (quick service restaurant franchisee) Term 12/31/01 388,702
2,546 Long John Silvers, Inc. (quick service seafood
restaurant chain) Term B 09/30/02 2,290,963
5,827 Papa Gino's, Inc. (quick service restaurants) Term A 02/19/02 5,826,673
15,017 Papa Gino's, Inc. Term B 02/19/04 15,017,002
6,500 24-Hour Fitness, Inc. (health club operator) Term A 12/31/02 6,500,000
13,500 24-Hour Fitness, Inc. Term B 12/31/04 13,500,000
----------
82,193,870
----------
Personal and Nondurable Consumer
Products (Manufacturing Only): 2.6%
1,186 AM Cosmetics (cosmetics and skin care products) Term A 06/30/03 1,185,898
8,687 AM Cosmetics Term B 12/31/04 8,687,484
4,093 Duo-Tang, Inc. (report cover manufacturer) Term A 12/31/02 4,093,010
5,304 Duo-Tang, Inc. Term B 12/31/02 5,304,180
9,750 Medtech Products, Inc. (non-prescription consumer
medications) Term B 10/15/02 9,750,000
----------
29,020,572
----------
</TABLE>
See Accompanying Notes to Financial Statements.
16
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of May 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
- ------- ----------------- ---- -------- -----
<S> <C> <C> <C> <C>
Printing and Publishing: 4.8%
$ 6,738 Bankers Systems, Inc. (banking industry compliance services) Term B 11/01/02 $ 6,737,500
19,271 Eastern Pulp and Paper (specialty paper) Term 08/31/04 19,270,831
8,000 Jefferson Smurfit (pulp and paper products) Term B 03/23/06 8,000,000
12,250 Stone Container (pulp and paper products) Term D 10/01/03 12,250,000
3,345 Von Hoffman Press, Inc. (textbook manufacturer) Term B 05/29/04 3,344,643
3,345 Von Hoffman Press, Inc. Term C 05/29/05 3,344,643
-------------
52,947,617
-------------
Retail Stores: 4.5%
6,916 @ Color Tile, Inc. (home improvement retailer) (3) Term D 12/31/98 2,005,576
11,898 Liberty House, Inc. (Hawaii department store chain) (4) Term B 06/30/02 10,708,291
12,356 Murray's Discount Auto Parts (auto parts retailer) Term 06/30/03 12,355,769
5,000 Nebraska Book Co. (wholesale and retail textbooks) Term B 04/30/04 5,000,000
5,347 Peebles, Inc. (department store chain) Term A 04/30/01 5,347,703
7,751 Peebles, Inc. Term B 04/30/02 7,750,897
5,963 TravelCenters of America (road transport service centers) Term B 03/27/05 5,962,500
-------------
49,130,736
-------------
Telecommunications: 7.7%
8,827 Clarity Telecommunications (telecommunications service) Term B 07/01/03 8,827,053
8,120 Commnet (PCS services) Term A 09/30/05 8,120,000
1,173 Commnet Term B 09/18/06 1,172,903
2,323 Commnet Term C 03/18/07 2,322,920
6,504 Commnet Term D 09/18/07 6,504,177
26,500 Nextel Finance Co. (personal communications services) Term B 09/30/06 26,500,000
9,725 Omnipoint Communications, Inc. (PCS services) Term A 02/17/06 9,724,576
2,775 Omnipoint Communications, Inc. Term B 02/17/06 2,775,424
2,625 Pacific Coin (private pay phone operator) Term A 12/31/02 2,625,000
6,750 Pacific Coin Term B 12/31/04 6,750,000
10,000 Teletouch Communications (rural paging services) Term B 11/30/04 10,000,000
-------------
85,322,053
-------------
Textiles and Leather: 4.4%
6,358 Harriet & Henderson (yarn manufacturer) Term A 06/12/00 6,358,243
6,825 Humphreys, Inc. (belts and personal leather goods) Term B 11/15/03 6,825,000
10,000 Polymer Group (polyolefin products manufacturer) Term B 01/31/06 10,000,000
12,830 Targus Group International, Inc. (luggage) Term B 01/05/05 12,830,357
2,143 Targus Group International, Inc. Term C 01/05/05 2,142,857
10,000 Tartan Textile Services (linen rental services) Term B 05/13/05 10,000,000
-------------
48,156,457
-------------
Total Senior Loans -- 134.9% 1,486,495,714
-------------
(Cost $1,493,589,765)
</TABLE>
See Accompanying Notes to Financial Statements.
17
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of May 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
OTHER CORPORATE DEBT
<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
------- ----------------- ---- -------- -----
<S> <C> <C> <C> <C>
Diversified/Conglomerate Manufacturing: 0.6%
$6,000 Capital Tool & Design (brake backing plates) Sub. Note 07/26/03 $ 6,000,000
-------------
Total Other Corporate Debt -- 0.6% 6,000,000
-------------
(Cost $6,000,000)
</TABLE>
COMMON STOCK AND PREFERRED STOCK
<TABLE>
<CAPTION>
Shares Value
- --------- -----------------
<S> <C> <C>
Apparel Products: 0.0%
13,294 @ Butterick Company, Inc. (sewing aids) 12,557
------
Diversified/Conglomerate Manufacturing: 0.0%
2,633 @ KDI Corp. -- common (defense and leisure products) (2) --
------
Diversified/Conglomerate Services: 0.1%
53,451 @ Staff Leasing, Inc. (employee leasing) 1,365,005
---------
Restaurants: 0.3%
413,980 @ America's Favorite Chicken Co. -- common (quick service
restaurant chain) (R) 3,645,645
---------
Textiles and Leather: 0.2%
127,306 @ Dan River, Inc. -- common (diversified textiles) (R) 2,191,254
---------
Total Common Stock and Preferred Stock -- 0.6% 7,214,461
---------
(Cost $1,247,811)
</TABLE>
STOCK PURCHASE WARRANTS AND OTHER SECURITIES
<TABLE>
<S> <C> <C> <C>
1 @ Autotote Systems, Inc., Warrant representing 48,930 common
shares (designer and manufacturer of wagering equipment),
Expires 10/30/03 (R) 64,147
1 @ Autotote Systems, Inc., Option representing 0.248% common
shares issued and outstanding (R) --
80,634 @ Capital Tool & Design, Warrants representing 80,634 common
shares (brake backing plates) (R) 143,529
19,000 @ Covenant Care, Inc., Warrants representing 19,000 common
shares (long-term healthcare facilities) (R) 285,000
26,606 @ KDI Corp. Units of Trust (defense and leisure products) (R)(2) --
---------
Total Stock Purchase Warrants and Other Securities -- 0.1% 492,676
---------
(Cost $0)
Total Investments (Cost $1,500,837,576) (5) 136.2% $1,500,202,851
Liabilities in Excess of Cash and Other Assets -- Net (36.2)% (398,628,177)
----- --------------
Net Assets 100.0% $1,101,574,674
===== ==============
</TABLE>
See Accompanying Notes to Financial Statements.
18
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of May 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
- ----------------
@ Non-income producing security
(A) Axel describes an amortizing extended term loan with limited call
protection.
(R) Restricted security
* Senior loans, while exempt from registration under the Securities Act of
1933, contain certain restrictions on resale and cannot be sold publicly.
These senior loans bear interest (unless otherwise noted) at rates that
float periodically at a margin above the Prime Rate of a U.S. bank
specified in the credit agreement, LIBOR, the certificate of deposit rate,
or in some cases another base lending rate.
(1) The borrower has entered into a forebearance agreement pending sale of the
company or refinance of this debt.
(2) The borrower filed for protection under Chapter 7 of the U.S. Federal
bankruptcy code and is in the process of liquidation.
(3) The borrower filed for protection under Chapter 11 of the U.S. Federal
bankruptcy code and is in the process of developing a plan of
reorganization.
(4) The borrower is restructuring and interest is being recognized as cash
payments are received.
(5) For Federal income tax purposes, which is the same for financial reporting
purposes, cost of investments is $1,500,837,576 and net unrealized
depreciation consists of the following:
Gross Unrealized Appreciation 6,459,326
Gross Unrealized Depreciation (7,094,051)
------------
Net Unrealized Depreciation $ (634,725)
============
See Accompanying Notes to Financial Statements.
19
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES as of May 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities at value (Cost $1,500,837,576) $ 1,500,202,851
Receivables:
Fund shares sold 38,740,962
Securities sold 1,465,092
Interest 14,645,495
Other 84,740
Prepaid expenses 397,488
Prepaid arrangement fees on notes payable 360,053
---------------
Total assets 1,555,896,681
---------------
LIABILITIES:
Notes payable 445,000,000
Overdraft payable to custodian 1,867,630
Deferred arrangement fees on senior loans 3,540,618
Accrued interest payable 2,967,776
Accrued expenses 945,983
---------------
Total liabilities 454,322,007
---------------
NET ASSETS (equivalent to $9.36 per share, based on 117,677,595 shares
of beneficial interest authorized and outstanding, no par value) $ 1,101,574,674
===============
Net Assets Consist of:
Paid-in capital $ 1,117,248,708
Undistributed net investment income 13,470,456
Accumulated net realized loss on investments (28,509,765)
Net unrealized depreciation of investments (634,725)
---------------
Net assets $ 1,101,574,674
===============
</TABLE>
See Accompanying Notes to Financial Statements.
20
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS for the Three Months Ended May 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 32,179,937
Arrangement fees earned 1,532,354
Other 780,993
------------
Total investment income 34,493,284
------------
EXPENSES:
Interest 6,616,570
Investment management fees 2,762,026
Administration fees 473,787
Revolving credit facility fees 203,961
Miscellaneous expense 189,058
Transfer agent and registrar fees 155,683
Reports to shareholders 133,898
Custodian fees 93,812
Recordkeeping and pricing fees 61,802
Professional fees 48,274
Insurance expense 22,247
Trustees' fees 7,562
------------
Total expenses 10,768,680
Less: Earnings credits --
------------
Net expenses 10,768,680
------------
Net investment income 23,724,604
------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS:
Net realized gain on investments 1,859,792
Change in unrealized depreciation of investments (2,214,851)
------------
Net loss on investments (355,059)
------------
Net increase in net assets resulting from operations $ 23,369,545
============
See Accompanying Notes to Financial Statements.
21
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months
Ended May 31, Year Ended
1998 February 28,
(Unaudited) 1998
-------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 23,724,604 $ 95,217,224
Net realized gain (loss) on investments 1,859,792 (18,935,269)
Change in unrealized appreciation (depreciation)
on investments (2,214,851) 5,319,483
-------------- --------------
Net increase in net assets resulting from operations 23,369,545 81,601,438
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income (22,180,862) (93,879,672)
CAPITAL SHARE TRANSACTIONS:
Issuance from dividend reinvestment 3,650,050 15,591,705
Share offerings (see NOTE 1) 62,333,131 --
-------------- --------------
Net increase from capital share transactions 65,983,181 15,591,705
Total increase in net assets 67,171,864 3,313,471
NET ASSETS:
Beginning of period 1,034,402,810 1,031,089,339
-------------- --------------
End of period (including undistributed net investment
income of $13,470,456 and $11,926,714, respectively) $1,101,574,674 $1,034,402,810
============== ==============
SUMMARY OF CAPITAL SHARE TRANSACTIONS:
Shares issued in payment of distributions from net
investment income 383,407 1,624,659
Shares sold in connection with share offerings (see NOTE 1) 6,529,700 --
-------------- --------------
Net increase in shares outstanding 6,913,107 1,624,659
============== ==============
</TABLE>
See Accompanying Notes to Financial Statements.
22
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS for the Three Months Ended May 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INCREASE (DECREASE) IN CASH
Cash Flows From Operating Activities:
Interest received $ 30,960,217
Facility fees received 1,667,919
Commitment fees received 104,924
Other income received 794,028
Interest paid (5,308,061)
Other operating expenses paid (3,834,732)
Purchases of portfolio securities (545,015,163)
Proceeds from disposition of portfolio securities 411,301,770
-------------
Net cash used for operating activities (109,329,098)
-------------
Cash Flows From Financing Activities:
Dividends paid (18,530,823)
Proceeds from share offerings 29,009,664
Overdraft financing (4,149,743)
Loan advance 103,000,000
-------------
Net cash provided by financing activities 109,329,098
-------------
Net change in cash --
Cash at beginning of year --
-------------
Cash at end of year $ --
=============
Reconciliation Of Net Increase In Net Assets Resulting From
Operations To Net Cash Provided By Operating Activities:
Net increase in net assets resulting from operations 23,369,545
-------------
Adjustments to reconcile net increase in net assets resulting from
operations to net cash provided by operating activities:
Increase in investments in securities (132,937,571)
Increase in dividends and interest receivable (1,630,015)
Decrease in other assets 43,749
Decrease in prepaid arrangement fees on notes payable 51,293
Decrease in prepaid expenses 15,939
Increase in deferred arrangement fees on senior loans 150,898
Increase in accrued interest payable 1,453,947
Increase in accrued expenses 153,117
-------------
Total adjustments (132,698,643)
-------------
Net cash used for operating activities $(109,329,098)
=============
</TABLE>
See Accompanying Notes to Financial Statements.
23
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months
Ended Years Ended February 28 or February 29,
May 31, 1998 -----------------------------------------------------------------------------
(Unaudited) 1998 1997(7) 1996(6) 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of
period $ 9.34 $ 9.45 $ 9.61 $ 9.66 $ 10.02 $ 10.05
Net investment income 0.21 0.87 0.82 0.89 0.74 0.60
Net realized and unrealized gain
(loss) on investments 0.01 (0.13) (0.02) (0.08) 0.07 (0.05)
----------- ----------- ----------- ----------- ----------- -----------
Increase in net asset value from
investment operations 0.22 0.74 0.80 0.81 0.81 0.55
Distributions from net investment
income (0.20) (0.85) (0.82) (0.86) (0.73) (0.60)
Reduction in net asset value from
rights offering -- -- (0.14) -- (0.44) --
Increase in net asset value from
repurchase of capital stock -- -- -- -- -- 0.02
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 9.36 $ 9.34 $ 9.45 $ 9.61 $ 9.66 $ 10.02
=========== =========== =========== =========== =========== ===========
Closing market price at end of
period $ 10.25 $ 10.31 $ 10.00 $ 9.50 $ 8.75 $ 9.25
Total Return
Total investment return at closing
market price(3) 1.50% 12.70% 15.04%(5) 19.19% 3.27%(5) 8.06%
Total investment return at net
asset value(4) 2.33% 8.01% 8.06%(5) 9.21% 5.24%(5) 6.28%
Ratios/Supplemental Data
Net assets, end of period (000's) $ 1,101,575 $ 1,034,403 $ 1,031,089 $ 862,938 $ 867,083 $ 719,979
Average borrowings (000's) $ 431,739 $ 346,110 $ 131,773 $ -- $ -- $ --
Ratios to average net assets plus
borrowings:
Expenses (before interest and
other fees related to revolving
credit facility) 1.07%(1) 1.04% 1.13% -- -- --
Expenses 2.91%(1) 2.65% 1.92% -- -- --
Net investment income 6.40%(1) 6.91% 7.59% -- -- --
Ratios to average net assets :
Expenses (before interest and
other fees related to revolving
credit facility) 1.50%(1) 1.39% 1.29% -- -- --
Expenses 4.08%(1) 3.54% 2.20% 1.23% 1.30% 1.31%
Net investment income 9.00%(1) 9.23% 8.67% 9.23% 7.59% 6.04%
Portfolio turnover rate 28% 90% 82% 88% 108% 87%
Shares outstanding at end of
period (000's) 117,678 110,764 109,140 89,794 89,794 71,835
</TABLE>
- ------------
(1) Annualized.
(2) Prior to the waiver of expenses, the ratios of expenses to average net
assets were 1.95% (annualized), 1.48% and 1.44% for the period from May
12, 1988 to February 28, 1989, and for the fiscal years ended February 28,
1990 and February 29, 1992, respectively, and the ratios of net investment
income to average net assets were 8.91% (annualized), 10.30% and 7.60% for
the period from May 12, 1988 to February 28, 1989, and for the fiscal
years ended February 28, 1990 and February 29, 1992, respectively.
(3) Total investment return measures the change in the market value of your
investment assuming reinvestment of dividends and capital gain
distributions, if any, in accordance with the provisions of the dividend
reinvestment plan. On March 9, 1992, the shares of the Trust were
initially listed for trading on the New York Stock Exchange. Accordingly,
the total investment return for the year ended February 28, 1993, covers
only the period from March 9, 1992, to February 28, 1993. Total investment
return for periods prior to the year ended February 28, 1993, are not
presented since market values for the Trust's shares were not available.
Total returns for less than one year are not annualized.
See Accompanying Notes to Financial Statements.
24
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended February 28 or February 29,
----------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
------------ -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of
period $ 9.96 $ 9.97 $ 10.00 $ 10.00 $ 10.00
Net investment income 0.60 0.76 0.98 1.06 0.72
Net realized and unrealized gain
(loss) on investments 0.01 (0.02) ( 0.05) -- --
------------ -------- ---------- --------- ----------
Increase in net asset value from
investment operations 0.61 0.74 0.93 1.06 0.72
Distributions from net investment
income (0.57) (0.75) ( 0.96) ( 1.06) ( 0.72)
Reduction in net asset value from
rights offering -- -- -- -- --
Increase in net asset value from
repurchase of capital stock 0.05 -- -- -- --
------------ -------- ---------- --------- ----------
Net asset value, end of period $ 10.05 $ 9.96 $ 9.97 $ 10.00 $ 10.00
============ ======== ========== ========= ==========
Closing market price at end of
period $ 9.13 $ -- $ -- $ -- $ --
Total Return
Total investment return at closing
market price(3) 10.89% -- -- -- --
Total investment return at net
asset value(4) 7.29% 7.71% 9.74% 11.13% 7.35%
Ratios/Supplemental Data
Net assets, end of period (000's) $ 738,810 $874,104 $1,158,224 $1,036,470 $ 252,998
Average borrowings (000's) $ -- $ -- $ -- $ -- $ --
Ratios to average net assets plus
borrowings:
Expenses (before interest and
other fees related to revolving
credit facility) -- -- -- -- --
Expenses -- -- -- -- --
Net investment income -- -- -- -- --
Ratios to average net assets :
Expenses (before interest and
other fees related to revolving
credit facility) -- -- -- -- --
Expenses 1.42% 1.42%(2) 1.38% 1.46%(2) 1.18%(1)(2)
Net investment income 5.88% 7.62%(2) 9.71% 10.32%(2) 9.68%(1)(2)
Portfolio turnover rate 81% 53% 55% 100% 49%(1)
Shares outstanding at end of
period (000's) 73,544 87,782 116,022 103,660 25,294
</TABLE>
- ------------
(4) Total investment return at net asset value has been calculated assuming a
purchase at net asset value at the beginning of each period and a sale at
net asset value at the end of each period and assumes reinvestment of
dividends and capital gain distributions in accordance with the provisions
of the dividend reinvestment plan. This calculation differs from total
investment return because it excludes the effects of changes in the market
values of the Trust's shares. Total returns for less than one year are not
annualized.
(5) Calculation of total return excludes the effects of the per share dilution
resulting from the rights offering as the total account value of a fully
subscribed shareholder was minimally impacted.
(6) Pilgrim America Investments, Inc., the Trust's investment manager, acquired
certain assets of Pilgrim Management Corporation, the Trust's former
investment manager, in a transaction that closed on April 7, 1995.
(7) The Manager has agreed to reduce its fee for a period of three years from
the Expiration Date of the November 12, 1996 Rights Offering to 0.60% of
the average daily net assets, plus the proceeds of any outstanding
borrowings, over $1.15 billion.
See Accompanying Notes to Financial Statements.
25
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of May 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
Pilgrim America Prime Rate Trust (the "Trust", formerly Pilgrim Prime Rate
Trust) is registered under the Investment Company Act of 1940, as amended, as a
diversified, closed-end, investment management company. The Trust invests in
senior loans which are exempt from registration under the Securities Act of
1933 (the "`33 Act") but contain certain restrictions on resale and cannot be
sold publicly. These loans bear interest (unless otherwise noted) at rates that
float periodically at a margin above the Prime Rate of a U.S. bank specified in
the credit agreement, the London Inter-Bank Offered Rate ("LIBOR"), the
certificate of deposit rate, or in some cases another base lending rate. The
following is a summary of the significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. Security Valuation. Senior loans are valued at fair value in the absence of
readily ascertainable market values. Fair value is determined by Pilgrim
America Investments, Inc. (the "Manager") under procedures established and
monitored by the Trust's Board of Trustees. In valuing a loan, the Manager
will consider, among other factors: (i) the creditworthiness of the corporate
issuer and any interpositioned bank; (ii) the current interest rate, period
until next interest rate reset and maturity date of the senior corporate
loan; (iii) recent market prices for similar loans, if any; and (iv) recent
prices in the market for instruments with similar quality, rate, period until
next interest rate reset, maturity, terms and conditions. The Manager may
also consider prices or quotations, if any, provided by banks, dealers or
pricing services which may represent the prices at which secondary market
transactions in the loans held by the Trust have or could have occurred.
However, because the secondary market in senior loans has not yet fully
developed, the Manager will not rely solely on such prices or quotations.
Securities for which the primary market is a national securities exchange or
the NASDAQ National Market System are stated at the last reported sale price
on the day of valuation. Debt and equity securities traded in the
over-the-counter market and listed securities for which no sale was reported
on that date are valued at the mean between the last reported bid and asked
price. Securities other than senior loans for which reliable quotations are
not readily available and all other assets will be valued at their respective
fair values as determined in good faith by, or under procedures established
by, the Board of Trustees of the Trust. Investments in securities maturing in
less than 60 days are valued at amortized cost, which when combined with
accrued interest, approximates market value.
B. Federal Income Taxes. It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no federal income tax provision is required.
At February 28, 1998, the Trust had capital loss carryforwards for federal
income tax purposes of approximately $19,738,326 which is scheduled to
expire through February 28, 2006.
The Board of Trustees intends to offset any future net capital gains with
each capital loss carryforward until each carryforward has been fully
utilized or expires.
C. Security Transactions and Revenue Recognition. Security transactions are
accounted for on trade date. Realized gains or losses are reported on the
basis of identified cost of securities delivered. Interest income is recorded
on an accrual basis at the then current loan rate, and dividend income is
recorded on the ex-dividend date. The accrual of interest on loans is
discontinued when, in the opinion of management, there is an indication that
the borrower may be unable to meet payments as they become due. Upon such
discontinuance, all unpaid accrued interest is reversed. Cash collections on
nonaccrual senior loans are generally applied as a reduction to the recorded
investment of the loan. Senior loans are returned to accrual status only
after all past due amounts have been received and the borrower has
demonstrated sustained performance. Arrangement fees, which represent
non-refundable fees associated with the acquisition of loans, are deferred
and recognized ratably over the shorter of 2.5 years or the actual term of
the loan.
26
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of May 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
D. Distributions to Shareholders. The Trust records distributions to its
shareholders on the ex-date. Distributions from income are declared by the
Trust on a monthly basis. Distributions from capital gains, if any, are
declared on at least an annual basis. 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 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 realized capital gains. To the extent
they exceed net investment income and net realized capital gains for tax
purposes, they are reported as a tax return of capital.
E. Dividend Reinvestments. Pursuant to the Shareholder Investment Program
(formerly known as the Automatic Dividend Reinvestment Plan), Investors
Fiduciary Trust Co., the Plan Agent, purchased, from time to time, shares of
beneficial interest of the Trust on the open market to satisfy dividend
reinvestments. Such shares were purchased only when the closing sale or bid
price plus commission was less than the net asset value per share of the
stock on the valuation date. If the market price plus commissions was equal
to or exceeded the net asset value, new shares may be issued at the greater
of (i) net asset value or (ii) the market price of the shares during the
pricing period, minus a discount of 5%.
F. Use of Estimates. Management of the Trust has made certain estimates and
assumptions relating to the reporting of assets and liabilities to prepare
these financial statements in conformity with generally accepted accounting
principles. Actual results could differ from these estimates.
G. Share Offerings. During the quarter ended May 31, 1998, the Trust began
issuing shares under two separate shelf registration statements, whereby the
net proceeds received by the Trust from share sales may not be less than the
greater of (i) the NAV per share or (ii) 94% of the average daily market
price over the relevant pricing period.
NOTE 2 -- INVESTMENTS
For the three months ended May 31, 1998, the cost of purchases and the proceeds
from principal repayment and sales of investments, excluding short-term notes,
totaled $544,945,889 and $411,301,770, respectively. At May 31, 1998, the Trust
held senior loans valued at $1,486,495,714 representing 99.1% of its total
investments. The market value of these securities can only be established by
negotiation between parties in a sales transaction. Due to the uncertainty
inherent in the valuation process, the fair values as determined may materially
differ from the market values that would have been used had a ready market for
these securities existed.
The senior loans acquired by the Trust may take the form of a direct co-lending
relationship with the corporate issuer, an assignment of a co-lender's interest
in a loan, or a participation interest in a co-lender's interest in a loan. The
lead lender in a typical corporate loan syndicate administers the loan and
monitors collateral. In the event that the lead lender becomes insolvent,
enters FDIC receivership or, if not FDIC insured, enters into bankruptcy, the
Trust may incur certain costs and delays in realizing payment, or may suffer a
loss of principal and/or interest. Additionally, certain situations may arise
where the Trust acquires a participation in a co-lender's interest in a loan
and the Trust does not have privity with or direct recourse against the
corporate issuer. Accordingly, the Trust may incur additional credit risk as a
participant because it must assume the risk of insolvency or bankruptcy of the
co-lender from which the participation was acquired. Common and preferred
stocks, and stock purchase warrants held in the portfolio were acquired in
conjunction with senior loans held by the Trust. Certain of these stocks and
warrants are restricted and may not be publicly sold without registration under
the '33 Act, or without an exemption under the '33 Act. In some cases, these
restrictions expire after a designated
27
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of May 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
period of time after issuance of the stock or warrant. These restricted
securities are valued at fair value as determined by the Board of Trustees by
considering quality, dividend rate, and marketability of the securities compared
to similar issues. In order to assist in the determination of fair value, the
Trust will obtain quotes from dealers who periodically trade in such securities
where such quotes are available. Dates of acquisition and cost or assigned basis
of restricted securities are as follows:
<TABLE>
<CAPTION>
Date of Cost or
Acquisition Assigned Basis
----------- --------------
<S> <C> <C>
America's Favorite Chicken Co. -- Common 11/05/92 $ 1
Autotote Systems, Inc. -- Option 11/11/92 --
Autotote Systems, Inc. -- Warrant 11/11/92 --
Capital Tool & Design -- Warrants 07/26/96 --
Covenant Care, Inc. -- Warrants 12/22/95 --
Dan River, Inc. -- Common 09/15/91 1,217,260
KDI Corp. Units of Trust 09/19/95 --
Staff Leasing, Inc. 09/01/95 30,550
----------
Total restricted securities excluding senior loans (market value
of $7,694,580 was 0.70% of net assets at May 31, 1998) $1,247,811
==========
</TABLE>
NOTE 3 -- MANAGEMENT AND ADMINISTRATIVE SERVICES AGREEMENT
The Trust has entered into an Investment Management Agreement with Pilgrim
America Investments, Inc. (the "Manager") a wholly-owned subsidiary of Pilgrim
America Group, Inc. ("PAG"), to provide advisory and management services. The
Investment Management Agreement compensates the Manager with a fee, computed
daily and payable monthly, at an annual rate of 0.85% of the Trust's average
daily net assets plus borrowings up to $700 million; 0.75% of the average daily
net assets plus borrowings of $700 to $800 million; and 0.65% of the average
daily net assets plus borrowings in excess of $800 million.
The Manager has agreed to reduce its fee for a period of three years from the
Expiration Date of the November 12, 1996 Rights Offering (See Note 5) to 0.60%
of the average daily net assets, plus the proceeds of any outstanding
borrowings, over $1.15 billion.
On May 2, 1998, the Board of Trustees approved an amendment to the Trust's
investment management agreement with the Manager that changes the investment
management fee to a rate of 0.80% of the average daily net assets of the Trust
plus the proceeds of any outstanding borrowings. The amendment will not be
effective until approved by a majority of the shareholders of the Trust. The
amendment will be submitted to shareholders for their approval at the Trust's
annual shareholders meeting currently scheduled for August 6, 1998.
The Trust has also entered into an Administration Agreement with PAG to provide
administrative services and also to furnish facilities. The Administration
Agreement compensates the Administrator with a fee, computed daily and payable
monthly, at an annual rate of 0.15% of the Trust's average daily net assets
plus borrowings up to $800 million; and 0.10% of the average daily net assets
plus borrowings in excess of $800 million.
NOTE 4 -- COMMITMENTS
The Trust has entered into both a 364 day and a four year revolving credit
agreement to borrow up to $515 million from a syndicate of major banks maturing
May 2, 2000. Borrowing rates under these agreements are based on a fixed spread
over LIBOR or the federal funds rate. The Trust also pays an unused arrangement
fee for any unborrowed amount amortized over 364 days and four years,
respectively. The amount of borrowings outstanding at May 31, 1998, was $445.0
million at a weighted average interest rate of 6.1%, which represented 28.8% of
net assets plus borrowings. Average borrowings for the three months ended May
31, 1998, were $431,739,130 and the average annualized interest rate was 6.1%.
28
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of May 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
As of May 31, 1998, the Trust had unfunded loan commitments pursuant to the
terms of the following loan participation agreements:
Classic Cable $ 3,352
Edward's Baking Co. 607,423
Huntsman Corp. 1,182,949
Liberman Broadcasting, Inc. 224,000
Liberty House, Inc. 4,066,582
Neff Corp. $ 1,861,752
Palace Station 394,143
Papa Gino's, Inc. 3,178,808
The Presley Companies 2,000,000
-----------
$13,519,009
===========
NOTE 5 -- RIGHTS OFFERINGS
On October 18, 1996, the Trust issued to its shareholders transferable rights
which entitled the holders to subscribe for 18,122,963 shares of the Trust's
common stock at the rate of one share of common stock for each five rights
held. On November 12, 1996, the offering expired and was fully subscribed. The
Trust issued 18,122,963 shares of its common stock to exercising rights holders
at a subscription price of $9.09 . Offering costs of $6,972,203 were charged
against the offering proceeds.
On December 27, 1994, the Trust issued to its shareholders non-transferable
rights which entitled the holders to subscribe for 17,958,766 shares of the
Trust's common stock at the rate of one share of common stock for each four
rights held. On January 27, 1995, the offering expired and was fully
subscribed. The Trust issued 17,958,766 shares of its common stock to
exercising rights holders at a subscription price of $8.12. Offering costs of
$4,470,955 were charged against the offering proceeds.
NOTE 6 -- CUSTODIAL AGREEMENT
Investors Fiduciary Trust Company ("IFTC") serves as the Trust's custodian and
recordkeeper. Custody fees paid to IFTC are reduced by earnings credits based
on the cash balances held by IFTC for the Trust.
NOTE 7 -- AFFILIATED TRANSACTIONS
During the quarter ended May 31, 1998, the Trust sold certain holdings in
senior loans to an affiliated fund managed by the Manager at prices determined
by the Manager to represent market prices. The proceeds and cost of such loans
were $20,022,920 and $20,000,000, respectively, excluding any benefit to the
Trust from the recognition of deferred arrangement fees.
NOTE 8 -- SUBSEQUENT EVENTS
Subsequent to May 31, 1998, the Trust declared the following dividends from net
investment income:
Per Share Amount Payable Date Record Date
---------------- ------------ -----------
$ 0.0710 06/22/98 06/10/98
$ 0.0680 07/22/98 07/10/98
29
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of May 31, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Management's Additional Operating Information
---------------------------------------------
APPROVAL OF CHANGES IN INVESTMENT POLICIES
At the Annual Meeting of Trust Shareholders, held August 30, 1994, shareholders
approved changes in the Trust's fundamental investment policies which make
available certain additional investment opportunities to the Trust, including
the purchase (i) of U.S. dollar denominated senior corporate loans made to
companies headquartered in Canada or U.S. Territories or Possessions; (ii)
subject to certain limitations, loans in excess of 10% of an issue of senior
bank debt of a corporate borrower; and (iii) with up to 5% of the Trust's
assets, loans in tranches of senior collateralized corporate loans that are
subordinated in some manner as to the payment of interest and/or principal. At
a special meeting held May 2, 1996, Trust Shareholders approved an amendment to
the Trust's fundamental investment policies to expand its ability to engage in
borrowing transactions up to 33.33% of net assets including borrowings,
primarily to acquire additional income producing investments.
The Trust's Manager believes that these changes in the Trust's investment
policies will increase the number of loan offerings which the Trust may
consider acquiring. Furthermore, the Manager also believes that these changes
are fully consistent with the Trust's overall investment philosophy of
purchasing senior collateralized corporate loans.
REPURCHASE OF SECURITIES BY CLOSED-END COMPANIES
In accordance with Section 23(c) of the Investment Company Act of 1940, and
Rule 23c-1 under the Investment Company Act of 1940, the Trust may from time to
time purchase shares of beneficial interest of the Trust in the open market, in
privately negotiated transactions and/or purchase shares to correct erroneous
transactions.
SHAREHOLDER INVESTMENT PROGRAM
The Trust offers a Shareholder Investment Program (the "Program") which enables
investors to conveniently add to their holdings at reduced costs. Should you
desire further information concerning this Program, please contact the
Shareholder Servicing Agent at (800) 992-0180.
30
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31
<PAGE>
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32
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
FUND ADVISORS AND AGENTS
- --------------------------------------------------------------------------------
INVESTMENT MANAGER INSTITUTIONAL INVESTORS AND ANALYSTS
Pilgrim America Investments, Inc. Call Pilgrim America Prime Rate Trust
Two Renaissance Square 1-800-336-3436, Extension 8256
40 North Central Avenue
Suite 1200
Phoenix, AZ 85004-4424
SHAREHOLDER SERVICING AGENT TRANSFER AGENT
Pilgrim America Group, Inc. DST Systems, Inc.
Two Renaissance Square P.O. Box 419368
40 North Central Avenue Kansas City, Missouri 64141
Suite 1200
Phoenix, AZ 85004-4424
1-800-992-0180
WRITTEN REQUESTS
Please mail all account inquiries and other comments to:
Pilgrim America Prime Rate Trust Account Services
c/o Pilgrim America Group, Inc.
Two Renaissance Square
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004-4424
TOLL-FREE SHAREHOLDER INFORMATION
Call us from 9:00 a.m. to 7:00 p.m. Eastern time on any business day for
account or other information, at 1-800-992-0180.
33
<PAGE>
Pilgrim America Funds
Pilgrim America Masters
Asia-Pacific Equity Fund
Pilgrim America Masters
MidCap Value Fund
Pilgrim America Masters
LargeCap Value Fund
Pilgrim America
Bank and Thrift Fund
Pilgrim America
MagnaCap Fund
Pilgrim America
High Yield Fund
Pilgrim Government
Securities Income Fund
Pilgrim America
Funds
"Our goal is for every investor to have a successful investment experience."
Prospectuses containing more complete information regarding the funds, including
charges and expenses, may be obtained by calling Pilgrim America Securities,
Inc. Distributor at 1-800-334-3444. Please read the prospectuses carefully
before you invest or send money.
13-SS-070198-072998
