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<SEC-DOCUMENT>0000950147-01-500822.txt : 20010509
<SEC-HEADER>0000950147-01-500822.hdr.sgml : 20010509
ACCESSION NUMBER:		0000950147-01-500822
CONFORMED SUBMISSION TYPE:	N-30D
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20010228
FILED AS OF DATE:		20010507

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			PILGRIM 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:		N-30D
		SEC ACT:		
		SEC FILE NUMBER:	811-05410
		FILM NUMBER:		1623486

	BUSINESS ADDRESS:	
		STREET 1:		TWO RENAISSANCE SQ
		STREET 2:		40 N CENTRAL STE 1200
		CITY:			PHOENIX
		STATE:			AZ
		ZIP:			85004-4424
		BUSINESS PHONE:		6024178100

	MAIL ADDRESS:	
		STREET 1:		TWO RENAISSANCE SQ
		STREET 2:		40 N CENTRAL STE 1200
		CITY:			PHOENIX
		STATE:			AZ
		ZIP:			85004-4424

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	PILGRIM PRIME RATE TRUST
		DATE OF NAME CHANGE:	19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-30D
<SEQUENCE>1
<FILENAME>e-6729.txt
<DESCRIPTION>ANNUAL REPORT DTD. 02/28/2001
<TEXT>

ING PILGRIM                                                          ANNUAL
                                                                     REPORT


                               February 28, 2001


                                                                     PILGRIM
                                                                     PRIME RATE
                                                                     TRUST
<PAGE>
                            PILGRIM PRIME RATE TRUST


                                  ANNUAL REPORT

                                February 28, 2001


                                    --------


                                Table of Contents


Letter to Shareholders .....................................................   2
Portfolio Managers' Report .................................................   3
Statistics and Performance .................................................   6
Performance Footnotes ......................................................   8
Additional Notes and Information ...........................................   9
Report of Independent Auditors .............................................  10
Portfolio of Investments ...................................................  11
Statement of Assets and Liabilities ........................................  28
Statement of Operations ....................................................  29
Statements of Changes in Net Assets ........................................  30
Statement of Cash Flows ....................................................  31
Financial Highlights .......................................................  32
Notes to Financial Statements ..............................................  34
Tax Information ............................................................  40


                                    --------
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------

Dear Shareholder:

We are  pleased to present the Annual  Report for Pilgrim  Prime Rate Trust (the
"Trust").

On the  following  pages,  the  Portfolio  Managers  will  discuss  the  Trust's
performance,  as well as recent market developments.  The Trust has continued to
provide  shareholders  with an attractive  current yield in difficult  financial
markets.

The Trust's  ultra-short  duration,  floating rate loan assets typically exhibit
lower price volatility than corporate bonds, whose prices fluctuate with changes
in interest rates.

We believe an investment in this type of asset can be an attactive  core holding
for income investors.

Thank you for selecting  Pilgrim Prime Rate Trust.  We appreciate the confidence
you have placed in us in serving your investment needs.


Sincerely,


ING PILGRIM INVESTMENTS, LLC
April 13, 2001

                                        2
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
Portfolio Managers' Report
- --------------------------------------------------------------------------------

Dear Shareholder:

Pilgrim  Prime Rate Trust (the "Trust")  invests in a  diversified  portfolio of
non-investment  grade senior secured  floating rate loans made primarily to U.S.
based  corporations.  During the quarter ended February 28, 2001, the Trust paid
its 154th consecutive dividend.  Based on $0.21 of dividends declared during the
quarter and the average  month-end  net asset value  ("NAV") per share of $8.08,
the annualized  distribution  rate was 10.29%1,  which continues to compare very
favorably to that of other  short-term  fixed income  alternatives.  If compared
with average  month-end  closing prices for the Trust's stock at the end of each
month, the annualized distribution rate, based on market, was 10.44%1.

CURRENT LOAN MARKET CONDITIONS
Since the middle of year 2000,  conditions  in the global  capital  markets have
been extremely  volatile,  driven by a dramatically  slowing  domestic  economy,
rapidly  decelerating  corporate  earnings,  and a significant  move downward in
prevailing market interest rates. Although effectively insulated from changes in
market rates by way of their reset  feature,  floating rate loans continue to be
unfavorably  impacted by a  historically  high level of  corporate  defaults and
public ratings  downgrades,  and an increasing  level of scrutiny on the part of
bank officers and  regulators.  While less dramatic than in the fixed income and
equity  markets,  the net effect has been a  meaningful  deflation in loan asset
valuations,  particularly  in  those  industry  sectors  vulnerable  to  capital
investment  disruption  (such  as  developmental  telecommunications),  cyclical
slowdown  (such as auto  suppliers  and chemical  producers)  and  supply/demand
imbalances,  be it from  foreign  imports  (such  as  steel)  or  self-inflicted
overcapacity (such as cinema  operators).  We are pleased to note that the Trust
over the course of 2000 did not  significantly  increase  its exposure to any of
these most troubled sectors.

Challenging market conditions notwithstanding, the leveraged loan market overall
continues to exhibit the resiliency that differentiates it from other short-term
investment options. For example, despite the volatility, the market continues to
grow  in  aggregate  size,  number  of  institutional   participants  and,  most
importantly,   secondary  market  liquidity.  An  indicator  of  overall  market
vitality,  new loan  issuance,  while down from previous  periods,  has remained
positive  over the last  several  quarters,  even at times when new deal flow in
both the fixed income and IPO markets basically came to a standstill.  Secondary
trading  activity  also  continues  to expand,  topping  $128 billion for all of
2000(2). As with all financial markets,  deeper, broader trading activity breeds
efficiency, a key to overall market viability and transparency.

Another  key  differentiating  factor,  net  recovery of senior  secured  loans,
remains  far  superior  to that of any other  high  yield  income  asset  class.
According to a recent study of recovery  rates from 1997 through 2000,  recovery
of senior  secured  loans  remained in excess of 70% of original  face value one
year after default, as compared to 17% for high yield bonds(3).  The substantial
favorable  difference  in recovery  values  versus other  junior  asset  classes
contributes  to  considerably  lower overall price  volatility.  Moderate  price
volatility,  combined with a high relative  yield,  continues to define floating
rate senior loans as the asset class of choice for conservative  yield-conscious
investors.

As we move further into 2001, we expect domestic  economic  conditions to remain
soft. In turn, the financial  markets,  equity and credit alike, are expected to
remain  somewhat  volatile.  High yield  investors  continue to work through the
problem credits originated during the late 1990s, a period

                                        3
<PAGE>
characterized  by excessively  cheap junior capital and weak credit  structures.
However,  the recent string of aggressive  interest rate cuts on the part of the
Federal  Reserve,  combined  with  emerging  signs  of  economic  stability  and
continued discipline on the part of investors,  bodes well for an improvement in
credit conditions later into the year. We continue to work to position the Trust
to take advantage of the  opportunities in the hopefully pending recovery in the
high yield credit markets.

VALUATION OF THE TRUST'S ASSETS
As noted in prior reports, the Trust uses independent market quotes to value its
loan  investments  when the Trust  believes that such market quotes are reliable
and generally  reflect current value.  Under the Trust's  valuation  procedures,
investments for which reliable market quotes are unavailable will continue to be
valued  based  on  fundamental  analysis  of their  fair  value.  As  previously
reported, the percentage of the Trust's investments that are valued on the basis
of market  quotes  has  steadily  increased  over the last 15 months  due to the
improved   breadth  and  relative   efficiency  of  the  secondary   market  for
non-investment grade loans.

BORROWING AND LEVERAGE
The Trust has utilized  financial  leverage to seek to increase the yield to the
holders of common shares. As of February 28, 2001, the Trust had $960 million of
borrowings outstanding, consisting of $450 million of `aaa/AAA' rated cumulative
auction rate  preferred  shares,  and $510 million  under a $620 million  credit
facility.  Total leverage,  as a percentage of total assets (including preferred
shares),  was 46.3% at  quarter  end.  The  average  cost of all  borrowing  and
leveraging as of the quarter end was 5.43%.

PERFORMANCE OF THE TRUST
Based on the aggregate  dividends for the quarter ended  February 28, 2001,  and
the average month-end NAV for the quarter, the annualized  distribution rate was
10.29%,   versus   10.03%  and  9.85%  at  November  30  and  August  31,  2000,
respectively.  The Trust's  annualized  distribution rate based on the quarterly
dividend  and the average  month-end  closing  prices for the Trust's  stock was
10.44%,  which  continues to represent an attractive  yield  advantage over many
other variable and fixed income investment products.

The Trust also  maintained  a high level of  diversification.  At the end of the
quarter,  the Trust managed  senior loans from 207 separate  borrowers,  with an
average investment size of $9.6 million,  up from 179 borrowers and $9.0 million
average  investment  size at November  30,  2000.  These loans were  diversified
across 33 industry  sectors,  the largest of which was  Cellular  Communications
representing  approximately  9.1% of total  assets.  The single  largest  issuer
within  the Trust  was  Voicestream  Wireless,  at  approximately  3.9% of total
assets.  Exclusive of Voicesteam  Wireless,  the average investment  represented
approximately 0.46% of total assets at February 28, 2001.

We thank you for your  continued  confidence  and encourage  your  questions and
comments.



/s/ Jeffrey A. Bakalar                  /s/ Daniel A. Norman

Jeffrey A. Bakalar                      Daniel A. Norman
Senior Vice President                   Senior Vice President
Co-Senior Portfolio Manager             Co-Senior Portfolio Manager

Pilgrim Prime Rate Trust April 13, 2001

                                        4
<PAGE>
1.   The  distribution  rate is calculated  by  annualizing  dividends  declared
     during the quarter and dividing the  resulting  annualized  dividend by the
     Trust's  average  month-end  net  asset  value  (in the case of NAV) or the
     average month-end NYSE Composite closing price (in the case of Market). The
     distribution   rate  is  based   solely  on  the   actual   dividends   and
     distributions,  which  are  made  at  the  discretion  of  management.  The
     distribution  rate  may  or may  not  include  all  investment  income  and
     ordinarily will not include capital gains or losses, if any.

2.   Loan Pricing Corporation

3.   Fitch IBCA, Duff & Phelps

Performance  data  represents  past  performance  and is no  guarantee of future
results.  Investment  return and  principal  value of an investment in the Trust
will fluctuate. Shares, when sold, may be worth more or less than their original
cost.

This letter contains statements that may be "forward-looking statements." Actual
results could differ  materially  from those  projected in the  "forward-looking
statements."

The views  expressed in this letter reflect those of the portfolio  manager only
through  the end of the  period  of the  report  as  stated  on the  cover.  The
portfolio  manager's views are subject to change at any time based on market and
other conditions.

                                        5
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
STATISTICS AND PERFORMANCE as of February 28, 2001
- --------------------------------------------------------------------------------

                            PORTFOLIO CHARACTERISTICS

Net Assets                                                       $1,557,432,097
Assets Invested in Senior Loans*                                 $1,988,832,057
Total Number of Senior Loans                                                207
Average Amount Outstanding per Loan                              $    9,607,884
Total Number of Industries                                                   33
Average Loan Amount per Industry                                 $   60,267,638
Portfolio Turnover Rate (YTD)                                                46%
Weighted Average Days to Interest Rate Reset                             35 days
Average Loan Maturity                                                  60 months
Average Age of Loans Held in Portfolio                                 16 months

* Includes loans and other debt received through restructures

                          TOP TEN INDUSTRIES AS A % OF

                                                        NET ASSETS  TOTAL ASSETS
                                                        ----------  ------------
Cellular Communications                                    12.1%        9.1%
Hotels, Motels, Inns and Gaming                            10.9%        8.2%
Building and Real Estate                                   10.5%        7.9%
Healthcare, Education and Childcare                         9.4%        7.0%
Containers, Packaging and Glass                             6.2%        4.7%
North American Cable                                        5.6%        4.2%
Ecological                                                  5.2%        3.9%
Chemicals, Plastics and Rubber                              4.7%        3.5%
Leisure, Amusement, Motion Pictures and Entertainment       4.5%        3.4%
Printing and Publishing                                     4.1%        3.1%


                          TOP 10 SENIOR LOANS AS A % OF

                                                        NET ASSETS  TOTAL ASSETS
                                                        ----------  ------------
Voicestream Wireless                                        5.2%        3.9%
Allied Waste Industries                                     4.4%        3.3%
Nextel Finance Corp.                                        3.1%        2.3%
Starwood Hotels & Resorts Worldwide, Inc                    3.0%        2.2%
Wyndham International, Inc.                                 2.1%        1.6%
Ventas Realty Limited Partnership                           2.1%        1.5%
Stone Container Corp.                                       2.0%        1.5%
Southdown Corporation                                       2.0%        1.5%
Redamco North America                                       1.8%        1.4%
Hercules, Inc.                                              1.7%        1.3%

                                        6
<PAGE>
                            Pilgrim Prime Rate Trust


- --------------------------------------------------------------------------------
STATISTICS AND PERFORMANCE as of February 28, 2001
- --------------------------------------------------------------------------------

                          YIELDS AND DISTRIBUTION RATES

<TABLE>
<CAPTION>
                                                                     Average           Average
                                      (NAV)          (MKT)          Annualized        Annualized
                         Prime      30-Day SEC     30-Day SEC      Distribution      Distribution
Quarter-ended            Rate        Yield A        Yield A       Rate at NAV B     Rate at MKT B
- -------------            ----        -------        -------       -------------     -------------
<S>                      <C>        <C>            <C>            <C>               <C>
February 28, 2001        8.50%        12.56%         12.51%           10.29%            10.44%
November 30, 2000        9.50%        11.94%         12.93%           10.03%            10.39%
August 31, 2000          9.50%        10.00%          9.94%            9.85%             9.79%
May 31, 2000             9.50%         7.28%          7.44%            9.94%            10.56%
</TABLE>

                          AVERAGE ANNUAL TOTAL RETURNS

                                       NAV         MKT
                                      -----       -----
1 Year                                0.19%       9.10%
3 Years                               4.53%       1.28%
5 Years                               5.91%       6.14%
10 Years                              6.82%        N/A
Since Trust Inception F,H             7.53%        N/A
Since Initial Trading on NYSE G        N/A        7.34%

Assumes rights were exercised and excludes sales charges and commissions C,D,E

             Performance data represents past performance and is no
                          guarantee of future results.


                      See performance footnotes on page 8.

                                        7
<PAGE>
                            Pilgrim Prime Rate Trust


- --------------------------------------------------------------------------------
PERFORMANCE FOOTNOTES
- --------------------------------------------------------------------------------

(A)  Yield is calculated by dividing the Trust's net investment income per share
     for the most recent thirty days by the net asset value (in the case of NAV)
     or the NYSE Composite closing price (in the case of market) at quarter-end.
     Yield calculations do not include any commissions or sales charges, and are
     compounded  for six  months and  annualized  for a twelve  month  period to
     derive the Trust's yield consistent with the SEC standardized yield formula
     for open-end investment companies.

(B)  The distribution  rate is calculated by annualizing each monthly  dividend,
     then averaging the annualized  dividends declared for each month during the
     quarter and dividing the resulting  average  annualized  dividend amount by
     the  Trust's  average  net  asset  value  (in the  case of NAV) or the NYSE
     Composite closing price (in the case of Market) at the end of the period.

(C)  Calculation of total return assumes a  hypothetical  initial  investment at
     the net  asset  value  (in the case of NAV) or the NYSE  Composite  closing
     price (in the case of Market) on the last business day before the first day
     of the stated period,  with all dividends and  distributions  reinvested at
     the actual reinvestment price.

(D)  On December 27, 1994,  the Trust  issued to its  shareholders  transferable
     rights which entitled the holders to subscribe for 17,958,766 shares of the
     Trust's common stock at the rate of one share of common stock for each four
     rights  held.  On January  27,  1995,  the  offering  expired and was fully
     subscribed.  The Trust  issued  17,958,766  shares of its  common  stock to
     exercising rights holders at a subscription price of $8.12.  Offering costs
     of $4,470,955 were charged against the offering proceeds.

(E)  On October 18, 1996, the Trust issued to its shareholders  non-transferable
     rights which entitled the holders to subscribe for 18,122,963 shares of the
     Trust's common stock at the rate of one share of common stock for each five
     rights  held.  On November 12,  1996,  the  offering  expired and was fully
     subscribed.  The Trust  issued  18,122,963  shares of its  common  stock to
     exercising rights holders at a subscription price of $9.09.  Offering costs
     of $6,972,203 were charged against the offering proceeds.

(F)  Inception Date -- May 12, 1988.

(G)  Initial Trading on NYSE -- March 9, 1992.

(H)  Reflects partial waiver of fees.

     Performance  data represents past performance and is no guarantee of future
     results.  Investment  return and  principal  value of an  investment in the
     Trust will  fluctuate.  Shares,  when sold,  may be worth more or less than
     their original cost.

                                        8
<PAGE>
                            Pilgrim Prime Rate Trust


- --------------------------------------------------------------------------------
ADDITIONAL NOTES AND INFORMATION
- --------------------------------------------------------------------------------

SHAREHOLDER INVESTMENT PROGRAM

The Trust offers a Shareholder Investment Program (the "Program", formerly known
as the Dividend Reinvestment and Cash Purchase Plan) which allows shareholders a
simple way to reinvest  dividends  and capital gains  distributions,  if any, in
additional  shares of the Trust. The Program also offers Trust  shareholders the
ability to make optional cash investments in any amount from $100 to $5,000 on a
monthly basis.  Amounts in excess of $5,000 require prior approval of the Trust.
DST Systems,  Inc., the Trust's  Transfer  Agent, is the  Administrator  for the
Program.

For dividend  reinvestment  purposes,  the Administrator will purchase shares of
the Trust on the open market when the market price plus estimated commissions is
less than the net asset  value on the  valuation  date.  The Trust may issue new
shares when the market price plus  estimated  commissions is equal to or exceeds
the net asset  value on the  valuation  date.  New  shares  may be issued at the
greater of (i) net asset value or (ii) the market price of the shares during the
pricing period, minus a discount of 5%.

For optional  cash  investments,  shares will be purchased on the open market by
the Administrator when the market price plus estimated  commissions is less than
the net asset value on the valuation date. New shares may be issued by the Trust
when the market price plus estimated  commissions is equal to or exceeds the net
asset value on the valuation date.

There is no charge to  participate  in the  Program.  Participants  may elect to
discontinue  participation in the Program at any time.  Participants will share,
on a pro-rata  basis, in the fees or expenses of any shares acquired in the open
market.

Participation in the Program is not automatic. If you would like to receive more
information  about the Program or if you desire to  participate,  please contact
your broker or our Shareholder Services Department at (800) 992-0180.

KEY FINANCIAL DATES -- Calendar 2001 Dividends:

     DECLARATION DATE           EX-DATE                   PAYABLE DATE
     ----------------           -------                   ------------
     January 31                 February 8                February 23
     February 28                March 8                   March 22
     March 30                   April 6                   April 23
     April 28                   May 8                     May 22
     May 31                     June 7                    June 22
     June 29                    July 6                    July 23
     July 31                    August 8                  August 22
     August 31                  September 7               September 22
     September 28               October 8                 October 22
     October 31                 November 8                November 23
     November 30                December 6                December 24
     December 21                December 27               January 11, 2002

     Record date will be two business days after each  Ex-Date.  These dates are
subject to change.

STOCK DATA

The  Trust's  shares are traded on the New York Stock  Exchange  (Symbol:  PPR).
Effective November 16, 1998 the Trust's name changed to Pilgrim Prime Rate Trust
and its cusip number  became 72146W 10 3. Prior to November 16, 1998 the Trust's
name was Pilgrim  America Prime Rate Trust and its cusip number was 720906 10 6.
The  Trust's NAV and market  price are  published  daily  under the  "Closed-End
Funds" feature in Barron's, The New York Times, The Wall Street Journal and many
other regional and national publications.

                                        9
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------

To the Shareholders and the Board of Trustees

Pilgrim Prime Rate Trust:

We have audited the accompanying statement of assets and liabilities,  including
the  portfolio of  investments,  of Pilgrim Prime Rate Trust (the "Trust") as of
February 28, 2001,  and the related  statements of operations and cash flows for
the year then ended, and the statements of changes in net assets for each of the
years  in the  two-year  period  ended  February  28,  2001,  and the  financial
highlights for each of the years in the six-year period ended February 28, 2001.
These financial  statements and financial  highlights are the  responsibility of
the Trust's  management.  Our  responsibility  is to express an opinion on these
financial  statements  and  financial  highlights  based on our audits.  For all
periods ending prior to March 1, 1995, the financial  highlights were audited by
the auditors whose report thereon dated March 16, 1995, expressed an unqualified
opinion on those financial highlights.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.  Our  procedures  included  confirmation  of
investments owned as of February 28, 2001 by confirmation with the custodian and
other procedures we considered  necessary.  We believe that our audits provide a
reasonable basis for our opinion.

In our opinion,  the financial  statements and financial  highlights referred to
above present fairly, in all material  respects,  the financial  position of the
Pilgrim  Prime  Rate  Trust  as of  February  28,  2001 and the  results  of its
operations  and its cash flows for the year then  ended,  and the changes in its
net assets for each of the years in the two-year period ended February 28, 2001,
and  financial  highlights  for each of the years in the  six-year  period ended
February 28, 2001, in conformity with accounting  principles  generally accepted
in the United States of America.


/s/ KPMG LLP


Los Angeles, California
April 13, 2001

                                       10
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2001
- --------------------------------------------------------------------------------

Senior Loans

<TABLE>
<CAPTION>
                                                                   Bank Loan
                                                                    Ratings+
                                                                  (Unaudited)
Principal Amount    Borrower/Tranche Description                Moody's     S&P         Value
- -------------------------------------------------------------------------------------------------
<S>                 <C>                                         <C>         <C>    <C>
Aerospace and Defense: 4.0%
                    Avborne, Inc.                                  NR        NR
     $ 14,623,963   Term Loan, maturing June 30, 2003                              $   14,404,604

                    Erickson Air-Crane Company                     NR        NR
        8,634,628   Term Loan, maturing December 31, 2004                               8,628,236

                    New Piper Aircraft, Inc.                       NR        NR
        8,639,269   Term Loan, maturing April 15, 2005                                  8,531,278

                    Piedmont Aviation Services                     NR        NR
        6,299,859   Term Loan, maturing July 23, 2007                                   6,236,860
        6,299,859   Term Loan, maturing July 23, 2007                                   6,236,860

                    Stellex Technologies, Inc.(2)                 Caa2       NR
        1,630,774   Term Loan, maturing September 30, 2006                              1,039,619

                    Titan Corporation                             Ba3       BB-
        3,482,456   Term Loan, maturing February 23, 2007                               3,483,546

                    Transtar Metals, Inc.                          NR        NR
       14,892,857   Term Loan, maturing January 20, 2006                               14,073,750
                                                                                   --------------
                                                                                       62,634,753
                                                                                   --------------
Automobile: 2.8%
                    Autosystems Mfg., Inc.(4)                      NR        NR
        4,962,500   Term Loan, maturing May 31, 2004(3)                                 2,431,625
        4,962,500   Term Loan, maturing May 31, 2005(3)                                 2,431,625

                    Avis Rent-A-Car                               Baa1      BB+
        5,929,074   Revolver, maturing June 5, 2005                                     5,895,723

                    Breed Technologies                             NR        NR
        1,612,242   Term Loan, maturing December 20, 2004                               1,612,242

                    Capital Tool & Design Ltd.                     NR        NR
        9,260,908   Term Loan, maturing July 19, 2003                                   8,983,081

                    Global Metal Technologies                      NR        NR
        6,588,349   Term Loan, maturing March 12, 2005                                  6,456,582

                    Safelite Glass Corporation                     B3        NR
        7,342,314   Term Loan, maturing September 30, 2007                              6,240,967
        7,342,314   Term Loan, maturing September 30, 2007                              6,240,967

                    Venture Holding Trust                          B1        B+
        3,283,334   Term Loan, maturing April 5, 2005                                   2,856,501
                                                                                   --------------
                                                                                       43,149,313
                                                                                   --------------
Banking: 0.8%
                    Outsourcing Solutions, Inc.                    B2        B+
       12,356,156   Term Loan, maturing June 1, 2006                                   11,635,384
                                                                                   --------------
                                                                                       11,635,384
                                                                                   --------------
</TABLE>

                                       11
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2001
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                   Bank Loan
                                                                    Ratings+
                                                                  (Unaudited)
Principal Amount    Borrower/Tranche Description                Moody's     S&P          Value
- -------------------------------------------------------------------------------------------------
<S>                 <C>                                         <C>         <C>    <C>
Beverage, Food and Tobacco: 3.9%
                    Aurora Foods, Inc.                             B2        B
     $  4,832,543   Term Loan, maturing June 30, 2005                              $    4,482,184
        2,973,750   Term Loan, maturing September 30, 2006                              2,775,499
        1,828,571   Revolver, maturing June 30, 2005                                    1,660,952

                    CP Kelco APS, Inc.                             B1        B+
        7,200,000   Term Loan, maturing March 28, 2008                                  6,966,000
        2,400,000   Term Loan, maturing September 28, 2008                              2,322,000

                    Edwards Baking Company                         NR        NR
        2,409,294   Term Loan, maturing Sepetmber 30, 2003                              2,337,015
        3,265,885   Term Loan, maturing Sepetmber 30, 2005                              3,200,567
        3,265,885   Term Loan, maturing Sepetmber 30, 2005                              3,200,567

                    Empire Kosher Poultry, Inc.                    NR        NR
       13,580,000   Term Loan, maturing July 31, 2004                                  11,495,985

                    Imperial Sugar Company(2)                      B3        D
        5,320,481   Term Loan, maturing December 31, 2003                               3,671,132
        5,220,818   Term Loan, maturing December 31, 2005                               3,602,364

                    Nutrasweet Acquisition Corporation            Ba3        NR
        1,433,913   Term Loan, maturing May 31, 2007                                    1,434,809

                    Pabst Brewing Company                         Ba3        BB-
        4,276,134   Term Loan, maturing April 30, 2003                                  3,934,043

                    Suiza Fluid Dairy Group, LP                   Ba2        BB+
        1,677,019   Term Loan, maturing January 4, 2005                                 1,678,067
        5,822,981   Term Loan, maturing January 4, 2005                                 5,815,703
        1,909,938   Revolving Loan, maturing January 4, 2005                            1,902,776
                                                                                   --------------
                                                                                       60,479,663
                                                                                   --------------
Building and Real Estate: 10.5%
                    Corrections Corporation of America             B3        B
        4,925,000   Term Loan, maturing December 31, 2002                               4,128,790

                    HQ Global Holdings, Inc.                       NR        NR
        7,418,111   Term Loan, maturing September 4, 2009                               7,306,839

                    Kevco, Inc.(2)                                 B3        D
        6,900,577   Term Loan, maturing February 2, 2005(3)                             4,830,404

                    KSL Recreation Group, Inc.                    Ba3        B+
        3,394,435   Term Loan, maturing December 21, 2006                               3,377,462
        3,394,435   Term Loan, maturing December 21, 2006                               3,377,462
       11,500,000   Term Loan, maturing December 21, 2006                              11,543,125

                    Meditrust Corporation                         Ba3        BB-
        5,099,418   Term Loan, maturing July 15, 2001                                   5,066,909

                    Rodamco North America                         Baa3      BBB-
       11,491,214   Term Loan, matruring November 8, 2002                              11,433,758
       17,250,000   Term Loan, matruring November 8, 2002                              17,142,188

                    Southdown Corporation                         Baa3      BBB-
       31,285,714   Term Loan, maturing December 20, 2001                              31,187,947
</TABLE>

                                       12
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2001
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                   Bank Loan
                                                                    Ratings+
                                                                  (Unaudited)
Principal Amount    Borrower/Tranche Description                Moody's     S&P          Value
- -------------------------------------------------------------------------------------------------
<S>                 <C>                                         <C>         <C>    <C>
Building and Real Estate (continued)
                    Tree Island Industries                         NR        NR
     $ 11,092,588   Term Loan, maturing March 31, 2003                             $   11,092,588

                    US Aggregates, Inc.                            NR        NR
        5,720,476   Term Loan, maturing March 31, 2006                                  5,577,464

                    Ventas Realty Limited Partnership              NR        NR
          785,955   Term Loan, maturing December 31, 2002                                 770,236
        3,066,012   Term Loan, maturing December 31, 2003                               2,975,947
       29,073,116   Term Loan, maturing December 31, 2005                              28,219,093

                    Washington Group International, Inc.          Ba1       BBB-
       14,937,469   Term Loan, maturing July 7, 2007                                   14,937,469
                                                                                   --------------
                                                                                      162,967,681
                                                                                   --------------
Cargo Transport: 2.4%
                    American Commercial Lines                     Ba2       BB-
        1,645,439   Term Loan, maturing June 30, 2006                                   1,438,731
        2,360,149   Term Loan, maturing June 30, 2007                                   2,063,655

                    Evergreen International Aviation, Inc.        Ba2        B+
        2,460,144   Term Loan, maturing May 31, 2002                                    2,232,580
          667,320   Term Loan, maturing May 31, 2002                                      605,593
          379,062   Term Loan, maturing May 7, 2003                                       343,999

                    Gemini Air Cargo, Inc.                         B1        B-
        4,568,856   Term Loan, maturing August 12, 2005                                 4,574,567

                    Interpool Acquisitions LLC                    Ba1       BBB
        6,982,500   Term Loan, maturing October 20, 2002                                6,999,956

                    Neoplan USA Corporation                        NR        NR
        9,742,847   Term Loan, maturing May 29, 2005                                    9,735,062

                    Omnitrax, Inc.                                 NR        NR
        8,863,636   Term Loan, maturing May 12, 2005                                    8,841,477
                                                                                   --------------
                                                                                       36,835,620
                                                                                   --------------
Cellular Communications: 12.1%
                    Airgate PCS                                    B2        B-
          967,427   Term Loan, maturing June 6, 2007                                      961,380
        3,009,772   Term Loan, maturing September 30, 2008                              2,990,961

                    American Cellular                             Ba3       BB-
        4,433,333   Term loan, maturing March 31, 2008                                  4,425,943
        7,733,333   Term loan, maturing March 31, 2009                                  7,720,442

                    Dobson Communications Corporation             Ba3       BB-
        7,450,000   Term Loan, maturing December 31, 2007                               7,397,232

                    Independent Wireless One Corporation           B2        B-
       10,000,000   Term Loan, maturing June 20, 2008                                   9,775,015

                    Nextel Communications, Inc.                   Ba2        B+
        8,140,822   Term Loan, maturing March 15, 2006                                  8,120,470

                    Nextel Finance                                Ba2        B+
       48,500,000   Term Loan, maturing March 31, 2009                                 48,199,639
</TABLE>

                                       13
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2001
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                   Bank Loan
                                                                    Ratings+
                                                                  (Unaudited)
Principal Amount    Borrower/Tranche Description                Moody's     S&P          Value
- -------------------------------------------------------------------------------------------------
<S>                 <C>                                         <C>         <C>    <C>
Cellular Communications (continued)
                    Rural Cellular Corporation                     B1        B+
     $  6,250,000   Term Loan, maturing October 3, 2008                            $    6,238,281
        6,250,000   Term Loan, maturing April 3, 2009                                   6,238,281

                    Voicestream Wireless                           B1        B+
       20,000,000   Term Loan, maturing February 25, 2008                              19,775,960
       15,000,000   Term Loan, maturing February 25, 2008                              14,831,970
       21,500,000   Term Loan, maturing February 25, 2009                              21,385,212
       25,000,000   Term Loan, maturing June 30, 2009                                  24,880,200

                    Western Wireless                              Ba2        BB
        2,500,000   Term Loan, maturing March 31, 2008                                  2,481,250
        3,000,000   Term Loan, maturing September 30, 2008                              3,009,687
                                                                                   --------------
                                                                                      188,431,923
                                                                                   --------------
Chemicals, Plastics and Rubber: 4.7%
                    Acadia Elasotmers Corporation                  NR        NR
        9,598,540   Term Loan, maturing February 17, 2004                               9,406,569

                    Cedar Chemical Corporation                     NR        NR
       11,000,411   Term Loan, maturing October 30, 2003                                7,810,292

                    Euro United Corporation(4)                     NR        NR
       14,887,500   Term Loan, maturing May 31, 2001(3)                                 7,443,750

                    Foam Fabrics, Inc.                             NR        NR
        5,139,180   Term Loan, maturing March 5, 2005                                   5,126,332

                    Foamex L.P.                                    B3        B
        3,297,269   Term Loan, maturing June 30, 2005                                   3,124,163
        2,997,528   Term Loan, maturing June 30, 2006                                   2,840,158

                    Hercules, Inc.                                Ba1       BB+
        2,000,000   Term Loan, maturing November 15, 2005                               2,000,000
       24,866,669   Term Loan, maturing October 15, 2003                               24,602,461

                    Huntsman Corporation                          Ba2        BB
        1,515,005   Revolving Loan, maturing December 31, 2002                          1,367,292
          260,155   Term Loan, maturing December 31, 2002                                 239,126
        7,000,000   Term Loan, maturing December 31, 2005                               6,515,831

                    Huntsman ICI Chemicals, Inc.                   B1        BB
        1,612,264   Term Loan, maturing June 30, 2005                                   1,605,210

                    Lyondell Chemical Company                     Ba3        BB
          463,827   Term Loan, maturing June 30, 2005                                     467,517
                                                                                   --------------
                                                                                       72,548,701
                                                                                   --------------
Containers, Packaging and Glass: 6.2%
                    Blue Ridge Paper Products, Inc.                B2        B+
        8,863,911   Term Loan, maturing May 14, 2006                                    8,863,911

                    Crown Paper Company(2)                        Caa1       D
        8,170,661   Term Loan, maturing August 22, 2003                                 4,730,812
        4,300,000   Revolving Loan (DIP), maturing September
                    14, 2001                                                            4,278,500
</TABLE>

                                      14
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2001
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                   Bank Loan
                                                                    Ratings+
                                                                  (Unaudited)
Principal Amount    Borrower/Tranche Description                Moody's     S&P          Value
- -------------------------------------------------------------------------------------------------
<S>                 <C>                                         <C>         <C>    <C>
Containers, Packaging and Glass (continued)
                    Eastern Pulp & Paper, Inc.(2)                  NR        NR
     $ 15,510,552   Term Loan, maturing August 31, 2004                            $   14,735,024
          338,360   Term Loan, maturing December 31, 2001                                 321,442

                    Impaxx, Inc.                                   NR        NR
        4,875,000   Term Loan, maturing December 31, 2005                               4,800,112

                    Nexpak Corporation                            Ba3        B+
        2,462,441   Term Loan, maturing December 31, 2005                               2,462,441
        2,462,441   Term Loan, maturing December 31, 2006                               2,462,441

                    Pliant Corporation                             B2       BB-
        3,000,000   Term Loan, maturing May 15, 2008                                    2,697,000

                    Riverwood International                        B1        B
       12,206,621   Term Loan, maturing February 28, 2003                              12,181,830
        3,724,745   Term Loan, maturing February 28, 2004                               3,740,828
        1,479,286   Term Loan, maturing August 31, 2004                                 1,485,673

                    Stone Container Corporation                   Ba3        B+
       14,249,739   Term Loan, maturing December 31, 2006                              14,312,082
       17,083,889   Term Loan, maturing December 31, 2006                              17,119,475

                    Tekni-Plex, Inc.                              Ba3        B+
        2,985,000   Term Loan, maturing June 21, 2006                                   2,925,300
                                                                                   --------------
                                                                                       97,116,871
                                                                                   --------------
Data and Internet Services: 3.5%
                    Arch Communications                            B2        NR
       13,253,625   Term Loan, maturing December 31, 2004                               8,570,682

                    Exodus Communications, Inc.                    B1        B+
        4,000,000   Term Loan, maturing October 31, 2007                                4,022,500

                    McLeod USA Corporation                        Ba2       BB-
       15,500,000   Term Loan, maturing May 31, 2008                                   15,558,125

                    Teletouch Communications                       NR        NR
        9,901,192   Term Loan, maturing November 30, 2004                               9,907,134

                    Teligent, Inc.                                Caa2      CCC
       10,000,000   Term Loan, maturing July 1, 2002                                    3,370,000

                    TSR Wireless, LLC(1)                           NR        NR
       11,970,000   Term Loan, maturing June 30, 2005(3)                                5,745,600

                    360 Networks, Inc.                             B2       BB-
        8,500,000   Term Loan, maturing December 31, 2007                               8,364,535
                                                                                   --------------
                                                                                       55,538,576
                                                                                   --------------
Diversified / Conglomerate Manufacturing: 2.2%
                    Allied Digital Technologies Corporation(2)     NR        NR
        8,647,351   Term Loan, maturing December 31, 2005(3)                              755,000

                    Barjan Products, LP                            NR        NR
        4,925,250   Term Loan, maturing May 31, 2006                                    4,802,119
</TABLE>

                                      15
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2001
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                   Bank Loan
                                                                    Ratings+
                                                                  (Unaudited)
Principal Amount    Borrower/Tranche Description                Moody's     S&P          Value
- -------------------------------------------------------------------------------------------------
<S>                 <C>                                         <C>         <C>    <C>
Divsersified / Conglomerate Manufacturing (continued)
                    General Cable Corporation                     Ba3       BB+
     $  4,367,675   Term Loan, maturing May 24, 2007                               $    4,221,358

                    Holmes Products Corporation                    B1        B+
        3,940,000   Term Loan, maturing February 15, 2007                               3,733,150

                    SPX Corporation                               Ba2       BB+
        5,000,000   Term Loan, maturing December 31, 2007                               5,043,750
        8,761,905   Term Loan, maturing September 30, 2004                              8,745,476

                    United Pet Group, Inc.                         NR        NR
        6,895,000   Term Loan, maturing March 31, 2006                                  6,867,904
                                                                                   --------------
                                                                                       34,168,757
                                                                                   --------------
Diversified / Conglomerate Service: 3.3%
                    Enterprise Profit Solutions Corporation        NR        B
        1,562,986   Term Loan, maturing June 14, 2001(3)                                  547,045

                    Key3Media Events                              Ba3       BB-
        9,965,642   Term Loan, maturing August 3, 2006                                  9,981,219
       11,406,980   Term Loan, maturing August 3, 2005                                 11,378,463

                    Mafco Finance Corporation                      NR        NR
        8,678,413   Term Loan, maturing August 29, 2001                                 8,629,597

                    Private Business                               NR        NR
        5,098,360   Term Loan, maturing August 19, 2006                                 5,047,377

                    URS Corporation                               Ba3        BB
        1,428,571   Revolving Loan, maturing June 9, 2005                               1,417,857
       11,941,871   Term Loan, maturing June 9, 2005                                   11,926,943
        1,231,250   Term Loan, maturing June 9, 2006                                    1,240,484
        1,231,250   Term Loan, maturing June 9, 2007                                    1,240,484
                                                                                   --------------
                                                                                       51,409,469
                                                                                   --------------
Ecological: 5.2%
                    Allied Waste Industries, Inc.                 Ba3        BB
       12,615,278   Term Loan, maturing July 12, 2005                                  12,270,175
       26,094,607   Term Loan, maturing July 12, 2006                                  25,840,785
       31,313,528   Term Loan, maturing July 12, 2007                                  31,008,942

                    Clean Harbors                                  NR        B
        3,900,000   Term Loan, maturing May 8, 2001                                     3,899,657

                    Rumpke Consolidated Company                    NR        NR
        8,312,500   Term Loan, maturing September 26, 2002                              8,273,016
                                                                                   --------------
                                                                                       81,292,575
                                                                                   --------------
Electronics: 3.4%
                    Acterna,LLC                                   Ba3        B+
       11,364,706   Term Loan, maturing September 30, 2007                             11,313,565

                    Decision One Corporation                      Caa3       NR
        3,465,094   Term Loan, maturing April 18, 2005                                  3,031,958
        2,188,647   Term Loan, maturing April 18, 2005                                  1,915,066

                    Dynamic Details, Inc.                         Ba3       BB-
        5,635,854   Term Loan,maturing April 22, 2005                                   5,611,198
</TABLE>

                                      16
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2001
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                   Bank Loan
                                                                    Ratings+
                                                                  (Unaudited)
Principal Amount    Borrower/Tranche Description                Moody's     S&P          Value
- -------------------------------------------------------------------------------------------------
<S>                 <C>                                         <C>         <C>    <C>
Electronics (continued)
                    Electro Mechanical Solutions, Inc.             NR        NR
     $  4,248,085   Term Loan, maturing June 30, 2004(3)                           $    3,398,468

                    Frontway Network Solutions, Inc.               NR        NR
        1,505,505   Term Loan, maturing November 20, 2002(3)                            1,327,139

                    Insilco Technologies                           B2        B+
        4,987,500   Term Loan, maturing August 25, 2007                                 4,975,031

                    Intri-Plex Technologies, Inc.                  NR        NR
        5,347,826   Term Loan, maturing September 30, 2002                              2,673,913

                    Knowles Electronics                            B1        B+
        6,965,000   Term Loan, maturing June 29, 2007                                   6,634,162

                    ON Semiconductor Corporation                  Ba3       BB-
        2,510,089   Term Loan, maturing August 4, 2006                                  2,506,951
        2,703,340   Term Loan, maturing August 4, 2007                                  2,699,961

                    Sarcom, Inc.                                   NR        NR
        7,488,141   Term Loan, maturing November 20, 2002(3)                            6,560,539
                                                                                   --------------
                                                                                       52,647,951
                                                                                   --------------
Finance: 3.9%
                    Alliance Data Systems Corporation              B1        B+
       14,400,000   Term Loan, maturing October 31, 2005                               14,402,594
        1,659,107   Term Loan, maturing March 4, 2006                                   1,639,152
          781,250   Term Loan, maturing March 4, 2006                                     771,854

                    Anthony Crane Rental, LP                       B1       BB-
       14,775,000   Term Loan, maturing July 20, 2006                                  12,041,625

                    Bridge Information Systems, Inc.(2)            NR        NR
        5,843,952   Term Loan, maturing May 29, 2005(3)                                   774,323
        2,693,225   Term Loan, maturing April 1, 2001(3)                                2,127,648
        1,365,577   Term Loan, maturing April 1, 2001(3)                                1,078,806

                    National Partnership Investments
                    Corporation                                    NR        NR
        5,735,373   Term Loan, maturing June 30, 2001                                   5,709,613

                    Rent-A-Center, Inc.                           Ba3       BB-
        4,613,741   Term Loan, maturing January 31, 2006                                4,576,974
        5,953,119   Term Loan, maturing January 31, 2007                                5,905,679
        3,510,358   Term Loan, maturing December 31, 2007                               3,518,039

                    United Rentals, Inc.                          Ba3       BB+
        4,975,000   Term Loan, maturing June 30, 2006                                   4,814,203

                    Value Asset Management, Inc.                   NR        NR
        2,833,333   Term Loan, maturing April 28, 2003                                  2,826,250
                                                                                   --------------
                                                                                       60,186,760
                                                                                   --------------
Grocery: 0.2%
                    Grand Union Capital Corporation(2)             NR        NR
        4,976,273   Term Loan, maturing August 17, 2003                                 3,769,526
                                                                                   --------------
                                                                                        3,769,526
                                                                                   --------------
</TABLE>

                                       17
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2001
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                   Bank Loan
                                                                    Ratings+
                                                                  (Unaudited)
Principal Amount    Borrower/Tranche Description                Moody's     S&P          Value
- -------------------------------------------------------------------------------------------------
<S>                 <C>                                         <C>         <C>    <C>
Healthcare, Education and Childcare: 9.4%
                    Advance PCS                                   Ba3        BB
     $  4,500,000   Term Loan, maturing October 2, 2007                            $    4,518,284
       13,769,231   Term Loan, maturing October 3, 2005                                13,691,779

                    Alliance Imaging, Inc.                         B1        B+
        1,343,284   Term Loan, October 2, 2007                                          1,319,776
        6,088,327   Term Loan, October 2, 2008                                          5,981,781

                    Caremark, RX                                  Ba3       BB-
           69,981   Term Loan, maturing June 9, 2001                                       69,871
          340,881   Term Loan, maturing June 9, 2001                                      340,349

                    Children's Discovery Centers of America        B3        B-
        9,117,188   Term Loan, maturing August 10, 2004                                 8,889,258

                    Columbia/HCA Healthcare                       Ba2       BB+
          725,000   Revolving Loan, maturing February 26, 2003                            717,750
       15,000,000   Term Loan, maturing September 13, 2001                             15,018,750

                    Community Health Systems, Inc.                 B2        B
        5,875,428   Term Loan, maturing December 31, 2003                               5,832,414
        5,875,428   Term Loan, maturing December 31, 2004                               5,833,460
        1,306,644   Term Loan, maturing December 31, 2005                               1,302,444

                    Concentra Operating Corporation               Ba3        B+
        3,283,333   Term Loan, maturing June 30, 2006                                   3,184,833
        1,641,667   Term Loan, maturing June 30, 2007                                   1,592,417

                    Covenent Care California                       NR        NR
        6,000,000   Term Loan, maturing April 30, 2001                                  5,910,000

                    Dade Behring, Inc.                            Ba3        B+
        3,188,876   Term Loan, maturing June 30, 2006                                   2,134,270
        3,188,876   Term Loan, maturing June 30, 2007                                   2,134,270

                    Express Scripts, Inc.                         Ba2        BB
        9,273,504   Term Loan, maturing March 31, 2005                                  9,227,137

                    Fountain View, Inc.                            B2        B
       12,794,118   Term Loan, maturing March 31, 2004                                 12,346,324

                    Genesis Health Ventures, Inc.(2)              Caa2       NR
        2,766,313   Term Loan, maturing September 30, 2003                              1,711,656

                    Healthcare Direct, Inc.                        NR        NR
        2,923,881   Term Loan, maturing August 1, 2004                                  2,868,542
        3,997,500   Term Loan, maturing August 1, 2006                                  3,950,242

                    Magellan Health Services                       B2        B+
        1,243,317   Term Loan, maturing February 28, 2005                               1,195,657
        1,243,317   Term Loan, maturing February 28, 2006                               1,195,657

                    Mellon Financial Services Corporation IV(2)    NR        NR
        4,400,754   Term Loan, maturing September 30, 2004                              2,688,861

                    Paragon Health Network, Inc.(2)                NR        NR
       14,449,496   Term Loan, maturing April 30, 2005(3)                               7,239,198
        8,644,935   Term Loan, maturing March 31, 2006(3)                               4,331,112

                    Sybron Dental Specialties                     Ba3       BB-
        2,500,000   Term Loan, maturing December 1, 2007                                2,517,970
</TABLE>

                                       18
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2001
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                   Bank Loan
                                                                    Ratings+
                                                                  (Unaudited)
Principal Amount    Borrower/Tranche Description                Moody's     S&P          Value
- -------------------------------------------------------------------------------------------------
<S>                 <C>                                         <C>         <C>    <C>
Healthcare, Education and Childcare (continued)
                    The Brown Schools (Healthcare America)        Caa1       B
     $ 10,156,250   Term Loan, maturing June 30, 2004                              $    9,699,219
        4,062,500   Term Loan, maturing June 30, 2005                                   3,879,688

                    The Multicare Companies, Inc.(2)              Caa3       NR
        3,312,183   Term Loan, maturing September 30, 2003(3)                           2,023,744

                    Vision Twenty-One                             Caa3       B-
        2,898,018   Term Loan, maturing October 31, 2002                                2,840,057
                                                                                   --------------
                                                                                      146,186,770
                                                                                   --------------
Home and Office Furnishings, Housewares, and Durable Consumer Products: 2.5%
                    American Blind & Wallpaper Factory, Inc.       NR        NR
          722,983   Term Loan, maturing December 29, 2005                                 714,797

                    Buhrmann NV                                   Ba3       BB-
        8,569,283   Term Loan, maturing October 26, 2007                                8,579,231
        6,914,903   Term Loan, maturing October 26, 2005                                6,855,836

                    Desa International, Inc.                       B2        B-
        7,735,900   Term Loan, maturing November 26, 2004                               7,175,047

                    Identity Group, Inc.                           B2        B+
        4,925,000   Term Loan, maturing May 7, 2007                                     4,683,984

                    Imperial Home D-cor Group(2)                   D         D
        2,490,579   Revolving Loan, maturing March 13, 2005(3)                            622,645
        5,969,469   Term Loan, maturing March 13, 2005(3)                               1,492,367
        1,492,367   Term Loan, maturing March 13, 2006(3)                                 373,092

                    Juno Lighting                                  B1        B+
        4,605,521   Term Loan, maturing November 30, 2006                               4,573,858

                    U.S. Office Products                          Caa1      CCC-
        6,650,731   Term Loan, maturing June 9, 2006                                    3,800,893
                                                                                   --------------
                                                                                       38,871,750
                                                                                   --------------
Hotels, Motels, Inns and Gaming: 10.9%
                    Aladdin Gaming, LLC                            B2       CCC+
        2,984,211   Term Loan, maturing February 26, 2008                               2,621,131
        4,477,500   Term Loan, maturing August 26, 2008                                 3,932,736

                    Ameristar Casinos, Inc.                       Ba3        B+
        2,278,107   Term Loan, maturing December 21, 2006                               2,282,378
        1,952,663   Term Loan, maturing December 21, 2007                               1,956,324

                    Autotote Corporation                           B1        B+
        4,987,500   Term Loan, maturing August 23, 2007                                 4,800,469

                    Extended Stay America, Inc.                   Ba3        B+
        9,849,495   Term Loan, maturing December 31, 2003                               9,808,452
        5,500,000   Term Loan, maturing June 30, 2007                                   5,516,698

                    Horseshoe Gaming Holding Corporation          Ba2       BB+
        2,961,000   Term Loan, maturing September 30, 2006                              2,969,329

                    Lodgian Financing Corporation                  B1        B+
       12,416,345   Term Loan, maturing September 15, 2006                             12,431,865
</TABLE>

                                       19
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2001
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                   Bank Loan
                                                                    Ratings+
                                                                  (Unaudited)
Principal Amount    Borrower/Tranche Description                Moody's     S&P          Value
- -------------------------------------------------------------------------------------------------
<S>                 <C>                                         <C>         <C>    <C>
Hotels, Motels, Inns and Gaming (continued)
                    Meristar Hospitality Corporation              Ba1       BB-
     $ 19,352,932   Term Loan, maturing July 31, 2003                              $   19,264,237

                    Meristar Investment Partners                  Ba3        B+
        9,962,980   Term Loan, maturing January 31, 2004                                9,900,711

                    Penn National Gaming, Inc.                    Ba3        B+
        4,975,000   Term Loan, matuing August 8, 2006                                   4,964,120

                    Resort at Summerlin(2)                         NR        NR
        1,218,274   Revolving Loan (DIP), maturing September
                    30, 2001                                                            1,193,909

                    Starwood Hotels & Resorts Worldwide, Inc.     Ba1       BBB-
       35,000,000   Term Loan, maturing February 23, 2003                              34,934,375
       11,500,000   Term Loan, maturing February 23, 2003                              11,535,938

                    Strategic Hotel Capital, Inc.                 Ba2       BB-
        9,341,667   Term Loan, maturing November 9, 2004                                9,400,052

                    Wyndham International, Inc.                    B1        B+
       11,390,769   Term Loan, maturing June 30, 2004                                  11,359,126
       21,500,000   Term Loan, maturing June 30, 2006                                  21,340,083
                                                                                   --------------
                                                                                      170,211,933
                                                                                   --------------
Insurance: 0.6%
                    USI Holdings Corporation                       B2        B+
        9,500,000   Term Loan, maturing September 17, 2004                              9,470,313
                                                                                   --------------
                                                                                        9,470,313
                                                                                   --------------
Leisure, Amusement, Motion Pictures and Entertainment: 4.5%
                    Amfac Parks & Resorts, Inc.                    NR        NR
        3,637,500   Term Loan, maturing September 4, 2004                               3,592,031
        3,637,500   Term Loan, maturing September 30, 2004                              3,592,031

                    Fitness Holdings Worldwide                     NR        B
        9,362,000   Term Loan, maturing November 1, 2006                                9,067,097
        8,370,000   Term Loan, maturing November 1, 2007                                8,106,345

                    Icon Health & Fitness, Inc.                    NR        NR
        4,896,875   Term Loan, maturing November 29, 2004                               4,872,390
        5,259,906   Term Loan, maturing March 1, 2005                                   5,102,109
        3,500,000   Term Loan, maturing August 31, 2004                                 3,469,375

                    Metro-Goldwyn-Mayer                           Ba3       BB-
       10,000,000   Term Loan, maturing March 31, 2005                                  9,816,670
        9,000,000   Term Loan, maturing March 31, 2006                                  8,942,346

                    Panavision, Inc.                               B2        B+
       14,183,919   Term Loan, maturing March 10, 2005                                 14,042,080
                                                                                   --------------
                                                                                       70,602,474
                                                                                   --------------
Machinery: 1.2%
                    Alliance Laundry Systems, LLC                  B1        B+
        4,987,500   Term Loan, maturing May 1, 2005                                     4,865,930

                    Clearing-Niagara(2)                            NR        NR
        8,312,732   Term Loan, maturing October 18, 2004(3)                             6,234,549
</TABLE>

                                       20
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2001
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                   Bank Loan
                                                                    Ratings+
                                                                  (Unaudited)
Principal Amount    Borrower/Tranche Description                Moody's     S&P          Value
- -------------------------------------------------------------------------------------------------
<S>                 <C>                                         <C>         <C>    <C>
Machinery (continued)
                    Morris Material Handling(2)                    NR        NR
     $  4,658,193   Term Loan, maturing March 31, 2005                             $    4,101,294

                    Vutek, Inc.                                    B1        NR
        3,956,869   Term Loan, maturing December 30, 2007                               3,950,636
                                                                                   --------------
                                                                                       19,152,409
                                                                                   --------------
Mining, Steel, Iron and Non-Precious Metals: 0.4%
                    National Refractories Company                  NR        NR
        2,083,334   Term Loan, maturing September 30, 2001                              2,088,638

                    Peabody Holding Company                       Ba2       BB-
        4,122,807   Term Loan, maturing June 30, 2006                                   4,122,807
                                                                                   --------------
                                                                                        6,211,445
                                                                                   --------------
North American Cable: 5.6%
                    Benedek Broadcasting Corporation               B1        B
        6,000,000   Term Loan, maturing November 20, 2007                               5,910,000

                    CC VI Operating Company LLC                   Ba3       BB+
        5,000,000   Term Loan, maturing November 1, 2008                                5,003,125

                    CC VIII Operating LLC                         Ba3       BB+
        4,500,000   Term Loan, maturing February 2, 2008                                4,504,500

                    Century Cable Holdings LLC                    Ba3        BB
        8,000,000   Term Loan, maturing June 30, 2009                                   7,999,232
       16,000,000   Term Loan, maturing December 31, 2009                              16,002,496

                    Charter Communications Operating LLC          Ba3        BB
       16,500,000   Term Loan, maturing March 17, 2008                                 16,497,706
        6,556,250   Term Loan, maturing March 18, 2008                                  6,559,325

                    Emmis Communications                          Ba2        B+
       25,000,000   Term Loan, maturing August 30, 2009                                25,140,625
                                                                                   --------------
                                                                                       87,617,009
                                                                                   --------------
Oil and Gas: 0.5%
                    Key Energy Group, Inc.                        Ba3        B+
        3,472,950   Term Loan, maturing October 26, 2004                                3,477,833
        5,100,333   Revolving Loan, maturing October 26, 2003                           4,966,449
                                                                                   --------------
                                                                                        8,444,282
                                                                                   --------------
Other Telecommunications: 2.1%
                    Cincinnati Bell, Inc.                         Ba1        NR
       10,000,000   Term Loan, maturing January 31, 2006                               10,029,170
       17,500,000   Term Loan, maturing November 9, 2004                               17,394,720

                    Pacific Coin                                   NR        NR
        4,380,713   Term Loan, maturing October 31, 2007                                4,293,099
        2,782,282   Term Loan, maturing December 31, 2007(3)                            1,669,369
                                                                                   --------------
                                                                                       33,386,358
                                                                                   --------------
</TABLE>
                                       21
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2001
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                   Bank Loan
                                                                    Ratings+
                                                                  (Unaudited)
Principal Amount    Borrower/Tranche Description                Moody's     S&P          Value
- -------------------------------------------------------------------------------------------------
<S>                 <C>                                         <C>         <C>    <C>
Personal and Nondurable Consumer Products: 2.7%
                    AM Cosmetics, Inc.                             NR        NR
     $  2,290,692   Revolver, maturing May 30, 2004(3)                             $    1,947,089
        1,305,151   Term Loan, maturing June 30, 2003(3)                                1,109,378
        2,610,303   Term Loan, maturing December 31, 2004(3)                            2,218,758

                    Amscan Holdings                                B1        B+
        9,668,774   Term Loan, maturing December 31, 2004                               8,532,693

                    Centis, Inc.                                   B1        B
        3,900,000   Term Loan, maturing September 30, 2005                              2,808,000
        3,421,250   Term Loan, maturing September 30, 2006                              2,463,300

                    Medtech Products, Inc.                         NR        NR
        7,000,468   Term Loan, maturing October 15, 2002                                6,930,463

                    Norwood Promotional Products                   B2        B
        3,131,029   Term Loan, maturing May 12, 2006                                    3,110,483
        2,795,295   Term Loan, maturing November 30, 2006                               2,776,952

                    Paint Sundry Brands LLC                        B1        B+
        1,019,102   Term Loan, maturing August 11, 2005                                 1,003,816
          998,095   Term Loan, maturing August 11, 2006                                   983,123

                    Playtex Products                              Ba2        BB
        8,000,000   Term Loan, maturing September 15, 2003                              7,876,664
                                                                                   --------------
                                                                                       41,760,719
                                                                                   --------------
Personal, Food & Miscellaneous: 2.7%
                    Brickman Group Ltd.                            NR        NR
        4,687,782   Term Loan, maturing December 31, 2005                               4,664,343

                    Coinmach Laundry Corporation                   B1       BB-
        8,695,881   Term Loan, maturing June 30, 2005                                   8,686,368
        5,595,808   Revolving Loan, maturing May 5, 2005                                5,497,881

                    Otis Spunkmeyer, Inc.                          NR        NR
        4,566,752   Term Loan, maturing June 1, 2006                                    4,292,747

                    Papa Gino's, Inc.                              NR        NR
        2,145,907   Term Loan, maturing February 19, 2002                               2,143,466
       14,388,247   Term Loan, maturing February 19, 2004                              14,373,828
        2,015,225   Term Loan, maturing August 31, 2004                                 1,991,401
                                                                                   --------------
                                                                                       41,650,034
                                                                                   --------------
Printing and Publishing: 4.1%
                    Advanstar Communications, Inc.                Ba3        B+
        1,782,857   Term Loan, maturing November 7, 2007                                1,787,314
       16,056,000   Term Loan, maturing April 11, 2007                                 16,005,825

                    Canwest Media, Inc.                           Ba3       BB-
        6,154,783   Term Loan, maturing May 15, 2008                                    6,167,603
        5,767,826   Term Loan, maturing May 15, 2009                                    5,779,841

                    Mail-Well I Corporation                       Ba2        BB
        4,202,571   Term Loan, maturing February 22, 2007                               4,181,558

                    Vertis, Inc.                                   B1       BB-
        3,974,258   Term Loan, maturing December 7, 2008                                3,859,998
</TABLE>

                                       22
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2001
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                   Bank Loan
                                                                    Ratings+
                                                                  (Unaudited)
Principal Amount    Borrower/Tranche Description                Moody's     S&P          Value
- -------------------------------------------------------------------------------------------------
<S>                 <C>                                         <C>         <C>    <C>
Printing and Publishing: 4.1% (continued)
                    Von Hoffman Press, Inc.                        B1        B+
     $  3,246,429   Term Loan, maturing May 22, 2004                               $    3,196,719
       10,551,786   Term Loan, maturing May 22, 2005                                   10,390,217

                    Weider Publications, Inc.                      NR        B-
        9,675,000   Term Loan, maturing September 28, 2005                              9,675,000

                    Ziff-Davis Media, Inc.                        Ba3        B+
        2,369,060   Term Loan, maturing March 31, 2007                                  2,362,027
                                                                                   --------------
                                                                                       63,406,102
                                                                                   --------------
Radio and Television Broadcasting: 2.4%
                    Insight Midwest, LP                           Ba3       BB+
       23,000,000   Term Loan, maturing December 31, 2009                              23,120,750

                    Pegasus Media & Communications, Inc.           B1        B+
        2,000,000   Term Loan, maturing April 20, 2005                                  2,000,834

                    Susquehanna Media Company                     Ba1       BB-
        5,000,000   Term Loan, maturing June 30, 2008                                   5,009,375

                    Telemundo Holdings, Inc.                       B1        B+
        6,837,878   Term Loan, maturing December 29, 2006                               6,786,594
                                                                                   --------------
                                                                                       36,917,553
                                                                                   --------------
Retail Stores: 2.4%
                    CSK Auto, Inc.                                Ba3       BB-
        6,250,000   Term Loan, maturing October 31, 2003                                5,715,625
        2,479,920   Term Loan, maturing October 31, 2003                                2,267,887

                    Murray's Discount Auto Stores, Inc.            NR        NR
       13,369,186   Term Loan, maturing June 30, 2003                                  12,961,723
          198,333   Revolving Loan, maturing January 26, 2006                             191,229

                    Peebles, Inc.                                  NR        NR
        2,134,913   Term Loan, maturing April 30, 2001                                  2,102,889
       11,565,647   Term Loan, maturing April 30, 2002                                 11,392,163

                    Travel Centers of America, Inc.               Ba3        BB
        2,500,000   Term Loan, maturing November 8, 2006                                2,520,313
                                                                                   --------------
                                                                                       37,151,829
                                                                                   --------------
Telecommunication Equipment: 3.0%
                    American Tower, LP                            Ba3       BB-
       17,916,667   Term Loan, maturing June 30, 2007                                  17,838,281

                    Crown Castle Operating Company                Ba3       BB-
        5,000,000   Term Loan, maturing March 18, 2008                                  5,028,470

                    Infonet Services Corp                         Ba3        BB
        5,000,000   Term Loan, maturing June 20, 2006                                   4,987,500

                    Pinnacle Towers, Inc.                          B1        B+
        6,000,000   Term Loan, maturing June 30, 2007                                   5,962,500
</TABLE>

                                       23
<PAGE>
                            Pilgrim Prime Rate Trust


- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2001
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                   Bank Loan
                                                                    Ratings+
                                                                  (Unaudited)
Principal Amount    Borrower/Tranche Description                Moody's     S&P          Value
- -------------------------------------------------------------------------------------------------
<S>                 <C>                                         <C>         <C>    <C>
Telecommunication Equipment (continued)
                    Spectrasite Communications                     B1        B
     $  6,500,000   Term Loan, maturing February 22, 2008                          $    6,539,104

                    Tripoint Global Communications, Inc.           NR        NR
        6,499,545   Term Loan, maturing May 28, 2006                                    6,418,301
                                                                                   --------------
                                                                                       46,774,156
                                                                                   --------------
Textiles and Leather: 3.6%
                    Accessory Network Group, Inc.                  NR        NR
        8,267,519   Term Loan, maturing August 13, 2005                                 7,370,759

                    Galey & Lord, Inc.                            Caa2       B+
        4,686,034   Term Loan, maturing March 23, 2005                                  4,246,718
        3,324,208   Term Loan, maturing March 23, 2006                                  3,012,564

                    Humphrey's, Inc.                               NR        NR
        6,645,732   Term Loan, maturing November 15, 2003                               5,682,101

                    Levi Strauss & Company                        Ba2       BB+
        3,214,286   Revolving Loan, maturing August 29, 2003                            3,206,250
       10,000,000   Term Loan, maturing August 29, 2003                                 9,962,500
        4,000,000   Term Loan, maturing August 31, 2003                                 4,028,332

                    Malden Mills                                   B1        NR
        9,809,000   Term Loan, maturing October 28, 2006                                8,533,830

                    Scovill Fasteners, Inc.                       Caa3      CCC-
        4,508,929   Term Loan, maturing November 26, 2003                               4,332,882

                    Tartan Textile Services, Inc.                  NR        NR
        9,712,437   Term Loan, maturing May 13, 2005(3)                                 5,827,462
                                                                                   --------------
                                                                                       56,203,398
                                                                                   --------------
                    Total Senior Loans 127.7%
                     (Cost $2,110,318,743)                                          1,988,832,057
                                                                                   --------------
</TABLE>

                                       24
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2001
- --------------------------------------------------------------------------------

Other Corporate Debt

<TABLE>
<CAPTION>
                                                                   Bank Loan
                                                                    Ratings+
                                                                  (Unaudited)
Principal Amount    Borrower/Tranche Description                Moody's     S&P          Value
- -------------------------------------------------------------------------------------------------
<S>                 <C>                                         <C>         <C>    <C>
Automobile 0.4%
                    Capital Tool & Design Ltd.                     NR        NR
     $  6,000,000   Subordinated Note, maturing July 19, 2003                      $    5,760,000
                                                                                   --------------
                                                                                        5,760,000
                                                                                   --------------
Building & Real Estate 0.6%
                    National Golf Operating Partnership            NR        NR
        9,900,000   Term Loan, maturing July 22, 2004                                   9,924,750
                                                                                   --------------
                                                                                        9,924,750
                                                                                   --------------
Finance 0.6%
                    Value Asset Management, Inc.                   NR        NR
       10,000,000   Sr. Sub Bridge, maturing August 31, 2005                            9,975,000
                                                                                   --------------
                                                                                        9,975,000
                                                                                   --------------
Healthcare, Education and Childcare 0.0%
                    Vision Twenty-One                              NR        NR
          368,022   Term Loan, maturing October 31, 2002                                  349,621
                                                                                   --------------
                                                                                          349,621
                                                                                   --------------
Oil and Gas 0.4%
                    Premcor Refining, Inc.                        Ba3       BB-
        9,000,000   Floating Rate Note, maturing November 15,
                    2004                                                                6,592,500
                                                                                   --------------
                                                                                        6,592,500
                                                                                   --------------
Personal & Nondurable Consumer Products 0.2%
                    Paint Sundry Brands LLC                        NR        NR
        2,875,000   Subordinated Note, maturing August 11,
                    2008                                                                2,645,000
                                                                                   --------------
                                                                                        2,645,000
                                                                                   --------------
                    Total Other Corporate Debt 2.3%
                    (Cost $37,766,022)                                                 35,246,871
                                                                                   --------------
</TABLE>

                                       25
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2001
- --------------------------------------------------------------------------------

Common Stocks

<TABLE>
<CAPTION>
           Shares
           ------
<S>                 <C>                                                            <C>
                    Apparel Products 0.0%
           13,294   Butterick Company, Inc.@(R)                                    $       22,364
                                                                                   --------------
                    Automobile 0.5%
          212,171   Breed Technology@(R)                                                3,365,032
          660,808   Safelite Glass Corp@                                                4,956,060
           44,605   Safelite Realty@                                                            1
                                                                                   --------------
                                                                                        8,321,093
                                                                                   --------------
                    Electronics 0.1%
          149,645   Decision One Corporation@                                           1,197,160
                                                                                   --------------
                    Diversified / Conglomerate Services 0.0%
           60,056   Staff Leasing, Inc.@                                                  195,182
                                                                                   --------------
                    Home and Office Furnishings 0.1%
           80,400   American Blind and Wallpaper, Inc.@(R)                              1,045,200
                                                                                   --------------
                    Personal and Nondurable Consumer Products 0.0%
           37,197   AM Cosmetics Corp.@(R)                                                    --
                                                                                   --------------
                    Restaurants 0.5%
          413,980   America's Favorite Chicken Co.@(R)                                  7,203,164
                                                                                   --------------
                    Textiles and Leather 0.0%
          127,306   Dan River, Inc.@                                                      308,081
                                                                                   --------------
                    Total Common Stock 1.2%
                      (Cost $4,980,861)                                                18,292,244
                                                                                   --------------

Other Securities

           Shares
           ------
              415  AM Cosmetics, Series E-1 Perferred Stock, exchangeable
                    for Common Shares on a 1-for-1 basis.                          $           --
                                                                                   --------------
           48,930  Autotote Systems, Inc., Warrants representing 48,930
                    Common shares, Expires 10/30/03@(R)                                    57,540
                                                                                   --------------
                1  Autotote Systems, Inc., Option representing 0.248%
                    Common shares issued and outstanding @(R)                                  --
                                                                                   --------------
           94,620  Boston Chicken, Inc., residual interest in the Boston
                    Chicken Plan Trust@(R)(2)                                           9,460,761
                                                                                   --------------
           10,000  Casden Properties Operation, Junior Cumulative
                   Preferred Partnership Units (R)                                        250,000
                                                                                   --------------
           80,634  Capital Tool & Design, Warrants representing 80,634
                    Common shares@(R)                                                     256,658
                                                                                   --------------
           19,000  Covenant Care, Inc., Warrants representing 19,000
                    Common shares@(R)                                                       6,915
                                                                                   --------------
              449  Murray's Discount, Warrants representing 5% of
                    common equity on a fully diluted basis@(R)                                  4
                                                                                   --------------
            2,564  Electro Mechanical Solutions, Warrants representing
                    2,564 Common shares@(R)                                                    26
                                                                                   --------------
          243,778  Vision Twenty-one, Warrants representing 243,778
                    Common shares@(R)                                                       2,438
                                                                                   --------------
                     Total Other Securities -- 0.6%
                       (Cost $9,460,761)                                               10,034,342
                                                                                   --------------
                   Total Investments (cost $2,162,526,387)(5)             131.8%   $2,052,405,514
                   Liabilities in excess of cash and other assets, net    (31.8)%    (494,973,417)
                                                                          -----    --------------
                   Net Assets                                             100.0%   $1,557,432,097
                                                                          =====    ==============
</TABLE>

                                       26
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of February 28, 2001
- --------------------------------------------------------------------------------

- ----------
@    Non-income producing security.
(R)  Restricted security.
*    Senior loans,  while exempt from  registration  under the Securities Act of
     1933,  contain certain  restrictions on resale and cannot be sold publicly.
     These senior loans 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 credit agreement,  LIBOR, the certificate of deposit rate,
     or in some cases another base lending rate.
NR   = Not Rated
DIP  = Debter In Possession Loan
+    Bank Loans rated below Baa by Moody's  Investors  Services,  Inc. or BBB by
     Standard & Poor's Group are considered to be below investment grade.
(1)  The  borrower  filed for  protection  under  Chapter 7 of the U.S.  Federal
     bankruptcy code.
(2)  The borrower  filed for  protection  under  Chapter 11 of the U.S.  Federal
     bankruptcy code.
(3)  Loan is on non-accrual basis.
(4)  The  borrower  filed for  protection  under  the  Canadian  Bankruptcy  and
     Insolvency Act.
(5)  For federal income tax purposes,  which is the same for financial reporting
     purposes,   cost  of  investments  is  $2,162,526,387  and  net  unrealized
     depreciation consists of the following:

         Gross Unrealized Appreciation                           $   20,651,951
         Gross Unrealized Depreciation                             (130,772,824)
                                                                 --------------
            Net Unrealized Depreciation                          $ (110,120,873)
                                                                 ==============

                                       27
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES as of February 28, 2001
- --------------------------------------------------------------------------------

<TABLE>
<S>                                                                             <C>
ASSETS:
Investments in securities at value (Cost $2,162,526,387)                        $ 2,052,405,514
Cash                                                                                  2,485,279
Receivables:
 Interest                                                                            18,114,005
 Other                                                                                   59,649
Prepaid expenses                                                                        390,559
Prepaid arrangement fees on notes payable                                               431,140
                                                                                ---------------
   Total assets                                                                   2,073,886,146
                                                                                ---------------
LIABILITIES:
Notes payable                                                                       510,000,000
Deferred arrangement fees on senior loans                                             1,047,971
Accrued interest payable                                                              2,331,429
Accrued Preferred Shares dividend payable                                               261,694
Payable to affiliates                                                                 1,619,673
Accrued expenses                                                                      1,193,282
                                                                                ---------------
   Total liabilities                                                                516,454,049
                                                                                ---------------
NET ASSETS                                                                      $ 1,557,432,097
                                                                                ===============
Net asset value per common share outstanding (net assets less preferred
 shares at liquidation value, divided by 136,847,071 common shares
 authorized and outstanding, no par value)                                      $          8.09
                                                                                ===============
Net Assets Consist of:
 Preferred Shares, $25,000 stated value per share
   at liquidation value (18,000 shares outstanding)                             $   450,000,000
 Paid in capital                                                                  1,287,135,487
 Undistributed net investment income                                                  7,032,048
 Accumulated net realized loss on investments                                       (76,614,565)
 Net unrealized depreciation of investments                                        (110,120,873)
                                                                                ---------------
   Net assets                                                                   $ 1,557,432,097
                                                                                ===============
</TABLE>

                 See Accompanying Notes to Financial Statements.

                                       28
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
 STATEMENT OF OPERATIONS for the Year Ended February 28, 2001
- --------------------------------------------------------------------------------

INVESTMENT INCOME:
Interest                                                          $ 167,500,046
Arrangement fees earned                                               2,131,404
Dividends                                                                30,000
Other                                                                 3,875,338
                                                                  -------------
 Total investment income                                            173,536,788
                                                                  -------------
EXPENSES:
Interest                                                             30,529,134
Investment management fees                                           14,077,382
Administration fees                                                   4,077,743
Transfer agent and registrar fees                                       346,805
Reports to shareholders                                                 275,509
Custodian fees                                                          556,318
Revolving credit facility fees                                          299,904
Professional fees                                                       970,447
Preferred Shares -- dividend disbursing agent fees                      324,734
Insurance expense                                                        38,509
Pricing fees                                                             85,742
ICI fees                                                                 16,663
Postage fees                                                            342,850
Trustees' fees                                                           56,830
                                                                  -------------
 Total expenses                                                      51,998,570
                                                                  -------------
   Net investment income                                            121,538,218
                                                                  -------------
REALIZED AND UNREALIZED LOSS FROM INVESTMENTS:
Net realized loss on investments                                     (4,909,435)
Net change in unrealized depreciation of investments               (101,823,007)
                                                                  -------------
 Net loss on investments                                           (106,732,442)
                                                                  -------------
   Net increase in net assets resulting from operations           $  14,805,776
                                                                  =============

                 See Accompanying Notes to Financial Statements.

                                       29
<PAGE>
                            Pilgrim Prime Rate Trust


- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                      Year Ended             Year Ended
                                                                     February 28,           February 29,
                                                                         2001                   2000
                                                                   ---------------        ---------------
<S>                                                                <C>                    <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income                                              $   121,538,218        $   106,494,015
Net realized loss on investments                                        (4,909,435)           (37,913,867)
Change in unrealized depreciation of investments                      (101,823,007)            (2,330,185)
                                                                   ---------------        ---------------
 Net increase in net assets resulting from operations                   14,805,776             66,249,963
                                                                   ---------------        ---------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Common Shares                                                         (117,654,573)          (104,450,361)
Preferred Shares                                                        (8,783,182)                    --
                                                                   ---------------        ---------------
Decrease in net assets from distributions to shareholders             (126,437,755)          (104,450,361)
                                                                   ---------------        ---------------
CAPITAL SHARE TRANSACTIONS:
Common shares issued from dividend reinvestment                          5,733,515              9,369,771
Common shares sold in connection with Shelf offerings                    1,236,107             43,604,392
Net proceeds from sales of Preferred Shares                            444,755,346                     --
                                                                   ---------------        ---------------

 Net increase from capital share transactions                          451,724,968             52,974,163
                                                                   ---------------        ---------------
 Net increase in net assets                                            340,092,989             14,773,765

NET ASSETS:
Beginning of year                                                    1,217,339,108          1,202,565,343
                                                                   ---------------        ---------------
End of year (including undistributed net investment income
 of $7,032,048 and $11,931,585, respectively)                      $ 1,557,432,097        $ 1,217,339,108
                                                                   ===============        ===============
SUMMARY OF COMMON SHARE TRANSACTIONS:
Shares issued in payment of distributions from net
 investment income                                                         666,982              1,031,864
Shares sold in connection with Shelf offerings                             143,928              4,798,146
                                                                   ---------------        ---------------
 Net increase in shares Common Shares outstanding                          810,910              5,830,010
                                                                   ===============        ===============
SUMMARY OF PREFERRED SHARES SOLD:
 Series M                                                                    3,600                     --
 Series T                                                                    3,600                     --
 Series W                                                                    3,600                     --
 Series Th                                                                   3,600                     --
 Series F                                                                    3,600                     --
                                                                   ---------------        ---------------
 Total preferred shares sold                                                18,000                     --
                                                                   ===============        ===============
</TABLE>
                 See Accompanying Notes to Financial Statements.

                                       30
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS for the Year Ended February 28, 2001
- --------------------------------------------------------------------------------

INCREASE (DECREASE) in Cash
Cash Flows From Operating Activities:
 Interest received                                              $   169,174,417
 Dividends received                                                      30,000
 Facility fees paid                                                     (77,341)
 Arrangement fee received                                             1,179,550
 Other income received                                                3,860,718
 Interest paid                                                      (31,337,289)
 Other operating expenses paid                                      (20,919,406)
 Purchases of portfolio securities                               (1,277,305,465)
 Proceeds from disposition of portfolio securities                  808,257,969
                                                                ---------------
   Net cash used for operating activities                          (347,136,847)
                                                                ---------------
Cash Flows From Financing Activities:
 Dividends paid                                                    (111,921,058)
 Overdraft financing                                                 (1,926,781)
 Net proceeds from sales of Preferred Shares                        444,755,346
 Dividends paid to Preferred Shareholders                            (8,521,488)
 Proceeds from Common Shares shelf offerings                          1,236,107
 Loan advance                                                        26,000,000
                                                                ---------------
   Net cash provided by financing activities                        349,622,126
                                                                ---------------
 Net change in cash                                                   2,485,279
 Cash at beginning of year                                                   --
                                                                ---------------
 Cash at end of year                                            $     2,485,279
                                                                ===============
Reconciliation Of Net Increase In Net Assets Resulting From
 Operations To Net Cash Used for Operating Activities:
Net increase in net assets resulting from operations            $    14,805,776
                                                                ---------------
Adjustments to reconcile net increase in net assets resulting
 from operations to net cash used for operating activities:
 Increase in investments in securities                             (362,315,054)
 Decrease in interest receivable                                      1,674,371
 Increase in other assets                                               (14,620)
 Decrease in prepaid arrangement fees on notes payable                  222,563
 Increase in prepaid expenses                                           (61,395)
 Decrease in deferred arrangement fees on senior loans                 (951,854)
 Decrease in accrued interest payable                                  (808,155)
 Increase in payable to affiliates                                    1,367,996
 Decrease in accrued expenses                                        (1,056,475)
                                                                ---------------
 Total adjustments                                                 (361,942,623)
                                                                ---------------
   Net cash used for operating activities                       $  (347,136,847)
                                                                ===============

                 See Accompanying Notes to Financial Statements.

                                       31
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------

For a common share outstanding throughout the period


<TABLE>
<CAPTION>
                                                                  Years Ended February 28 or February 29,
                                                          -----------------------------------------------------
                                                              2001                 2000                1999(8)
                                                          -----------          -----------          -----------
<S>                                                       <C>                  <C>                  <C>
Per Share Operating Performance
Net asset value, beginning of period                      $      8.95          $      9.24          $      9.34
Net investment income                                            0.88                 0.79                 0.79
Net realized and unrealized gain (loss)
 on investments                                                 (0.78)               (0.30)               (0.10)
                                                          -----------          -----------          -----------
Increase in net asset value from
 investment operations                                           0.10                 0.49                 0.69
Distributions to Common Shareholders
 from net investment income                                     (0.86)               (0.78)               (0.82)
Distribution to Preferred Shareholders                          (0.06)                  --                   --
Increase in net asset value from share offerings                   --                   --                 0.03
Reduction in net asset value from rights offering                  --                   --                   --
Increase in net asset value from
 repurchase of capital stock                                       --                   --                   --
Reduction in net asset value from
 Preferred Shares offerings                                     (0.04)                  --                   --
                                                          -----------          -----------          -----------
Net asset value, end of period                            $      8.09          $      8.95          $      9.24
                                                          ===========          ===========          ===========
Closing market price at end of period                     $      8.12          $      8.25          $      9.56
Total Return(3)
Total investment return at closing market price(4)               9.10%               (5.88)%               1.11%
Total investment return at net asset value(5)                    0.19%                5.67%                7.86%
Ratios/Supplemental Data
Net Assets, end of period (000's)                         $ 1,557,432                   --                   --
Net assets attributed to common shares
 end of period (000's)                                    $ 1,107,432          $ 1,217,339          $ 1,202,565
Preferred Rate Shares
 Aggregate amount outstanding (000's)                     $   450,000                   --                   --
Liquidation and market value Per Share                    $    25,000                   --                   --
Asset coverage Per Share**                                        215%                  --                   --
Average borrowings (000's)                                $   450,197          $   524,019          $   490,978
Ratios to average net assets including preferred*
 Expenses (before interest and other fees
  related to revolving credit facility)                          1.62%                  --                   --
 Expenses                                                        3.97%                  --                   --
 Net investment income                                           9.28%                  --                   --
Ratios to average net assets plus borrowing
 applicable to common shares*
 Expenses (before interest and other fees
  related to revolving credit facility)                          1.31%                1.00%(9)             1.05%(9)
 Expenses                                                        3.21%                2.79%(9)             2.86%(9)
 Net investment income                                           7.50%                6.12%                6.00%
Ratios to average net assets applicable to
 common shares*
 Expenses (before interest and other fees
  related to revolving credit facility)                          1.81%                1.43%(9)             1.50%(9)
 Expenses                                                        4.45%                4.00%(9)             4.10%(9)
 Net investment income                                          10.39%                8.77%                8.60%
 Portfolio turnover rate                                           46%                  71%                  68%
 Shares outstanding at end of period (000's)                  136,847              136,036              130,206


                                                                         Years Ended February 28 or February 29,
                                                         -----------------------------------------------------------------------
                                                           1998(8)             1997(8)             1996(7)               1995
                                                         -----------         -----------         -----------         -----------
Per Share Operating Performance
Net asset value, beginning of period                     $      9.45         $      9.61         $      9.66         $     10.02
Net investment income                                           0.87                0.82                0.89                0.74
Net realized and unrealized gain (loss) on
 investments                                                   (0.13)              (0.02)              (0.08)               0.07
                                                         -----------         -----------         -----------         -----------
Increase in net asset value from
 investment operations                                          0.74                0.80                0.81                0.81
Distributions to Common Shareholders
 from net investment income                                    (0.85)              (0.82)              (0.86)              (0.73)
Distribution to Preferred Shareholders                            --                  --                  --                  --
Increase in net asset value from share offerings                  --                  --                  --                  --
Reduction in net asset value from rights offering                 --               (0.14)                 --               (0.44)
Increase in net asset value from
 repurchase of capital stock                                      --                  --                  --                  --
Reduction in net asset value from
 Preferred Shares offerings                                       --                  --                  --                  --
                                                         -----------         -----------         -----------         -----------
Net asset value, end of period                           $      9.34         $      9.45         $      9.61         $      9.66
                                                         ===========         ===========         ===========         ===========
Closing market price at end of period                    $     10.31         $     10.00         $      9.50         $      8.75
Total Return(3)
Total investment return at closing market price(4)             12.70%              15.04%(6)           19.19%               3.27%(6)
Total investment return at net asset value(5)                   8.01%               8.06%(6)            9.21%               5.24%(6)
Ratios/Supplemental Data
Net Assets, end of period (000's)                                 --                  --                  --                  --
Net assets attributed to common shares
 end of period (000's)                                   $ 1,034,403         $ 1,031,089         $   862,938         $   867,083
Preferred Rate Shares
 Aggregate amount outstanding (000's)                             --                  --                  --                  --
Liquidation and market value Per Share                            --                  --                  --                  --
Asset coverage Per Share**                                        --                  --                  --                  --
Average borrowings (000's)                               $   346,110         $   131,773         $        --         $        --
Ratios to average net assets including preferred*
 Expenses (before interest and other fees
  related to revolving credit facility)                           --                  --                  --                  --
 Expenses                                                         --                  --                  --                  --
 Net investment income                                            --                  --                  --                  --
Ratios to average net assets plus borrowing
 applicable to common shares*
 Expenses (before interest and other fees
  related to revolving credit facility)                         1.04%               1.13%                 --                  --
 Expenses                                                       2.65%               1.92%                 --                  --
 Net investment income                                          6.91%               7.59%                 --                  --
Ratios to average net assets applicable to
 common shares*
 Expenses (before interest and other fees
  related to revolving credit facility)                         1.39%               1.29%                 --                  --
 Expenses                                                       3.54%               2.20%               1.23%               1.30%
 Net investment income                                          9.23%               8.67%               9.23%               7.59%
 Portfolio turnover rate                                          90%                 82%                 88%                108%
 Shares outstanding at end of period (000's)                 110,764             109,140              89,794              89,794
</TABLE>

- ----------
(1)  Annualized.
(2)  Prior to the waiver of  expenses,  the ratios of  expenses  to average  net
     assets were 1.95% (annualized), 1.48% and 1.44% for the period from May 12,
     1988 to February 28, 1989, and for the fiscal years ended February 28, 1990
     and  February  29,  1992,  respectively,  and the ratios of net  investment
     income to average net assets were 8.91% (annualized),  10.30% and 7.60% for
     the period from May 12, 1988 to February 28, 1989, and for the fiscal years
     ended February 28, 1990 and February 29, 1992, respectively.
(3)  Total return calculations are attributable to common shareholders.
(4)  Total  investment  return  measures  the change in the market value of your
     investment   assuming   reinvestment   of   dividends   and  capital   gain
     distributions,  if any, in accordance  with the  provisions of the dividend
     reinvestment plan. On March 9, 1992, the shares of the Trust were initially
     listed for trading on the New York Stock Exchange.  Accordingly,  the total
     investment  return for the year ended  February 28,  1993,  covers only the
     period from March 9, 1992, to February 28, 1993.  Total  investment  return
     for periods  prior to the year ended  February 28, 1993,  are not presented
     since  market  values for the  Trust's  shares  were not  available.  Total
     returns for less than one year are not annualized.

                                       32
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Continued)
- --------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                        Years Ended February 28 or February 29,
      ---------------------------------------------------------------------------------------------------------------
          1994                1993                1992                1991                1990                1989
      -----------         -----------         -----------         -----------         -----------         -----------
<S>   <C>                 <C>                 <C>                 <C>                 <C>                 <C>
      $     10.05         $      9.96         $      9.97         $     10.00         $     10.00         $     10.00
             0.60                0.60                0.76                0.98                1.06                0.72

            (0.05)               0.01               (0.02)              (0.05)                 --                  --
      -----------         -----------         -----------         -----------         -----------         -----------

             0.55                0.61                0.74                0.93                1.06                0.72

            (0.60)              (0.57)              (0.75)              (0.96)              (1.06)              (0.72)
               --                  --                  --                  --                  --                  --
               --                  --                  --                  --                  --                  --

               --                  --                  --                  --                  --                  --
             0.02                0.05                  --                  --                  --                  --

               --                  --                  --                  --                  --                  --
      -----------         -----------         -----------         -----------         -----------         -----------
      $     10.02         $     10.05         $      9.96         $      9.97         $     10.00         $     10.00
      ===========         ===========         ===========         ===========         ===========         ===========
      $      9.25         $      9.13                  --                  --                  --                  --

             8.06%              10.89%                 --                  --                  --                  --
             6.28%               7.29%               7.71%               9.74%              11.13%               7.35%

      $   719,979         $   738,810         $   874,104         $ 1,158,224         $ 1,036,470         $   252,998

      $        --         $        --         $        --         $        --         $        --         $        --

               --                  --                  --                  --                  --                  --
               --                  --                  --                  --                  --                  --
               --                  --                  --                  --                  --                  --
               --                  --                  --                  --                  --                  --


               --                  --                  --                  --                  --                  --
               --                  --                  --                  --                  --                  --
               --                  --                  --                  --                  --                  --



               --                  --                  --                  --                  --                  --
               --                  --                  --                  --                  --                  --
               --                  --                  --                  --                  --                  --



               --                  --                  --                  --                  --                  --
             1.31%               1.42%               1.42%(2)            1.38%               1.46%(2)            1.18%(1)(2)
             6.04%               5.88%               7.62%(2)            9.71%              10.32%(2)            9.68%(1)(2)
               87%                 81%                 53%                 55%                100%                 49%(1)
           71,835              73,544              87,782             116,022             103,660              25,294
</TABLE>

- ----------
(5)  Total investment  return at net asset value has been calculated  assuming a
     purchase at net asset value at the  beginning  of each period and a sale at
     net asset  value at the end of each  period  and  assumes  reinvestment  of
     dividends and capital gain  distributions in accordance with the provisions
     of the dividend  reinvestment  plan.  This  calculation  differs from total
     investment  return because it excludes the effects of changes in the market
     values of the Trust's shares.  Total returns for less than one year are not
     annualized.
(6)  Calculation of total return  excludes the effects of the per share dilution
     resulting  from the rights  offering as the total  account value of a fully
     subscribed shareholder was minimally impacted.
(7)  Pilgrim Investments, Inc., the Trust's investment manager, acquired certain
     assets of Pilgrim  Management  Corporation,  the Trust's former  investment
     manager, in a transaction that closed on April 7, 1995.
(8)  The  Manager  agreed to reduce its fee for a period of three years from the
     Expiration  Date of the November  12, 1996 Rights  Offering to 0.60% of the
     average daily net assets, plus the proceeds of any outstanding  borrowings,
     over $1.15 billion.
(9)  Calculated on total expenses before impact of earnings credits.
*    Ratios  do not  reflect  the  effect  of  dividend  payments  to  Preferred
     Shareholders; income ratios reflect income earned on assets attributable to
     preferred shares.
**   Asset  coverage  represents  the total assets  available for  settlement of
     Preferred  Stockholder's  interest  and notes  payables  in relation to the
     Preferred  Shareholder interest and notes payable balance outstanding.  The
     Preferred Shares were first offered November 2, 2000.

                                       33
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of February 28, 2001
- --------------------------------------------------------------------------------

NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES


Pilgrim  Prime Rate Trust (the  "Trust"),  is  registered  under the  Investment
Company  Act of 1940,  as  amended,  as a  diversified,  closed-end,  investment
management  company.  The Trust  invests in senior  loans  which are exempt from
registration  under  the  Securities  Act of 1933 (the  "`33  Act") but  contain
certain  restrictions  on resale and cannot be sold  publicly.  These loans 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 credit  agreement,  the
London Inter-Bank Offered Rate ("LIBOR"), the certificate of deposit rate, or in
some  cases  another  base  lending  rate.  The  following  is a summary  of the
significant  accounting  policies  consistently  followed  by the  Trust  in the
preparation  of its financial  statements.  The policies are in conformity  with
accounting principles generally accepted in the United States of America.

A.   Senior Loan and Other Security Valuation.  Loans are normally valued at the
     mean of the means of one or more bid and asked  quotations  obtained from a
     pricing service or other sources  believed to be reliable.  Loans for which
     reliable  quotations  are not  available  may be valued with  reference  to
     another  loan or a group of loans for  which  quotations  are more  readily
     available  and  whose  characteristics  are  comparable  to the loan  being
     valued.  Under  this  approach,  the  comparable  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 loans and to calculate values
     under the "proxy"  procedure  described  above. It is expected that most of
     the loans held by the Trust will be valued  with  reference  to  quotations
     from the  independent  pricing  service or with  reference  to the  "proxy"
     procedure described above.

     ING Pilgrim Investments,  LLC ( the "Investment  Manager") may believe that
     the  price  for a 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  loan or borrower
     known to the Investment  Manager that the Investment  Manager  believes may
     not be known to the pricing  service or reflected in a price quote. In this
     event,  the loan is valued at fair value as  determined in good faith under
     procedures  established  by the Trust's Board of Trustees and in accordance
     with the provisions of the 1940 Act. Under these procedures,  fair value is
     determined by the Investment  Manager and monitored by the Trust's Board of
     Trustees  through  its  Valuation  Committee.   In  fair  valuing  a  loan,
     consideration is given to several factors, which may include, among others,
     the following:  (i) the  charactistics  of and fundamental  analytical data
     relating to the loan,  including the cost,  size,  current  interest  rate,
     period until the next interest  rate reset,  maturity and base lending rate
     of the  loan,  the  terms  and  conditions  of the  loan  and  any  related
     agreements,  and the position of the 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 loan, including price quotations
     for,  and  trading in, the loan and  interests  in similar  loans;  (v) the
     reputation  and  financial  condition  of the  agent  for the  loan and any
     intermediate participants in the loan; (vi) the borrower's management;  and
     (vii) the general economic and market  conditions  affecting the fair value
     of the  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.  Securities  other than senior loans for
     which reliable  quotations  are not readily  available and all other assets
     will be valued at their  respective fair values as determined in good faith
     by, or under procedures established by, the Board of Trustees of the Trust.
     Investments  in  securities  maturing in less than 60 days from the date of
     acquisition are valued at amortized cost, which, when combined with accrued
     interest, approximates market value.

                                       34
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of February 28, 2001
- --------------------------------------------------------------------------------

B.   Federal  Income  Taxes.  It is  the  Trust's  policy  to  comply  with  the
     requirements   of  the  Internal   Revenue  Code  applicable  to  regulated
     investment  companies  and to distribute  substantially  all of its taxable
     income to its shareholders.  Therefore,  no federal income tax provision is
     required.

     At February 28, 2001, the Trust had capital loss  carryforwards for federal
     income tax purposes of  approximately  $76,611,257  which are  scheduled to
     expire through February 28, 2009.

     The Board of Trustees  intends to offset any future net capital  gains with
     the  capital  loss  carryforwards  until each  carryforward  has been fully
     utilized or expires.

C.   Security  Transactions  and  Revenue  Recognition.  Loans  are  booked on a
     settlement date basis and security  transactions are accounted for on trade
     date (date the order to buy or sell is executed).  Realized gains or losses
     are  reported  on the basis of  identified  cost of  securities  delivered.
     Interest  income  is  recorded  on an  accrual  basis at the  then  current
     interest rate of the loan. The accrual of interest on loans is discontinued
     when,  in the  opinion  of  management,  there  is an  indication  that the
     borrower  may be unable to meet  payments  as they  become  due.  Upon such
     discontinuance,  all unpaid accrued interest is reversed.  Cash collections
     on  nonaccrual  senior  loans are  generally  applied as a reduction to the
     recorded  investment  of the loan.  Senior  loans are  returned  to accrual
     status only after all past due amounts have been  received and the borrower
     has demonstrated sustained  performance.  Arrangement fees, which represent
     non-refundable  fees associated with the acquisition of loans, are deferred
     and recognized  ratably over the shorter of 2.5 years or the actual term of
     the loan.  No such fees are  recognized  on loans which have been placed on
     non-accrual status.

D.   Distributions  to  Shareholders.  The Trust  records  distributions  to its
     shareholders on the ex-date.  Distributions from income are declared by the
     Trust on a monthly basis.  Distributions  from capital  gains,  if any, are
     declared  on  an  annual  basis.  The  amount  of  distributions  from  net
     investment  income  and  net  realized  capital  gains  are  determined  in
     accordance  with  federal  income tax  regulations,  which may differ  from
     accounting  principles  generally  accepted in the United States of America
     for  items  such as the  treatment  of  short  term  capital  gains.  These
     "book/tax"  differences  are either  considered  temporary  or permanent in
     nature. To the extent that these differences are permanent in nature,  such
     amounts are reclassified within the capital accounts based on their federal
     tax-basis    treatment;    temporary    differences    do    not    require
     reclassifications. Distributions which exceed net investment income and net
     realized  capital  gains for financial  reporting  purposes but not for tax
     purposes are reported as distributions  in excess of net investment  income
     and/or  realized  capital  gains.  To the extent they exceed net investment
     income and net realized  capital gains for tax purposes,  they are reported
     as a tax return of  capital.  During the year ended  February  28, 2001 the
     Trust  reclassified  $794,477  from  paid in  capital  to  accumulated  net
     realized  loss on  investments,  to  reflect  the  treatment  of  permanent
     book/tax differences.

E.   Dividend  Reinvestments.  Pursuant to the  Shareholder  Investment  Program
     (formerly known as the Automatic Dividend  Reinvestment Plan), DST Systems,
     Inc., the Plan Agent,  purchases,  from time to time,  shares of beneficial
     interest of the Trust on the open market to satisfy dividend reinvestments.
     Such  shares are  purchased  only when the  closing  sale or bid price plus
     commission  is less than the net asset  value per share of the stock on the
     valuation date. If the market price plus commissions is equal to or exceeds
     the net asset value,  new shares are issued at the greater of (i) net asset
     value or (ii) the market  price of the shares  during the  pricing  period,
     minus a discount of 5%.

F.   Use of Estimates.  Management  of the Trust has made certain  estimates and
     assumptions  relating to the  reporting of assets,  liabilities,  revenues,
     expenses  and  contingencies  to  prepare  these  financial  statements  in
     conformity  with  generally  accepted  accounting  principles in the United
     States of America. Actual results could differ from these estimates.

G.   Share  Offerings.  During the year ended February 28, 1999, the Trust began
     issuing shares under

                                       35
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of February 28, 2001
- --------------------------------------------------------------------------------

     various shelf registration statements, whereby the net proceeds received by
     the Trust from share  sales may not be less than the greater of (i) the NAV
     per share or (ii) 94% of the average  daily  market price over the relevant
     pricing period.

H.   Recently  Issued  Accounting  Standards.  In  November  2000  the  American
     Institute of Certified  Public  Accountants  (the "AICPA") issued a revised
     version of the AICPA Audit and Accounting  Guide for  Investment  Companies
     (the "Guide").  The revised version of the Guide is effective for the Trust
     as of March 1, 2001 and will require the Trust to amortize all premiums and
     accrete all discounts on debt securities.  Historically,  the Trust has not
     amortized premiums nor accreted discounts. Upon adoption, the Trust will be
     required to record the  cumulative  effect of this change.  The  cumulative
     effect will impact net investment  income and  unrealized  gains and losses
     but will have no impact on net assets.  The expected  impact of this change
     will  be  a  $3.7  million  increase  in  the  cost  of  securities  and  a
     corresponding  $3.7  million  increase in net  unrealized  depreciation  of
     investments.


NOTE 2 -- INVESTMENTS

For the year ended  February  28, 2001,  the cost of purchases  and the proceeds
from principal repayment and sales of investments,  excluding  short-term notes,
totaled $1,277,305,465 and $808,257,969, respectively. At February 28, 2001, the
Trust held senior loans valued at $1,988,832,057 representing 96.9% of its total
investments.  The market  value of these assets is  established  as set forth in
Note 1.

The senior loans acquired by the Trust may take the form of a direct  co-lending
relationship with the corporate issuer, an assignment of a co-lender's  interest
in a loan, or a participation  interest in a co-lender's interest in a loan. The
lead  lender in a typical  corporate  loan  syndicate  administers  the loan and
monitors collateral. In the event that the lead lender becomes insolvent, enters
FDIC receivership or, if not FDIC insured, enters into bankruptcy, the Trust may
incur  certain  costs and delays in realizing  payment,  or may suffer a loss of
principal and/or interest. Additionally,  certain situations may arise where the
Trust acquires a participation in a co-lender's interest in a loan and the Trust
does not have  privity with or direct  recourse  against the  corporate  issuer.
Accordingly, the Trust may incur additional credit risk as a participant because
it must assume the risk of insolvency or bankruptcy of the co-lender  from which
the participation was acquired.  Common and preferred stocks, and stock purchase
warrants held in the portfolio  were acquired in  conjunction  with senior loans
held by the Trust.  Certain of these stocks and warrants are  restricted and may
not be  publicly  sold  without  registration  under the '33 Act,  or without an
exemption under the '33 Act. In some cases,  these  restrictions  expire after a
designated  period  of time  after  issuance  of the  stock  or  warrant.  These
restricted  securities  are valued at fair value as  determined  by the Board of
Trustees  by  considering  quality,  dividend  rate,  and  marketability  of the
securities  compared to similar issues.  In order to assist in the determination
of fair value, the Trust will obtain quotes from dealers who periodically  trade
in such  securities  where such quotes are available.  Dates of acquisition  and
cost or assigned basis of restricted securities are as follows:

<TABLE>
<CAPTION>
                                                                       Date of          Cost or
                                                                     Acquisition     Assigned Basis
                                                                    -------------   ---------------
<S>                                                                 <C>             <C>
American Blind and Wallpaper -- Common                                 01/12/99             --
America's Favorite Chicken Co. -- Common                               11/06/92           $  1
Autotote Systems, Inc. -- Option                                       02/26/97             --
Autotote Systems, Inc. -- Warrant                                      11/11/92             --
Butterick Company, Inc. -- Common                                      05/01/97             --
Capital Tool & Design -- Warrants                                      07/26/96             --
Casden Properties Operation -- Preferred Partnership Units             12/31/98             --
Covenant Care, Inc. -- Warrants                                        12/22/95             --
Murray's Discount -- Warrants                                          02/16/99             --
Vision 21 -- Warrants                                                  11/28/00             --
                                                                                          ----
Total restricted securities excluding senior loans (market value
 of $21,670,102 was 1.39% of net assets at February 28, 2001)                             $  1
                                                                                          ====
</TABLE>

                                       36
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of February 28, 2001
- --------------------------------------------------------------------------------

NOTE 3 -- MANAGEMENT AND ADMINISTRATIVE SERVICES AGREEMENT

The  Trust  has  entered  into  an  Investment  Management  Agreement  with  the
Investment  Manager,  a wholly-owned  subsidiary of ING Pilgrim Group,  LLC (the
"Administrator"),  to provide advisory and management  services.  The Investment
Management  Agreement  compensates the Investment  Manager with a fee,  computed
daily and payable  monthly,  at an annual  rate of 0.80% of the Trust's  average
daily net assets plus borrowings.

The  Trust  has  also  entered  into  an   Administration   Agreement  with  the
Administrator to provide administrative services and also to furnish facilities.
Through  April 30,  2000 the Trust  compensated  the  Administrator  with a fee,
computed  daily and payable  monthly,  at an annual rate of 0.15% of the Trust's
average daily net assets plus  borrowings  up to $800 million;  and 0.10% of the
average daily net assets plus  borrowings  in excess of $800 million.  Effective
May 1, 2000, the  Administrator  is compensated  with a fee,  computed daily and
payable  monthly,  at an annual rate of 0.25% of the Trust's  average  daily net
assets plus borrowings.


NOTE 4 -- COMMITMENTS

The Trust has  entered  into  both a 364 day and a five  year  revolving  credit
agreement,  collateralized  by assets of the Trust, to borrow up to $620 million
from a  syndicate  of major  financial  institutions  maturing  July  15,  2003.
Borrowing  rates under these  agreements are based on a fixed spread over LIBOR,
the federal funds rate, or a commercial  paper based rate.  Prepaid  arrangement
fees for any unborrowed  amounts are amortized over the term of the  agreements.
The amount of borrowings  outstanding at February 28, 2001, was $510 million, at
a weighted average interest rate of 5.7%, which  represented 24.7% of net assets
plus  borrowings.  Average  borrowings for the year ended February 28, 2001 were
$450,197,260 and the average annualized interest rate was 6.4%.

As of February 28, 2001, the Trust had unfunded loan commitments pursuant to the
terms of the following loan agreements:

Airgate PCS                                                          $ 7,022,801
Alliance Data Systems                                                  1,785,714
AM Cosmetics                                                               1,997
Aurora Foods                                                           1,459,167
Avis Rent-A-Car                                                        2,487,593
Coinmach Laundry Corp.                                                 4,215,362
Columbia/HCA Healthcare                                                3,944,872
Crown Paper Co.                                                          700,000
Express Scripts, Inc.                                                 17,948,718
Huntsman Corporation                                                     590,785
Key Energy Group, Inc.                                               $ 5,599,667
Levi Strauss & Co.                                                     6,785,714
Meditrust Corp.                                                        7,058,824
Murray's Discount Auto Stores, Inc.                                      171,429
Resort at Summerlin                                                    2,842,640
SPX Corporation                                                        2,837,320
Station Casinos                                                        7,898,884
Suiza Fluid Dairy Group LP                                             5,463,272
URS Corporation                                                        4,285,714
                                                                     -----------
                                                                     $83,100,473
                                                                     ===========


NOTE 5 -- RIGHTS AND OTHER OFFERINGS

On October  18,  1996,  the Trust  issued to its  shareholders  non-transferable
rights  which  entitled the holders to subscribe  for  18,122,963  shares of the
Trust's  common  stock at the rate of one  share of  common  stock for each five
rights  held.  On  November  12,  1996,  the  offering  expired  and  was  fully
subscribed. The Trust issued 18,122,963 shares of its common stock to exercising
rights  holders at a subscription  price of $9.09.  Offering costs of $6,972,203
were charged against the offering proceeds.

On December 27, 1994, the Trust issued to its shareholders  transferable  rights
which  entitled the holders to subscribe  for  17,958,766  shares of the Trust's
common stock at the rate of one share of common stock for each four rights held.
On January 27, 1995, the offering  expired and was fully  subscribed.  The Trust
issued  17,958,766  shares of its common stock to exercising rights holders at a
subscription  price of $8.12.  Offering costs of $4,470,955 were charged against
the offering proceeds.

                                       37
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of February 28, 2001
- --------------------------------------------------------------------------------

As of February 28, 2001, share offerings pursuant to shelf registrations were as
follows:

                     Registration       Shares          Shares
                         Date         Registered       Remaining
                     ------------     ----------      ----------
                        6/11/98       15,000,000              --
                        6/19/98       10,000,000       9,730,800
                        9/15/98       25,000,000      19,325,222
                        3/04/99        5,000,000       3,241,644

On November 2, 2000,  the Trust  issued  3,600 shares each of Series M, Series W
and Series F Auction Rate Cumulative  Preferred Shares, $.01 Par Value,  $25,000
liquidation preference,  for a total issuance of $270 million. Also, on November
16,  2000,  the Trust issued 3,600 shares of Series T and Series Th Auction Rate
Cumulative Preferred Shares, $.01 Par Value,  $25,000,  liquidation  preference,
for a total issuance of $180 million. All such Preferred Shares were outstanding
as of February 28, 2001.  Costs  associated  with the offering of  approximately
$5,244,654 were charged against the proceeds  received upon issuance.  The Trust
used the net proceeds of the offering to  partially  pay down the then  existing
indebtedness.  The Trust may reborrow  amounts in the future to increase its use
of  leverage  which  will be  consistent  with the  limitations  imposed  by the
Investment  Company Act of 1940.  Preferred Shares pay dividends based on a rate
set at auctions, normally held every 7 days. In the most instances dividends are
also payable  every 7 days,  on the first  business day following the end of the
rate period.


NOTE 6 -- CUSTODIAL AGREEMENT

State Street Bank,  Kansas City  ("SSBKC")  serves as the Trust's  custodian and
recordkeeper.  Custody fees paid to SSBKC are reduced by earnings  credits based
on the cash balances held by SSBKC for the Trust. There were no earnings credits
for the year ended Febraury 28, 2001.


NOTE 7 -- AFFILIATED TRANSACTIONS

During the year ended February 28, 2001,  the Trust  purchased and sold holdings
in senior loans from/to  affiliated  funds managed by the Investment  Manager at
prices determined by the Investment Manager to represent market prices. The cost
of purchased  loans was $27,202,486 and the proceeds and cost of sold loans were
$26,912,891 and  $27,208,437,  respectively,  excluding any benefit to the Trust
from the recognition of deferred arrangement fees.


NOTE 8 -- SUBORDINATED LOANS AND UNSECURED LOANS

The primary risk arising from  investing in  subordinated  loans or in unsecured
loans is the potential  loss in the event of default by the issuer of the loans.
The Trust may acquire a subordinated  loan only if, at the time of  acquisition,
it  acquires  or holds a Senior  Loan from the same  borrower.  The  Trust  will
acquire unsecured loans only where the Investment Manager believes,  at the time
of acqusition,  that the Trust would have the right to payment upon default that
is not subordinate to any other  creditor.  The Trust may invest up to 5% of its
total assets,  measured at the time of  investment,  in  subordinated  loans and
unsecured  loans.  As of  February  28,  2001,  the Trust held 1.7% of its total
assets in subordinated loans and unsecured loans.


NOTE 9 -- SUBSEQUENT EVENTS

Subsequent  to February  28,  2001,  the Trust paid to Common  Shareholders  the
following dividends from net investment income:

      Per Share Amount     Declaration Date     Record Date     Payable Date
      ----------------     ----------------     -----------     ------------
          $ 0.062             02/28/2001         03/12/2001      03/22/2001
            0.065             03/31/2001         04/11/2001      04/23/2001

                                       38
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of February 28, 2001
- --------------------------------------------------------------------------------

Subsequent to February 28, 2001,  the Trust paid to Preferred  Shareholders  the
following dividends from net investment income:

<TABLE>
<CAPTION>
                Total
Preferred      Per Share           Auction                   Record                    Payable
 Shares         Amount              Dates                     Dates                     Dates
- ---------      --------       ------------------      --------------------      --------------------
<S>            <C>            <C>                     <C>                       <C>
Series M       $ 148.39         3/5/01 to 4/9/01        3/12/01 to 4/16/01        3/13/01 to 4/17/01
Series T       $ 148.76        3/6/01 to 4/10/01        3/13/01 to 4/17/01        3/14/01 to 4/18/01
Series W       $ 148.17       3/07/01 to 4/11/01        3/14/01 to 4/18/01       3/15/01/ to 4/19/01
Series Th      $ 149.35        3/1/01 to 4/12/01         3/8/01 to 4/20/01         3/9/01 to 4/20/01
Series F       $ 173.81        3/2/01 to 4/12/01         3/9/01 to 4/20/01        3/12/01 to 4/23/01
</TABLE>

            Management's Additional Operating Information (Unaudited)


APPROVAL OF CHANGES IN INVESTMENT POLICIES

At a Special Meeting of Trust  Shareholders,  held August 6, 1998,  Shareholders
approved  changes in the  Trust's  fundamental  investment  policies  which make
available certain additional  investment  opportunities to the Trust,  including
(i)  investing  in loans in 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; (ii) the treatment of lease  participations as Senior Loans which
would  constitute  part of the 80% of the Trust's  assets  normally  invested in
Senior  Loans;  (iii)  investing  in all types of hybrid  loans that meet credit
standards  established by the Investment Manager constituting part of the 20% of
the Trust's assets that may be invested in Other  Investments;  (iv) the ability
to invest up to 5% of its total assets in both subordinated  loans and unsecured
loans which would  constitute  part of the 20% of the Trust's assets that may be
invested in Other Investments.

Additionally,  another  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,  patent rights,  franchise  value,  and  trademarks.  Another policy
change  approved  by the  Board,  that does not  require  shareholder  approval,
provides  that 80% of the  Trust's  gross  assets,  as opposed to 80% of its net
assets, may normally be invested in Senior Loans.

The Trust's Manager considered the evolving nature of the syndicated loan market
and the  potential  benefits to the Trust and its  shareholders  of revising the
restriction  to permit the Trust to invest in loans other than Senior  Loans and
the increase in the number of attractive investment  opportunities  available to
the Trust due to the change.


REPURCHASE OF SECURITIES BY CLOSED-END COMPANIES

In accordance with Section 23(c) of the Investment Company Act of 1940, and Rule
23c-1 under the Investment  Company Act of 1940, the Trust may from time to time
purchase  shares of  beneficial  interest  of the Trust in the open  market,  in
privately  negotiated  transactions  and/or purchase shares to correct erroneous
transactions.


SHAREHOLDER INVESTMENT PROGRAM

The Trust offers a Shareholder  Investment Program (the "Program") which enables
investors to  conveniently  add to their holdings at reduced  costs.  Should you
desire  further  information   concerning  this  Program,   please  contact  the
Shareholder Servicing Agent at (800) 992-0180.

                                       39
<PAGE>
                            Pilgrim Prime Rate Trust

- --------------------------------------------------------------------------------
TAX INFORMATION (Unaudited)
- --------------------------------------------------------------------------------

The Trust is required by  Subchapter M of the Internal  Revenue Code of 1986, as
amended,  to advise within 60 days of the Trust's  fiscal year end (February 28,
2001) as to the  federal  tax status of  distributions  received  by the Trust's
shareholders.  Accordingly,  the Trust is hereby advising you that the following
dividends were paid to Common Shareholders during the fiscal year ended February
28, 2001:

                        Per Share
  Type of Dividend        Amount       Ex-Dividend Date     Payable Date
  ----------------      ----------     ----------------     ------------
  Ordinary Income       $  0.0670          03/08/00           03/22/00
                        $  0.0730          04/06/00           04/24/00
                        $  0.0750          05/08/00           05/22/00
                        $  0.0750          06/08/00           06/22/00
                        $  0.0720          07/06/00           07/24/00
                        $  0.0730          08/06/00           08/22/00
                        $  0.0730          09/07/00           09/22/00
                        $  0.0700          10/06/00           10/23/00
                        $  0.0710          11/08/00           11/22/00
                        $  0.0700          12/07/00           12/22/00
                        $  0.0730          12/27/00           01/11/01
                        $  0.0700          02/08/01           02/23/01
                        ---------
            Total       $  0.8620
                        =========

The Trust is  hereby  advising  you that the  following  dividends  were paid to
Preferred Shareholders during the fiscal year ended February 28, 2001:

<TABLE>
<CAPTION>
                                    Total
Preferred         Type of         Per Share          Auction                 Record                  Payable
 Shares           Dividend          Amount            Dates                   Dates                   Dates
 ------       ---------------     ---------     -------------------     ------------------     ------------------
<S>           <C>                 <C>           <C>                     <C>                    <C>
Series M      Ordinary Income     $  531.69      11/2/00 to 2/26/01     11/13/00 to 3/5/01     11/14/00 to 3/6/01
Series T      Ordinary Income     $  473.71     11/16/00 to 2/27/01     11/28/00 to 3/6/01     11/29/00 to 3/7/01
Series W      Ordinary Income     $  540.36      11/2/00 to 2/28/01     11/15/00 to 3/7/01     11/16/00 to 3/8/01
Series Th     Ordinary Income     $  451.71     11/16/00 to 2/22/01     11/30/00 to 3/1/01      12/1/00 to 3/2/01
Series F      Ordinary Income     $  523.81      11/3/00 to 2/23/01     11/17/00 to 3/2/01     11/20/00 to 3/5/01
</TABLE>

Corporate  shareholders  are  generally  entitled to take the dividend  received
deduction  on the portion of the Trust's  dividend  distributions  that  qualify
under tax law. The  percentage  of the Trust's  fiscal year 2001 net  investment
income dividends that qualify for the corporate dividends received deductions is
0%.

Shareholders are strongly advised to consult their own tax advisers with respect
to the tax  consequences of their  investment in the Trust. In January 2001, you
should have  received an IRS Form 1099 DIV  regarding  the federal tax status of
the dividends and distributions received by you in calendar year 2000.

                                       40
<PAGE>
INVESTMENT MANAGER
ING Pilgrim Investments, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258-2034

ADMINISTRATOR
ING Pilgrim Group, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
1-800-992-0180

INSTITUTIONAL INVESTORS AND ANALYSTS
Call Pilgrim Prime Rate Trust
1-800-336-3436, Extension 2217

DISTRIBUTOR
ING Pilgrim Securities, Inc.
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
1-800-334-3444

TRANSFER AGENT
DST Systems, Inc.
P.O. Box 219368
Kansas City, Missouri 64141-9368

CUSTODIAN
State Street Bank and Trust Company
801 Pennsylvania Avenue
Kansas City, Missouri 64105

LEGAL COUNSEL
Dechert
1775 Eye Street, N.W.
Washington, D.C. 20006

INDEPENDENT AUDITORS
KPMG LLP
355 South Grand Avenue
Los Angeles, California 90071

WRITTEN REQUESTS
Please mail all account inquiries and other comments to:

Pilgrim Prime Rate Trust Account
c/o ING Pilgrim Group, LLC
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258-2034

TOLL-FREE SHAREHOLDER INFORMATION
Call us from 9:00 a.m. to 7:00 p.m. Eastern time on any business day for account
or other information, at 1-800-992-0180

A prospectus containing more complete information regarding the Trust, including
charges and expenses,  may be obtained by calling ING Pilgrim Securities,  Inc.,
Distributor at 1-800-334-3444.  Please read the prospectus  carefully before you
invest or send money.

                                PRANN0201-042401
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
