SEC File No. 333-61831
SEC File No. 333-68239
PILGRIM PRIME RATE TRUST
Supplement dated January 31, 2000 to the Prospectus and
Statement of Additional Information dated June 18, 1999
The following discussion of "Net Asset Value" is inserted into the Prospectus
directly after the discussion of "Use of Proceeds" and replaces the discussion
of "Net Asset Value" in the Statement of Additional Information.
NET ASSET VALUE
The NAV per share of the Trust is determined once daily at 4:00 p.m. on each day
the NYSE is open. NAV per share is determined by dividing the value of the
Trust's portfolio securities plus all cash and other assets (including dividends
accrued but not collected) less all liabilities (including accrued expenses but
excluding capital and surplus) by the number of shares outstanding. In
accordance with generally accepted accounting principles for investment
companies, dividend income is accrued on the ex-dividend date. The NAV per share
is made available for publication.
Senior Loans that are deemed to be liquid under standards approved by the
Trust's Board of Trustees are normally valued on the basis of market quotations
obtained from a pricing service or other sources believed to be reliable. They
are valued at the mean between bid and asked quotations. Other Senior Loans are
valued at fair value as determined in good faith under procedures established by
the Trust's Board of Trustees. Fair value is determined by Pilgrim Investments
and monitored by the Trust's Board of Trustees through its Valuation Committee.
In valuing a loan, consideration is given to several factors, which may include,
among others, the following: (i) the characteristics of and fundamental
analytical data relating to the Senior Loan, including the cost, size, current
interest rate, period until the next interest rate reset, maturity and base
lending rate of the Senior Loan, the terms and conditions of the Senior Loan and
any related agreements, and the position of the Senior Loan in the borrower's
debt structure; (ii) the nature, adequacy and value of the collateral, including
the Trust's rights, remedies and interests with respect to the collateral; (iii)
the creditworthiness of the borrower and the cash flow coverage of outstanding
principal and interest, based on an evaluation of its financial condition,
financial statements and information about the borrower's business, cash flows,
capital structure and future prospects; (iv) information relating to the market
for the Senior Loan, including price quotations for and trading in the Senior
Loan and interests in similar senior loans and the market environment and
investor attitudes towards the senior loan and interests in similar senior
loans; (v) the reputation and financial condition of the agent of the Senior
Loan and any intermediate participants in the Senior Loan; (vi) the borrower's
management; and (vii) the general economic and market conditions affecting the
fair value of the Senior Loan. Senior Loans for which the period for interest
rate resets is considered sufficiently short so that the interest rate risk is
considered minimal may, in the absence of known credit impairment, be valued at
cost or par.
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.
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE
