SEC File No. 333-61831
SEC File No. 333-68239
PILGRIM PRIME RATE TRUST
Supplement dated December 14, 2000
to
Prospectus dated June 30, 2000
ISSUANCE OF $450 MILLION OF AUCTION RATE CUMULATIVE PREFERRED SHARES
In November 2000, Pilgrim Prime Rate Trust (the "Trust") issued 3,600 shares
each of Series M, T, W, Th and F Auction Rate Cumulative Preferred Shares, $0.01
par value, $25,000 liquidation preference per share, for a total issuance of
$450 million (the "Preferred Shares"). Holders of Preferred Shares receive
dividends at the end of each dividend period. In general, a dividend period for
a series of the Preferred Shares will be seven days in length. The auction
agent, Bankers Trust Company, will determine the dividend rate for a particular
dividend period by an auction conducted on the business day immediately prior to
the start of that dividend period.
All of the Preferred Shares have been rated "aaa" by Moody's Investors Service,
Inc. and "AAA" by Standard and Poor's. In order to obtain these ratings, the
Trust has agreed to maintain specific asset coverage requirements as well as
certain diversification requirements on the Trust's overall portfolio. These
diversification requirements are more restrictive than the diversification
requirements which otherwise apply to the Trust, and they will apply to the
Trust as long as Moody's or S&P, or both, is rating the Preferred Shares.
The Preferred Shares are not listed on an exchange. Investors and potential
investors in the Preferred Shares may participate in auctions for the Preferred
Shares through broker-dealers that have entered into an agreement with the
auction agent and the Trust.
The Trust used all of the net proceeds of the Preferred Shares offering to pay
down existing indebtedness. However, the Trust is currently reborrowing and may
continue to reborrow in the future to increase its use of leverage, which will
be consistent with the limitations imposed by the Investment Company Act of
1940.
Holders of the Preferred Shares are entitled to receive dividends before common
shareholders, and are entitled to receive the liquidation value of their
Preferred Shares before any distributions are made to common shareholders should
the Trust ever be dissolved. Holders of the Preferred Shares also have the right
to elect as a class at least two trustees and to vote separately as a class on
certain other matters.
The Trust's prospectus and statement of additional information for the Preferred
Shares as well as other Trust-related materials are available at the Securities
and Exchange Commission's internet web site (http://www.sec.gov).
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE
