-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KgN/4Mql+ioduS2Na7/W3Y9lTXduttIqoGYWoslQw2sdTMLPkxZIykXx0UAhj1G1 AQRuKE+1d7A3dgILFVIUxQ== 0000950147-98-000858.txt : 19981102 0000950147-98-000858.hdr.sgml : 19981102 ACCESSION NUMBER: 0000950147-98-000858 CONFORMED SUBMISSION TYPE: NSAR-A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980831 FILED AS OF DATE: 19981030 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PILGRIM AMERICA PRIME RATE TRUST CENTRAL INDEX KEY: 0000826020 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 956874587 STATE OF INCORPORATION: MA FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: NSAR-A SEC ACT: SEC FILE NUMBER: 811-05410 FILM NUMBER: 98734233 BUSINESS ADDRESS: STREET 1: TWO RENAISSANCE SQ 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B000000 0 PAGE 9 084 B000000 0 086 A010000 12885 086 A020000 123421 086 B010000 0 086 B020000 0 086 C010000 0 086 C020000 0 086 D010000 0 086 D020000 0 086 E010000 0 086 E020000 0 086 F010000 0 086 F020000 0 087 A010000 COMMON STOCKS 087 A020000 720906106 087 A030000 PPR 088 A000000 Y 088 B000000 N 088 C000000 N 088 D000000 N SIGNATURE MIKE J ROLAND TITLE CHIEF FINANCIAL OFFI Pilgrim Prime Rate Trust - -------------------------------------------------------------------------------- ITEM 77C - Submission of matters to a vote of security holders. - -------------------------------------------------------------------------------- SPECIAL MEETING A special meeting of the shareholders of Pilgrim Prime Rate Trust was held at the offices of the trust on August 6, 1998. A brief description of each matter voted upon as well as the voting results are outlined below:
SHARES SHARES VOTED AGAINST SHARES BROKER VOTED FOR OR WITHHELD ABSTAINED NON-VOTE TOTAL --------- ----------- --------- -------- ----- 1. Vote on Trustees Mary A. Baldwin 64,790,447 3,869,221 68,659,668 John P. Burke 64,828,649 3,831,019 68,659,668 Al Burton 64,933,568 3,726,100 68,659,668 Bruce S. Foerster 64,980,639 3,679,029 68,659,668 Jock Patton 65,006,629 3,653,039 68,659,668 Robert W. Stallings 65,004,593 3,655,075 68,659,668
11. To approve a change to a fundamental investment restriction on the Trust that would expand the types of loans in which the Trust may invest. 56,538,407 5,452,613 3,094,382 3,574,266 68,659,668
111. To approve a proposed amendment to the Trust's investment management agreement with Pilgrim Investments, Inc. that increases the investment management fee paid by the Trust. 49,646,174 11,758,265 3,680,963 3,574,265 68,659,668
IV. To ratify the appointment of KPMG Peat Marwick LLP as the independent auditors for the Trust for the fiscal year ending February 28, 1999. 65,874,349 553,611 2,231,706 68,659,666
V. To transact such other business as may properly come before the Annual Meeting of Shareholders or any adjournments thereof. 62,641,403 2,029,029 3,989,234 68,659,666
ITEM 77D(a) POLICIES WITH RESPECT TO SECURITY INVESTMENTS A 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, patents rights, and franchise value (the Trust could already accept trade-marks). The Board of Trustees also approved a change in policy that does not require shareholder approval, which provides that 80% of the Trust's gross assets, as opposed to 80% of its net assets, may normally be invested in Senior Loans. This change is intended to reflect the fact that the Trust borrows for investment purposes, so that the Trust's policy regarding the amount invested in Senior Loans applies to borrowings. AMENDMENT OF POLICY REGARDING TRUST'S INVESTMENTS IN LOANS The Trust's previous fundamental investment restriction with respect to the Trust's ability to make loans stated the following: [The Trust may not] make loans of money or property to any person, except that the Trust (i) may hold Senior Loans in accordance with its investment objectives and policies; (ii) may lend portfolio instruments; and (iii) may acquire securities subject to repurchase agreements. As proposed, this fundamental investment restriction will be revised to read as follows (the revised language is upper cased): [The Trust may not] make loans of money or property to any person, except that the Trust (i) may MAKE LOANS TO CORPORATIONS OR OTHER BUSINESS ENTITIES, OR ENTER INTO LEASES OR OTHER ARRANGEMENTS THAT HAVE THE CHARACTERISTICS OF A LOAN; (ii) may lend portfolio instruments; and (iii) may acquire securities subject to repurchase agreements. EFFECT OF CHANGE IN INVESTMENT RESTRICTION The effect of this change in the investment restriction regarding the making of loans will be to allow the Board, in response to changes in the syndicated loan market, to expand the types of loans in which the Trust may invest and the types of borrowers that may be parties to such loans. At a meeting held on May 4, 1998, the Board approved several such changes to the investment policies of the Trust, which are discussed below, and which become effective upon shareholder approval of the change in the fundamental investment restriction. EXPANDING PERMISSIBLE BORROWERS Previously, the Trust was permitted to make loans only to U.S. corporations or corporations domiciled in Canada or U.S. territories and possessions. Since the Trust's organization, syndicated loans in which the borrower is a business entity other than a corporation, such as a partnership, limited liability company or other business entity, have become increasingly common. Loans to business entities other than corporations may present attractive investment opportunities for the Trust, while being consistent with the quality of the corporate loans in which the Trust currently invests. As a result, the Trust believed it would be beneficial to be able to invest in loans to 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. EXPANDING THE TYPES OF LOANS IN WHICH THE TRUST MAY INVEST The Trust's previous investment restriction limited the types of loans in which the Trust may invest to Senior Loans. A Senior Loan is a floating-rate corporate loan that holds the most senior position in the capital structure of the borrower. Senior Loans are fully collateralized, with assets that the Investment Manager believes equal or exceed the market value of the principal amount of the Senior Loan at the time of acquisition. The Trust's investment policies provide that normally at least 80% of the Trust's assets will be invested in Senior Loans, while the remaining 20% may be invested in other investments permitted by the Trust's policies ("Other Investments"). As the syndicated loan market has grown, loan structures have developed that have many of the qualities of a Senior Loan and are consistent with the quality of the loans in which the Trust has historically invested, but which may not have certain security or covenant privileges as typical Senior Loans. The Trust believed that these loans, which will be treated as Other Investments, present attractive investment opportunities for the Trust. The Trust now has the ability to invest in the following types of loans to the extent described, which were approved by the Board at the May 4, 1998 meeting in response to changes in the syndicate loan market. LEASE PARTICIPATIONS -- (MOVED TO 80% SENIOR LOAN BASKET) A "lease participation" is a participation interest in a lease financing. While the Trust may currently invest in lease participations, they presently are treated as Other Investments and, therefore, constitute part of the 20% of the Trust's assets that may be invested in Other Investments. By changing the Trust's investment restriction, the Trust is permitted to treat lease participations as Senior Loans, and, therefore, would constitute part of the 80% of the Trust's assets normally invested in Senior Loans. This would permit the Trust to invest more than 20% of its assets in lease participations. The risks associated with an investment in a lease participation are essentially the same as the risks of investing in a conventional Senior Loan, which include the risk that the borrower will default on its obligations, and the risk that in the event of default the collateral could not be readily liquidated. Under policies adopted by the Board, the Trust invests in lease participations only where the collateral quality, credit quality of the borrower, and likelihood of payback are believed by the Investment Manager to be the same as those applied to conventional Senior Loans. HYBRID LOANS -- (IN 20% BASKET OF OTHER INVESTMENTS) The Trust is able to invest in certain types of "hybrid loans". Hybrid loans are secured, floating rate loans that possess some characteristics of Senior Loans. Hybrid loans may provide a relatively higher yield than conventional Senior Loans. While hybrid loans are secured, with some hybrid loans the lender may not possess a senior claim to all of the collateral securing the loan. Therefore, the risk of nonpayment of interest or loss of principal may be greater than would be the case with conventional Senior Loans. Other hybrid loans do not contain certain covenants normally found in conventional Senior Loans, such as covenants requiring the maintenance of minimum interest coverage ratios. As a result of the absence of these or other provisions, the lender's negotiation or voting rights in the event of a default in the hybrid loan may be diminished. Under investment policies recently adopted by the Trust's Board of Trustees, the Trust may invest in hybrid loans that meet credit standards established by the Investment Manager. Hybrid loans constitute part of the 20% of the Trust's assets that may be invested in Other Investments, and will not count toward the 80% of the Trust's assets that are normally invested in Senior Loans. SUBORDINATED AND UNSECURED LOANS -- (MAXIMUM 5% OF ASSETS COMBINED -- IN 20% BASKET OF OTHER INVESTMENTS) Previously, the Trust may invest up to 5% of its total assets in subordinated loans. With this change the Trust has the ability to invest up to 5% of its total assets in both subordinated and unsecured loans. Unsecured loans are not secured by any specific collateral of the borrower. They do not enjoy the security associated with collateralization and may pose a greater risk of nonpayment of interest or loss of principal than do secured loans. Under policies recently adopted by the Trust's Board of Trustees, the Trust will acquire unsecured loans only where Pilgrim Investments, Inc. believes, at the time of acquisition, that the Trust would have the right to payment upon default that is not subordinate to any other creditor. Under the Trust's previous policies, the Trust may invest up to 5% of its total assets in subordinated loans. Unsecured loans will be added to this 5% basket of assets, so that the Trust may not invest more than 5% of its total assets, measured at the time of investment, in any combination of unsecured loans and subordinated loans. The 5% of total assets that may be invested in unsecured and subordinated loans constitutes part of the 20% of the Trust's assets that may be invested in Other Investments, and will not count toward the 80% of the Trust's assets that are normally invested in Senior Loans. ITEM 77Q1(e) Incorporated originally by reference the amendment to the investment management agreement as filed on June 23, 1997 was filed as part of the Registration Statement on August 19, 1998 and went effective September 15, 1998. ITEM 77Q1(b) Incorporated by reference the text of the proposals as described in Sub-Item 77(D) was filed in the Registration Statement on August 19, 1998 and went effective September 15, 1998. EX-27 2 FDS --
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