Pilgrim Prime Rate Trust First Quarter Report
Dear Shareholder:
Pilgrim Prime Rate Trust enjoyed another good quarter. Amid signs of a slowing
economy, short term interest rates remained relatively stable, with the prime
rate remaining at 9% throughout the quarter, and one-month LIBOR dropping
slightly from 6.125% on February 28, 1995 to 6.0625% on May 31, 1995. In this
stable rate environment, the Trust's monthly dividend yield approximated the 9%
prime rate every month. Based on dividends declared during the 92-day quarter of
$0.2195, and the $9.67 net asset value (NAV) as of May 31, the dividend yield
for the quarter was 9.01% on an annualized basis.
FIRST QUARTER HIGHLIGHTS
During the quarter ended May 31, 1995, Pilgrim Prime Rate Trust:
* Fully invested $141,300,813 of proceeds from the successful completion
of a rights offering for 17,958,766 shares of beneficial interest. The
supply of new loans was relatively strong during the quarter, enabling
the Trust to add 12 new loans to the portfolio, including Paging
Network Inc., Dominick's Finer Foods, and Mary Kay Cosmetics.
* Increased overall diversification of the portfolio. The total number of
loans in the portfolio increased from 77 at February 28, 1995, to 89 at
May 31, 1995. Moreover, the five largest loans at May 31 represented
18.5% of total net assets, down from 22.1% at February 28. We increased
the diversification because we believe it is prudent to do so in
preparation for any significant near-term slowing of the economy.
* Maintained a relatively stable NAV per share. During the quarter, the
NAV rose 1(cent) because of minor valuation adjustments in several
loans. We successfully completed a restructuring of the Rowe
International credit, and moved much closer toward final resolution of
the KDI Corp. restructuring. After quarter-end, however, as was
reported in the July 3rd regular monthly public press release, the
Trust's NAV declined by 2(cent) primarily due to a decline in the value
of the Trust's loan to Bradlees Inc. as the borrower unexpectedly filed
for bankruptcy. Most of the position has already been sold to minimize
further material exposure. Subsequently, the Trust has recorded
approximately 1(cent) of appreciation in other holdings.
* Continued to rank number one among the five funds in the "Loan
Participation Fund" category according to Lipper Analytical Services,
Inc. for the 1, 3, and 5-years ended May 31, 1995.*
OUTLOOK
In the face of uncertainty over the near-term economic and interest rate
environments, we believe the Trust has been appropriately positioned. Indeed,
while the Federal Reserve ("Fed") recently pushed the federal funds rate down
1/4% in early June due to a reduction of inflationary pressures, the Fed's
smaller than expected move indicated a continuing possibility of steady, albeit
slow economic growth and even reignited inflation later in the year. Such an
environment could continue to be beneficial to the Trust's performance. While
past performance is no assurance of future results, the Trust has consistently
maintained a 2 to 3 percentage point yield advantage over most other short-term
investment alternatives in all types of economic environments since its 1988
inception.
We appreciate your continued support and confidence, and welcome your questions
and comments.
Sincerely,
/s/ Michael P. McAdams
Michael P. McAdams
Portfolio Manager
July 28, 1995
<PAGE>
Pilgrim Prime Rate Trust First Quarter Report
Pilgrim Prime Rate is a closed-end management investment company listed on the
New York Stock Exchange (Symbol: PPR) that seeks to provide high current income,
consistent with preservation of capital. The Trust seeks to achieve these
objectives by investing in a portfolio of senior, collateralized corporate
loans, whose interest rates float with the prime lending rate as posted by major
banks of LIBOR (London Inter-Bank Offered Rate).
*Source: Lipper Analytical Services, Inc. Lipper ranked Pilgrim Prime Rate Trust
for total return, without deducting sales charges, and assuming reinvestment of
all dividends and capital gains distributions.
Performance data represents past performance and is no guarantee of future
results. Investment return will fluctuate . Shares, when sold, may be worth more
or less than their original cost.
For a free prospectus on any of the Pilgrim America open-end funds, which
contains more complete information, including all fees, charges and expenses,
call 1-800-331-1080. Be sure to read the prospectus carefully before investing
or sending money. Pilgrim America open-end funds are offered through Pilgrim
America Securities, Inc.
TOLL-FREE SHAREHOLDER INFORMATION
Call us from 9:00 a.m. to 7:00 p.m. Eastern time on any business day for Account
Information or special account services at 1- 800-331-1080.
WRITTEN REQUESTS
Please mail all account inquiries and other comments to:
Pilgrim America Group, Inc.
Two Renaissance Square
40 North Central Avenue, Suite 1200
Phoenix, AZ 85004-4424
Attn: Pilgrim Prime Rate Trust Account Services
DIVIDEND REINVESTMENT PLAN
Pilgrim Prime Rate Trust shareholders may receive dividends monthly in cash or
participate in the dividend reinvestment plan providing for purchase of
additional trust shares at reduced brokerage commissions. An additional cash
purchase plan is also available.
STOCK DATA
The Trust's Shares are traded on the New York Stock Exchange (symbol: PPR). The
Trust's NAV and market price are tracked weekly under the "Closed-End Funds"
featured in Barron's, the New York Times, Wall Street Journal and many other
regional and national publications.
ANNUAL MEETING
Annual shareholder meetings are held at the executives offices of Pilgrim
America Group, Inc. As of this date the next shareholder meeting has not been
scheduled.
KEY FINANCIAL DATES - Remaining Calendar 1995 Dividends:
Declaration date Ex-date Payable date
- --------------------------------------------------------------------------------
July 31 August 9 August 25
August 31 September 7 September 25
September 29 October 5 October 23
October 31 November 8 November 27
November 30 December 7 December 26
December 19 December 27 January 15, 1996
Please call Pilgrim America Shareholder Services Department for calendar year
1996 dividend dates.
Record date will be ten business days after each Ex-date.
INSTITUTIONAL INVESTOR CONTACTS
Institutional investor and analyst comments should be directed to:
Pilgrim Prime Rate Trust
Investor Relations Department
c/o Pilgrim America Group, Inc. or
by calling 1-602-417-8256
<PAGE>
Portfolio of Investments (Unaudited)
May 31, 1995
<TABLE>
<CAPTION>
SENIOR COLLATERALIZED LOAN PARTICIPATIONS: 95.9%*
Principal
Amount Value
- ------ -----
(Dollar weighted portfolio interest reset period is 44 days.)
<S> <C> <C>
Aerospace Products & Services: 6.0%
$ 15,000,000 Aviall, Inc. (aircraft engine maintenance) November 2000 $ 15,000,000
8,000,000 Dallas Airmotive, Inc. (aircraft engine maintenance) March 2001 8,000,000
6,005,687 Grimes Aerospace Corp. (aerospace products) December 1999 5,405,119
5,000,000 Gulfstream Delaware Corp. (aircraft manufacturer) March 1998 5,000,000
18,798,370 VSI Corp. (aerospace products) March 1997 18,798,370
------------
52,203,489
------------
Apparel & Textiles: 1.9%
1,210,937 Butterick Pattern Co. (sewing aids) May 1996 1,210,937
15,000,000 Chicopee, Inc. (specialty fabrics) March 2003 15,000,000
------------
16,210,937
------------
Communications Services: 2.6%
22,500,000 Paging Network Inc. (paging services) March 2002 22,500,000
------------
Construction Products: 2.8%
2,207,740 Essex Industries, Inc. (locks and hardware manufacturer) August 1995 2,207,740
20,000,000 MTF Acquisition Corp. (paint and coating products) November 2002 20,000,000
2,484,677 United Building Materials, Inc. (stone and concrete products) March 1996 2,484,677
------------
24,692,417
------------
Container Products: 3.1%
9,756,800 Silgan Corp. (metal and plastic containers) September 1996 9,756,800
7,218,750 Portola Packaging, Inc. (plastic bottle cap manufacturer) July 2001 7,218,750
10,000,000 Reid Plastics Inc. (plastic bottle manufacturer) January 2002 10,000,000
------------
26,975,550
------------
Diversified Manufacturing: 8.2%
10,000,000 Blackstone Capital-Wasserstein/C & A (shareholders of Collins & Aikman Inc. January 1997 10,000,000
8,580,400 Desa International, Inc. (heating/fastening systems) November 2000 8,580,400
1,750,049@(1) KDI Corp. (defense and leisure products) March 1998 1,050,030
16,816,887 Pullman Company (transportation, industrial products) September 2000 16,494,216
7,650,000 Rowe International, Inc. (vending machine, jukebox and currency changer manufacturer)
June 2000 7,281,250
12,430,556 Spalding & Evenflo Companies, Inc. (sporting goods and juvenile products) October 2002 12,430,556
14,992,857 UCAR Global Enterprises, Inc. (manufacturer of graphite electrodes) September 2003 14,992,857
------------
70,829,309
------------
Electronic Equipment: 0.7%
1,475,695 Anacomp, Inc. (micrographics equipment, supplies and services) April 1996 1,424,046
4,975,000 Tracor Inc. (defense and electronic products) February 2001 4,975,000
------------
6,399,046
------------
Food/Beverage Products and Services: 4.4%
7,375,000 Bumble Bee Seafoods, Inc. (canned seafood) December 1996 7,375,000
11,000,000 Specialty Foods Corp. (cheeses, breads, cookies, precooked meat products) August 1999 11,000,000
2,263,243 Tom's Foods, Inc. (snack foods) December 1998 2,263,243
17,092,748 U.S. Foodservice, Inc. (food wholesaler) November 2000 17,092,748
------------
37,730,991
------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
- ------ -----
<S> <C> <C>
Food Stores: 2.7%
$ 18,360,656 Dominick's Finer Foods, Inc. (Chicago supermarkets) September 2003 $ 18,360,656
1,000,000 New Almac's Inc. (formerly Almac's, Rhode Island supermarkets) December 2001 1,000,000
3,706,310 Mayfair Supermarkets, Inc. (New Jersey supermarkets) February 1998 3,706,310
------------
23,066,06
------------
General Merchandise Stores: 5.8%
5,000,000 Federated Department Store (national department store) March 2000 5,000,000
20,000,000 Liberty House, Inc. (Hawaiian department store chain) June 2002 20,000,000
25,771,225 Saks and Company (general merchandise retailer) June 2000 25,771,225
------------
50,771,225
------------
Health Care Services: 1.7%
10,000,000 Covenant Care, Inc. (operator of long-term health care facilities) June 1999 10,000,000
4,639,753 Media/PRN Life Support Inc. (hospital equipment leasing) September 1998 4,639,753
------------
14,639,753
Health & Beauty Products: 6.8%
7,500,000 Deknatel Inc. (surgical products manufacturer) April 2001 7,500,000
17,500,000 ICON Health & Fitness Co. (exercise equipment) November 2001 17,500,000
5,000,000 IVAC Corporation (manufacturer of intravenous and vital sign measurement instruments)
December 1999 5,000,000
10,000,000 Mary Kay Cosmetics, Inc. (client sale cosmetics) December 2002 10,000,000
10,000,000 Revlon Inc. (cosmetics manufacturer) June 1997 10,000,000
9,423,067 Thermoscan Inc. (electronic thermometers) October 1999 9,423,067
------------
59,423,067
------------
Industrial Equipment: 6.0%
4,654,932 Graphic Controls Corp. (industrial and medical charts) September 1999 4,654,932
4,823,896 Intermetro Industries Inc. (storage and material transport products) December 2002 4,823,896
7,216,625 Jackson Products, Inc. (industrial and highway safety products manufacturer) March 2001 7,216,625
10,000,000 National Propane Inc. (propane distribution) June 2002 10,000,000
5,800,000 National Refractories Inc. (kiln lining materials) September 1999 5,800,000
2,578,374 Newflo Corp. (pump & valve manufacturer) February 1998 2,578,374
4,150,915 Sperry Marine, Inc. (manufacturer of navigation products) November 2000 4,150,915
12,704,018 Waters Corporation (testing equipment) May 2003 12,704,018
------------
51,928,760
------------
Industrial Services: 6.8%
7,000,000 Bankers Systems, Inc. (compliance services to banking industry) November 2002 7,000,000
10,000,000 Clean Harbors (industrial cleaning) May 2000 10,000,000
7,500,000 Nimbus Manufacturing Inc. (compact disc manufacturer) March 2002 7,500,000
2,755,171 Norcal Waste Systems, Inc. (landfill & waste services) September 1998 2,534,760
15,000,000 Primeco, Inc. (equipment leasing) December 2000 15,000,000
7,750,000 Professional Service Inc. (engineering services) April 2002 7,750,000
9,580,000 Staff Capital, L.P. (payroll and human resources services) December 1999 9,580,000
------------
59,364,760
------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
- ------ -----
<S> <C> <C>
Media/Entertainment: 8.1%
$ 7,500,000 Classic Cable Corp. (cable TV system) March 2004 $ 7,500,000
9,983,333 Phoenix Associates Inc. (cable television company) December 1999 9,983,333
4,825,488 Renaissance Communications Corp. (independent television stations) December 1998 4,825,488
10,917,500 Silver King Communications Inc. (independent television stations) July 2002 10,917,500
7,000,000 U.S. Radio Holdings (independent radio stations) September 2003 7,000,000
30,000,000 Ziff-Davis Corporation (electronics trade magazine publishing) December 2002 30,000,000
------------
70,226,321
------------
Metal Products: 3.1%
3,049,070 Carolina Steel Co. (bridge & highway products) October 1999 3,049,070
3,224,436 The Doe Run Company (lead smelter) March 1997 3,224,436
16,521,739 Titanium Metals, Inc. (metal smelter) April 1996 16,521,739
4,500,000 Triangle Wire and Cable Inc. (metal products fabricator) April 1997 4,500,000
------------
27,295,245
------------
Miscellaneous Companies: 2.4%
6,000,000 Explosive Technologies Inc. (industrial explosives manufacturer) February 1998 6,000,000
2,500,000 Liggett Group Inc. (tobacco products) March 1997 2,500,000
12,000,000 Worldwide Sports and Recreation Corp. (optics, airguns & swim products) March 2001 12,000,000
------------
20,500,000
------------
Paper Products: 7.5%
10,000,000 Fort Howard Corp. (tissue manufacturer) December 1996 10,000,000
38,300,000 Jefferson Smurfit Corporation/Container Corporation of America (paper and packaging
materials) April 2002 38,300,000
10,000,000 SD Warren Co. (diversified paper manufacturer) December 2002 10,000,000
7,198,492 Stone Container Corp. (diversified paper products) April 2000 7,198,492
------------
65,498,492
------------
Publishing and Information Services: 0.6%
5,000,000 Pierce Leahy Corp. (document storage) July 2000 19,210,524
------------
Restaurants: 4.6%
19,210,524 America's Favorite Chicken Co. (quick service restaurant chain) November 1998 19,210,524
9,118,578 Domino's Pizza, Inc. (pizza delivery chain) July 2000 9,118,578
10,649,484 Friendly's Ice Cream Company (Northeastern restaurant chain) October 1995 9,850,773
1,849,427 Long John Silvers Inc. (quick service seafood restaurant chain) December 1998 1,849,427
------------
40,029,302
------------
Specialty Retailing: 2.6%
4,906,445 Camelot Music, Inc. (music stores) February 2002 4,783,785
15,193,333 Color Tile, Inc. (home improvement retailer) December 1998 15,193,333
2,484,184 M & H Drugs, Inc. (Midwestern retail drugstores) March 1996 2,484,184
------------
22,461,302
------------
Transportation: 7.5%
9,997,413(1) Caterair International Corp. (airline foodservice) December 1998 9,997,413
2,041,259 Gateway Western Railway (regional railroad) December 2000 2,041,259
43,970,097 Northwest Airlines, Inc. (international airline) December 1999 43,970,097
4,940,915 Paducah & Louisville Railway (regional railroad) November 1998 4,940,915
3,958,736 Petro PSC Properties (truckstops/travel centers) May 2001 3,958,736
------------
64,908,420
------------
Total Senior Collateralized Loan Participations (Cost $834,856,567) 832,655,352
------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
- ------ -----
OTHER CORPORATE DEBT: 0.2%
<S> <C> <C>
Food Stores: 0.1%
$1,050,400 New Almac's Inc. (formerly Almac's, Rhode Island supermarkets) Senior Subordinated Note,
December 2004 $ 945,360
------------
Textiles: 0.1%
1,129,107(R) Dan River (Braelan) Corp. (diversified textiles) 16.35% Convertible Junior Subordinated
Debenture, September 1995 1,129,107
------------
Total Other Corporate Debt (Cost $2,179,507) 2,074,467
------------
COMMON STOCK AND PREFERRED STOCK: 0.6%
Shares
- ------
Diversified Manufacturing: 0.1%
100,000@ Interco, Inc. -- common (furniture) 612,500
Electronic Products: 0.1%
174,951@(R) MICOM Communications Corp.-- common (wide area networking products) 964,417
------------
Footwear: 0.0%
30,000@ Converse Inc.-- common (athletic shoes) 202,500
------------
Restaurants: 0.3%
24,848(R) America's Favorite Chicken Co. -- preferred (quickservice restaurant chain) 2,484,800
17,664@ Flagstar, Inc. -- common (family restaurants and institutional foodservice companies) 88,320
------------
2,573,120
Textiles: 0.1%
6,198@(R) Dan River (Braelan) Corp.-- common (diversified textiles) 741,000
------------
Total Common Stock and Preferred Stock (Cost $3,606,179) 5,093,537
------------
STOCK PURCHASE WARRANTS: 0.1%
48,930@(R) Autotote Systems, Inc. Warrants, Exercise price $3.835, Expires 10/30/03 128,735
--@(R) Friendly Ice Cream Company, Equity Linked, Contingent Interest Payments --
18,954,372@(R) Gateway Western Railway, Warrants, Exercise Price $.001 497,249
4.17@(R) Paducah & Louisville Railway, Exercise Price $2,976, Expires 11/18/98 --
45,000@(R) Victory Holding Corp., Warrants, Exercise Price $10, Expires 12/1/01 354,375
13,341@(R) Thermoscan Inc., Warrants, Exercise Price $0, Expires 7/31/00 171,832
------------
Total Stock Purchase Warrants (cost $2,239,007) 1,152,191
------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
- ------ -----
SHORT-TERM INVESTMENTS: 3.1%
<S> <C> <C>
U.S. Agency Discount Notes:
$ 19,170,000 Federal Home Loan bank, 5.86%, Due 06/05/95 $ 19,157,518
7,525,000 Federal Home Loan Mortgage Corporation, 6.10%, Due 06/01/95 7,525,000
------------
Total Short-Term Investments (Cost $26,682,518) 26,682,518
------------
Total Investments (Cost $869, 563,779) 99.9% 867,658,065
Cash and Other Assets in Excess of Liabilities-- Net 0.1 626,208
----- ------------
Total Net Assets (Unaudited) 100.0% $868,284,273
===== ============
</TABLE>
- ----------------
@ Non-income producing security
(R) Restricted security
* Collateralized loan participations, while exempt from registration under
the Securities Act of 1933, contain certain restrictions on resale and can
not be sold publicly. These collateralized loan participations 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 participation
agreement, LIBOR, the certificate of deposit rate, or in some cases
another base lending rate.
(1) Borrower is in the process of developing a plan of debt and/or corporate
restructure.
<PAGE>
Pilgrim America Group, Inc.
Family of Funds
- ---------------------
Open-End Funds
- ---------------------
Pilgrim America MagnaCap Fund
Pilgrim Government Securities Income Fund
(Formerly Pilgrim GNMA Fund)
Pilgrim America High Yield Fund
Closed-End Funds
- ---------------------
Pilgrim Regional BankShares(SM)
Pilgrim Prime Rate Trust(TM)
Money Market Fund
- ---------------------
Pilgrim General Money Market Shares
Pilgrim General Money Market Shares is a class of the Cortland General Money
Market Fund Series of Cortland Trust, Inc.
- ---------------------
Prospectuses containing more complete information about the Funds, including
charges and expenses, may be obtained from Pilgrim America Securities, Inc. Read
the Prospectus carefully before you invest or send money.
<PAGE>
Two Renaissance Square
40 North Central Avenue
Suite 1200
Phoenix, AZ 85004-4424
- ---------------------------------------------------
PILGRIM PRIME RATE TRUST
Investment Manager
Pilgrim America Investments, Inc.
Two Renaissance Square
40 North Central Avenue
Suite 1200
Phoenix, AZ 85004-4424
Shareholder Servicing Agent
Pilgrim America Group, Inc.
Two Renaissance Square
40 North Central Avenue
Suite 1200
Phoenix, AZ 85004-4424
(800) 331-1080
Transfer Agent
Investors Fiduciary Trust Company
c/o DST Systems, Inc.
P.O. Box 419368
Kansas City, Missouri 64141
PILGRIM
AMERICA
GROUP(R)
AN EXPRESS AMERICA COMPANY
This report is submitted for the general information of the shareholders of the
Pilgrim Prime Rate Trust.
PILGRIM
PILGRIM
PRIME
AMERICA
RATE
GROUP(R)
TRUST
AN EXPRESS AMERICA COMPANY
FIRST QUARTER REPORT
MAY 31, 1995
