<DOCUMENT>
<TYPE>N-30D
<SEQUENCE>1
<FILENAME>e-7641.txt
<DESCRIPTION>SEMI-ANNUAL REPORT FOR THE PERIOD ENDED 8/31/01
<TEXT>
Semi-Annual Report

August 31, 2001

                                                                 Pilgrim Prime
                                                                 Rate Trust














                              [GRAPHIC OF COLUMNS]






                                                              [ING PILGRIM LOGO]
<PAGE>
                            Pilgrim Prime Rate Trust


                               SEMI-ANNUAL REPORT

                                 August 31, 2001

                                   ----------


                                Table of Contents

              Portfolio Managers' Report ....................   2
              Index Descriptions ............................   5
              Statistics and Performance ....................   6
              Performance Footnotes .........................   8
              Additional Notes and Information ..............   9
              Portfolio of Investments ......................  10
              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
              Shareholder Meetings ..........................  41

                                   ----------

                                        1
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
PORTFOLIO MANAGERS' REPORT
--------------------------------------------------------------------------------

Dear Shareholders:

Pilgrim  Prime Rate Trust (the "Trust")  invests in a  diversified  portfolio of
non-investment  grade senior  floating rate loans made  primarily to U.S.  based
corporations.  During the fiscal  quarter ended August 31, 2001,  the Trust paid
its 160th consecutive dividend.

PERFORMANCE OF THE TRUST

Based on  $0.16  of  dividends  declared  during  the  quarter  and the  average
month-end  net  asset  value  ("NAV")  per  share  of  $7.75,   the   annualized
distribution rate was 8.19%1,  down from 9.42% and 10.29% as of May 31, 2001 and
February 28, 2001, respectively. The decline in the annualized distribution rate
is consistent with the unprecedented  series of moves on the part of the Federal
Reserve, commencing in January of this year, to reduce short-term interest rates
in response to a visibly slowing economy.  The Trust's  annualized  distribution
rate based on the Trust's  month-end NYSE composite closing price ("Market") for
the quarter was 8.37%1,  which  continues to present an attractive  distribution
rate advantage over many other variable and fixed income investment products.

The Trust also improved its overall level of  diversification,  an  increasingly
important performance factor in a challenging credit environment.  At the end of
the quarter, the Trust managed senior loans from 241 separate borrowers, with an
average  investment  size of $7.4 million  (0.4% of total  assets),  up from 220
borrowers and $8.3 million average  investment at May 31, 2001. These loans were
diversified  across 35 industry  sectors,  the  largest of which  being  Hotels,
Motels & Inns,  representing  approximately  7.0% of total  assets.  The  single
largest  issuer  within the Trust was Allied Waste  Industries,  Inc.  (`Ba3/BB'
rated), at approximately 3.4% of total assets.

BORROWING AND LEVERAGE

The Trust has utilized  financial  leverage to seek to increase the yield to the
holders of common  shares.  As of August 31, 2001, the Trust had $800 million of
leverage  outstanding,  consisting of $450 million of `aaa/AAA' rated cumulative
auction rate preferred shares,  and $350 million under $550 million of revolving
credit  facilities.  Total leverage,  as a percentage of total assets (including
preferred  shares),  was 43.1% at quarter end. The average cost of all borrowing
and leveraging as of the quarter end was 3.7%.

CURRENT LOAN MARKET CONDITIONS

The Trust's  second  fiscal  quarter  cannot be discussed  apart from the tragic
September  11th  terrorist  hijacking  of four U.S.  airliners  and the  ensuing
horrific  attacks on New York  City's  World  Trade  Center and the  Pentagon in
Washington  D.C. Being an integral part of the close-knit  community that is the
syndicated bank loan market,  we at ING Pilgrim have many friends and colleagues
that were both  directly  and  indirectly  impacted by these  senseless  acts of
violence against the American people. Our deepest sympathies go out to those who
experienced what can only be described as profound loss.

Without  question,  prior to September  11th,  the  non-investment  grade credit
markets were already  feeling the effects of a swift  deceleration  in corporate
earnings,  weaker  capital  spending  across  most  industry  sectors,  and more
recently,  a  substantial  rise  in the  unemployment  ranks.  Together,  with a
contraction in the level of readily available capital, these factors have caused
high yield default rates to remain  stubbornly  high and new issuance  volume to
remain well off the historical norm. Subsequent to the attacks,  within the loan
market, the resumption of trading was met with only a fraction of the volatility
experienced  in other  markets.  During the ensuing two weeks,  however,  as the
price  discovery  process  developed  and  actual  trading  activity  increased,
secondary  price  indications  for  virtually  all loans  continued  to  weaken,
including  those for the largest and most liquid  issues.  Although  some of the
price  movement  was  warranted  based on ongoing  credit  difficulties,  a good
portion of the  softness can be  attributed  to the  unwillingness  of buyers to
commit  capital  in the  face  of  unprecedented  uncertainty.  The  decline  in
indicative value touched

                                        2
<PAGE>
most industry sectors,  with pronounced  softness across those directly impacted
by the  attacks,  notably  travel  and  leisure  (primarily  commercial  airline
suppliers,  hotel operators,  and gaming companies),  insurance underwriters and
those sectors dependent upon the continuation of robust consumer spending. While
we have  since seen a degree of  stabilization  in price  indications,  thus far
there has been little improvement from the recent lows.

Across all markets,  periods of broad-based weakness translate  immediately into
lower net asset values and, ultimately,  lower share prices.  Virtually all loan
participation  funds  experienced a marked  decline in value during the quarter,
most of which took place after the attacks. Of paramount importance, however, is
the  continued  resiliency  of the  senior  loan asset  class.  In the face of a
rapidly  slowing  global  economy,  an  extraordinarily  volatile  interest rate
environment,  and most recently,  the extreme dislocation caused by the attacks,
loans have continued to maintain an attractive  yield  advantage over many other
fixed-income asset classes,  with substantially  lower volatility.  Year-to-date
through  the end of the third  quarter,  the total  rate of return of the Credit
Suisse First  Boston  ("CSFB")  Leveraged  Loan Index was  approximately  1.61%,
versus 0.11% for the JP Morgan High Yield Index. For comparative  purposes,  the
S&P 500 Index declined roughly 21.16%.

OUTLOOK

It is against an increasingly unpredictable economic and political backdrop that
we enter the fourth  quarter of 2001 and begin to formulate our strategy for the
first  half of next  year.  Even if one was to take a  conservative  view of the
ultimate  impact of the attacks,  the evidence  points to little  change for the
better over the next few quarters.  Nonetheless,  regardless of near-term market
conditions, we continue to point to the unchanging characteristics that make the
loan market  appealing to income  investors  seeking a high relative  yield with
lower overall volatility. The Fed has guided short-term interest rates to levels
not seen  since  the  Kennedy  administration.  While  there  may be  additional
downward pressure, most observers feel as though the reduction cycle has largely
run its course.  By definition,  floating rate loans would provide an increasing
yield once the Fed reverses  course.  Conversely,  bond prices generally move in
the  opposite  direction  as  interest  rates,  regardless  of  credit  quality.
Moreover,  the difficult  credit  environment in which we've been operating over
the last  several  quarters  may already be largely  factored  into loan prices.
Although  there are  exceptions,  given time, we believe low absolute  borrowing
rates are almost sure to foster  improved  credit  conditions  and re-kindle new
activity.  In light of these  developments,  we believe  that secured loan asset
class is, at this point in time,  reasonably  well positioned from a risk/return
standpoint.

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
October 15, 2001

                                        3
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO MANAGERS' FOOTNOTES
--------------------------------------------------------------------------------

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.


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.

Senior loans are subject to credit risks and the  potential for  non-payment  of
scheduled principal or interest payments, which may result in a reduction of the
Trust's NAV.

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  managers only
through  the end of the  period  of the  report  as  stated  on the  cover.  The
portfolio  managers' views are subject to change at any time based on market and
other conditions.

                                        4
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
INDEX DESCRIPTIONS
--------------------------------------------------------------------------------

The S&P 500 Index is a widely recognized index of 500 common stocks.

The Credit  Suisse First Boston High Yield Index is an index of high yield bonds
rated BB or below.

The JP Morgan High Yield Index is an index of high yield bonds rated  "B1/BB" or
lower.

The BAS (Banc of America  Securities)  Leveraged  Loan  Index is a market  value
weighted index  intended to track the  performance of the leveraged loan market.
The index  tracks  facilities  of 150 separate  issuers  ranging over 30 Moody's
industries.

                                        5
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
STATISTICS AND PERFORMANCE as of August 31, 2001
--------------------------------------------------------------------------------

                            PORTFOLIO CHARACTERISTICS

        Net Assets                                       $1,503,093,543
        Assets Invested in Senior Loans*                 $1,785,188,092
        Total Number of Senior Loans                                241
        Average Amount Outstanding per Loan              $    7,407,419
        Total Number of Industries                                   35
        Average Loan Amount per Industry                 $   51,005,374
        Portfolio Turnover Rate (YTD)                               34%
        Weighted Average Days to Interest Rate Reset            34 days
        Average Loan Maturity                                 60 months
        Average Age of Loans Held in Portfolio                15 months

*    Includes loans and other debt received through restructurings


                     TOP TEN INDUSTRIES AS A PERCENTAGE OF:

                                               NET ASSETS     TOTAL ASSETS
                                               ----------     ------------
    Hotels, Motels and Inns                        8.7%            7.0%
    Healthcare, Education and Childcare            8.1%            6.6%
    Cellular Communications                        7.3%            5.9%
    Containers, Packaging and Glass                6.6%            5.3%
    Chemicals, Plastics and Rubber                 6.4%            5.2%
    Buildings and Real Estate                      5.6%            4.5%
    Aerospace and Defense                          5.2%            4.2%
    Ecological                                     4.9%            4.0%
    Cable Television                               4.5%            3.6%
    Beverage, Food and Tobacco                     4.4%            3.5%


                    TOP 10 SENIOR LOANS AS A PERCENTAGE OF:

                                                 NET ASSETS     TOTAL ASSETS
                                                 ----------     ------------
    Allied Waste Industries, Inc.                    4.2%            3.4%
    Nextel Finance Co.                               3.4%            2.7%
    Stone Container Corporation                      2.0%            1.6%
    Ventas Realty Limited Partnership                1.9%            1.5%
    Broadwing Corporation                            1.9%            1.5%
    Wyndham International, Inc.                      1.8%            1.5%
    Starwood Hotels & Resorts Worldwide, Inc.        1.7%            1.4%
    SC International Services                        1.7%            1.4%
    Rodamco North America                            1.7%            1.4%
    Charter Communications Operating LLC             1.5%            1.2%

                                        6
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
STATISTICS AND PERFORMANCE as of August 31, 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>
August 31, 2001           6.50%        10.49%         10.69%           8.19%             8.37%
May 31, 2001              7.00%        11.20%         11.38%           9.42%             9.50%
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%
</TABLE>

                          AVERAGE ANNUAL TOTAL RETURNS

                                                    NAV                  MKT
       1 Year                                      -2.57%              -4.89%
       3 Years                                      2.93%               0.18%
       5 Years                                      4.93%               3.85%
       10 Years                                     6.35%                N/A
       Since Trust Inception (F,H)                  7.19%                N/A
       Since Initial Trading on NYSE (G)             N/A                6.62%

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.  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.

                      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.

                                        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 5       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

--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------

Senior Loans*

<TABLE>
<CAPTION>
                                                                     Bank Loan
                                                                      Ratings+
                                                                  ---------------
Principal Amount      Borrower/Tranche Description                Moody's     S&P        Value
----------------      ----------------------------                -------     ---        -----
<S>                   <C>                                        <C>         <C>     <C>
 Aerospace and Defense: 5.2%

                      The Aerostructures Corporation                 NR       BB-
     $  2,824,914     Term Loan, maturing May 9, 2003                                $2,805,492
                      Alliant Techsystems Inc.                      Ba2       BB-
        2,992,500     Term Loan, maturing April 20, 2009                              3,033,958
                      Avborne, Inc.                                  NR        NR
       14,546,889     Term Loan, maturing June 30, 2003                              14,328,686
                      Erickson Air-Crane Company                     NR        NR
        8,574,838     Term Loan, maturing December 31, 2004                           8,568,491
                      New Piper Aircraft, Inc.                       NR        NR
        8,594,965     Term Loan, maturing April 15, 2005                              8,487,528
                      Piedmont Aviation Services                     NR        NR
        6,269,868     Term Loan, maturing July 23, 2006                               6,207,170
        6,269,868     Term Loan, maturing July 23, 2007                               6,207,170
                      Stellex Technologies, Inc.(2)                 Caa2       D
        1,630,774     Term Loan, maturing September 30, 2006(3)                       1,007,003
                      Titan Corporation                             Ba3       BB-
        3,464,912     Term Loan, maturing February 23, 2007                           3,447,588
                      Transdigm Inc.                                 B1        B+
          561,094     Term Loan, maturing May 31, 2006                                  563,724
        1,433,906     Term Loan, maturing May 31, 2007                                1,441,525
                      Transtar Metals, Inc.                          NR        NR
       14,866,071     Term Loan, maturing January 20, 2006                           13,767,438
                      United Defense Industries Inc.                 B1       BB-
        8,500,000     Term Loan, maturing August 13, 2009                             8,545,161
                                                                                     ----------
                                                                                     78,410,934
                                                                                     ----------
 Automobile: 2.6%

                      Autosystems Mfg., Inc.(4)                      NR        NR
        4,962,500     Term Loan, maturing May 31, 2004(3)                             1,191,000
        4,962,500     Term Loan, maturing May 31, 2005(3)                             1,191,000
                      Breed Technologies                             NR        NR
        1,612,242     Term Loan, maturing December 20, 2004                           1,612,242
                      Capital Tool & Design Ltd.                     NR        NR
        9,231,178     Term Loan, maturing July 19, 2003                               8,954,242
                      Exide Corp.                                   Ba3        B+
        5,248,459     Term Loan, maturing March 18 , 2005                             4,881,067
                      Hayes Lemmerz International Inc.               B2        B+
        4,500,000     Term loan, maturing December 15, 2005                           4,516,875
                      Metaldyne Corp.                               Ba3       BB-
        3,629,674     Term Loan, maturing June 21, 2009                               3,339,300
                      Safelite Glass Corporation                     B3        NR
        6,620,094     Term Loan, maturing September 30, 2007                          6,272,539
        7,190,035     Term Loan, maturing September 30, 2007                          6,812,558
                                                                                     ----------
                                                                                     38,770,823
                                                                                     ----------
 Banking: 0.8%
                      Outsourcing Solutions, Inc.                    B2        B+
       12,293,593     Term Loan, maturing June 1, 2006                               11,648,179
                                                                                     ----------
                                                                                     11,648,179
                                                                                     ----------
</TABLE>

                                       10
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                       Bank Loan
                                                                        Ratings+
                                                                    ---------------
Principal Amount      Borrower/Tranche Description                  Moody's     S&P       Value
----------------      ----------------------------                  -------     ---       -----
<S>                   <C>                                          <C>         <C>     <C>
 Beverage, Food and Tobacco: 4.4%
                      Aurora Foods, Inc.                               B2        B
    $   4,418,325     Term Loan, maturing June 30, 2005                                $4,318,913
        1,828,571     Revolving Loan, maturing June 30, 2005                            1,773,714
                      Commonwealth Brands, Inc.                       Ba3       BB-
        3,000,000     Term Loan, maturing January 20, 2005                              2,990,625
                      Cott Corp.                                      Ba3       BB-
        1,930,000     Term Loan, maturing December 31, 2006                             1,945,681
                      CP Kelco APS, Inc.                               B1        B+
        5,325,000     Term Loan, maturing March 28, 2008                                5,049,873
        1,775,000     Term Loan, maturing September 28, 2008                            1,684,771
                      Edwards Baking Company                           NR        NR
        1,536,583     Term Loan, maturing Sepetmber 30, 2003                            1,490,485
        3,166,621     Term Loan, maturing Sepetmber 30, 2005                            3,103,289
        2,214,163     Term Loan, maturing Sepetmber 30, 2005                            2,169,880
                      Empire Kosher Poultry, Inc.                      NR        NR
       13,545,000     Term Loan, maturing July 31, 2004                                12,151,057
                      Flower Foods, Inc.                              Ba2       BBB-
        2,500,000     Term Loan, maturing March 26, 2007                                2,523,125
                      Imperial Sugar Company(2)                        NR        D
        2,526,343     Term Loan, maturing December 31, 2003                             1,743,176
        2,437,129     Term Loan, maturing December 31, 2005                             1,681,619
                      Interstate Bakeries                             Ba1       BBB-
        3,000,000     Term Loan, maturing July 19, 2007                                 3,016,875
                      Mafco Worldwide Corp.                            B1        NR
        3,888,889     Term Loan, maturing April 19, 2006                                3,840,278
                      New World Coffee-Manhattan Bagel Inc.            B3        B-
        4,000,000     Senior Secured Note, maturing June 15, 2003                       3,810,000
                      Nutrasweet Acquisition Corporation               B1        NR
        1,290,886     Term Loan, maturing May 31, 2007                                  1,293,306
                      Pabst Brewing Company                            NR       CCC
        3,999,146     Term Loan, maturing April 30, 2003                                3,319,291
                      Suiza Food Dairy Group LP                       Ba2       BB+
        5,391,484     Term Loan, maturing January 4, 2005                               5,389,801
        1,641,185     Term Loan, maturing January 4, 2005                               1,640,673
        1,240,006     Revolving Loan, maturing January 4, 2005                          1,239,619
                                                                                       ----------
                                                                                       66,176,051
                                                                                       ----------
 Buildings and Real Estate: 5.6%
                      Corrections Corporation of America               B3        B
        7,292,711     Term Loan, maturing December 31, 2002                             7,037,466
                      HQ Global Workplaces                             NR        NR
        3,865,243     Term Loan, maturing September 4, 2009                             3,691,307
                      Kevco, Inc.(2)                                   NR        D
        1,257,691     Term Loan, maturing February 2, 2005(3)                             919,115
                      National Golf Operating Partnership              NR        NR
        9,800,000     Term Loan, maturing July 22, 2004                                 9,800,000
                      Rodamco North America                           Baa3      BBB-
        8,086,938     Term Loan, matruring November 8, 2002                             8,036,395
       17,250,000     Term Loan, matruring November 8, 2002                            17,135,937
                      Southdown Corporation                           Ba1       BBB-
        3,971,428     Revolving Loan, maturing December 20, 2001                        3,959,018
</TABLE>

                                       11
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                      Bank Loan
                                                                       Ratings+
                                                                   ---------------
Principal Amount      Borrower/Tranche Description                 Moody's     S&P      Value
----------------      ----------------------------                 -------     ---      -----
<S>                   <C>                                          <C>         <C>   <C>
 Buildings and Real Estate (continued)
                      US Aggregates, Inc.                             NR        NR
    $   5,109,488     Term Loan, maturing March 31, 2006                              $4,598,539
          684,794     Term Loan, maturing September 30, 2001                             684,794
                      Ventas Realty Limited Partnership               NR        NR
          677,905     Term Loan, maturing December 31, 2002                              669,854
        2,857,237     Term Loan, maturing December 31, 2005                            2,823,308
       25,073,116     Term Loan, maturing December 31, 2007                           24,769,998
                                                                                      ----------
                                                                                      84,125,731
                                                                                      ----------
 Cable Television: 4.5%
                      CC VI Operating Company LLC                    Ba3        BB
        5,000,000     Term Loan, maturing November 1, 2008                             4,980,000
                      CC VIII Operating LLC                          Ba3        BB
        3,500,000     Term Loan, maturing February 2, 2008                             3,498,471
                      Century Cable Holdings LLC                     Ba3       BB-
        8,000,000     Term Loan, maturing June 30, 2009                                7,935,832
        5,000,000     Term Loan, maturing December 31, 2009                            4,973,125
                      Charter Communications Operating LLC           Ba3       BB+
       11,556,250     Term Loan, maturing March 17, 2008                              11,456,936
       11,500,000     Term Loan, maturing March 18, 2008                              11,412,957
                      Insight Midwest LP                             Ba3       BB+
       13,000,000     Term Loan, maturing December 31, 2009                           13,082,875
                      Mediacom Communications                        Ba3       BB+
        7,000,000     Term Loan, maturing September 30, 2010                           7,003,647
        3,000,000     Term Loan, maturing September 30, 2010                           3,001,563
                                                                                      ----------
                                                                                      67,345,406
                                                                                      ----------
 Cargo Transport: 3.1%
                      American Commercial Lines                       B1       BB-
        1,522,430     Term Loan, maturing June 30, 2006                                1,375,896
        2,183,710     Term Loan, maturing June 30, 2007                                1,973,528
                      Evergreen International Aviation, Inc.         Ba2        B+
          301,003     Term Loan, maturing May 31, 2002                                   255,853
        2,249,114     Term Loan, maturing May 7, 2003                                  1,911,747
          346,546     Term Loan, maturing May 7, 2003                                    294,564
                      Gemini Air Cargo, Inc.                          B1        B-
        4,117,116     Term Loan, maturing August 12, 2005                              3,612,770
                      Interpool Acquisitions LLC                     Ba1       BBB
       15,900,652     Term Loan, maturing October 20, 2002                            15,955,318
                      Neoplan USA Corporation                         NR        NR
        9,691,419     Term Loan, maturing May 29, 2005                                 9,691,419
                      Omnitrax, Inc.                                  NR        NR
        4,843,219     Term Loan, maturing May 12, 2005                                 4,831,111
                      Oshkosh Truck Corp.                            Ba1       BB+
        3,000,000     Term Loan, maturing January 31, 2007                             3,023,124
                      Rail America, Inc.                              B2        B
        1,285,982     Term Loan, maturing December 31, 2005                            1,261,869
          457,501     Term Loan, maturing December 31, 2006                              459,968
          108,763     Revolving Loan, maturing December 31, 2005                         106,724
                      Transportation Manufacturing Operations        Ba3       BB-
        3,000,000     Term Loan, maturing June 16, 2006                                2,497,500
                                                                                      ----------
                                                                                      47,251,391
                                                                                      ----------
</TABLE>

                                       12
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                        Bank Loan
                                                                         Ratings+
                                                                     ---------------
Principal Amount      Borrower/Tranche Description                   Moody's     S&P      Value
----------------      ----------------------------                   -------     ---      -----
<S>                   <C>                                           <C>         <C>     <C>
 Cellular Communications: 7.3%
                      Airgate PCS, Inc.                                 B2        B-
      $   967,427     Term Loan, maturing June 6, 2007                                  $   960,171
        4,428,665     Term Loan, maturing September 30, 2008                              4,395,450
                      American Cellular Corp.                          Ba3       BB-
        3,198,354     Term loan, maturing March 31, 2008                                  3,164,205
        5,579,084     Term loan, maturing March 31, 2009                                  5,519,516
                      Independent Wireless One Corporation              B2        B-
       10,000,000     Term Loan, maturing June 20, 2008                                   9,724,090
                      Nextel Communications, Inc,                      Ba2        B+
        7,393,513     Term Loan, maturing March 15, 2006                                  7,375,029
                      Nextel Finance Co.                               Ba2        B+
       48,500,000     Term Loan, maturing March 31, 2009                                 44,155,225
        3,500,000     Term Loan, maturing December 31, 2008                               3,246,093
        3,500,000     Term Loan, maturing June 30, 2008                                   3,246,093
                      Rural Cellular Corporation                        B1        B+
        6,250,000     Term Loan, maturing October 3, 2008                                 6,134,769
        6,250,000     Term Loan, maturing April 3, 2009                                   6,135,419
                      Western Wireless Corp.                           Ba2        BB
        8,000,000     Term Loan, maturing March 31, 2008                                  7,906,664
        8,000,000     Term Loan, maturing September 30, 2008                              7,969,168
          400,000     Revolving Loan, maturing March 31, 2008                               394,500
                                                                                        -----------
                                                                                        110,326,392
                                                                                        -----------
 Chemicals, Plastics and Rubber: 6.4%
                      Acadia Elasotmers Corporation                     NR        NR
        9,525,547     Term Loan, maturing February 17, 2004                               9,144,526
                      Cedar Chemical Corporation                        NR        NR
       10,943,864     Term Loan, maturing October 30, 2003                                5,471,932
                      Equistar Chemicals LP                            Baa3      BBB
        5,000,000     Term Loan, maturing September 1, 2007                               4,992,500
                      Euro United Corporation(4)                        NR        NR
       14,887,500     Term Loan, maturing May 31, 2001(3)                                 7,443,750
                      Foam Fabricators, Inc.                            NR        NR
        4,514,180     Term Loan, maturing March 5, 2005                                   4,502,894
                      Foamex L.P.                                       B3        B
        3,280,185     Term Loan, maturing June 30, 2005                                   3,091,574
        2,981,997     Term Loan, maturing June 30, 2006                                   2,810,532
                      GEO Specialty Chemicals                           B1        B+
        3,000,000     Term Loan, maturing March 25, 2004                                  3,014,064
                      Hercules, Inc.                                   Ba1        BB
        1,990,000     Term Loan, maturing November 15, 2005                               1,984,030
       16,240,683     Term Loan, maturing October 15, 2003                               16,052,909
                      Huntsman Corporation                              B1        B
        5,099,524     Revolving Loan, maturing February 7, 2003                           4,139,115
          260,155     Term Loan, maturing December 31, 2002                                 214,953
        7,000,000     Term Loan, maturing December 31, 2005                               5,838,000
                      Huntsman International LLC                       Ba3       BB-
        1,612,264     Term Loan, maturing June 30, 2005                                   1,588,080
        3,158,023     Term Loan, maturing June 30, 2007                                   3,131,969
        3,158,023     Term Loan, maturing June 30, 2008                                   3,129,602
</TABLE>

                                       13
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                      Bank Loan
                                                                       Ratings+
                                                                   ---------------
Principal Amount      Borrower/Tranche Description                 Moody's     S&P      Value
----------------      ----------------------------                 -------     ---      -----
<S>                   <C>                                        <C>         <C>     <C>
 Chemicals, Plastics and Rubber (continued)
                      Lyondell Chemical Company                     Ba3        BB
      $   462,882     Term Loan, maturing June 30, 2005                              $  465,005
                      Millennium Chemicals, Inc.                    Baa3      BBB-
        2,000,000     Term Loan, maturing June 8, 2008                                2,017,500
                      Noveon, Inc.                                   B1       BB-
        7,750,000     Term Loan, maturing August 28, 2008                             7,664,022
                      OM Group, Inc.                                Ba3        BB
        2,000,000     Term Loan, maturing April 1, 2007                               2,006,718
        8,000,000     Term Loan, maturing May 10, 2002                                8,000,000
                                                                                     ----------
                                                                                     96,703,675
                                                                                     ----------
 Containers, Packaging and Glass: 6.6%
                      Blue Ridge Paper Products, Inc.                B2        B+
        8,818,255     Term Loan, maturing May 14, 2006                                8,818,255
                      Crown Paper Company(2)                         NR        NR
        7,594,433     Term Loan, maturing August 22, 2003(3)                          1,518,887
                      Greif Bros. Corp.                             Ba3        BB
        2,825,031     Term Loan, maturing April 3, 2002                               2,822,678
        2,443,288     Term Loan, maturing March 1, 2008                               2,455,199
                      Impaxx, Inc.                                   NR        NR
        4,825,000     Term Loan, maturing December 31, 2005                           4,805,309
                      Eastern Pulp & Paper Corporation(2)            NR        NR
       15,167,219     Term Loan, maturing August 31, 2004                            12,892,136
          246,080     Term Loan, maturing December 31, 2004                             209,168
                      Nexpak Corporation                             B1        B+
        2,307,174     Term Loan, maturing December 31, 2005                           1,615,022
        2,307,174     Term Loan, maturing December 31, 2006                           1,615,022
                      Norske Skog Canada Ltd.                       Ba1       BB+
        1,000,000     Term Loan, maturing August 14, 2007                             1,006,250
                      Packaging Corporation of America              Ba3       BBB-
        1,776,818     Term Loan, maturing June 29, 2006                               1,774,597
                      Pliant Corporation                             B2        B+
        2,946,429     Term Loan, maturing May 15, 2008                                2,822,434
                      Potlatch Corporation                          Baa2      BBB-
        3,000,000     Term Loan, maturing July 9, 2005                                3,031,251
                      Riverwood International Corp.                  B1        B+
       17,000,000     Term Loan, maturing December 31, 2006                          17,185,946
          660,000     Revolving Loan, maturing December 31, 2006                        645,769
                      Smurfit-Stone Container Corp.                 Ba3        B+
        3,000,000     Term Loan, maturing March 27, 2007                              3,006,459
                      Stone Container Corporation                   Ba3        B+
       12,671,148     Term Loan, maturing December 31, 2005                          12,710,746
       17,068,574     Term Loan, maturing December 31, 2006                          17,096,311
                      Tekni-Plex, Inc.                               B1        B+
        2,970,000     Term Loan, maturing June 21, 2006                               2,875,949
                                                                                     ----------
                                                                                     98,907,388
                                                                                     ----------
 Data and Internet Services: 1.8%
                      Arch Communications, Inc.                      NR        CC
        8,814,739     Term Loan, maturing December 31, 2004                           1,859,910

</TABLE>

                                       14
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                        Bank Loan
                                                                         Ratings+
                                                                     ---------------
Principal Amount      Borrower/Tranche Description                   Moody's     S&P        Value
----------------      ----------------------------                   -------     ---        -----
<S>                   <C>                                            <C>         <C>     <C>
 Data and Internet Services (continued)
                      ICG Communications, Inc.(2)                        NR        D
    $   6,995,226     Term Loan, maturing March 31, 2006                                  $ 6,855,322
                      McLeod USA Corp.                                   B2        B
       11,195,000     Term Loan, maturing May 30, 2008                                      9,054,891
                      Teletouch Communications                           NR        NR
        9,896,064     Term Loan, maturing November 30, 2004                                 4,651,150
                      Teligent, Inc.(2)                                  Ca        D
        5,000,000     Term Loan, maturing July 1, 2002(3)                                     630,000
                      TSR Wireless LLC(1)                                NR        NR
       11,970,000     Term Loan, maturing June 30, 2005(3)                                  1,795,500
                      360 Networks, Inc.(2)                              Ca        D
        7,500,000     Term Loan, maturing December 31, 2007(3)                              2,409,375
                                                                                          -----------
                                                                                           27,256,148
                                                                                          -----------
 Diversified/Conglomerate Manufacturing: 2.5%
                      Allied Digital Technologies Corporation(2)         NR        NR
        8,578,133     Term Loan, maturing December 31, 2005(3)                                716,406
                      Barjan Products, LLC                               NR        NR
        4,900,500     Term Loan, maturing May 31, 2006                                      4,679,978
                      Dresser, Inc.                                     Ba3       BB-
        7,000,000     Term Loan, maturing April 10, 2009                                    7,093,625
                      General Cable Corporation                         Ba3       BB+
        4,231,325     Term Loan, maturing May 24, 2007                                      4,203,115
                      Manitowoc Company, Inc.                           Ba2        BB
        2,000,000     Term Loan, maturing May 9, 2007                                       2,015,500
                      SPX Corporation                                   Ba2       BB+
        4,975,000     Term Loan, maturing December 31, 2007                                 4,991,791
        7,885,714     Term Loan, maturing September 30, 2004                                7,866,000
                      United Pet Group, Inc.                             NR        NR
        6,246,266     Term Loan, maturing March 31, 2006                                    6,302,923
                                                                                          -----------
                                                                                           37,869,338
                                                                                          -----------
 Diversified/Conglomerate Service: 2.1%
                      Enterprise Profit Solutions Corporation            NR        NR
        1,548,033     Term Loan, maturing June 14, 2001(3)                                     30,961
                      Mafco Finance Corporation                          NR        NR
       13,500,000     Term Loan, maturing June 20, 2002                                    13,424,063
                      Private Business                                   NR        NR
        3,981,262     Term Loan, maturing August 19, 2006                                   3,941,449
                      URS Corporation                                   Ba3        BB
        1,000,000     Revolving Loan, maturing June 9, 2005                                   995,000
       11,278,433     Term Loan, maturing June 9, 2005                                     11,222,041
        1,225,000     Term Loan, maturing June 9, 2006                                      1,231,125
        1,225,000     Term Loan, maturing June 9, 2007                                      1,231,125
                                                                                          -----------
                                                                                           32,075,764
                                                                                          -----------
 Ecological: 4.9%
                      Allied Waste Industries, Inc.                     Ba3        BB
       17,615,278     Term Loan, maturing July 12, 2005                                    17,278,703
       20,640,062     Term Loan, maturing July 12, 2006                                    20,594,096
       24,768,074     Term Loan, maturing July 12, 2007                                    24,710,983
</TABLE>

                                       15
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                      Bank Loan
                                                                       Ratings+
                                                                   ---------------
Principal Amount      Borrower/Tranche Description                 Moody's     S&P      Value
----------------      ----------------------------                 -------     ---      -----
<S>                   <C>                                        <C>         <C>     <C>
 Ecological (continued)
                      American Ref-Fuel Company LLC                 Baa2      BBB
$   4,000,000         Term Loan, maturing April 30, 2005                              $ 4,010,000
                      Rumpke Consolidated Company                    NR        NR
        7,837,500     Term Loan, maturing September 26, 2002                            7,800,272
                                                                                      -----------
                                                                                       74,394,054
                                                                                      -----------
 Electronics: 2.8%
                      Acterna, LLC                                  Ba3        B+
       11,274,510     Term Loan, maturing September 30, 2007                           10,165,854
                      Decision One Corporation                       B3       CCC
       11,037,214     Term Loan, maturing April 18, 2005                                8,940,144
        2,188,647     Term Loan, maturing April 18, 2005                                1,772,804
                      Electro Mechanical Solutions                   NR        NR
        4,248,085     Term Loan, maturing June 30, 2004(3)                              1,656,753
                      Frontway Network Solutions, Inc.               NR        NR
        1,505,505     Term Loan, maturing November 20, 2002(3)                            844,410
                      Insilco Technologies, Inc.                     B2        B
        4,962,500     Term Loan, maturing August 25, 2007                               4,590,313
                      Intri-Plex Technologies, Inc.                  NR        NR
        5,347,826     Term Loan, maturing September 30, 2002                            2,673,913
                      Knowles Electronics, Inc.                      B1        B+
        3,438,816     Term Loan, maturing June 29, 2007                                 3,180,905
                      ON Semiconductor Corporation                   B1        B+
        1,306,372     Term Loan, maturing August 4, 2006                                1,168,387
        1,407,056     Term Loan, maturing August 4, 2007                                1,258,436
                      Sarcom, Inc.                                   NR        NR
        7,488,141     Term Loan, maturing November 20, 2002(3)                          6,532,555
                                                                                      -----------
                                                                                       42,784,474
                                                                                      -----------
 Finance: 3.1%
                      Alliance Data Systems Corporation              B1        B+
       14,100,000     Term Loan, maturing October 31, 2005                             13,976,251
          725,446     Term Loan, maturing March 4, 2006                                   709,196
                      Anthony Crane Rental L.P.                      B2        B+
       14,700,000     Term Loan, maturing July 20, 2006                                12,568,500
                      Bridge Information Systems(2)                  NR        NR
        5,843,952     Term Loan, maturing May 29, 2005(3)                               3,231,705
        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
                      Rent-A-Center, Inc.                           Ba2       BB-
        3,894,166     Term Loan, maturing January 31, 2006                              3,864,960
        5,024,651     Term Loan, maturing January 31, 2007                              4,986,966
        1,898,057     Term Loan, maturing December 31, 2007                             1,903,988
                      Value Asset Management, Inc.                   NR        NR
        2,166,667     Term Loan, maturing April 28, 2003                                2,161,250
                                                                                      -----------
                                                                                       46,609,270
                                                                                      -----------
 Gaming: 4.0%
                      Aladdin Gaming, LLC                           Caa1      CCC-
        2,968,421     Term Loan, maturing August 26, 2006                               2,491,618
        4,455,000     Term Loan, maturing February 26, 2008                             3,739,416
</TABLE>

                                       16
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                        Bank Loan
                                                                         Ratings+
                                                                     ---------------
Principal Amount      Borrower/Tranche Description                   Moody's     S&P        Value
----------------      ----------------------------                   -------     ---        -----
<S>                     <C>                                         <C>         <C>     <C>
 Gaming (continued)
                        Alliance Gaming Corporation                     B1        B+
$       10,000,000      Term Loan, maturing December 31, 2006                            $ 10,031,250
                        Ameristar Casinos, Inc.                        Ba3        B+
         2,266,716      Term Loan, maturing December 21, 2006                               2,278,050
         1,942,899      Term Loan, maturing December 21, 2007                               1,952,614
                        Argosy Gaming                                  Ba2        BB
         9,500,000      Term Loan, maturing July 31, 2007                                   9,597,974
                        Mandalay Resort Group                          Ba1       BB+
        17,000,000      Term Loan, maturing August 21, 2006                                16,915,000
                        Penn National Gaming, Inc.                     Ba3        B+
         4,950,000      Term Loan, matuing August 8, 2006                                   4,976,433
                        Scientific Games Corporation                    B1        B+
         4,962,500      Term Loan, maturing August 23, 2007                                 4,956,297
                        Station Casinos, Inc.                          Ba1       BB+
         3,020,355      Revolving Loan, maturing September 30, 2003                         3,005,253
                                                                                         ------------
                                                                                           59,943,905
                                                                                         ------------
 Grocery: 0.3%
                        Grand Union Capital Corporation(2)              NR        NR
         1,069,255      Term Loan, maturing August 17, 2003(3)                                 21,385
                        Winn-Dixie Stores, Inc.                        Baa3      BBB
         3,990,000      Term Loan, maturing March 29, 2007                                  4,021,174
                                                                                         ------------
                                                                                            4,042,559
                                                                                         ------------
 Healthcare, Education and Childcare: 8.1%
                        Advance PCS                                    Ba3        BB
         2,232,891      Term Loan, maturing October 2, 2007                                 2,248,242
                        Alliance Imaging, Inc.                          B1        B+
         2,000,000      Term Loan, October 2, 2006                                          1,965,000
         1,343,284      Term Loan, October 2, 2007                                          1,346,642
         4,093,050      Term Loan, October 2, 2008                                          4,103,282
                        Apria Healthcare                               Ba1       BBB-
         5,000,000      Term Loan, maturing August 28, 2007                                 5,006,250
                        Caremark, Rx                                   Ba3        BB
         2,992,500      Term Loan, maturing March 15, 2006                                  3,021,803
                        Children's Discovery Centers of America         NR        NR
         9,093,750      Term Loan, maturing August 10, 2004                                 8,775,469
                        Community Health Systems, Inc.                 Ba3        B+
         2,125,428      Term Loan, maturing December 31, 2003                               2,136,720
         2,125,428      Term Loan, maturing December 31, 2004                               2,138,546
         1,306,644      Term Loan, maturing December 31, 2005                               1,316,750
                        Concentra Operating Corporation                 B1        B+
         3,266,667      Term Loan, maturing June 30, 2006                                   3,264,625
         1,633,333      Term Loan, maturing June 30, 2007                                   1,632,312
                        Covenent Care California                        NR        NR
         5,931,906      Term Loan, maturing June 30, 2003                                   5,857,757
                        Express Scripts, Inc.                          Ba2       BB+
         6,282,051      Term Loan, maturing March 31, 2005                                  6,242,788
                        Fountain View, Inc.                             B2        CC
        12,352,941      Term Loan, maturing March 31, 2004                                 11,920,588
                        Genesis Health Ventures, Inc.(2)                NR        NR
         2,766,313      Term Loan, maturing September 30, 2003                              2,116,230
</TABLE>

                                       17
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                         Bank Loan
                                                                          Ratings+
                                                                      ---------------
Principal Amount      Borrower/Tranche Description                    Moody's     S&P        Value
----------------      ----------------------------                    -------     ---        -----
<S>                     <C>                                          <C>         <C>     <C>
 Healthcare, Education and Childcare (continued)
                        HCA-The Healthcare Company                      Ba1       BB+
$       10,285,714      Term Loan, maturing May 30, 2006                                  $ 10,160,362
                        Healthcare Direct, Inc.                          NR        NR
         1,999,655      Term Loan, maturing August 1, 2004                                   1,983,021
         3,977,000      Term Loan, maturing August 1, 2006                                   3,972,120
                        Kinetic Concepts, Inc.                          Ba3        B
         4,000,000      Term Loan, maturing March 31, 2006                                   3,991,252
                        Magellan Health Services, Inc.                   B1        B+
         2,000,745      Term Loan, maturing February 28, 2005                                2,003,996
         2,000,745      Term Loan, maturing February 28, 2006                                2,003,996
                        Mellon Financial Services
                        Corporation IV(2)                                NR        NR
         4,400,754      Term Loan, maturing September 30, 2004                               3,476,595
                        Paragon Health Network, Inc.(2)                  NR        NR
         6,933,808      Term Loan, maturing April 30, 2005(3)                                4,740,745
         6,130,582      Term Loan, maturing March 31, 2006(3)                                4,184,224
                        Sybron Dental Management, Inc.                  Ba3       BB-
         2,483,526      Term Loan, maturing December 1, 2007                                 2,503,704
                        The Brown Schools (Healthcare America)           NR        NR
        13,794,103      Term Loan, maturing June 30, 2003                                   13,003,802
                        The Multicare Companies, Inc.(2)                 NR        NR
         3,312,183      Term Loan, maturing September 30, 2003(3)                            2,616,625
                        Triad Hospitals, Inc.                           Ba3        B+
         2,000,000      Term Loan, maturing October 27, 2008                                 2,023,126
                        Vision Twenty-One                                NR        NR
         2,898,018      Term Loan, maturing October 31, 2002                                 2,463,315
                                                                                          ------------
                                                                                           122,219,887
                                                                                          ------------
 Home and Office Furnishings, Housewares, and Durable Consumer Products: 2.4%
                        American Blind & Wallpaper Factory, Inc.         NR        NR
           722,983      Term Loan, maturing December 29, 2005                                  722,983
                        Buhrmann NV                                     Ba3        BB
         4,353,858      Term Loan, maturing October 26, 2007                                 4,279,481
         3,407,049      Term Loan, maturing October 26, 2005                                 3,310,517
                        Desa International, Inc.                         B2        B-
         7,461,218      Term Loan, maturing November 26, 2004                                6,640,484
                        Holmes Products Corporation                      B2        B
         3,854,567      Term Loan, maturing February 15, 2007                                2,621,106
                        Icon Health & Fitness, Inc.                      NR        NR
         4,879,688      Term Loan, maturing November 29, 2004                                4,855,289
         5,375,407      Term Loan, maturing March 1, 2005                                    5,294,776
         3,250,000      Term Loan, maturing August 31, 2004                                  3,221,563
                        Identity Group, Inc.                             NR        NR
         4,525,000      Term Loan, maturing May 7, 2007                                      4,223,860
                        Imperial Home Decor Group, Inc.                  NR        NR
           833,725      Term Loan, maturing April 4, 2006                                      833,725
                        U.S. Office Products Company(2)                 Caa2       D
         3,632,349      Term Loan, maturing June 9, 2006(3)                                    259,256
                                                                                          ------------
                                                                                            36,263,040
                                                                                          ------------
</TABLE>

                                       18
<PAGE>

                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                         Bank Loan
                                                                          Ratings+
                                                                      ---------------
Principal Amount      Borrower/Tranche Description                    Moody's     S&P        Value
----------------      ----------------------------                    -------     ---        -----
<S>                     <C>                                        <C>         <C>     <C>
 Hotels, Motels and Inns: 8.7%
                        Extended Stay America, Inc.                   Ba3       BB-
$       17,000,000      Term Loan, maturing July 30, 2007                               $ 17,061,625
                        Host Marriot Corporation                      Ba2        BB
         4,709,677      Term loan, maturing August 5, 2003                                 4,702,097
                        KSL Recreation Group, Inc.                    Ba3        B+
        11,166,667      Term Loan, maturing December 21, 2006                             11,202,556
         3,029,544      Term Loan, maturing April 30, 2005                                 3,022,600
         3,029,544      Term Loan, maturing April 30, 2006                                 3,025,126
                        Lodgian Financing Corporation                  B3        B
        17,486,119      Term Loan, maturing September 15, 2006                            17,048,966
                        Meristar Hospitality Corporation              Ba1       BB-
         8,773,205      Term Loan, maturing July 31, 2003                                  8,745,788
                        Meristar Investment Partners, L.P.            Ba3        B+
         7,400,558      Term Loan, maturing March 31, 2004                                 7,400,558
         2,500,000      Term Loan, maturing March 31, 2002                                 2,500,000
                        Resort at Summerlin, Inc.(2)                   NR        NR
         2,944,162      Revolving Loan, maturing September 30, 2001                        2,885,279
                        Starwood Hotels & Resorts
                        Worldwide, Inc.                               Ba1       BBB-
        20,000,000      Term Loan, maturing February 23, 2003                             19,900,000
         5,750,000      Term Loan, maturing February 23, 2003                              5,770,844
                        Wyndham International, Inc.                    B1        B+
         8,175,514      Term Loan, maturing June 30, 2004                                  8,057,427
        20,000,000      Term Loan, maturing June 30, 2006                                 19,520,840
                                                                                        ------------
                                                                                         130,843,706
                                                                                        ------------
 Insurance: 1.2%
                        USI Holdings Corporation                       NR        B+
         9,300,000      Term Loan, maturing September 17, 2004                             9,270,938
                        White Mountains                               Baa2      BBB+
         9,000,000      Term Loan, maturing March 31, 2007                                 8,988,750
                                                                                        ------------
                                                                                          18,259,688
                                                                                        ------------
 Leisure, Amusement, Motion Pictures and Entertainment: 4.4%
                        Amfac Parks & Resorts, Inc.                    NR        NR
         3,588,471      Term Loan, maturing September 4, 2004                              3,521,187
         3,588,471      Term Loan, maturing September 30, 2004                             3,521,187
                        Edwards Megaplex Holdings, Inc.                NR        NR
         3,360,656      Term Loan, maturing December 26, 2005                              3,276,639
                        Fitness Holdings Worldwide, Inc.               NR        B
         9,324,250      Term Loan, maturing November 1, 2006                               8,826,960
         8,336,250      Term Loan, maturing November 1, 2007                               7,891,653
                        Lodgenet Entertainment                        Ba3        B+
         1,000,000      Term Loan, maturing June 30, 2006                                    995,000
                        Metro-Goldwyn-Mayer                           Ba3       BB-
         8,500,000      Term Loan, maturing March 31, 2005                                 8,372,500
         7,500,000      Term Loan, maturing March 31, 2006                                 7,485,000
                        Panavision, Inc.                               B2        B+
        14,136,081      Term Loan, maturing March 10, 2005                                13,994,720
                        Premier Parks, Inc.                           Ba2       BB-
         3,000,000      Term Loan, maturing September 30, 2005                             3,031,500
</TABLE>

                                       19
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                     Bank Loan
                                                                      Ratings+
                                                                  ---------------
Principal Amount      Borrower/Tranche Description                Moody's     S&P        Value
----------------      ----------------------------                -------     ---        -----
<S>                   <C>                                        <C>         <C>     <C>
 Leisure, Amusement, Motion Pictures and Entertainment (continued)

                      United Artists Theatre Company                 B3        B-
$   4,987,500         Term Loan, maturing January 24, 2005                            $ 4,830,085
                                                                                      -----------
                                                                                       65,746,431
                                                                                      -----------
 Machinery: 1.1%
                      Alliance Laundry Systems, LLC                  B1        B
       10,468,099     Term Loan, maturing May 1, 2005                                   9,630,652
                      Morris Material Handling, Inc.(2)              NR        NR
        3,980,934     Term Loan, maturing March 31, 2005                                3,505,003
                      Vutek, Inc.                                    B1        NR
          597,544     Term Loan, maturing December 30, 2007                               599,785
        1,480,076     Term Loan, maturing December 30, 2007                             1,476,376
        1,776,458     Term Loan, maturing December 30, 2007                             1,772,017
                                                                                      -----------
                                                                                       16,983,833
                                                                                      -----------
 Mining, Steel, Iron and Non-Precious Metals: 0.1%
                      National Refractories Co.                      NR        NR
        1,250,000     Term Loan, maturing September 30, 2001                            1,239,993
                                                                                      -----------
                                                                                        1,239,993
                                                                                      -----------
 Oil and Gas: 0.6%
                      Key Energy Group, Inc,                        Ba2       BB-
        2,354,000     Revolving Loan, maturing October 26, 2003                         2,286,323
                      Plains Resources, Inc.                        Ba1       BB+
        3,000,000     Term Loan, maturing May 1, 2006                                   3,015,000
                      W-H Energy Services                            B1        B
        3,491,250     Term Loan, maturing April 16, 2007                                3,499,978
                                                                                      -----------
                                                                                        8,801,301
                                                                                      -----------
 Other Telecommunications: 2.6%
                      Broadwing Corporation                         Ba1       BB+
       10,000,000     Term Loan, maturing January 31, 2006                              9,851,560
       17,500,000     Term Loan, maturing November 9, 2004                             17,051,562
        1,000,000     Term Loan, maturing June 29, 2007                                   993,958
                      Infonet Services Corporation                  Ba2        BB
        5,000,000     Term Loan, maturing June 30, 2006                                 4,993,750
                      Pacific Coin                                   NR        NR
        4,133,230     Term Loan, maturing October 31, 2007                              4,050,565
        2,892,734     Term Loan, maturing December 31, 2007                             1,735,641
                                                                                      -----------
                                                                                       38,677,036
                                                                                      -----------
</TABLE>

                                       20
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                     Bank Loan
                                                                      Ratings+
                                                                  ---------------
Principal Amount      Borrower/Tranche Description                Moody's     S&P        Value
----------------      ----------------------------                -------     ---        -----
<S>                   <C>                                          <C>         <C>     <C>
 Personal and Nondurable Consumer Products: 2.1%
                      AM Cosmetics Corp.                               NR        NR
$   2,292,689         Revolving Loan, maturing May 30, 2004(3)                         $1,948,786
        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, Inc.                            B1        NR
        9,618,935     Term Loan, maturing December 31, 2004                             8,849,420
                      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
                      Jostens, Inc.                                    B1       BB-
        3,868,689     Term Loan, maturing May 31, 2006                                  3,836,451
                      Norwood Promotional Products, Inc.               B1       BB-
        3,082,579     Term Loan, maturing May 12, 2006                                  2,204,044
        2,756,807     Term Loan, maturing November 30, 2006                             1,971,117
                      Paint Sundry Brands LLC                          B2        B+
          977,360     Term Loan, maturing August 11, 2005                                 913,831
          957,213     Term Loan, maturing August 11, 2006                                 894,994
                      Playtex Products, Inc.                          Ba2       BB-
        2,495,625     Term Loan, maturing May 23, 2009                                  2,521,829
                                                                                       ----------
                                                                                       31,739,908
                                                                                       ----------
 Personal, Food & Miscellaneous: 3.6%
                      Coinmach Laundry Corporation                     B1       BB-
        8,651,423     Term Loan, maturing June 30, 2005                                 8,651,423
        5,476,909     Revolving Loan, maturing May 5, 2005                              5,353,678
                      Otis Spunkmaeyer, Inc.                           NR        NR
        4,417,049     Term Loan, maturing December 31, 2005                             4,152,026
                      Papa Gino's, Inc.                                NR        NR
        3,000,000     Term Loan, maturing August 31, 2004                               2,943,817
        7,000,000     Term Loan, maturing August 31, 2004                               6,910,076
                      SC International Services                       Baa1      BBB-
          584,086     Term Loan, maturing March 1, 2007                                   584,086
       24,868,988     Term Loan, maturing March 1, 2007                                24,868,988
                                                                                       ----------
                                                                                       53,464,094
                                                                                       ----------
 Printing and Publishing: 4.3%
                      Adams Outdoor Advertising Ltd.                   B1        B+
        2,000,000     Term Loan, maturing February 8, 2008                              2,002,000
                      Advanstar Communications, Inc.                  Ba3        B+
        1,782,857     Term Loan, maturing October 11, 2007                              1,782,857
       14,056,000     Term Loan, maturing April 11, 2007                               13,917,870
                      Canwest Media, Inc.                             Ba3       BB-
        4,286,806     Term Loan, maturing May 15, 2008                                  4,316,814
        4,591,190     Term Loan, maturing May 15, 2009                                  4,623,328
                      Lamar Advertising Company                       Ba2       BB-
        1,687,500     Revolving Loan, maturing March 1, 2006                            1,667,110
        6,437,500     Term Loan, maturing March 1, 2006                                 6,375,809
                      Mail-Well I Corp                                Ba3        BB
        3,884,330     Term Loan, maturing February 22, 2007                             3,723,293
                      Primedia, Inc.                                  Ba3       BB-
        4,000,000     Term Loan, maturing June 30, 2009                                 3,961,000
</TABLE>

                                       21
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                     Bank Loan
                                                                      Ratings+
                                                                  ---------------
Principal Amount      Borrower/Tranche Description                Moody's     S&P        Value
----------------      ----------------------------                -------     ---        -----
<S>                   <C>                                       <C>         <C>     <C>
 Printing and Publishing (continued)
                      Transwestern Publishing                      Ba3        B+
$   3,000,000         Term Loan, maturing June 30, 2007                             $3,028,749
                      Vertis, Inc.                                  B1       BB-
        3,954,321     Term Loan, maturing December 7, 2008                           3,687,404
                      Von Hoffman Press, Inc.                       B1        B+
        3,203,517     Term Loan, maturing May 22, 2004                               3,151,460
       10,414,973     Term Loan, maturing May 22, 2005                              10,245,730
                      Ziff-Davis Media, Inc.                       Ba3       CCC
        1,720,669     Term Loan, maturing March 31, 2007                             1,474,041
                                                                                    ----------
                                                                                    63,957,465
                                                                                    ----------
 Radio and Television Broadcasting: 2.4%
                      Benedek Broadcasting Corp                     B2        CC
        6,000,000     Term Loan, maturing November 20, 2007                          5,430,000
                      Citadel Broadcasting                         Ba3        B+
        4,500,000     Term Loan, maturing April 2, 2009                              4,528,827
                      Emmis Communications Corp.                   Ba2        B+
       15,862,941     Term Loan, maturing August 30, 2009                           15,919,733
                      Sinclair Broadcasting Group                  Ba2       BB-
        5,000,000     Term Loan, maturing December 31, 2009                          5,043,750
                      Susquehanna Media Company                    Ba1       BB-
        2,500,000     Term Loan, maturing June 30, 2008                              2,515,625
                      Telemundo Group, Inc.                         B1        B+
        2,000,000     Term Loan, maturing June 1, 2008                               2,009,500
                                                                                    ----------
                                                                                    35,447,435
                                                                                    ----------
 Retail Stores: 3.5%
                      Advance Stores Co.                           Ba3        B+
          649,547     Term Loan, maturing April 15, 2006                               641,427
                      CSK Auto, Inc.                                B1       BB-
        6,144,940     Term Loan, maturing October 31, 2003                           5,591,896
        5,414,244     Term Loan, maturing October 31, 2003                           4,926,962
                      Murray's Discount Auto Stores, Inc.           NR        NR
       11,059,454     Term Loan, maturing June 30, 2003                             10,810,420
                      Peebles, Inc.                                 NR        NR
        1,248,619     Term Loan, maturing April 30, 2003                             1,229,890
        9,596,928     Term Loan, maturing April 30, 2004                             9,452,974
                      Rite Aid Funding LLC                          B1        B
       17,000,000     Term Loan, maturing July 31, 2005                             17,010,625
                      Travel Centers of America, Inc.              Ba3        BB
        2,500,000     Term Loan, maturing November 14, 2008                          2,519,793
                                                                                    ----------
                                                                                    52,183,987
                                                                                    ----------
 Satelite: 0.4%
                      Pegasus Media & Communications, Inc.          B1        B+
        5,975,013     Term Loan, maturing April 30, 2005                             5,915,262
                                                                                    ----------
                                                                                     5,915,262
                                                                                    ----------
</TABLE>

                                       22
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                       Bank Loan
                                                                        Ratings+
                                                                    ---------------
Principal Amount      Borrower/Tranche Description                  Moody's     S&P        Value
----------------      ----------------------------                  -------     ---        -----
<S>                       <C>                                       <C>         <C>     <C>
 Telecommunication Equipment: 2.6%
                          American Tower LP                            Ba3       BB-
        $  11,916,667     Term Loan, maturing June 30, 2007                             $  11,635,505
                          Crown Castle International Company           Ba3       BB-
            4,000,000     Term Loan, maturing March 18, 2008                                3,995,436
                          Pinnacle Towers, Inc.                         B2        B-
           12,500,000     Term Loan, maturing June 30, 2007                                11,125,625
                          Spectrasite Communications                    B1        B
            6,500,000     Term Loan, maturing February 22, 2008                             5,991,375
                          Tripoint Global Communications, Inc.          NR        NR
            5,933,376     Term Loan, maturing May 28, 2006                                  5,859,209
                                                                                        -------------
                                                                                           38,607,150
                                                                                        -------------
 Textiles and Leather: 2.7%
                          Accessory Network Group, Inc.                 NR        NR
            8,249,336     Term Loan, maturing August 13, 2005                               7,366,219
                          Galey & Lord, Inc.                           Caa2       B
            4,661,027     Term Loan, maturing March 23, 2005                                3,882,635
            3,306,468     Term Loan, maturing March 23, 2006                                2,754,288
                          Humphrey's, Inc.(2)                           NR        NR
            6,024,372     Term Loan, maturing November 15, 2003(3)                             24,700
                          Levi Strauss & Company                       Ba3       BB+
            1,321,429     Revolving Loan, maturing August 29, 2003                          1,275,179
            3,923,406     Term Loan, maturing August 29, 2003                               3,908,693
                          Malden Mills Industries, Inc.                 B1        NR
            9,394,747     Term Loan, maturing October 28, 2006                              8,173,430
                          Polymer Group                                 B1        B+
            4,799,520     Term Loan, maturing December 1, 2005                              4,228,377
                          Scovill Fasteners, Inc.                      Caa3       NR
            4,241,071     Term Loan, maturing November 26, 2003                             4,156,250
                          Targus Group International, Inc.             Ba3       BB-
            3,476,206     Term Loan, maturing December 20, 2006                             3,415,373
                          William Carter Company                       Ba3       BB-
            1,000,000     Term Loan, maturing August 15, 2008                               1,011,250
                                                                                        -------------
                                                                                           40,196,394
                                                                                        -------------
                          Total Senior Loans -- 118.8%
                          (cost $1,923,663,153)                                         1,785,188,092
                                                                                        -------------
</TABLE>

                                       23
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------
 Other Corporate Debt

<TABLE>
<CAPTION>
                                                                         Bank Loan
                                                                          Ratings+
                                                                       ---------------
Principal Amount      Borrower/Tranche Description                     Moody's     S&P      Value
----------------      ----------------------------                     -------     ---      -----
<S>                   <C>                                             <C>         <C>     <C>
 Automobile: 0.3%
                      Capital Tool & Design Ltd.                          NR        NR
$   6,000,000         Subordinated Note, maturing July 26, 2003                           $4,800,000
                                                                                          ----------
                                                                                           4,800,000
                                                                                          ----------
 Finance: 0.7%
                      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     Convertible Note, maturing October 31, 2003                            349,621
                                                                                          ----------
                                                                                             349,621
                                                                                          ----------
 Home and Office Furnishings, Housewares, and Durable Consumer Products: 0.0%
                      MP Holdings, Inc.                                   NR        NR
           64,527     Subordinated Note, maturing March 14, 2007                              61,301
                                                                                          ----------
                                                                                              61,301
                                                                                          ----------
 Oil and Gas: 0.4%
                      Premcor Refining, Inc,                             Ba3       BB-
        9,000,000     Floating Rate Note, maturing November 15, 2004                       6,851,250
                                                                                          ----------
                                                                                           6,851,250
                                                                                          ----------
 Personal & Nondurable Consumer Products: 0.2%
                      AM Cosmetics Corp.                                  NR        NR
        3,127,215     Subordinated Note, maturing May 30, 2007                                    --
                      Paint Sundry Brands LLC                             NR        NR
        2,875,000     Subordinated Note, maturing August 11, 2008                          2,371,875
                                                                                          ----------
                                                                                           2,371,875
                                                                                          ----------
 Textiles and Leather: 0.1%
                      Tartan Textile Services                             NR        NR
        1,332,583     Subordinated Note, maturing April 1, 2011                            1,265,954
                                                                                          ----------
                                                                                           1,265,954
                                                                                          ----------
                       Total Other Corporate Debt -- 1.7%
                      (cost $32,198,371)                                                  25,675,001
                                                                                          ----------
</TABLE>

                                       24
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------
 Common Stock

  Shares                                                                Value
  ------                                                                -----
             Automobile: 0.5%
 212,171     Breed Technology@(R)                                    $3,365,032
 660,808     Safelite Glass Corporation@(R)                           4,460,454
  44,605     Safelite Realty@(R)                                              1
                                                                     ----------
                                                                      7,825,487
                                                                     ----------
             Diversified/Conglomerate Services: 0.0%
  60,056     Staff Leasing, Inc.@                                       207,794
                                                                     ----------
             Electronics: 0.1%
 149,645     Decision One Corporation@                                1,197,160
                                                                     ----------
             Home and Office Furnishings: 0.1%
  80,400     American Blind and Wallpaper, Inc.@(R)                         804
 300,141     Imperial Home Decor Group@                               1,654,378
     590     MP Holdings, Inc.@(R)                                            6
  17,582     Soho Publishing, Inc.@(R)                                      176
                                                                     ----------
                                                                      1,655,364
                                                                     ----------
             Other Telecommunications: 0.0%
   1,091     Pacific Coin, Inc.@                                              1
                                                                     ----------
             Personal and Nondurable Consumer Products: 0.0%
  37,197     AM Cosmetics Corp.@(R)                                          --
                                                                     ----------
             Textiles and Leather: 0.0%
 127,306     Dan River, Inc.@                                           159,132
                                                                     ----------
             Total Common Stock -- 0.7%
             (cost $6,635,420)                                       11,044,938
                                                                     ----------

                                       25
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------
 Other Securities

<TABLE>
<CAPTION>
 Shares                                                                                        Value
--------                                                                                    ----------
<S>          <C>                                                                            <C>
     415     AM Cosmetics Corp, Series E-1 Preferred Stock, exchangable for common
             shares on a 1-for-1 basis@(R)                                                  $       --
                                                                                            ----------
       1     Autotote Systems, Inc., Option representing 0.248% common shares
             issued and outstanding@(R)                                                             --
                                                                                            ----------
    N/A      Boston Chicken Inc., residual interest in Boston Chicken Plan Trust@(R)(2)      8,562,809
                                                                                            ----------
  80,634     Capital Tool & Design, Warrants representing 19,000 common shares@(R)                  --
                                                                                            ----------
  10,000     Casden Properties Operation, 10,000 shares of junior Cumulative
             Preferred partnership units(R)                                                    250,000
                                                                                            ----------
  19,000     Covenant Care, Inc., Warrants representing 19,000 common shares@(R)                    --
                                                                                            ----------
   2,696     Electro Mechanical Solutions, Warrant representing 2,564 common
             shares@(R)                                                                            727
                                                                                            ----------
 300,141     Imperial Home Decor Group Realty -- common Shares                                      --
                                                                                            ----------
     449     Murray's Discount Auto Stores, Inc., Warrants representing 5%, a fully
             diluted common stock@(R)                                                                4
                                                                                            ----------
  48,930     Scientific Games Corp., Warrants representing Class B common stock,
             non-voting@(R)                                                                     30,079
                                                                                            ----------
  23,449     Tartan Textiles, Series D preferred stock(R)                                    2,227,656
                                                                                            ----------
  36,775     Tartan Textiles, Series E preferred stock(R)                                    2,333,852
                                                                                            ----------
 243,778     Vision Twenty-One, Warrant representing 243,778 common shares@R                     2,438
                                                                                            ----------
             Total Other Securities -- 0.9%
             (cost $13,180,559)                                                             13,407,565
                                                                                            ----------
             Total Investments (cost $1,975,677,503)(5)        122.1%                   $1,835,315,596
             Liabilities in Excess of Cash and Other
             Assets -- Net                                     (22.1)%                    (332,222,053)
                                                               -----                    --------------
             Net Assets                                        100.0%                   $1,503,093,543
                                                               =====                    ==============
</TABLE>

                                       26
<PAGE>

                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of August 31, 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
+   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,  the cost of investments is  $1,971,240,503
    and net unrealized depreciation consists of the following:


          Gross Unrealized Appreciation      $   13,962,527
          Gross Unrealized Depreciation        (149,887,434)
                                             --------------
          Net Unrealized Depreciation        $ (135,924,907)
                                             ==============

                                       27
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES as of August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------

ASSETS:
Investments in securities at value (Cost $1,975,677,503)        $ 1,835,315,596
Cash                                                                  7,685,084
Receivables:
  Interest                                                           13,424,769
  Other                                                                 110,808
Prepaid expenses                                                        423,271
Prepaid arrangement fees on notes payable                               412,554
                                                                ---------------
       Total assets                                               1,857,372,082
                                                                ---------------
LIABILITIES:
Notes payable                                                       350,000,000
Deferred arrangement fees                                               632,928
Accrued interest payable                                              1,042,522
Accrued Preferred Shares dividend payable                               131,606
Payable to affiliates                                                 1,728,094
Accrued expenses                                                        743,389
                                                                ---------------
       Total liabilities                                            354,278,539
                                                                ---------------
NET ASSETS                                                      $ 1,503,093,543
                                                                ===============
Net asset value per common share outstanding (net assets less
 preferred shares at liquidation value, divided by 136,972,914
 common shares authorized and outstanding, no par value)        $          7.69
                                                                ===============
Net Assets Consist of:
  Preferred Shares, $25,000 stated value per share at
    liquidation value (18,000 shares authorized, issued
    and outstanding)                                            $   450,000,000
  Paid in capital                                                 1,287,956,481
  Undistributed net investment income (Note 1.H.)                    11,512,947
  Accumulated net realized loss on investments                     (106,013,978)
  Net unrealized depreciation of investments                       (140,361,907)
                                                                ---------------
       Net assets                                               $ 1,503,093,543
                                                                ===============

                See Accompanying Notes to Financial Statements.

                                       28
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS for the Six Months Ended August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------

INVESTMENT INCOME:
Interest                                                           $ 78,827,945
Arrangement fees earned                                               1,053,631
Dividends                                                                13,506
Other                                                                 1,483,989
                                                                   ------------
       Total investment income                                       81,379,071
                                                                   ------------
EXPENSES:
Interest                                                             10,082,984
Investment management fees                                            7,807,274
Administration fees                                                   2,439,773
Preferred Shares -- dividend disbursing agent fees                      591,648
Transfer agent and registrar fees                                       240,363
Custodian fees                                                          231,845
Postage fees                                                            154,760
Professional fees                                                       159,060
Revolving credit facility fees                                          129,726
Registration fees                                                        93,976
Fund accounting and pricing fees                                        124,889
Reports to shareholders                                                  46,731
Miscellaneous fees                                                       42,606
Trustees' fees                                                           27,485
Insurance expense                                                        21,933
                                                                   ------------
       Total expenses                                                22,195,053
                                                                   ------------
          Net investment income                                      59,184,018
                                                                   ------------
REALIZED AND UNREALIZED LOSS FROM INVESTMENTS:
Net realized loss on investments                                    (29,399,413)
Net change in unrealized depreciation of investments                (26,588,034)
                                                                   ------------
       Net loss on investments                                      (55,987,447)
                                                                   ------------
          Net increase in net assets resulting from operations     $  3,196,571
                                                                   ============

                 See Accompanying Notes to Financial Statements.

                                       29
<PAGE>
                            Pilgrim Prime Rate Trust

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

<TABLE>
<CAPTION>
                                                                 Six Months        Year Ended
                                                              Ended August 31,    February 28,
                                                              2001 (Unaudited)        2001
                                                              ---------------    ---------------
<S>                                                      <C>                  <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income                                         $    59,184,018    $   121,538,218
Net realized loss on investments                                  (29,399,413)        (4,909,435)
Change in unrealized depreciation
 of investments                                                   (26,588,034)      (101,823,007)
                                                              ---------------    ---------------
       Net increase in net assets resulting
        from operations                                             3,196,571         14,805,776
                                                              ---------------    ---------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income:
Common Shares                                                     (48,465,428)      (117,654,573)
Preferred Shares                                                   (9,890,691)        (8,783,182)
                                                              ---------------    ---------------
Decrease in net assets from distributions to
 shareholders                                                     (58,356,119)      (126,437,755)
                                                              ---------------    ---------------
CAPITAL SHARE TRANSACTIONS:
Value of distributions reinvested                                     919,219          5,733,515
Proceeds from shares sold in connection with
 Shelf offerings                                                       87,513          1,236,107
Net proceeds from sales of Preferred Shares                                --        444,755,346
Cost incurred in offering of Preferred Shares                        (185,738)                --
                                                              ---------------    ---------------
       Net increase in net assets from capital share
        transactions                                                  820,994        451,724,968
                                                              ---------------    ---------------
       Net increase (decrease) in net assets                      (54,338,554)       340,092,989

NET ASSETS:
Beginning of period                                             1,557,432,097      1,217,339,108
                                                              ---------------    ---------------
End of period (including undistributed net investment
 income of $11,512,947 and $7,032,048, respectively)          $ 1,503,093,543    $ 1,557,432,097
                                                              ===============    ===============
SUMMARY OF COMMON SHARE TRANSACTIONS:
Shares issued in payment of distributions from net
 investment income                                                    114,904            666,982
Shares sold in connection with Shelf offerings                         10,939            143,928
                                                              ---------------    ---------------
       Net increase in Common Shares outstanding                      125,843            810,910
                                                              ===============    ===============
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 Six Months Ended August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------

INCREASE (DECREASE) in Cash
Cash Flows From Operating Activities:
  Interest received                                               $  80,715,058
  Dividends received                                                     13,506
  Facility fees paid                                                   (111,140)
  Arrangement fee received                                              638,588
  Other income received                                               1,432,831
  Interest paid                                                      (8,962,521)
  Other operating expenses paid                                     (12,432,236)
  Purchases of portfolio securities                                (656,347,357)
  Proceeds from disposition of portfolio securities                 817,919,807
                                                                  -------------
       Net cash provided by operating activities                    222,866,536
                                                                  -------------
Cash Flows From Financing Activities:
  Dividends paid                                                    (47,546,209)
  Cost incurred in offering of Preferred Shares                        (185,738)
  Dividends paid to Preferred Shareholders                          (10,022,297)
  Proceeds from Common Shares shelf offerings                            87,513
  Loan repayment                                                   (160,000,000)
                                                                  -------------
       Net cash used by financing activities                       (217,666,731)
                                                                  -------------
  Net change in cash                                                  5,199,805
  Cash at beginning of period                                         2,485,279
                                                                  -------------
  Cash at end of period                                           $   7,685,084
                                                                  =============
Reconciliation Of Net Increase In Net Assets Resulting From
 Operations To Net Cash Provided by Operating Activities:
Net increase in net assets resulting from operations              $   3,196,571
                                                                  -------------
Adjustments to reconcile net increase in net assets resulting
 from operations to net cash provided by operating activities:
  Decrease in investments in securities                             217,091,435
  Decrease in interest receivable                                     4,689,236
  Increase in other assets                                              (51,158)
  Decrease in prepaid arrangement fees on notes payable                  18,586
  Increase in prepaid expenses                                          (32,712)
  Decrease in deferred arrangement fees                                (415,043)
  Decrease in accrued interest payable                               (1,288,907)
  Increase in payable to affiliates                                     108,421
  Decrease in accrued expenses                                         (449,893)
                                                                  -------------
  Total adjustments                                                 219,669,965
                                                                  -------------
       Net cash provided by operating activities                  $ 222,866,536
                                                                  =============

                See Accompanying Notes to Financial Statements.

                                       31
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a common share outstanding throughout the period

<TABLE>
<CAPTION>
                                                      Six Months
                                                    Ended August 31,                Years Ended February 28 or February 29,
                                                    ----------------         ---------------------------------------------------
                                                          2001                    2001              2000              1999(8)
                                                     -------------           -------------     -------------       -------------
                                                      (Unaudited)
<S>                                                  <C>                     <C>               <C>                 <C>
Per Share Operating Performance
Net asset value, beginning of period                 $        8.09           $        8.95     $        9.24       $        9.34
Net investment income                                         0.41                    0.88              0.79                0.79
Net realized and unrealized gain (loss) on
 investments                                                 (0.39)                  (0.78)            (0.30)              (0.10)
                                                     -------------           -------------     -------------       -------------
Increase (decrease) in net asset value from
 investment operations                                        0.02                    0.10              0.49                0.69
Distributions to Common Shareholders from net
 investment income                                           (0.35)                  (0.86)            (0.78)              (0.82)
Distribution to Preferred Shareholders                       (0.07)                  (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                       $        7.69           $        8.09     $        8.95       $        9.24
                                                     =============           =============     =============       =============
Closing market price at end of period                $        7.55           $        8.12     $        8.25       $        9.56
Total Return(3)
Total investment return at closing market price(4)           (2.79)%                  9.10%            (5.88)%              1.11%
Total investment return at net asset value(5)                (0.56)%                  0.19%             5.67%               7.86%
Ratios/Supplemental Data
Net Assets, end of period (000's)                    $   1,503,094           $   1,557,432                --                  --
Net assets attributed to common shares end of
 period (000's)                                      $   1,053,094           $   1,107,432     $   1,217,339       $   1,202,565
Preferred Rate Shares Aggregate amount
 outstanding (000's)                                 $     450,000           $     450,000                --                  --
Liquidation and market value Per Share               $      25,000           $      25,000                --                  --
Asset coverage Per Share**                                     232%                    215%               --                  --
Average borrowings (000's)                           $     412,223           $     450,197     $     524,019       $     490,978
Ratios to average net assets including preferred*
 Expenses (before interest and other fees
  related to revolving credit facility)                       1.57%(1)                1.62%               --                  --
 Expenses                                                     2.90%(1)                3.97%               --                  --
 Net investment income                                        7.70%(1)(A)             9.28%               --                  --
Ratios to average net assets plus borrowing
 applicable to common shares*
 Expenses (before interest and other fees
  related to revolving credit facility)                       1.61%(1)                1.31%             1.00%(9)            1.05%(9)
 Expenses                                                     2.96%(1)                3.21%             2.79%(9)            2.86%(9)
 Net investment income                                        7.90%(1)(B)             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)                       2.22%(1)                1.81%             1.43%(9)            1.50%(9)
 Expenses                                                     4.11%(1)                4.45%             4.00%(9)            4.10%(9)
 Net investment income                                       10.93%(1)(C)            10.39%             8.77%               8.60%
 Portfolio turnover rate                                        34%                     46%               71%                 68%
 Shares outstanding at end of period (000's)               136,973                 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 (decrease) 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.
(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.

                                       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>
  $  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>

----------
(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 but do include ongoing related expenses; 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.
(A)  Had the Trust not amortized premiums and accreted  discounts,  the ratio of
     net  investment  income to average net assets  including  preferred  shares
     would have been 7.34% for six months ended August 31, 2001.
(B)  Had the Trust not amortized premiums and accreted  discounts,  the ratio of
     net investment  income to average net assets plus borrowings  applicable to
     common  shares  would have been 7.52% for the six months  ended  August 31,
     2001.
(C)  Had the Trust not amortized premiums and accreted  discounts,  the ratio of
     net  investment  income to average net assets  applicable  to common shares
     would have been 10.41% for the six months ended August 31, 2001.

                                       33
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------

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

                                       34
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------

     60 days from the date of acquisition are valued at amortized  cost,  which,
     when combined with accrued interest, approximates market value.

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.  For all loans acquired prior to
     March 1,  2001,  arrangement  fees,  which  represent  non-refundable  fees
     associated with the acquisition of loans,  are deferred and recognized over
     the  shorter of 2.5 years or the actual  terms of the loan.  For all loans,
     except revolving  credit  facilities,  acquired  subsequent to February 28,
     2001,  arrangement  fees are treated as discounts and accreted as described
     in Note 1.H.  Arrangement fees associated with revolving credit  facilities
     acquired  subsequent to February 28, 2001 are deferred and recognized  over
     the  shorter  of 4 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%.

                                       35
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------

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 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.   Change in Accounting Principle.  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").
     Effective  March 1, 2001,  the Fund adopted the provisions of the Guide and
     began amortizing premiums and accreting discounts on debt securities. Prior
     to March 1,  2001,  the  Trust  had not  amortized  premiums  nor  accreted
     discounts. The cumulative effect of this accounting change had no impact on
     total net assets of the Trust, but resulted in a $3,653,000 increase in the
     cost  of  securities  and  a  corresponding   $3,653,000  increase  in  net
     unrealized  depreciation  of  investments,  based on securities held by the
     Trust on March 1,  2001.  The effect of this  change  during the six months
     ended August 31, 2001, was to increase net investment income by $1,942,000,
     increase  unrealized  depreciation  of investments by $784,000 and increase
     net realized loss on investments by $1,158,000.

NOTE 2 -- INVESTMENTS

For the six months ended August 31, 2001, the cost of purchases and the proceeds
from principal repayment and sales of investments,  excluding  short-term notes,
totaled  $656,347,357 and  $817,919,807,  respectively.  At August 31, 2001, the
Trust held senior loans valued at $1,785,188,092 representing 97.3% of its total
investments.  The market  value of these assets is  established  as set forth in
Note 1.

                                       36
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------

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, Inc. -- Common                           01/12/99                --
AM Cosmetics Corp. -- Common                                           06/08/99       $   385,610
AM Cosmetics Corp. -- Preferred Stock                                  06/02/99                --
Autotote Systems, Inc. -- Option                                       02/26/97                --
Boston Chicken--Residual interest in Boston Chicken Trust              12/26/00         8,619,050
Breed Technologies -- Common                                           12/27/00         3,343,665
Capital Tool & Design -- Warrants                                      07/26/96                --
Casden Properties Operation -- Preferred Partnership Units             12/31/98                --
Covenant Care, Inc. -- Warrants                                        12/22/95                --
Electro Mechanical Solutions -- Warrants                               06/20/00                --
MP Holdings, Inc. -- Common                                            03/14/01                 6
Murray's Discount Auto Stores, Inc. -- Warrants                        02/16/99                --
Safelite Glass Corporation                                             09/12/00                --
Safelite Realty                                                        09/12/00                --
Scientific Games Corp. -- Common                                       05/11/01                --
Soho Publishing, Inc. -- Common                                        03/14/01               176
Tartan Textiles, Series D Preferred Stock                              07/17/01         2,227,655
Tartan Textiles, Series E Preferred Stock                              07/17/01         2,333,852
Vision Twenty-One -- Warrants                                          11/28/00                --
                                                                                      -----------
Total restricted securities excluding senior loans (market value
 of $21,234,038 was 1.4% of net assets at August 31, 2001)                            $16,910,014
                                                                                      ===========
</TABLE>

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.
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.

                                       37
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------

At August 31, 2001, the Trust had the following  amounts  recorded in payable to
affiliates on the accompanying Statement of Assets and Liabilities:

         Accrued Investment     Accrued Administrative
           Management Fees               Fees              Total
           ---------------               ----              -----
            $  1,316,852               $411,242          $1,728,094

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 $550 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 August 31, 2001, was $350 million, at a
weighted  average  interest rate of 3.9%.  The amount of borrowings  represented
18.9% of net assets plus borrowings at August 31, 2001.  Average  borrowings for
the the six months  ended  August 31,  2001 were  $412,222,826  and the  average
annualized interest rate was 4.9%.

As of August 31, 2001, the Trust had unfunded loan  commitments  pursuant to the
terms of the following loan agreements:

Airgate PCS              $ 5,603,909    Murray's Discount Auto
Alliance Data Systems      1,785,714     Stores, Inc.                $ 1,699,998
Aurora Foods                 171,429    Packaging Corporation          2,753,594
Avis Rent-A-Car           11,333,333    Premier Parks                 10,000,000
Coinmach Laundry Corp.     4,334,260    Rail America, Inc.               326,289
Doshi Diagnostic           1,287,031    Resort at Summerlin            1,116,751
Express Scripts, Inc.      8,974,359    Riverwood International        4,840,000
Huntsman Corporation         106,035    Southdown                      1,028,572
Key Energy Group, Inc.     6,562,667    Station Casinos                6,979,645
Lamar Advertising          4,875,000    Suiza Fluid Dairy Group LP     6,099,737
Levi Strauss & Co.         3,672,784    URS Corporation                4,714,286
                                        Western Wireless               9,600,000
                                                                     -----------
                                                                     $97,865,393
                                                                     ===========

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.

As of August 31, 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      19,170,354
                      3/04/99       5,000,000       3,241,645

                                       38
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------

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
$5,430,392 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 six months ended August 31, 2001.

NOTE 7 -- AFFILIATED TRANSACTIONS

During the six  months  ended  August 31,  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 $21,791,365 and the proceeds and cost of
sold loans were $60,835,305 and $61,375,625, 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 August 31, 2001, the Trust held 2.4% of its total assets
in subordinated loans and unsecured loans.

NOTE 9 -- SUBSEQUENT EVENTS

Subsequent  to August  31,  2001,  the Trust  paid to  Common  Shareholders  the
following dividends from net investment income:

    Per Share Amount     Declaration Date     Record Date     Payable Date
    ----------------     ----------------     -----------     ------------
       $   0.052            08/31/2001         09/10/2001      09/24/2001
           0.047            09/28/2001         10/10/2001      10/22/2001

                                       39
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS as of August 31, 2001 (Unaudited)
--------------------------------------------------------------------------------

Subsequent  to August 31,  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       $ 102.08     9/10/01 to 10/22/01     9/17/01 to 10/29/01     9/18/01 to 10/30/01
 Series T       $ 107.72     9/04/01 to 10/16/01     9/11/01 to 10/23/01     9/12/01 to 10/24/01
 Series W       $ 106.03     9/05/01 to 10/17/01     9/12/01 to 10/24/01     9/13/01 to 10/25/01
 Series Th      $ 103.60     9/06/01 to 10/18/01     9/13/01 to 10/25/01     9/17/01 to 10/26/01
 Series F       $ 102.46     9/07/01 to 10/19/01     9/14/01 to 10/26/01     9/17/01 to 10/29/01
</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.

                                       40
<PAGE>
                            Pilgrim Prime Rate Trust

--------------------------------------------------------------------------------
SHAREHOLDER MEETING (Unaudited)
--------------------------------------------------------------------------------

The Annual  Meeting of  Shareholders  of Pilgrim Prime Rate Trust (the "Trust"),
held June 28, 2001, at the offices of ING Pilgrim,  7337 East  Doubletree  Ranch
Road, Scottsdale, Arizona 85258.

A brief  description  of each  matter  voted  upon  as well as the  results  are
outlined below:

<TABLE>
<CAPTION>
                                                         Shares voted
                                          Shares          against or       Shares          Broker
                                         voted for         withheld      abstained        non-vote        Total Voted
                                         ---------         --------      ---------        --------        -----------
<S>                                     <C>                <C>           <C>              <C>             <C>
1.   To elect seven trustees to represent the interests of the holders of Common Shares to serve until their successors are
     elected and qualified.

     Paul S. Doherty                    119,245,007        2,020,106            --           --           121,265,113
     Alan L. Gosule                     119,265,839        1,999,274            --           --           121,265,113
     Thomas J. McInerney                119,258,462        2,006,651            --           --           121,265,113
     David W.C. Putnam                  119,295,212        1,969,901            --           --           121,265,113
     Blaine E. Rieke                    119,221,755        2,043,358            --           --           121,265,113
     John G. Turner                     119,263,119        2,001,994            --           --           121,265,113
     Richard A. Wedemeyer               119,221,369        2,043,744            --           --           121,265,113

2.   To elect two trustees to represent  the interests of the holders of Auction
     Rate Cumlative Preferred Shares -- Series M, Series T, Series W, Series Th,
     and Series F to serve until their successors are elected and qualified.

     Walter H. May                           16,640               14            --           --                16,654
     Jock Patton                             16,640               14            --           --                16,654

3.   To ratify the appointment of KPMG LLP as independent auditors for the Trust
     for fiscal year ending February 28, 2002.

                                        118,952,139          983,752     1,345,876           --           121,281,767
</TABLE>

                                       41
<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.

[ING PILGRIM LOGO]                                            PRT2Q083101-102601

</TEXT>
</DOCUMENT>
