Securities Act File No. 333-61831
                                               Securities Act File No. 333-68239

                            PILGRIM PRIME RATE TRUST

                       Supplement dated September 29, 2000
                     to the Prime Rate Trust Prospectus and
             Statement of Additional Information dated June 30, 2000


     The section of both the Prospectus and Statement of Additional  Information
captioned "Net Asset Value" is replaced with the following:

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.

     The  Senior  Loans  in  which  the  Trust  invests  are not  listed  on any
securities  exchange  or board  of  trade.  Some  Senior  Loans  are  traded  by
institutional  investors  in  an  over-the-counter  secondary  market  that  has
developed in the past several years.  This secondary  market generally has fewer
trades  and less  liquidity  than  the  secondary  markets  for  other  types of
securities. Some Senior Loans have few or no trades. Accordingly, determinations
of the market value of Senior Loans may be based on infrequent and dated trades.
Because there is less reliable,  objective data available,  elements of judgment
may play a greater role in the  valuation of Senior Loans than in the  valuation
of other  types of  securities.  For  further  information,  see the  discussion
"Limited Secondary Market for Senior Loans."

     Senior  Loans are  normally  valued on the basis of one or more  quotations
obtained from a pricing service or other sources believed to be reliable. Senior
Loans for which reliable  quotations are not available,  which may include those
deemed  unreliable under criteria  established by the Trust's Board of Trustees,
may be valued with  reference to another  Senior Loan or a group of Senior Loans
for which quotations are more readily  available and whose  characteristics  are
comparable to the Senior Loan being valued. Under this approach,  the comparable
Senior  Loan or Loans  serve as a "proxy"  for  changes in value.  The Trust has
engaged an independent  pricing  service to provide  quotations  from dealers in
Senior  Loans and to  calculate  values  under the "proxy"  procedure  described
above. Senior Loans are valued at the mean between bid and asked quotations.

     The Investment Manager may believe that the price for a Senior Loan derived
from market quotations or the "proxy" procedure  described above is not reliable
or accurate.  Among other reasons, this may be the result of information about a
particular  Senior Loan or borrower  known to the  Investment  Manager  that the
Investment  Manager  believes may not be known to the pricing  service.  In this
event, the Senior Loan is 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 ratified  and  monitored by the Trust's

Board of Trustees through its Valuation Committee. In determining the fair value
of a Senior 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 Loans; (vi) the borrower's
management;  and (vii) the general economic and market conditions  affecting the
fair value of the Senior Loan.

     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

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