Pilgrim [LOGO]
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FUNDS FOR SERIOUS INVESTORS
PRIME RATE TRUST
First Quarter Report
May 31, 1999
First Quarter Report
Q1
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Pilgrim Prime Rate Trust
FIRST QUARTER REPORT
May 31, 1999
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Table of Contents
Chairman's Message......................................................... 2
Letter to Shareholders..................................................... 3
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 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 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 the three months results a reflection of the Pilgrim
Investment, Inc. 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 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 Group, Inc.
June 8, 1999
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Pilgrim Prime Rate Trust
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LETTER TO SHAREHOLDERS
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Dear Fellow Shareholders:
The objective of Pilgrim Prime Rate Trust is to provide a high level of current
income consistent with the preservation of capital. During the fiscal quarter
ended on May 31, 1999, the Trust declared its 133rd consecutive dividend. Based
on average month-end net asset value ("NAV") per share, dividends declared
during the quarter of $0.195 per share, were equivalent to a distribution rate
of 8.52%(1) per annum. Short-term interest rates were generally stable during
the quarter under review. Chart One compares the Trust's trailing twelve-month
average distribution rates with Prime Rate and LIBOR (an index of the rate of
interest at which banks lend to one another) over the period from January 1,
1991 through May 31, 1999.
Prime Rate Prime Rate
Trust (at NAV) (at Market) Composite
Month Ended (1)(2) (1)(2) Average(2)(3) 60-Day LIBOR(5)
- ----------- -------------- ----------- ------------- ---------------
1/31/91 9.675% 9.917% 8.063%
2/28/91 9.627% 9.833% 7.943%
3/31/91 9.500% 9.750% 7.792%
4/30/91 9.379% 9.667% 7.579%
5/31/91 9.203% 9.542% 7.386%
6/30/91 9.052% 9.417% 7.199%
7/31/91 8.896% 9.292% 7.032%
8/31/91 8.730% 9.167% 6.834%
9/30/91 8.527% 9.000% 6.600%
10/31/91 8.372% 8.833% 6.365%
11/30/91 8.160% 8.625% 6.084%
12/31/91 7.963% 8.375% 5.818%
1/31/92 7.739% 8.125% 5.574%
2/29/92 7.526% 7.917% 5.349%
3/31/92 7.382% 7.708% 7.397% 5.157%
4/30/92 7.199% 7.500% 7.239% 4.990%
5/31/92 7.072% 7.333% 7.142% 4.823%
6/30/92 6.939% 7.167% 7.034% 4.641%
7/31/92 6.790% 6.958% 6.895% 4.432%
8/31/92 6.671% 6.750% 6.779% 4.250%
9/30/92 6.578% 6.583% 6.697% 4.063%
10/31/92 6.498% 6.417% 6.621% 3.932%
11/30/92 6.394% 6.292% 6.533% 3.844%
12/31/92 6.277% 6.250% 6.417% 3.755%
1/31/93 6.203% 6.208% 6.354% 3.677%
2/28/93 6.151% 6.167% 6.305% 3.589%
3/31/93 6.095% 6.125% 6.267% 3.500%
4/30/93 6.070% 6.083% 6.229% 3.432%
5/31/93 6.056% 6.042% 6.196% 3.375%
6/30/93 6.022% 6.000% 6.141% 3.318%
7/31/93 5.998% 6.000% 6.112% 3.302%
8/31/93 6.002% 6.000% 6.110% 3.281%
9/30/93 5.975% 6.000% 6.070% 3.281%
10/31/93 5.899% 6.000% 5.989% 3.266%
11/30/93 5.910% 6.000% 5.955% 3.224%
12/31/93 5.932% 6.000% 6.018% 3.219%
1/31/94 5.955% 6.000% 6.040% 3.214%
2/28/94 5.978% 6.000% 6.055% 3.255%
3/31/94 6.017% 6.021% 6.080% 3.302%
4/30/94 6.068% 6.083% 6.103% 3.385%
5/31/94 6.157% 6.188% 6.163% 3.484%
6/30/94 6.258% 6.292% 6.243% 3.609%
7/31/94 6.374% 6.396% 6.331% 3.734%
8/31/94 6.474% 6.542% 6.404% 3.875%
9/30/94 6.604% 6.688% 6.518% 4.042%
10/31/94 6.738% 6.833% 6.637% 4.219%
11/30/94 6.874% 7.042% 6.758% 4.432%
12/31/94 7.076% 7.250% 6.971% 4.677%
1/31/95 7.288% 7.458% 7.269% 4.927%
2/28/95 7.487% 7.708% 7.533% 5.135%
3/31/95 7.711% 7.938% 7.831% 5.333%
4/30/95 7.915% 8.125% 8.119% 5.495%
5/31/95 8.089% 8.271% 8.367% 5.625%
6/30/95 8.249% 8.417% 8.588% 5.734%
7/31/95 8.396% 8.542% 8.825% 5.828%
8/31/95 8.534% 8.625% 9.034% 5.854%
9/30/95 8.650% 8.708% 9.189% 5.911%
10/31/95 8.749% 8.792% 9.335% 5.943%
11/30/95 8.855% 8.813% 9.488% 5.930%
12/31/95 8.876% 8.813% 9.506% 5.878%
1/31/96 8.886% 8.813% 9.432% 5.812%
2/29/96 8.895% 8.750% 9.351% 5.739%
3/31/96 8.836% 8.688% 9.215% 5.677%
4/30/96 8.773% 8.625% 9.084% 5.622%
5/31/96 8.727% 8.563% 8.983% 5.573%
6/30/96 8.671% 8.500% 8.874% 5.527%
7/31/96 8.639% 8.458% 8.760% 5.503%
8/31/96 8.612% 8.417% 8.679% 5.524%
9/30/96 8.590% 8.375% 8.606% 5.493%
10/31/96 8.577% 8.333% 8.571% 5.456%
11/30/96 8.563% 8.292% 8.530% 5.422%
12/31/96 8.567% 8.271% 8.486% 5.413%
1/31/97 8.569% 8.250% 8.455% 5.422%
2/28/97 8.564% 8.250% 8.434% 5.436%
3/31/97 8.595% 8.271% 8.431% 5.459%
4/30/97 8.647% 8.292% 8.439% 5.483%
5/31/97 8.666% 8.313% 8.411% 5.507%
6/30/97 8.715% 8.333% 8.425% 5.523%
7/31/97 8.734% 8.354% 8.415% 5.529%
8/31/97 8.744% 8.375% 8.384% 5.544%
9/30/97 8.758% 8.396% 8.371% 5.560%
10/31/97 8.768% 8.417% 8.313% 5.581%
11/30/97 8.771% 8.438% 8.248% 5.615%
12/31/97 8.777% 8.458% 8.206% 5.633%
1/31/98 8.780% 8.479% 8.168% 5.639%
2/28/98 8.777% 8.500% 8.128% 5.655%
3/31/98 8.788% 8.500% 8.125% 5.652%
4/30/98 8.788% 8.500% 8.107% 5.647%
5/31/98 8.809% 8.500% 8.109% 5.642%
6/30/98 8.798% 8.500% 8.094% 5.640%
7/31/98 8.806% 8.500% 8.098% 5.642%
8/31/98 8.807% 8.500% 8.101% 5.639%
9/30/98 8.810% 8.479% 8.114% 5.610%
10/31/98 8.793% 8.438% 8.127% 5.571%
11/30/98 8.786% 8.375% 8.155% 5.527%
12/31/98 8.782% 8.313% 8.220% 5.470%
1/31/99 8.764% 8.250% 8.242% 5.420%
2/28/99 8.737% 8.188% 8.259% 5.364%
3/31/99 8.704% 8.125% 8.259% 5.304%
4/30/99 8.663% 8.063% 8.259% 5.242%
5/31/99 8.630% 8.000% 8.261% 5.187%
During the quarter, the Trust's month end NAV ranged between $9.25 and $9.07.
The decline in NAV over the last few months has resulted from a combination of
losses realized on assets sold and unrealized losses on assets which remain part
of the portfolio. This issue is further discussed later in this letter.
THE TRUST
The Trust invests primarily in senior loans made to large American and Canadian
corporations. All investments are made in US dollars and bear interest at rates
which adjust to current market conditions periodically. The Trust buys
investments from large, sophisticated banks and financial institutions. These
institutions typically administer the loans on the Trust's behalf. Investments
usually have a final maturity between seven and ten years, but most are repaid
within two to five years. Interest rates on most of the loans reset to current
market indices every thirty to ninety days. Consequently, the Trust's
investments exhibit very low price volatility unlike corporate bonds, whose
prices fluctuate significantly in response to changes in interest rates. Other
factors which reduce the risk of the senior loan asset class include being (i)
senior status among all lenders; (ii) collateral coverage; and (iii) covenants
granted by borrowers to adhere to certain
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Pilgrim Prime Rate Trust
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LETTER TO SHAREHOLDERS
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operating and financial standards. Additionally, the Trust maintains a highly
diversified portfolio, which limits the adverse effect of loan defaults on the
Trust's performance.
The two to ten year lifecycle of senior loan investments suggests that investors
should have a moderate to long term investment horizon when investing in the
Trust. The Trust seeks to provide a high degree of principal stability relative
to the traditional fixed income component of an appropriately diversified
investment portfolio.
ASSET QUALITY
The recent decline in NAV generally resulted from the deterioration of a small
number of assets. On May 31, 1999, non-performing loans were 1.48% and 2.13% of
total assets and net assets, respectively, compared to 1.75% and 2.53% at
February 28, 1999. This improvement in the level of non-performing loans can be
seen as a positive indicator for NAV stability. Some unrealized losses may be
recoverable since the sale or resolution of these assets could provide the Trust
with proceeds in excess of its adjusted basis. The opportunity for future gains
arises from the inherent strengths of the senior loan asset class. In corporate
restructurings following loan defaults, the investments owned by the Trust
generally give the Trust the right to protect its senior claim to the assets.
The greatest value may be recovered by the Trust by substituting part of the
Trust's debt investment with equity issued by the borrower. If the borrower
performs well, the equity position owned by the Trust will appreciate in value.
Over its history, the Trust has realized gains from the appreciation of equity
positions resulting from debt restructuring.
Management continually monitors the less strong parts of the portfolio. We have
re-doubled our efforts to detect potential problems early and to take
appropriate corrective action.
MARKET PLACE FOR LOANS
During the past three months, there has been a stable and attractive supply of
new transactions in the primary market. We have also taken greater advantage of
the increasingly attractive secondary market place to acquire assets. Offsetting
these helpful trends has been continued growth in demand for senior floating
rate loans. This has tended to keep spreads over LIBOR stable and allocations by
lead lenders relatively small. Generally though, the Trust has been able to
remain close to fully invested.
PILGRIM PRIME RATE TRUST
DATE PRICE NAV %PREM DATE PRICE NAV %PREM
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05/28/99 9.500 9.100 4.40 03/19/99 9.313 9.210 1.11
05/21/99 9.375 9.100 3.02 03/12/99 9.438 9.200 2.58
05/14/99 9.313 9.080 2.56 03/05/99 9.500 9.240 2.81
05/07/99 9.438 9.070 4.05 02/26/99 9.563 9.240 3.49
04/30/99 9.438 9.170 2.92 02/19/99 9.500 9.230 2.92
04/23/99 9.438 9.160 3.03 02/12/99 9.500 9.230 2.93
04/16/99 9.313 9.140 1.89 02/05/99 9.438 9.280 1.70
04/09/99 9.375 9.130 2.68 01/29/99 9.563 9.270 3.16
04/02/99 9.438 9.190 2.69 01/22/99 9.438 9.270 1.81
03/26/99 9.375 9.230 1.57 01/15/99 9.313 9.260 0.57
01/08/99 9.313 9.250 0.68
01/01/99 9.313 9.230 0.89
DATE PRICE NAV %PREM DATE PRICE NAV %PREM
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12/25/98 10.000 9.280 7.76 06/26/98 9.938 9.340 6.40
12/11/98 10.000 9.330 7.18 06/19/98 9.938 9.320 6.63
12/11/98 9.938 9.320 6.63 06/12/98 10.000 9.310 7.41
12/04/98 10.000 9.300 7.53 06/05/98 10.125 9.370 8.06
11/27/98 10.000 9.280 7.76 05/29/98 10.250 9.360 9.51
11/20/98 10.000 9.330 7.18 05/22/98 10.188 9.330 9.19
11/13/98 9.938 9.320 7.76 05/15/98 10.188 9.310 9.43
11/06/98 10.000 9.300 7.18 05/08/98 10.063 9.290 8.32
10/30/98 10.000 9.300 6.63 05/01/98 10.125 9.340 8.10
10/23/98 10.000 9.350 7.53 04/24/98 10.000 9.330 7.18
10/16/98 9.938 9.340 7.76 04/17/98 10.063 9.320 7.97
10/02/98 9.938 9.320 7.76 04/10/98 9.938 9.300 6.85
09/25/98 10.000 9.310 7.18 04/03/98 10.063 9.360 7.51
09/18/98 10.125 9.370 6.63 03/27/98 9.875 9.340 5.73
09/11/98 10.250 9.360 7.53 03/20/98 10.000 9.330 7.18
09/04/98 10.188 9.330 7.76 03/13/98 10.125 9.310 8.75
08/28/98 10.188 9.310 7.76 03/06/98 10.250 9.290 10.33
08/21/98 10.063 9.290 7.18 02/27/98 10.313 9.340 10.41
08/14/98 10.125 9.340 6.63 02/20/98 10.313 9.340 10.41
08/07/98 10.000 9.280 7.53 02/13/98 10.250 9.340 9.74
07/31/98 10.000 9.330 7.76 02/06/98 10.250 9.320 9.98
07/24/98 9.938 9.320 7.76 01/30/98 10.250 9.380 9.28
07/17/98 10.000 9.300 6.63 01/23/98 10.500 9.360 12.18
07/10/98 10.000 9.300 7.53 01/16/98 10.313 9.340 10.41
07/03/98 10.063 9.350 7.76 01/09/98 10.313 9.330 10.53
01/02/98 10.313 9.310 10.77
DATE PRICE NAV %PREM DATE PRICE NAV %PREM
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12/26/97 10.375 9.390 10.49 07/04/97 10.000 9.430 6.04
12/19/97 10.375 9.380 10.61 06/27/97 10.031 9.420 6.49
12/12/97 10.250 9.360 9.51 06/20/97 10.125 9.400 7.71
12/05/97 10.250 9.340 9.74 06/13/97 10.125 9.390 7.83
11/28/97 10.250 9.390 9.16 06/06/97 10.063 9.370 7.39
11/21/97 10.188 9.390 8.49 05/30/97 10.063 9.420 6.82
11/14/97 10.188 9.360 8.84 05/23/97 10.125 9.400 7.71
11/07/97 10.250 9.350 9.63 05/16/97 9.875 9.380 5.28
10/31/97 10.250 9.400 9.04 05/09/97 10.000 9.370 6.72
10/24/97 10.313 9.390 9.82 05/02/97 10.000 9.420 6.16
10/17/97 10.188 9.380 8.61 04/25/97 10.000 9.420 6.16
10/10/97 10.188 9.360 8.84 04/18/97 10.125 9.400 7.71
10/03/97 10.250 9.410 8.93 04/11/97 10.125 9.380 7.94
09/26/97 10.188 9.390 8.49 04/04/97 10.125 9.440 7.26
09/19/97 10.188 9.380 8.61 03/28/97 9.875 9.420 4.83
09/12/97 10.125 9.350 8.29 03/21/97 9.750 9.410 3.61
09/05/97 10.125 9.330 8.52 03/14/97 10.000 9.390 6.50
08/29/97 10.125 9.400 7.71 03/07/97 10.000 9.400 6.38
08/22/97 10.125 9.380 7.94 02/28/97 9.875 9.450 4.50
08/15/97 10.188 9.370 8.72 02/21/97 9.875 9.430 4.72
08/08/97 10.125 n.a. n.a 02/14/97 10.000 n.a. n.a
08/01/97 10.188 9.430 8.03 02/07/97 9.750 9.410 3.61
07/25/97 10.125 9.410 7.60 01/31/97 9.750 9.460 3.07
07/18/97 10.000 9.380 6.61 01/24/97 9.813 9.440 3.95
07/11/97 10.000 9.380 6.61 01/17/97 9.750 9.430 3.39
01/10/97 9.875 9.410 4.94
01/03/97 9.875 9.390 5.17
DATE PRICE NAV %PREM DATE PRICE NAV %PREM
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12/27/96 9.750 9.380 3.94 06/28/96 9.750 9.610 1.46
12/20/96 9.750 n.a. n.a. 06/21/96 9.625 9.590 .36
12/13/96 9.625 9.410 2.28 06/14/96 9.750 9.570 1.88
12/06/96 9.375 9.390 -.16 06/07/96 9.625 9.560 .68
11/29/96 9.375 9.450 -.79 05/31/96 9.500 9.610 -1.14
11/22/96 9.375 9.430 -.58 05/24/96 9.625 9.590 .36
11/15/96 9.375 9.560 -1.94
05/17/96 9.625 9.570 .57
11/08/96 9.250 9.560 -3.24 05/10/96 9.500 9.560 -.63
11/01/96 9.438 9.610 -1.80 05/03/96 9.625 9.600 .26
10/25/96 9.625 9.600 .26 04/26/96 9.500 9.580 -.84
10/18/96 9.625 9.580 .47 04/19/96 9.625 9.570 .57
10/11/96 9.750 9.570 1.88
04/12/96 9.625 9.550 .79
10/04/96 9.875 9.620 2.65 04/05/96 9.500 9.540 -.42
09/27/96 9.875 9.600 2.86 03/29/96 9.625 9.610 .16
09/20/96 9.625 9.580 .47 03/22/96 9.375 9.590 -2.24
09/13/96 10.000 9.560 4.60 03/15/96 9.375 9.570 -2.04
09/06/96 9.875 n.a. n.a.
03/08/96 9.375 n.a. n.a.
08/30/96 9.875 9.600 2.86 03/01/96 9.375 9.610 -2.45
08/23/96 9.875 9.600 2.86 02/23/96 9.500 9.610 -1.14
08/16/96 9.875 9.580 3.08 02/16/96 9.375 9.590 -2.24
08/09/96 9.875 9.560 3.29 02/09/96 9.375 9.580 -2.14
08/02/96 9.813 9.620 2.00
02/02/96 9.313 9.640 -3.40
07/26/96 9.750 9.600 1.56 01/26/96 9.375 9.620 -2.55
07/19/96 9.625 9.580 .47 01/19/96 9.375 9.620 -2.55
07/12/96 9.625 9.570 .57 01/12/96 9.375 9.600 -2.34
07/05/96 9.750 9.550 2.09 01/05/96 9.375 9.590 -2.24
DATE PRICE NAV %PREM DATE PRICE NAV %PREM
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12/29/95 9.250 9.580 -3.44 07/14/95 9.000 9.620 -6.44
12/22/95 9.375 9.630 -2.65 07/07/95 9.125 9.600 -4.95
12/15/95 9.375 9.630 -2.65 06/30/95 9.125 9.650 -5.44
12/08/95 9.250 9.610 -3.75 06/23/95 9.125 9.650 -5.44
06/16/95 9.000 9.630 -6.54
12/01/95 9.125 9.670 -5.64
11/24/95 9.125 9.650 -5.44 06/09/95 9.125 9.620 -5.15
11/17/95 9.250 9.620 -3.85 06/02/95 9.000 9.670 -6.93
11/10/95 9.000 9.620 -6.44 05/26/95 8.875 9.660 -8.13
11/03/95 9.125 9.670 -5.64 05/19/95 9.000 9.640 -6.64
05/12/95 8.875 9.620 -7.74
10/27/95 9.250 9.660 -4.25
10/20/95 9.250 9.640 -4.05 05/05/95 8.875 9.600 -7.55
10/13/95 9.375 9.620 -2.55 04/28/95 8.875 9.660 -8.13
10/06/95 9.375 9.610 -2.45 04/21/95 8.875 9.640 -7.94
09/29/95 9.375 9.660 -2.95 04/14/95 8.750 9.620 -9.04
04/07/95 8.750 9.610 -8.95
09/22/95 9.250 9.640 -4.05
09/15/95 9.375 9.630 -2.65 03/31/95 8.750 9.670 -9.51
09/08/95 9.250 9.610 -3.75 03/24/95 8.750 9.650 -9.33
09/01/95 9.250 9.670 -4.34 03/17/95 8.750 9.630 -9.14
08/25/95 9.250 9.640 -4.05 03/10/95 8.750 9.610 -8.95
03/03/95 8.750 9.660 -9.42
08/18/95 9.125 9.620 -5.15
08/11/95 9.000 9.610 -6.35
08/04/95 9.125 9.670 -5.64
07/28/95 9.000 9.650 -6.74
07/21/95 8.875 9.630 -7.84
Source: BLOOMBERG Financial Markets.
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Pilgrim Prime Rate Trust
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LETTER TO SHAREHOLDERS
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MARKET PRICE FOR TRUST SHARES
The Trust's shares have begun to trade at a more significant premium in recent
weeks. Chart Two shows the Trust's stock price, NAV and Premium over NAV.
The higher premium increases the possibilities for the Trust to issue shares
under its shelf programs. For more complete information, including charges and
expenses for purchasing shares under the shelf programs, please call Pilgrim
Securities at 1-800-334-3436, ext. 8112. Please read the prospectus carefully
before investing or sending any money.
OUTLOOK
The next quarter should see resolution of more of the Trust's troublesome
investments. There are pockets of heightened risk in healthcare and in some
service businesses. We are watching these very carefully and will take
appropriate action seeking to minimize the impact on the portfolio.
New transactions seem likely to continue at a healthy rate. Both quality and
profit margins remain attractive. There are some signs that short-term interest
rates may rise moderately, which is a generally positive factor for the Trust.
We look forward to your comments and questions.
/s/ Howard Tiffen
Howard Tiffen
President, COO, and
Senior Portfolio Manager
Pilgrim Prime Rate Trust
June 8, 1999
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Pilgrim Prime Rate Trust
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SHAREHOLDER LETTER FOOTNOTES
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(1) The distribution rate is calculated by dividing the total distributions
declared during the quarter by the Trust's net asset value at the end of
the period. The distribution rate is based solely on the actual dividends
and distributions, which are made at the discretion of management. The
distribution rate may or may not include all investment income and
ordinarily will not include capital gains or losses, if any.
(2) The distribution rate is the average of the Trust's distribution rates for
the preceding twelve months. Distribution rates are calculated by
annualizing each monthly dividend 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 each
month.
(3) Source: Bloomberg Financial Markets.
(4) LIBOR is the London Inter-Bank Offered Rate and is the benchmark for
determining the interest paid on more than 90% of the senior loans in the
Trust's portfolio.
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.
THIS LETTER CONTAINS STATEMENTS THAT MAY BE "FORWARD-LOOKING STATEMENTS". ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE "FORWARD-LOOKING
STATEMENTS".
THE VIEWS EXPRESSED IN THIS LETTER REFLECT THOSE OF THE PORTFOLIO MANAGER, ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER
CONDITIONS.
6
<PAGE>
Pilgrim Prime Rate Trust
- --------------------------------------------------------------------------------
STATISTICS AND PERFORMANCE as of May 31, 1999
- --------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
Net Assets $1,188,301,527
Assets Invested in Senior Loans* $1,661,224,994
Total Number of Senior Loans 167
Average Amount Outstanding per Loan $9,947,455
Total Number of Industries 32
Average Loan Amount per Industry $51,913,281
Portfolio Turnover Rate (YTD) 37%
Weighted Average Days to Interest Rate Reset 43 days
Average Loan Maturity 63 months
Average Age of Loans Held in Portfolio 11 months
* Includes loans and other debt received through restructures
TOP 10 INDUSTRIES AS A % OF
NET ASSETS TOTAL ASSETS
---------- ------------
Healthcare, Education and Childcare 15.1% 10.5%
Telecommunications 12.4% 8.6%
Chemicals, Plastics and Rubber 9.0% 6.2%
Containers, Packaging and Glass 7.6% 5.3%
Buildings and Real Estate 7.3% 5.1%
Personal, Food and Miscellaneous Services 6.9% 4.8%
Broadcasting 5.7% 4.0%
Printing and Publishing 5.6% 3.9%
Aerospace and Defense 5.6% 3.9%
Automobile 5.6% 3.9%
TOP 10 SENIOR LOANS AS A % OF
NET ASSETS TOTAL ASSETS
---------- ------------
Lyondell Petrochemical Co. 3.0% 2.1%
Patriot American Hospitality 2.9% 2.0%
MAFCO Finance Corp. 2.6% 1.8%
Community Health Systems, Inc. 2.0% 1.4%
Jefferson Smurfit 2.0% 1.4%
Omnitrax Inc. 2.0% 1.4%
Gaylord Container 1.8% 1.2%
Papa Gino's Inc. 1.8% 1.2%
American Wireless Corp. 1.7% 1.2%
Mariner Health Group 1.7% 1.2%
7
<PAGE>
Pilgrim Prime Rate Trust
- --------------------------------------------------------------------------------
STATISTICS AND PERFORMANCE as of May 31, 1999
- --------------------------------------------------------------------------------
YIELDS AND DISTRIBUTION RATES
(NAV) (MKT) Annualized Annualized
Prime 30-Day SEC 30-Day SEC Distribution Distribution
Quarter-ended Rate Yield A Yield A Rate at NAV B Rate at MKT B
- ------------- ----- ---------- ---------- ------------- -------------
May 31, 1999 7.75% 8.78% 8.40% 8.52% 8.20%
February 28, 1999 7.75% 8.28% 7.99% 8.56% 8.27%
November 30, 1998 7.75% 9.02% 8.68% 8.74% 8.42%
August 31, 1998 8.50% 8.46% 7.88% 8.81% 8.21%
AVERAGE ANNUAL TOTAL RETURNS
NAV MKT
----- -----
1 Year 5.96% 1.02%
3 Years 7.42% 8.72%
5 Years 8.03% 8.79%
10 Years 8.09% N/A
Since Trust Inception F,H 8.26% N/A
Since Initial Trading on NYSE G N/A 9.94%
Assumes rights were exercised and excludes sales charges and commissions C,D,E
Performance data represents past performance and is no guarantee of future
results.
See performance footnotes on page 9.
8
<PAGE>
Pilgrim Prime Rate Trust
- --------------------------------------------------------------------------------
PERFORMANCE FOOTNOTES
- --------------------------------------------------------------------------------
(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 each monthly dividend,
then averaging the annualized dividends declared for each month during the
quarter and dividing the resulting average 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 a
market basis and assuming rights were exercised through May 31, 1999 were
1.02% and 8.79% for the one and five year periods, respectively. The
Trust's average annual total return assuming an initial investment at NAV
with a 3% sales charge and assuming an ending value at market and assuming
rights were exercised through May 31, 1999, was 9.42% 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) 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. 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.
(E) 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 $6,972,203 were charged against the offering proceeds.
(F) Inception Date -- May 12, 1988.
(G) Initial Trading on NYSE -- March 9, 1992.
(H) 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
<PAGE>
Pilgrim Prime Rate Trust
- --------------------------------------------------------------------------------
ADDITIONAL NOTES AND INFORMATION
- --------------------------------------------------------------------------------
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 1999 Dividends:
DECLARATION DATE EX-DATE PAYABLE DATE
---------------- ------- ------------
January 29 February 8 February 23
February 26 March 8 March 22
March 31 April 8 April 22
April 30 May 6 May 24
May 28 June 8 June 22
June 30 July 8 July 22
July 30 August 6 August 23
August 31 September 8 September 22
September 30 October 6 October 22
October 28 November 8 November 22
November 30 December 8 December 22
December 20 December 28 January 13, 2000
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).
Effective November 16, 1998 the Trust's name changed to Pilgrim Prime Rate Trust
and its cusip number became 72146W 10 3. Prior to November 16, 1998 the Trust's
name was Pilgrim America Prime Rate Trust and its cusip number was 720906 10 6.
The Trust's NAV and market price are published daily 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
<PAGE>
Pilgrim Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
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: 5.6%
$ 14,888 Avborne (aircraft maintenance) Term B 06/30/03 $14,887,500
8,820 Erickson Air-Crane Co. (heavy lift helicopters) Term B 12/31/04 8,114,400
8,794 New Piper Aircraft, Inc. (aircraft manufacturer) Term 04/15/05 8,794,332
6,390 Piedmont Aviation Services (airport facility operator) Term B 07/23/06 6,389,830
6,390 Piedmont Aviation Services Term C 07/23/07 6,389,831
2,500 Stellex Industries, Inc. (aerospace & defense parts mfg.) Term B 09/30/06 2,500,000
4,602 Technetics Corp. (aircraft engine components) Term 06/20/02 4,602,168
14,987 TRANSTAR (aluminum distribution) Term B 01/20/06 14,986,607
-----------
66,664,668
-----------
AUTOMOBILE: 5.6%
4,962 Autosystems manufacturing, Inc. (automotive lighting) Term B 05/31/04 4,863,250
4,963 Autosystems manufacturing, Inc. Term C 05/31/05 4,863,250
14,438 Breed Technologies (airbags/seatbelts) Term B 04/27/06 14,437,870
9,800 Cambridge Industries, Inc. (automotive plastics) Term B 06/30/05 9,800,000
9,365 Capital Tool & Design (brake backing plates) Term B 07/19/03 9,364,964
8,767 Global Metal Technologies, Inc. (automotive parts) Term B 03/12/05 8,767,420
7,101 Safelite Glass Corp. (automobile windshield replacement) Term B 12/23/04 7,101,000
7,101 Safelite Glass Corp. Term C 12/23/05 7,101,000
-----------
66,298,754
-----------
BANKING: 1.5%
893 Loyalty Management Group (banking) Term A 03/04/06 892,857
15,000 Loyalty Management Group Term B 10/31/05 15,000,000
2,238 Loyalty Management Group US Term 03/04/06 2,238,580
-----------
18,131,437
-----------
BEVERAGE, FOOD AND TOBACCO: 4.6%
2,833 Edward's Baking Co. (food service bakery) Term A 09/30/03 2,691,667
3,292 Edward's Baking Co. Term B 09/30/05 3,127,083
3,292 Edward's Baking Co. Term C 09/30/05 3,127,084
13,755 Empire Kosher Poultry (kosher chicken and poultry) Term B 07/31/04 13,755,000
15,000 General Nutrition Corp. (nutritional product retail
and manufacturer)+ Term 12/18/05 15,000,000
9,102 Imperial Holly Corp. (sugar producer) Term A 12/31/05 9,102,033
8,272 Imperial Holly Corp. Term B 12/31/05 8,272,192
-----------
55,075,059
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
11
<PAGE>
Pilgrim Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
- --------- ----------------------------------------------------------- ------ -------- -----------
<S> <C> <C> <C> <C>
BROADCASTING: 5.7%
$ 1,547 Capstar Radio Broadcasting (radio broadcasting) Revolver 09/24/99 $ 1,547,368
2,369 Capstar Radio Broadcasting Term A 09/24/99 2,368,421
4,000 Charter Communications Operating LLC (cable television) Term B 03/17/08 4,000,000
5,000 Classic Cable, Inc. (cable television) Term B 10/31/07 5,000,000
9,977 Intermedia Partners IV (cable television) Term 01/01/05 9,977,273
1,738 Liberman Broadcasting, Inc. (spanish radio/tv) Revolver 03/31/05 1,737,600
7,920 Liberman Broadcasting, Inc. Term B 09/30/05 7,920,000
9,157 Retlaw Broadcasting, LLC (television broadcasting) Term B 04/30/06 9,157,500
17,000 Telemundo (television broadcasting) Term B 12/28/06 17,000,000
4,000 Z Spanish (radio broadcaster) Bridge 03/31/06 4,000,000
5,000 Z Spanish Term 03/31/06 5,000,000
-----------
67,708,162
-----------
BUILDINGS AND REAL ESTATE: 7.3%
4,990 Alliance National, Inc. (temporary offices) Term B 09/04/05 4,989,583
6,000 Dayton Superior Corp. (concrete/masonry accessories) Term 09/29/05 6,000,000
5,421 Falcon Building Products (building products) Term B 06/30/05 5,421,519
6,600 Imperial Home Decor Group (home accessories) Term B 03/13/05 6,600,000
3,400 Imperial Home Decor Group Term C 03/13/06 3,400,000
7,788 Kevco, Inc. (manufactured home components) Term B 02/02/05 7,787,674
11,120 Meditrust Corp. (real estate investment trust) Revolver 07/15/01 11,120,234
6,500 Meditrust Corp. Term D 07/15/01 6,500,000
11,268 Tree Island Industries (nail and wire products) Term B 03/31/03 11,268,000
7,800 US Aggregates (aggregate, asphalt, concrete manufacturer) Term B 03/31/06 7,800,000
15,777 Ventas, Inc. (real estate investment trust) Term D 05/05/03 15,776,828
-----------
86,663,838
-----------
CARGO TRANSPORT: 2.6%
10,543 Atlas Freighter Leasing (air cargo carrier) Term 05/29/04 10,543,487
2,709 Evergreen International Aviation, Inc. (air cargo carrier) Term B 05/31/02 2,709,006
1,368 Evergreen International Aviation, Inc. Term B 05/31/02 1,367,553
385 Evergreen International Aviation, Inc. Term B-1 05/19/03 385,260
6,300 Gemini Air Cargo, Inc. (air cargo carrier) Term A 12/12/02 6,300,000
9,023 Omnitrax, Inc. (rail operator) Term 05/12/05 9,022,727
-----------
30,328,033
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
12
<PAGE>
Pilgrim Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
- --------- ----------------------------------------------------------- ------ -------- -----------
<S> <C> <C> <C> <C>
CHEMICALS, PLASTICS AND RUBBER: 9.0%
$ 9,854 Acadia Elastomers Corp. (specialty chemicals) Term 02/17/04 $ 9,854,015
11,198 Cedar Chemical Corp. (specialty chemicals) Term B 10/30/03 11,198,323
14,963 Euro United Corp. (plastic products) Term B 05/31/01 14,962,500
4,388 Foam Fabrics Inc. (styrofoam products) Term A 03/05/05 4,387,500
3,536 Foamex, L.P. (polyurethane foam) Term B 06/30/05 3,535,877
3,214 Foamex, L.P. Term C 06/30/06 3,214,433
1,806 Huntsman Corp. (industrial chemicals) Revolver 12/31/02 1,805,554
476 Huntsman Corp. Term A 12/31/02 475,560
3,442 Huntsman Corp. Term B 10/07/04 3,442,437
1,584 Huntsman Specialty (specialty chemicals) Term B 03/15/04 1,583,994
1,584 Huntsman Specialty Term C 03/15/05 1,583,994
5,000 Identity Group, Inc. (office product manufacturer) Term B 05/07/07 5,000,000
10,875 Lyondell Petrochemical Company (petrochemicals) Term A 07/23/03 10,875,214
7,801 Lyondell Petrochemical Company Term B 07/23/05 7,801,012
17,000 Lyondell Petrochemical Company Term E 05/20/06 17,000,000
5,102 NEN Life Science Products (biochemicals) Term B 12/31/04 5,102,041
4,694 Texas Petrochemical Corp. (industrial chemicals) Term B 06/30/04 4,694,444
------------
106,516,898
------------
CONTAINERS, PACKAGING AND GLASS: 7.6%
7,000 Blue Ridge Paper Products (paper producer) Term B 05/14/06 7,000,000
1,430 Gaylord Container Corporation (corrugated containers) Revolver 06/19/03 1,430,542
19,897 Gaylord Container Corporation Term 06/19/03 19,896,552
23,880 Jefferson Smurfit (paperboard and packaging producer) Term B 03/31/06 23,880,000
4,000 Pacifica Paper Inc. (manufacturer of value added paper) Term B 03/12/06 4,000,000
3,752 Packaging Corporation of America (packaging product
producer) Term B 04/12/07 3,752,066
3,752 Packaging Corporation of America Term C 04/12/07 3,752,066
9,925 Pretium Packaging, LLC (plastic packaging) Term B 07/29/06 9,925,020
5,498 RIC Holdings Inc. (Riverwood) (paper and pulp company) Term A 02/28/03 5,497,622
11,442 Stone Container (paper and pulp company) Term D 10/01/03 11,442,314
------------
90,576,182
------------
DIVERSIFIED/CONGLOMERATE MANUFACTURING: 3.4%
9,975 Allied Digital Technologies Corp. (multimedia manufacturer) Term B 12/31/05 9,975,000
6,250 General Cable Corp. (copper cable mfg.) Term B 05/24/07 6,250,000
4,000 Holmes Products Corp. (consumer products manufacturer) Term B 02/15/07 4,000,000
9,955 Private Business, Inc. (banking services & software) Term B 08/19/06 9,954,545
9,950 SPX Corporation (industrial components) Term B 10/06/06 9,950,000
------------
40,129,545
------------
DIVERSIFIED/CONGLOMERATE SERVICES: 4.8%
5,000 Barjan Products (distributor to truck stops) Term B 05/31/06 5,000,000
3,000 Enterprise Profit Solutions Corp. (business services
outsourcing) Term 09/25/02 3,000,000
30,634 MAFCO Financial Corp. (diversified services and
entertainment) Term A 04/16/00 30,634,615
11,855 Outsourcing Solutions (accounts receivable management) Term B 11/06/03 11,854,438
6,887 Outsourcing Solutions Term C 10/15/04 6,887,304
------------
57,376,357
------------
</TABLE>
See Accompanying Notes to Financial Statements.
13
<PAGE>
Pilgrim Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
- --------- ----------------------------------------------------------- ------ -------- -----------
<S> <C> <C> <C> <C>
ECOLOGICAL: 0.6%
$ 1,861 Clean Harbors, Inc. (environmental services) Term 05/08/00 $ 1,860,698
4,625 Rumpke (waste management) Term A 09/26/02 4,625,000
-----------
6,485,698
-----------
ELECTRONICS: 4.1%
4,500 Dynamic Details Silicon, Inc. (circuit board manufacturer) Term B 04/22/05 4,500,000
5,348 Intri-Plex Technologies, Inc. (disk drive component
manufacturer)(1) Term 09/30/02 5,347,826
9,468 Mitel Corporation (semiconductor manufacturing) Term B 06/02/04 9,468,061
8,429 OK Industries, Inc. (circuit board manufacturing systems) Term 10/31/02 8,428,571
4,345 RSP Manufacturing (electronic enclosures) Term B 06/30/04 4,345,075
9,454 Sarcom, Inc. (systems integration) Term 11/20/02 9,454,365
7,500 Stonebridge Technologies, Inc. (enterprise computing) Term 07/27/05 7,500,000
-----------
49,043,898
-----------
FARMING AND AGRICULTURE: 0.3%
3,000 United Industries Corp. (herbicides, pesticides) Term B 01/20/06 3,000,000
-----------
3,000,000
-----------
FINANCE: 2.6%
8,000 Bridge Information Systems (news services) Term B 05/29/05 8,000,000
5,837 National Partnership Investments Corp. (asset management) Term 06/30/01 5,837,490
5,163 Rent-A-Center, Inc. (home appliances rental company) Term B 01/31/06 5,163,454
6,913 Rent-A-Center, Inc. Term C 01/31/07 6,912,900
4,667 Value Asset Management, Inc. (money management) Term B 04/28/03 4,666,667
-----------
30,580,511
-----------
GROCERY: 3.2%
1,745 Pathmark Stores, Inc. (mid atlantic supermarkets) Revolver 06/15/01 1,745,455
1,456 Pathmark Stores, Inc. Term A 06/15/01 1,456,544
9,033 Pathmark Stores, Inc. Term B 12/15/01 9,032,592
418 Schwegmann Giant Supermarket (Louisiana supermarkets) Dip Loan (B) 06/23/99 417,480
273 Schwegmann Giant Supermarket(1) Revolver 01/31/04 191,193
402 Schwegmann Giant Supermarket(1) Revolver C 07/07/99 281,713
17,767 Schwegmann Giant Supermarket(1) Term B 07/30/02 12,436,626
9,287 Star Markets Co., Inc. (Boston area supermarkets) Term B 12/31/02 9,286,651
2,880 Star Markets Co., Inc. Term C 12/31/03 2,880,472
-----------
37,728,726
-----------
HEALTHCARE, EDUCATION AND CHILDCARE: 15.1%
1,108 Alliance Imaging, Inc. (diagnostic services) Term A 12/18/03 1,107,631
5,261 Alliance Imaging, Inc. Term B 08/09/04 5,261,246
5,000 Alliance Imaging, Inc. Term D 06/18/05 5,000,000
9,281 Children's Discovery Centers (daycare and education) Term 08/10/04 9,281,250
8,836 Community Health Systems (hospitals) Term B 12/31/03 8,835,616
8,836 Community Health Systems Term C 12/31/04 8,835,616
6,609 Community Health Systems Term D 12/31/05 6,609,589
6,000 Covenant Care California, Inc. (long-term healthcare
facilities) Term 04/30/01 6,000,000
</TABLE>
See Accompanying Notes to Financial Statements.
14
<PAGE>
Pilgrim Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
- --------- ----------------------------------------------------------- ------ -------- -----------
<S> <C> <C> <C> <C>
HEALTHCARE, EDUCATION AND CHILDCARE (CONTINUED)
$ 4,925 Doshi Diagnostics Imaging Service (radiology and medical
testing) Term 05/15/05 $ 4,925,000
15,000 Fountain View, Inc. (long-term healthcare facilities) Term B 03/31/04 15,000,000
4,412 Genesis Eldercare Acquisition (long term healthcare
facilities) Term 09/30/04 4,411,983
3,731 Healthcare Direct, Inc. (medical device retailer) Term A 08/01/04 3,731,250
4,069 Healthcare Direct, Inc. Term B 08/01/06 4,069,250
1,278 Integrated Health Services (subacute care/home health) Term B 09/30/04 1,278,120
9,813 Integrated Health Services Term C 12/31/05 9,812,500
5,873 Magellan Health Services (managed behavioral care) Term B 02/28/05 5,873,674
5,874 Magellan Health Services Term C 02/28/06 5,873,674
10,549 Mariner Health Group, Inc. (long term care) Term B 03/31/05 10,549,233
9,291 Mariner Health Group, Inc. Term C 03/31/06 9,290,927
4,269 Med Partners Inc. (physician practice management)+ Term A 06/30/99 4,269,357
1,909 Med Partners Inc.+ Term B 06/30/01 1,908,762
5,207 Paracelsus Healthcare Corporation (for profit hospital chain) Term A 05/15/03 5,206,667
7,943 Paracelsus Healthcare Corporation Term B 06/15/04 7,942,857
12,500 The Brown Schools (behaviorial healthcare) Term B 06/30/04 12,500,000
5,000 The Brown Schools Term C 06/30/05 5,000,000
13,287 Vencor, Inc. (long term care facility operator) Term B 05/05/05 12,224,220
5,000 Vision Twenty-One, Inc. (eye care) Term C 06/30/05 5,000,000
------------
179,798,422
------------
HOME AND OFFICE FURNISHINGS, HOUSEWARES AND DURABLE
CONSUMER PRODUCTS: 2.8%
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
724 American Blind and Wallpaper (furniture and
home furnishings) Term 12/29/05 723,840
8,825 Desa International (heaters and fireplaces) Term 11/26/04 8,825,000
15,552 ICON Health & Fitness, Inc. (exercise equipment) Term B 11/14/01 15,551,874
------------
32,600,714
------------
HOTELS, MOTELS, INNS AND GAMING: 3.5%
6,250 Felcor Lodging Trust (hotel equity REIT) Term B 03/31/04 6,250,000
4,599 Patriot American Hospitality (hotels & resorts) Bridge II 06/30/99 4,599,216
5,294 Patriot American Hospitality Bridge III 03/31/00 5,294,118
24,979 Patriot American Hospitality Term B 03/31/03 24,979,161
------------
41,122,495
------------
INSURANCE: 0.7%
4,373 TRG Holdings Corp. (insurance run-off) Term 01/07/03 4,372,500
1,543 Willis Caroon Corporation (insurance brokerage) Term B 11/19/06 1,543,182
926 Willis Caroon Corporation Term C 11/19/07 925,909
926 Willis Caroon Corporation Term D 05/19/08 925,909
------------
7,767,500
------------
</TABLE>
See Accompanying Notes to Financial Statements.
15
<PAGE>
Pilgrim Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
- --------- ----------------------------------------------------------- ------ -------- -----------
<S> <C> <C> <C> <C>
LEISURE, AMUSEMENT, MOTION PICTURES AND
ENTERTAINMENT: 4.5%
$ 3,712 AMFAC Parks and Resorts (park services operator) Term B 09/04/04 $ 3,712,500
3,713 AMFAC Parks and Resorts Term C 09/30/04 3,712,500
9,875 Four Media Co. (film services) Term B 09/10/04 9,875,000
10,000 Metro-Goldwyn-Mayer (Media and broadcast) Term A 03/31/05 10,000,000
4,000 Metro-Goldwyn-Mayer Term B 03/31/06 4,000,000
15,000 Panavision, Inc. (precision film camera systems) Term B 03/10/05 15,000,000
7,157 Worldwide Sports & Recreation Corp. (optics, sports
products) Term B 03/31/01 6,977,665
-----------
53,277,665
-----------
MACHINERY (NONAGRICULTURE, NONCONSTRUCTION,
NONELECTRONIC): 0.6%
8,025 Clearing -- Niagara (metal stamping press manufacturer) Term 10/18/04 7,623,715
-----------
7,623,715
-----------
MINING, STEEL, IRON AND NONPRECIOUS METALS: 2.8%
5,865 Cable Systems International (cable wire manufacturer) Term B 10/04/02 5,865,000
3,269 Centennial Resources (coal mining)(1)(2) Term A 03/31/02 32,692
8,510 Centennial Resources(1)(2) Term B 03/31/04 85,096
9,800 Ispat Sidbec, Inc. (steel producer) Term B 07/17/03 9,800,658
9,801 Ispat Sidbec, Inc. Term C 07/17/04 9,800,658
5,000 National Refractories, Inc. (kiln lining materials) Term C 09/30/99 5,000,000
2,385 P & L Coal Holdings (coal producer) Term B 06/30/06 2,384,615
-----------
32,968,719
-----------
OIL AND GAS: 3.7%
11,402 Cardinal Services, Inc. (marine liftboats and
wireline services) Term B 03/10/05 11,401,710
5,000 Clark Refining and Marketing (petroleum
refining/distribution)+ Term A 11/15/04 4,775,000
13,000 Key Energy Group, Inc. (oil field services) Term B 09/14/04 13,000,000
6,397 Kinder Morgan, Inc. (pipeline operator) Term 05/31/00 6,397,059
1,481 Perf-O-Log (oil field services) Delayed Term 08/11/03 1,481,250
3,940 Perf-O-Log Term B 08/11/03 3,940,000
2,475 Perf-O-Log Term C 08/11/04 2,475,000
-----------
43,470,019
-----------
PERSONAL TRANSPORTATION: 0.8%
9,923 Neoplan USA Corporation (bus manufacturer) Term B 05/29/05 9,922,847
-----------
9,922,847
-----------
PERSONAL, FOOD AND MISCELLANEOUS SERVICES: 6.9%
14,604 Boston Chicken, Inc. (quick service restaurant)(2) Term C 12/09/01 12,268,058
4,824 Brickman Group, Ltd. (landscaping) Term B 12/31/05 4,823,915
8,848 Coinmach Laundry Corp. (laundry) Term B 06/30/05 8,847,720
4,987 Otis Spunkmeyer (food, beverage, tobacco) Term B 12/31/05 4,987,500
1,192 Papa Gino's, Inc. (quick service restaurants) T/L A-2 08/31/04 1,192,053
5,097 Papa Gino's, Inc. Term A 02/19/02 5,097,714
14,765 Papa Gino's, Inc. Term B 02/19/04 14,765,231
9,912 SC International Services (airline catering) Term 06/01/05 9,912,243
6,175 24-Hour Fitness, Inc. (health club operator) Term A 12/31/02 6,175,000
13,500 24-Hour Fitness, Inc. Term B 12/31/04 13,500,000
-----------
81,569,434
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
16
<PAGE>
Pilgrim Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
- --------- ----------------------------------------------------------- ------ -------- -----------
<S> <C> <C> <C> <C>
PERSONAL AND NONDURABLE CONSUMER PRODUCTS
(MANUFACTURING ONLY): 1.7%
$ 393 AM Cosmetics (cosmetics and skin care products) Revolver 06/30/03 $ 392,862
1,186 AM Cosmetics(1) Term A 06/30/03 830,128
8,687 AM Cosmetics(1) Term B 12/31/04 6,081,239
1,889 American Safety Razor (consumer products) Term A 04/30/05 1,889,231
9,029 Medtech Products, Inc. (non-prescription consumer
medications) Term B 10/15/02 9,028,661
1,128 Paint Sundry Brands LLC (paint supply manufacturer) Term B 08/11/05 1,127,549
1,104 Paint Sundry Brands LLC Term C 08/11/06 1,104,306
-----------
20,453,976
-----------
PRINTING AND PUBLISHING: 5.6%
6,650 Bankers Systems, Inc. (banking industry compliance services) Term B 11/01/02 6,650,000
9,771 Crown Paper Co. (paper and pulp manufacturer) Term B 08/22/03 9,770,719
17,875 Lincoln Pulp & Eastern Fine (specialty paper) Term 08/31/04 17,874,996
615 Lincoln Pulp & Eastern Fine Term A 12/31/99 615,200
8,000 Reiman Publications (magazine/book publications) Term B 12/01/05 8,000,000
3,309 Von Hoffman Press, Inc. (textbook manufacturer) Term B 05/29/04 3,308,929
10,745 Von Hoffman Press, Inc. Term C 05/29/05 10,745,536
9,925 Weider Publications, Inc. (magazine publications) Term 09/18/05 9,925,000
-----------
66,890,380
-----------
RETAIL STORES: 5.3%
9,925 Amscan Holdings, Inc. (party goods) Axel (A) 12/31/04 9,924,623
5,000 Central Tractor Farm & Country, Inc. (specialty retailer) Term B 04/30/06 5,000,000
13,797 Murray's Discount Auto Stores (auto parts retailer) Term 06/30/03 13,797,000
198 Murray's Discount Auto Stores Revolver 01/26/06 198,333
9,000 Norwood Promotional Products (licensed products) Term B 03/31/06 9,000,000
4,278 Peebles, Inc. (department store chain) Term A 04/30/01 4,278,169
12,872 Peebles, Inc. Term B 04/30/02 12,871,980
3,978 20th Century Plactics Inc. (album manufacturing) Term B 09/30/05 3,977,778
3,482 20th Century Plactics Inc. Term C 09/30/06 3,482,500
-----------
62,530,383
-----------
TELECOMMUNICATIONS: 12.4%
10,000 American Wireless Corporation (rural cellular phone
operator) Term B 06/04/07 10,000,000
10,000 American Wireless Corporation Term C 12/04/07 10,000,000
10,620 Commnet (PCS services) Term A 09/30/05 10,620,000
1,481 Commnet Term B 09/30/06 1,480,830
1,433 Commnet Term C 03/31/07 1,432,676
4,586 Commnet Term D 09/30/07 4,586,494
8,000 Dobson Communications Corp. (cellular communications) Term C 12/23/07 8,000,000
10,801 Microcell Connexions, Inc. (Canadian PCS) Term B 03/17/06 10,800,788
10,000 Nextel Finance Co. (cellular phones) Lease 03/15/06 10,000,000
7,000 Nextel Finance Co. Term A 03/10/06 7,000,000
1,500 Nextel Finance Co. Term B 09/30/06 1,500,000
</TABLE>
See Accompanying Notes to Financial Statements.
17
<PAGE>
Pilgrim Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
- --------- ------------------------------------------------------- ------ -------- -----------
<S> <C> <C> <C> <C>
TELECOMMUNICATIONS (CONTINUED)
$11,942 Omnipoint Communications, Inc. (PCS services) Term A 02/23/06 $ 11,941,884
3,408 Omnipoint Communications, Inc. Term B 02/23/06 3,408,006
7,977 Omnipoint Communications, Inc. Term C 02/23/06 7,976,908
2,399 Pacific Coin (private pay phone operator) Term A 12/31/02 2,399,078
6,666 Pacific Coin Term B 12/31/04 6,665,625
8,068 Prodelin Holding Corporation (satellite antenna
manufacturer) Term B 05/28/06 8,068,693
10,000 Teletouch Communications (rural paging services) Term B 11/30/04 10,000,000
12,000 TSR Wireless, LLC (paging) Term 06/30/05 12,000,000
10,000 Western PCS Corporation (cellular phones) Term B 07/09/05 10,000,000
--------------
147,880,982
--------------
TEXTILES AND LEATHER: 4.7%
9,266 Accessory Network Group (personal clothing accessories) Term B 08/13/05 9,265,909
5,190 Harriet & Henderson (yarn manufacturer) Term A 06/12/00 5,189,825
500 Harriet & Henderson Term C 01/20/04 499,893
6,650 Humphrey's, Inc. (belts and personal leather goods) Term B 11/15/03 6,650,000
9,920 Polymer Group (manufacturing of woven/unwoven
polyolefin products) Term B 12/05/05 9,920,000
4,687 Scovill Fasteners, Inc. (metal/plastic fasteners) Term A 11/26/03 4,687,500
8,475 Targus Group International, Inc. (computer luggage) Term B 01/05/05 8,474,556
1,427 Targus Group International, Inc. Term C 01/05/05 1,427,294
9,925 Tartan Textile Services (commercial linen supply) Term B 05/13/05 9,925,000
--------------
56,039,977
--------------
UTILITIES: 0.4%
5,000 AES Corporation (power generation, coal fired plants) Term 05/11/02 5,000,000
--------------
5,000,000
--------------
Total Senior Loans -- 140.0% 1,661,224,994
==============
(Cost $1,685,268,300)
OTHER CORPORATE DEBT
FINANCE: 0.8%
10,000 Value Asset Management, Inc. (money management)+ Sr. Sub. Bridge 08/31/05 10,000,000
--------------
10,000,000
--------------
PERSONAL AND NONDURABLE CONSUMER PRODUCTS: 0.2%
2,875 Paint Sundry Brands, LLC (paint brushes & accessories)+ Sub. Note 08/11/08 2,875,000
--------------
2,875,000
--------------
AUTOMOBILE: 0.5%
6,000 Capital Tool & Design, Ltd. (brake backing plates)+ Sub. Note 07/26/03 6,000,000
--------------
6,000,000
--------------
Total Other Corporate Debt -- 1.5% 18,875,000
--------------
(Cost $18,875,000)
</TABLE>
See Accompanying Notes to Financial Statements.
18
<PAGE>
Pilgrim Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
COMMON STOCK AND PREFERRED STOCK
<TABLE>
<CAPTION>
Shares Value
- --------- --------------
<S> <C> <C> <C>
APPAREL PRODUCTS: 0.0%
13,294 @ Butterick Company, Inc. (sewing aids) (R) $ 17,645
--------------
DIVERSIFIED/CONGLOMERATE SERVICES: 0.1%
60,056 @ Staff Leasing, Inc. (employee leasing) 679,383
--------------
HOME AND OFFICE FURNISHINGS: 0.1%
714,000 @ American Blind and Wallpaper (furniture and home furnishing) (R) 714,000
--------------
RESTAURANTS: 0.3%
413,980 @ America's Favorite Chicken Co. -- common
(quick service restaurant chain) (R) 3,645,508
--------------
TEXTILES AND LEATHER: 0.1%
127,306 @ Dan River, Inc. -- common (diversified textiles) (R) 1,169,624
--------------
Total Common Stock and Preferred Stock -- 0.5% 6,226,160
--------------
(Cost $1,251,586)
STOCK PURCHASE WARRANTS AND OTHER SECURITIES
1 @ Autotote Systems, Inc., Warrant representing 48,930 common
shares (designer and manufacturer of wagering equipment),
Expires 10/30/03 (R) 96,688
1 @ Autotote Systems, Inc., Option representing 0.248% common
shares issued and outstanding (R) --
10,000 @ Casden Properties Operation, 10,000 shares of junior Cumulative
Preferred Partnership Units (Asset Management) (R) 250,000
80,634 @ Capital Tool & Design, Warrants representing 80,634 common
shares (brake backing plates) (R) 256,658
19,000 @ Covenant Care, Inc., Warrants representing 19,000 common
shares (long-term healthcare facilities) (R) 177,270
449 @ Murray's Discount, Warrants representing 5% equity stakes on a
fully diluted basis (retail stores) 4
--------------
Total Stock Purchase Warrants and Other Securities -- 0.1% 780,620
(Cost $0) --------------
TOTAL INVESTMENTS (COST $1,705,394,886)(3) 142.0% $1,687,106,774
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS -- NET (42.0) (498,805,247)
----- --------------
NET ASSETS 100.0% $1,188,301,527
===== ==============
</TABLE>
- ----------
+ Non-Collateralized Loans
@ Non-income producing security
(A) Axel describes an amortizing extended term loan with limited call
protection
(B) DIP loan describes debtor in possession loan. (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) Loan is on non-accrual status.
(2) 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.
(3) For Federal income tax purposes, which is the same for financial reporting
purposes, cost of investments is $1,705,394,886 and net unrealized
depreciation consists of the following:
Gross Unrealized Appreciation $ 7,995,722
Gross Unrealized Depreciation (26,283,834)
-------------
Net Unrealized Depreciation $ (18,288,112)
=============
See Accompanying Notes to Financial Statements.
19
<PAGE>
Pilgrim Prime Rate Trust
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES as of May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS:
Cash $ 8,351,869
Investments in securities at value (Cost $1,705,394,886) 1,687,106,774
Receivables:
Interest 14,534,274
Other 91,856
Prepaid expenses 360,572
Prepaid arrangement fees on notes payable 786,124
---------------
Total assets 1,711,231,469
---------------
LIABILITIES:
Notes payable 516,000,000
Deferred arrangement fees on senior loans 2,966,306
Accrued interest payable 2,590,893
Accrued expenses 1,372,743
---------------
Total liabilities 522,929,942
---------------
NET ASSETS (equivalent to $9.10 per share, based on
130,619,196 shares of beneficial interest authorized
and outstanding, no par value) $ 1,188,301,527
===============
Net Assets Consist of:
Paid in capital $ 1,238,845,297
Undistributed net investment income 9,691,786
Accumulated net realized loss on investments (41,947,444)
Net unrealized depreciation of investments (18,288,112)
---------------
Net assets $ 1,188,301,527
===============
See Accompanying Notes to Financial Statements.
20
<PAGE>
Pilgrim Prime Rate Trust
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS for the Three Months Ended May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 33,748,938
Dividends 7,500
Arrangement fees earned 981,234
Other 1,079,110
-------------
Total investment income 35,816,782
-------------
EXPENSES:
Interest 7,120,121
Investment management fees 3,171,422
Administration fees 532,772
Revolving credit facility fees 193,358
Shareholder communications 130,186
Transfer agent and registrar fees 99,560
Custodian fees 98,630
Professional fees 79,607
Recordkeeping and pricing fees 47,876
Miscellaneous expense 25,784
Insurance expense 18,554
Trustees' fees 15,082
-------------
Total expenses 11,532,952
Less: Earnings credits (27,594)
-------------
Net expenses 11,505,358
-------------
Net investment income 24,311,424
-------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS:
Net realized loss on investments (5,531,143)
Change in unrealized depreciation of investments (12,320,431)
-------------
Net loss on investments (17,851,574)
-------------
Net increase in net assets resulting from operations $ 6,459,850
=============
See Accompanying Notes to Financial Statements.
21
<PAGE>
Pilgrim Prime Rate Trust
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Year
Ended Ended
May 31,1999, February 28,
(Unaudited) 1999
--------------- ---------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 24,311,424 $ 97,381,273
Net realized loss on investments (5,531,143) (6,313,758)
Change in unrealized (depreciation)
on investments (12,320,431) (7,547,808)
--------------- ---------------
Net increase in net assets resulting from operations 6,459,850 83,519,707
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income (24,507,569) (99,153,106)
CAPITAL SHARE TRANSACTIONS:
Issuance from dividend reinvestment 3,050,348 14,460,902
Net increase in net assets derived from the sale of
shares in connection with share offerings 733,555 169,335,030
--------------- ---------------
Net increase from capital share transactions 3,783,903 183,795,932
--------------- ---------------
Total increase (decrease) in net assets (14,263,816) 168,162,533
NET ASSETS:
Beginning of year 1,202,565,343 1,034,402,810
--------------- ---------------
End of year (including undistributed net investment
income of $9,691,786 and $9,887,931 respectively) $ 1,188,301,527 $ 1,202,565,343
=============== ===============
SUMMARY OF CAPITAL SHARE TRANSACTIONS:
Shares issued from dividend reinvestment 333,986 1,537,475
Shares sold in connection with share offerings 79,059 17,904,188
--------------- ---------------
Net increase in shares outstanding 413,045 19,441,663
=============== ===============
</TABLE>
See Accompanying Notes to Financial Statements.
22
<PAGE>
Pilgrim Prime Rate Trust
- --------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS for the Three Months Ended May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 35,523,019
Dividends received 7,500
Arrangement fees received 866,530
Commitment fees received 30,439
Other income received 1,081,101
Interest paid (7,054,102)
Facility fees paid (638,088)
Other operating expenses paid (4,045,523)
Purchases of portfolio securities (297,131,010)
Proceeds from disposition of portfolio securities 318,890,727
--------------
Net cash provided by operating activities 47,530,593
--------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (21,912,279)
Proceeds from share offerings 733,555
Loan advance (18,000,000)
--------------
Net cash used for financing activities (39,178,724)
--------------
Net change in cash 8,351,869
Cash at beginning of year --
--------------
Cash at end of year $ 8,351,869
==============
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 $ 6,459,850
--------------
Adjustments to reconcile net increase in net assets resulting
from operations to net cash provided by operating activities:
Decrease in investments in securities 39,179,284
Decrease in dividends and interest receivable 1,774,081
Decrease in other assets 8,491
Increase in prepaid arrangement fees on notes payable (444,872)
Decrease in prepaid expenses 456,088
Decrease in deferred arrangement fees on senior loans (114,704)
Increase in accrued interest payable 66,019
Increase in accrued expenses 146,356
--------------
Total adjustments 41,070,743
--------------
Net cash provided by operating activities $ 47,530,593
==============
See Accompanying Notes to Financial Statements.
23
<PAGE>
Pilgrim Prime Rate Trust
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months
Ended Years Ended February 28 or February 29,
May 31, 1999 --------------------------------------------
(Unaudited) 1999 (7) 1998 (7) 1997(7)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period $ 9.24 $ 9.34 $ 9.45 $ 9.61
Net investment income 0.19 0.79 0.87 0.82
Net realized and unrealized gain
(loss) on investments (0.14) (0.10) (0.13) (0.02)
----------- ----------- ----------- -----------
Increase in net asset value from
investment operations 0.05 0.69 0.74 0.80
Distributions from net investment
income (0.20) (0.82) (0.85) (0.82)
Increase in net asset value from
share offerings 0.01 0.03 -- --
Reduction in net asset value from
rights offering -- -- -- (0.14)
Increase in net asset value from
repurchase of capital stock -- -- -- --
----------- ----------- ----------- -----------
Net asset value, end of period $ 9.10 $ 9.24 $ 9.34 $ 9.45
=========== =========== =========== ===========
Closing market price at end of
period $ 9.50 $ 9.56 $ 10.31 $ 10.00
TOTAL RETURN
Total investment return at closing
market price(3) 1.40% 1.11% 12.70% 15.04%(5)
Total investment return at net
asset value(4) 0.52% 7.86% 8.01% 8.06%(5)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) $ 1,188,302 $ 1,202,565 $ 1,034,403 $ 1,031,089
Average borrowings (000's) $ 520,109 $ 346,110 $ 131,773 $ --
Ratios to average net assets plus
borrowings:
Expenses (before interest and
other fees related to revolving
credit facility) 0.97%(1)(8) 1.05%(8) 1.04% 1.13%
Expenses 2.66%(1)(8) 2.86%(8) 2.65% 1.92%
Net investment income 5.63%(1) 6.00% 6.91% 7.59%
Ratios to average net assets:
Expenses (before interest and
other fees related to revolving
credit facility) 1.39%(1)(8) 1.50%(8) 1.39% 1.29%
Expenses 3.82%(1)(8) 4.10%(8) 3.54% 2.20%
Net investment income 8.08%(1) 8.60% 9.23% 8.67%
Portfolio turnover rate 37% 68% 90% 82%
Shares outstanding at end of
period (000's) 130,619 130,206 110,764 109,140
<CAPTION>
Years Ended February 28 or February 29,
--------------------------------------------
1996(6) 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period $ 9.66 $ 10.02 $ 10.05
Net investment income 0.89 0.74 0.60
Net realized and unrealized gain
(loss) on investments (0.08) 0.07 (0.05)
----------- ----------- -----------
Increase in net asset value from
investment operations 0.81 0.81 0.55
Distributions from net investment
income (0.86) (0.73) (0.60)
Increase in net asset value from
share offerings -- -- --
Reduction in net asset value from
rights offering -- (0.44) --
Increase in net asset value from
repurchase of capital stock -- -- 0.02
----------- ----------- -----------
Net asset value, end of period $ 9.61 $ 9.66 $ 10.02
=========== =========== ===========
Closing market price at end of
period $ 9.50 $ 8.75 $ 9.25
TOTAL RETURN
Total investment return at closing
market price(3) 19.19% 3.27%(5) 8.06%
Total investment return at net
asset value(4) 9.21% 5.24%(5) 6.28%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) $ 862,938 $ 867,083 $719,979
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 1.23% 1.30% 1.31%
Net investment income 9.23% 7.59% 6.04%
Portfolio turnover rate 88% 108% 87%
Shares outstanding at end of
period (000's) 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 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>
$ 9.96 $ 9.97 $ 10.00 $ 10.00 $ 10.00
0.60 0.76 0.98 1.06 0.72
0.01 (0.02) (0.05) -- --
- ----------- ----------- ----------- ----------- -----------
0.61 0.74 0.93 1.06 0.72
(0.57) (0.75) (0.96) (1.06) (0.72)
-- -- -- -- --
-- -- -- -- --
0.05 -- -- -- --
- ----------- ----------- ----------- ----------- -----------
$ 10.05 $ 9.96 $ 9.97 $ 10.00 $ 10.00
=========== =========== =========== =========== ===========
$ 9.13 -- -- -- --
10.89% -- -- -- --
7.29% 7.71% 9.74% 11.13% 7.35%
$ 738,810 $ 874,104 $ 1,158,224 $ 1,036,470 $ 252,998
$ -- $ -- $ -- $ -- $ --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
1.42% 1.42%(2) 1.38% 1.46%(2) 1.18%(1)(2)
5.88% 7.62%(2) 9.71% 10.32%(2) 9.68%(1)(2)
81% 53% 55% 100% 49%(1)
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 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.
(8) Calculated on total expenses before impact of earnings credits.
See Accompanying Notes to Financial Statements.
25
<PAGE>
Pilgrim Prime Rate Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
Pilgrim Prime Rate Trust (the "Trust", prior to November 16, 1998 Pilgrim
America 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. Senior Loan and Other Security Valuation. Senior loans are valued at fair
value in the absence of readily ascertainable market values. Fair value is
determined by Pilgrim 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, 1999, the Trust had capital loss carryforwards for federal
income tax purposes of approximately $30,223,359 which are scheduled to
expire through February 28, 2007.
The Board of Trustees intends to offset any future net capital gains with
the capital loss carryforwards until each carryforward has been fully
utilized or expires.
C. Security Transactions and Revenue Recognition. Security transactions are
accounted for on trade date (date the order to buy or sell is executed).
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. 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 Prime Rate Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of May 31, 1999 (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), DST Systems,
Inc., the Plan Agent, purchases, from time to time, shares of beneficial
interest of the Trust on the open market to satisfy dividend reinvestments.
Such shares are purchased only when the closing sale or bid price plus
commission is less than the net asset value per share of the stock on the
valuation date. If the market price plus commissions is equal to or exceeds
the net asset value, new shares are 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, liabilities, revenues,
expenses and contingencies to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results
could differ from these estimates.
G. Share Offerings. Beginning May 31, 1999, the Trust began issuing shares
under various 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, 1999, the cost of purchases and the proceeds
from principal repayment and sales of investments, excluding short-term notes,
totaled $297,131,010 and $318,890,727, respectively. At May 31, 1999, the Trust
held senior loans valued at $1,661,224,994 representing 98.5% 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
27
<PAGE>
Pilgrim Prime Rate Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
designated 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>
American Blind and Wallpaper -- Common 01/12/99 --
America's Favorite Chicken Co. -- Common 11/05/92 $ 1
Autotote Systems, Inc. -- Option 11/11/92 --
Autotote Systems, Inc. -- Warrant 11/11/92 --
Butterick Company, Inc. -- Common 05/01/97 --
Capital Tool & Design -- Warrants 07/26/96 --
Casden Properties Operation -- Preferred Partnership Units 12/31/98 --
Covenant Care, Inc. -- Warrants 12/22/95 --
Murray's Discount -- Warrants 02/16/99 --
-----
Total restricted securities excluding senior loans (market value
of $5,157,773 was 0.43% of net assets at May 31, 1999) $ 1
=====
</TABLE>
NOTE 3 -- MANAGEMENT AND ADMINISTRATIVE SERVICES AGREEMENT
The Trust has entered into an Investment Management Agreement with Pilgrim
Investments, Inc. (the "Manager") a wholly-owned subsidiary of Pilgrim Group,
Inc. ("PG"), 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 0.80% of the Trust's average daily net
assets plus borrowings. Prior to August 6, 1998, the Investment Management
Agreement compensated the Manager 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 million to $800 million; and
0.65% of average daily net assets plus borrowings in excess of $800 million.
The Manager has reduced 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.
The Trust has also entered into an Administration Agreement with PG 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 five year revolving credit
agreement, collateralized by assets of the Trust, to borrow up to $650 million
from a syndicate of major financial institutions maturing July 15, 2003.
Borrowing rates under these agreements are based on a fixed spread over LIBOR,
the federal funds rate, or a commercial paper based rate. Prepaid arrangement
fees for any unborrowed amounts are amortized over the term of the agreements.
The amount of borrowings outstanding at May 31, 1999, was $516 million, at a
weighted average interest rate of 5.3%, which represented 30.3% of net assets
plus borrowings. Average borrowings for the three months ended May 31, 1999 were
$520,108,696 and the average annualized interest rate was 5.9%.
28
<PAGE>
Pilgrim Prime Rate Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
As of May 31, 1999, the Trust had unfunded loan commitments pursuant to the
terms of the following loan agreements:
American Safety $ 110,769
Capstar Radio Broadcasting 1,084,211
Edwards Baking Co. 200,000
Gaylord Container Corp. 7,672,906
Genesis Eldercare Acquisition 88,017
Huntsman Corporation 2,077,424
Liberman Broadcasting, Inc. 212,400
Loyalty Management Group 1,785,714
Mafco Finance Co. 5,561,799
Meditrust Corp. 3,879,766
Murray's Discount Auto Stores 1,801,667
PaPa Gino's Inc. 1,192,053
Pathmark Stores Inc. 3,521,840
Schwegmann Giant Super Market 1,263,834
-----------
$30,452,400
===========
NOTE 5 -- RIGHTS AND OTHER OFFERINGS
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 $6,972,203
were charged against the offering proceeds.
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.
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.
As of May 31, 1999, share offerings pursuant to shelf registrations were drawn
down as follows:
Registration Shares Shares
Date Registered Remaining
------------ ---------- ----------
6/11/98 15,000,000 --
6/19/98 10,000,000 9,730,800
9/15/98 25,000,000 22,269,045
3/04/99 5,000,000 5,000,000
During the three months ended May 31, 1999, expenses related to the offerings,
in the amount of $800,373, were charged against the proceeds received upon
issuance of the shares.
NOTE 6 -- CUSTODIAL EARNINGS CREDITS
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. For the three months ended May 31,
1999, the Trust received $27,594 in earnings credits from IFTC.
NOTE 7 -- AFFILIATED TRANSACTIONS
During the three months ended May 31, 1999, 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 sold loans
were $16,009,500 and $16,000,000, respectively, excluding any benefit to the
Trust from the recognition of deferred arrangement fees.
29
<PAGE>
Pilgrim Prime Rate Trust
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
NOTE 8 -- SUBORDINATED AND UNCOLLATERALIZED LOANS
The Trust may acquire a subordinated loan only if, at the time of acquisition,
it acquires or holds a Senior Loan from the same borrower. The primary risk
arising from a holder's subordination is the potential loss in the event of
default by the issuer of the loans. The trust may invest up to 5% of its total
assets, measured at the time of investment, in subordinated and uncollateralized
loans. As of May 31, 1999, the Trust held 2.6% of its total assets in
subordinated and uncollateralized loans.
NOTE 9 -- SUBSEQUENT EVENTS
Subsequent to May 31, 1999, the Trust paid the following dividends from net
investment income:
Per Share Amount Declaration Date Record Date Payable Date
---------------- ---------------- ----------- ------------
$0.066 05/28/99 06/10/99 06/22/99
$0.064 06/30/99 07/12/99 07/22/99
Management's Additional Operating Information
APPROVAL OF CHANGES IN INVESTMENT POLICIES
At a Special Meeting of Trust Shareholders, held August 6, 1998, Shareholders
approved changes in the Trust's fundamental investment policies which make
available certain additional investment opportunities to the Trust, including
(i) investing in loans in any form of business entity, as long as the loans
otherwise meet the Trust's requirements regarding the quality of loans in which
it may invest; (ii) the treatment of lease participations as Senior Loans which
would constitute part of the 80% of the Trust's assets normally invested in
Senior Loans; (iii) investing in all types of hybrid loans that meet credit
standards established by the Investment Manager constituting part of the 20% of
the Trust's assets that may be invested in Other Investments; (iv) the ability
to invest up to 5% of its total assets in both subordinated and unsecured loans
which would constitute part of the 20% of the Trust's assets that may be
invested in Other Investments.
Additionally, another policy change approved by the Board of Trustees of the
Trust, which does not require shareholder approval, permits the Trust to accept
guarantees and expanded forms of intangible assets as collateral, including
copyrights, patent rights, franchise value, and trademarks. Another policy
change approved by the Board, that does not require shareholder approval,
provides that 80% of the Trust's gross assets, as opposed to 80% of its net
assets, may normally be invested in Senior Loans.
The Trust's Manager considered the evolving nature of the syndicated loan market
and the potential benefits to the Trust and its shareholders of revising the
restriction to permit the Trust to invest in loans other than Senior Loans and
the increase in the number of attractive investment opportunities available to
the Trust due to the change.
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
<PAGE>
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31
<PAGE>
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32
<PAGE>
Pilgrim Prime Rate Trust
- --------------------------------------------------------------------------------
FUND ADVISORS AND AGENTS
- --------------------------------------------------------------------------------
INVESTMENT MANAGER INSTITUTIONAL INVESTORS AND ANALYSTS
Pilgrim Investments, Inc. Call Pilgrim Prime Rate Trust
Two Renaissance Square 1-800-336-3436, Extension 8256
40 North Central Avenue
Suite 1200
Phoenix, Arizona 85004-4424
SHAREHOLDER SERVICING AGENT TRANSFER AGENT
Pilgrim Group, Inc. DST Systems, Inc.
Two Renaissance Square P.O. Box 419368
40 North Central Avenue Kansas City, Missouri 64141
Suite 1200
Phoenix, Arizona 85004-4424
1-800-992-0180
INDEPENDENT AUDITORS CUSTODIAN
KPMG LLP Investors Fiduciary Trust Company
725 South Figueroa Street 801 Pennsylvania
Los Angeles, California 90017 Kansas City, Missouri 64105
WRITTEN REQUESTS
Please mail all account inquiries and other comments to:
Pilgrim Prime Rate Trust Account Services
c/o Pilgrim 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 [LOGO]
---------------------------
FUNDS FOR SERIOUS INVESTORS
U.S. EQUITY FUNDS
Pilgrim MagnaCap Fund
Pilgrim LargeCap Leaders Fund
Pilgrim LargeCap Growth Fund
Pilgrim MidCap Value Fund
Pilgrim MidCap Growth Fund
Pilgrim SmallCap Growth Fund
Pilgrim Bank and Thrift Fund
INTERNATIONAL EQUITY FUNDS
Pilgrim Worldwide Growth Fund
Pilgrim International Core Growth Fund
Pilgrim International SmallCap Growth Fund
Pilgrim Emerging Countries Fund
Pilgrim Asia-Pacific Equity Fund
INCOME FUNDS
Pilgrim Government Securities Income Fund
Pilgrim High Quality Bond Fund
Pilgrim High Yield Fund
Pilgrim Hight Yield II Fund
OTHER FUNDS
Pilgrim Balanced Fund
Pilgrim Convertible Fund
- --------------------------------------------------------------------------------
Q1 Prospectus containing more complete information regarding the funds,
including charges and expenses, may be obtained by calling Pilgrim
Securities, Inc., Distributor at 1-800-334-3444. Please read the
prospectuses carefully before you invest or send money.
PRT1Q0599-072999
