<PAGE>
Pilgrim America Prime Rate Trust
[PHOTO APPEARS HERE]
Third Quarter Report
November 30, 1996
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Pilgrim America Prime Rate Trust
Third Quarter Report
November 30, 1996
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Table of Contents
Letter to Shareholders............. 2
Shareholder Letter Footnotes....... 6
Statistics and Performance......... 7
Performance Footnotes.............. 9
Additional Notes and Information... 10
Portfolio of Investments........... 11
Fund Advisor and Agents............ 18
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1
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Pilgrim America Prime Rate Trust
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LETTER TO SHAREHOLDERS
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Dear Fellow Shareholders:
The third quarter witnessed several milestones for Pilgrim America Prime Rate
Trust (the "Trust"). The Trust paid in November its 101st consecutive monthly
dividend as it continued to meet its first objective of generating a high level
of current income. Meanwhile, the value of the assets in which the Trust
invests remained relatively stable, meeting its second goal of preserving
capital. In November, the Trust received the proceeds of its rights offering
which was a great success by virtually all measures. Finally, during the
quarter the Trust reached $1.19 billion in total net assets plus borrowings, the
highest level ever in its 8 year history.
MARKET PLACE
Interest rates for short maturity assets remained in a very narrow range during
the quarter. The Federal Reserve chose to leave short term interest rates
unchanged as the economy continued to deliver mixed signals about its direction.
LIBOR, an index of the interest rate at which banks offer deposits to one
another on a wholesale basis, ranged between 5.50% and 5.66% during the quarter.
On November 30th, 90-day LIBOR was 5.50%. LIBOR is important to the Trust as a
general indicator of interest rate levels and because the interest rates earned
on a significant proportion of Trust assets are based on LIBOR. Based on our
observation of companies in which the Trust invests, interest rates seem likely
to remain largely unchanged as loan demand has been modest.
A significant amount of the Trust's assets are loans used to purchase a company
or division. The strong performance of the stock market has allowed more buyers
to make these acquisitions using equity instead of senior secured debt. This
reduced loan activity has resulted in little upward pressure on interest rates.
During the quarter, new issue volume was high, but refinancings also were high
and the strong equity and bond markets provided most of the funding for
prepayments. Although the robust bond and equity markets have resulted in
stronger balance sheets of many Trust target companies, we have seen a growing
number of transactions with structural and financial weaknesses. We will
remain selective as we attempt to avoid credit pitfalls.
2
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Pilgrim America Prime Rate Trust
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LETTER TO SHAREHOLDERS
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PERFORMANCE
Distributions to shareholders during the quarter totaled $0.21 per share,
providing a distribution rate of 8.74% based on the average dividend adjusted
month end net asset value ("NAV") and 8.66% based on the average month end
market price of the Trust's common stock./1/ This compares favorably with the
prime lending rate of large commercial banks for their best customers which
remained unchanged at 8.25% during the quarter.
The Trust maintained its strong performance position in relation to its peers as
measured by Lipper Analytical Services, Inc. We are pleased to report that the
Trust ranks first as measured by NAV total return for the one, three and five
year measurement periods ended December 31, 1996. The Trust was ranked among a
total of seven, six and five funds in the Loan Participation Fund category for
the one, three and five year periods, respectively./2/
For the three and five year periods ended December 31, 1996, the Trust had a
four star and a three star Morningstar risk-adjusted performance rating,
respectively, when rated among 135 and 85 taxable fixed income funds. The
Trust's overall rating through December 31, 1996, is three stars. For the three
and five year periods ended December 31, 1996, the Trust's risk scores placed
the Trust first out of 32 and 26 in the Corporate Bond - General category,
respectively. For the three and five year periods ended December 31, 1996, the
Trust's risk scores placed the Trust third out of the entire universe of 447
and 256 closed-end funds, respectively./3/
THIRD QUARTER HIGHLIGHTS
Borrowings under the Trust's revolving credit facility averaged $198 million
during the quarter. This four year floating rate facility is designed to provide
a positive spread on borrowings and to provide maximum flexibility in managing
the Trust's portfolio. The borrowing rate under the facility is .50% over LIBOR
or if lower, the federal funds rate. The Trust also pays a .125% fee on any
unborrowed amount. Management of the Trust does not intend to borrow unless it
believes the investment being purchased yields a return that exceeds both the
cost of borrowing and management fees. The credit facility has also permitted
the creation of additional investment income by substituting unused borrowing
capacity under the facility for short term lower yielding investments previously
used to offset unfunded credit commitments. Outstanding borrowings under the
credit facility on
3
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Pilgrim America Prime Rate Trust
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LETTER TO SHAREHOLDERS
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November 30, 1996, declined to $150 million since the proceeds of the recent
rights offering of $157.8 million were received on November 19th and utilized by
making a temporary repayment of borrowings.
The rights offering met the Trust's objectives of (a) minimizing stock price
volatility, (b) keeping NAV dilution low, and (c) raising new capital which
enabled the Trust to continue to improve its ability to compete among larger
investors in senior credit transactions. Under the offering, shareholders
received a nontransferable right to acquire one new share for every five shares
held. The exercise price was 97.5% of the lower of NAV or the five day average
market price and was designed to be shareholder friendly and minimize dilution.
The offering dealer managers, Prudential Securities Incorporated and Merrill
Lynch & Co assisted the Trust in making this one of the most successful rights
offerings ever in terms of minimized NAV dilution and low stock price
volatility.
The Trust's stock price fell from $9.875 before the announcement to $9.250 at
the end of the pricing period in mid November and by late December, the stock
was trading again at about $9.75. Normally it takes up to 3 months for closed-
end fund rights offering stocks to recover to NAV. NAV dilution was 1.53%
compared to 5.7% for all 1995 and 1996 comparable rights offerings. Also, the
annualized dividend rate has remained stable following the rights offering.
The Trust has committed to more than 34 new senior loans during the period
including CSK Auto, Inc., Columbus McKinnon Corporation, Doubletree Corporation,
DESA International, Inc., International Home Foods, Inc., Medtech Products Inc.,
Rayovac, and Targus Inc. During the quarter, sales or repayments included
Dollar Financial, Dominick's Finer Foods, Experian, Graco Children's Products
and the Hawk Group.
Non-performing senior loans amounted to 1.72% of net assets on November 30,
1996, compared to 2.50% on August 31, 1996 and 1.93% on May 31, 1996.
Management will continue to work vigorously to reduce non-performing senior
loans.
4
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Pilgrim America Prime Rate Trust
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LETTER TO SHAREHOLDERS
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OUTLOOK
We believe interest rates should continue to be relatively stable. To the
extent that short term interest rates change over the next quarter, we believe
any movement will be upward. Interest rates on the Trust's senior loans will
adjust as short term rates change. Although the Trust's yield will change
periodically, the value of the Trust's assets generally will be unaffected as a
result of moderate interest rate changes.
We will continue to deploy the additional resources provided by the rights
offering. We have also secured an increase in availability under our line of
credit which now totals $400 million.
The entire Trust management team is grateful to you for your support. As
always, we look forward to your comments and questions.
Sincerely,
/s/ Howard Tiffen
Howard Tiffen
Senior Vice President and
Senior Portfolio Manager
Pilgrim America Investments, Inc.
January 29, 1997
5
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Pilgrim America Prime Rate Trust
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SHAREHOLDER LETTER FOOTNOTES
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(1) The distribution rate is calculated by annualizing the dividends
declared in each month and dividing the resulting annualized dividend
amount by the Trust's net asset value or the NYSE closing price, as
applicable at the end of the period. The distribution rate is based
solely on the actual dividends and distributions, which are made at the
discretion of management.
(2) Lipper Analytical Services, Inc. ranked the Trust for total return,
without deducting sales charges and assuming reinvestment of all
dividends and capital gains distributions and reflecting January 1995
and November 1996 rights offerings. The Trust's expenses were partially
waived for the fiscal year ended February 29, 1992.
(3) Morningstar's taxable fixed income fund category includes Corporate
Bond - General, Government Bond, International Bond and Multisector Bond
funds. On Morningstar's risk-adjusted performance rating system, funds
falling into the top 10% of all funds within their category are awarded
five stars and funds in the next 22.5% receive fours stars. Morningstar
ratings are calculated from the fund's three, five and ten-year returns
(with fee adjustment) in excess of 90-day Treasury bill returns and a
risk factor that reflects fund performance below 90-day Treasury bill
returns. The ratings are subject to change every month. Morningstar
ranks funds within the Corporate Bond - General category and the closed-
end universe for risk for the three and five year periods based upon
their downside volatility compared to a 90-day Treasury bill relative to
all other investment companies in their class.
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.
The views expressed in this letter reflect those of the portfolio
manager. The manager's views are subject to change at any time based on
market and other conditions.
6
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Pilgrim America Prime Rate Trust
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STATISTICS AND PERFORMANCE as of November 30, 1996
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<TABLE>
<CAPTION>
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PORTFOLIO CHARACTERISTICS
<S> <C>
Net Assets $1,027,555,181
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Assets Invested in Senior Loan Interests $1,163,413,335 *
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Total Number of Senior Loan Interests 110
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Average Amount Outstanding per Loan $10,576,485
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Total Number of Industries 26
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Year to Date Portfolio Turnover Rate 71%
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Average Loan Amount per Industry $44,746,667
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Weighted Average Days to Interest Rate Reset 39 days
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Average Loan Maturity 65 months
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Average Age of Loans Held in Portfolio 9 months
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*Includes loans and other debt received through restructures
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<CAPTION>
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TOP 10 INDUSTRIES AS A
% OF TOTAL INVESTMENTS
<S> <C>
Aerospace Products & Services 9.5%
Media/Broadcast 9.1%
General Merchandise Retailing 9.0%
Food/Tobacco Products & Serv. 6.0%
Diversified Manufacturing 5.1%
Industrial Equipment 5.1%
Electronic Equipment 4.9%
Healthcare Services 4.8%
Diversified Serv./Entertainment 4.7%
Health & Beauty Products 4.6%
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<CAPTION>
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TOP 10 SENIOR
LOAN INTEREST HOLDINGS
AS A % OF TOTAL INVESTMENTS
Kmart Corp 6.1%
RIC Holdings 2.3%
Continental Micronesia 2.1%
Favorite Brands International 2.1%
Marvel IV Holdings 2.0%
Ralph's Grocery Co. 1.8%
International Home Foods 1.7%
Community Health Systems 1.7%
Liberty House, Inc. 1.7%
MTF Acquisition Corp. 1.6%
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</TABLE>
7
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Pilgrim America Prime Rate Trust
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STATISTICS AND PERFORMANCE as of November 30, 1996
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<TABLE>
<CAPTION>
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DISTRIBUTION RATES
SEC 30-Day SEC 30-Day Annualized Annualized
Prime Yield at Yield at Distribution Distribution
Quarter-ended Rate NAV/A/ MKT/A/ Rate at NAV/B/ Rate at MKT/B/
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
February 29, 1996 8.25% 8.08% 8.17% 8.47% 8.57%
---------------------------------------------------------------------------------------------------
May 31, 1996 8.25% 8.26% 8.24% 8.45% 8.44%
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August 31, 1996 8.25% 8.41% 8.17% 8.56% 8.32%
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November 30, 1996 8.25% 9.64% 9.72% 8.78% 8.85%
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This table sets forth the Trust's monthly dividend performance which is summarized quarterly.
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<CAPTION>
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AVERAGE ANNUAL TOTAL RETURNS
NAV MKT
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<S> <C> <C>
Year to Date 6.82% 7.69%
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1 Year 7.44% 10.81%
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3 Years 8.65% 9.12%
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5 Years 7.69%G N/A
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Since Trust Inception/E/ 8.50%G N/A
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Since Initial Trading on NYSE/F/ N/A 10.08%
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Assumes rights were exercised and excludes sales charges and commissions/C,D/
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</TABLE>
See performance footnotes on page 9
8
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Pilgrim America Prime Rate Trust
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Performance Footnotes
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(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 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 the dividend declared
in the month and dividing the resulting annualized dividend amount by the
Trust's net asset value (in the case of NAV) or the NYSE 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 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. The Trust's average annual total returns on an
NAV basis with a 3% sales charge and assuming rights were exercised
through November 30, 1996, were 7.04% and 8.11% for the five-year and
since inception periods, respectively. The average annual total returns
based on market price assuming rights were exercised with a brokerage
commission are not presented.
(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. The offering was completed on January 27, 1995.
(E) Inception Date - May 12, 1988.
(F) Initial Trading on NYSE - March 9, 1992.
(G) Reflects Partial Waiver of Fees.
Performance data represents past performance and is no guarantee of future
results. Investment return and principal value of an investment in the
Trust will fluctuate. Shares, when sold, may be worth more or less than
their original cost.
9
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Pilgrim America Prime Rate Trust
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ADDITIONAL NOTES AND INFORMATION
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DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
Trust shareholders are paid distributions in cash unless they elect to reinvest
the payments in additional shares of the Trust, at reduced brokerage
commissions, pursuant to the Dividend Reinvestment and Cash Purchase Plan. This
Plan also allows shareholders to make periodic cash purchases. For a copy of
the Plan, or for more information, contact our Shareholder Service Department at
1-800-331-1080.
KEY FINANCIAL DATES - Calendar 1997 Dividends:
<TABLE>
<CAPTION>
DECLARATION DATE EX-DATE PAYABLE DATE
<S> <C> <C>
January 31 February 6 February 21
February 28 March 6 March 20
March 31 April 8 April 22
April 30 May 8 May 22
May 30 June 5 June 19
June 30 July 8 July 22
July 31 August 7 August 21
August 29 September 4 September 18
September 30 October 8 October 23
October 31 November 6 November 20
November 28 December 4 December 18
December 19 December 29 January 13, 1998
</TABLE>
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). The
Trust's name changed to Pilgrim America Prime Rate Trust and its cusip number
changed to 720906 10 6 effective April 12, 1996. The Trust's NAV and market
price are published weekly under the "Closed-End Funds" feature in Barron's, The
New York Times, The Wall Street Journal and many other regional and
national publications.
10
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Pilgrim America Prime Rate Trust
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PORTFOLIO OF INVESTMENTS as of November 30, 1996 (Unaudited)
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SENIOR LOAN INTERESTS*
(Dollar weighted portfolio interest reset period is 39 days)
<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
------- ----------------- ---- -------- -----
<S> <C> <C> <C> <C>
Aerospace Products & Services: 9.5%
$ 5,060 Aerostructures Corp.
(airframe and component manufacturer) Term B 09/30/03 $ 5,060,000
1,840 Aerostructures Corp. Term C 09/30/04 1,840,000
9,562 Atlas Air (air cargo carrier) Revolver 06/30/98 9,562,390
15,000 Banner Aerospace (aerospace fasteners) Term B 07/01/03 15,000,000
25,000 Continental Micronesia (airline) Axel (A) 07/26/03 25,000,000
8,000 Dallas Airmotive, Inc. (aircraft engine maintenance) Term 03/15/01 8,000,000
8,904 Fiberite, Inc. (plastic composite manufacturer) Term B 12/31/01 8,903,571
2,180 Grimes Aerospace Corp. (aerospace products) Revolver 12/31/99 2,180,016
13,606 Grimes Aerospace Corp. Term 12/31/99 13,605,635
7,818 Technetics Corp. (aircraft engine components) Term 06/20/02 7,818,182
14,500 Tri Star/Odyssey, Inc. (aerospace hardware distributor) Term 09/30/03 14,500,000
-------------
111,469,794
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Apparel Products: 2.2%
1,078 Butterick Pattern Co. (sewing aids) (1) Term 05/31/96 646,624
6,930 Humphreys, Inc. (belts and personal leather goods) Term B 11/15/03 6,930,000
7,406 Scovill Fasteners (metal fasteners for apparel products) Term B 01/24/03 7,406,410
5,000 Scovill Fasteners Lease 10/15/02 5,000,000
6,300 The William Carter Co. (children's clothing) Term B 10/31/03 6,300,000
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26,283,034
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Communications: 2.4%
8,000 Executone Business Solutions (telecommunication service) Term B 07/01/03 8,000,000
9,857 Shared Technologies, Inc. (communication services) Term B 03/31/03 9,857,143
10,000 Teletouch Communications (rural paging services) Term A 11/30/03 10,000,000
-------------
27,857,143
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Construction Products and Services: 2.1%
18,400 MTF Acquisition Corp. (paint and coating products) Term 11/30/02 18,400,000
4,000 The Presley Companies (homebuilder) Revolver 05/20/97 4,000,000
1,803 United Building Materials, Inc.
(stone and concrete products) Term 04/30/96 1,758,145
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24,158,145
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Container Products: 1.3%
15,000 Silgan Corp. (metal and plastic containers) Term B 03/15/02 15,093,750
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Diversified Manufacturing: 5.1%
5,673 Cambridge Industries, Inc. (automotive plastics) Term B 05/17/02 5,673,487
6,382 Cambridge Industries, Inc. Term C 11/17/03 6,382,477
2,837 Cambridge Industries, Inc. Term D 05/17/04 2,836,700
10,000 Capital Tool & Design (brake backing plates) Term B 07/19/03 10,000,000
7,272 Desa International (specialty equipment manufacturing) Term A 08/31/01 7,271,574
</TABLE>
11
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Pilgrim America Prime Rate Trust
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PORTFOLIO OF INVESTMENTS as of November 30, 1996 (Unaudited)
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<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
------- ----------------- ---- -------- -----
<S> <C> <C> <C> <C>
Diversified Manufacturing (continued)
$ 7,470 Desa International Term B 02/28/03 $ 7,469,940
276 @ KDI Corp. (defense and leisure products) (2) Term A 12/31/96 16,791
13 @ KDI Corp. (2) Term B 12/31/96 13,187
2,778 Rayovac Corp. (battery manufacturer) Term B 09/30/03 2,777,778
2,778 Rayovac Corp. Term C 09/30/04 2,777,778
900 Rowe International, Inc. (vending, jukebox,
currency machines) (1) Revolver 12/31/96 900,000
7,375 Rowe International, Inc. (1) Term C 12/31/96 4,056,250
10,681 Worldwide Sports & Recreation Corp.
(optics, sports products) Term B 03/31/01 10,414,456
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60,590,418
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Diversified Services/Entertainment: 4.7%
7,151 AMF Group (bowling centers and equipment) Term A 05/01/03 7,222,453
2,819 AMF Group Term B 05/01/04 2,847,057
6,913 Bankers Systems, Inc. (compliance services
to banking industry) Term B 11/01/02 6,912,500
6,587 Doubletree Corp. (hotel management) Term B 05/08/04 6,586,550
23,880 Marvel IV Holdings, Inc. (diversified services
and entertainment) Revolver 06/22/99 23,880,000
7,480 Staff Capital, L.P. (payroll and human resource services) Term 12/08/99 7,480,000
-----------
54,928,560
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Electronic Equipment: 4.9%
6,525 Details, Inc. (circuit board manufacturer) Term 02/13/01 6,525,424
12,500 Dictaphone Acquisition, Inc. (dictation and
recording equipment) Term 06/30/02 12,500,000
4,729 Elgar Electronics (electronic testing equipment) Term B 03/31/03 4,729,042
8,780 Intesys Technologies, Inc. (contract engineering
and manufacturing) Term B 12/31/01 8,780,488
10,000 OK Industries (circuit board soldering systems) Term 10/31/02 10,000,000
15,000 PSC Incorporated (scanning equipment) Term B 06/28/02 15,000,000
-----------
57,534,954
-----------
Food/Tobacco Products and Services: 6.0%
2,563 Bumble Bee Seafoods, Inc. (canned seafood) Term A 09/15/96 2,562,500
3,750 Bumble Bee Seafoods, Inc. Term B 09/15/96 3,750,000
4,466 Edward's Baking Co. (food service bakery) Term B 09/30/02 4,466,250
25,000 Favorite Brands International (confectionary manufacturer) Term B 08/01/04 25,000,000
9,189 International Home Foods (food product manufacturer) Term C 12/31/04 9,189,189
10,811 International Home Foods Term D 10/30/05 10,810,811
2,453 Liggett Group Inc. (tobacco products) Revolver 09/15/97 2,453,160
7,303 Van De Kamp's (frozen foods) Term B 04/30/03 7,303,493
4,570 Van De Kamp's Term C 09/30/03 4,570,425
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70,105,828
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</TABLE>
12
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Pilgrim America Prime Rate Trust
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PORTFOLIO OF INVESTMENTS as of November 30, 1996 (Unaudited)
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<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
------- ----------------- ---- -------- -----
<S> <C> <C> <C> <C>
Food Stores: 4.4%
$ 1,000 @ New Almac's Inc. (Rhode Island supermarkets) (3) Sr. Note 11/18/01 $ 390,000
40 @ New Almac's Inc. (3) Sr. Note 11/18/04 15,722
809 Pathmark (New York, New Jersey supermarkets) Revolver 07/31/98 808,363
2,439 Pathmark Term A 07/31/98 2,436,254
6,706 Ralph's Grocery Co. (Southern California supermarkets) Term B 06/15/02 6,739,256
6,709 Ralph's Grocery Co. Term C 06/15/03 6,742,206
4,976 Ralph's Grocery Co. Term D 02/15/04 5,000,383
1,800 Ralph's Grocery Co. Term E 06/15/02 1,800,000
600 Ralph's Grocery Co. Term F 06/15/03 600,000
600 Ralph's Grocery Co. Term G 02/15/04 600,000
4,677 Smith's Food & Drug Co. (western states supermarkets) Term B 08/31/02 4,700,641
1,344 Smith's Food & Drug Co. Term C 08/31/04 1,350,641
4,677 Smith's Food & Drug Co. Term D 08/31/04 4,700,641
16,333 Star Markets Co., Inc. (Boston area supermarkets) Term B 12/31/01 16,332,895
------------
52,217,002
------------
Furniture & Garden Products: 1.9%
14,933 Lifestyle Furnishings International (furniture) Term B 06/20/04 14,933,334
6,957 Simmons Company (mattress manufacturer) Term B 03/31/03 6,956,774
------------
21,890,108
------------
General Merchandise Retailing: 9.0%
71,771 Kmart Corp. (general merchandise retailer) Term 12/19/99 71,771,194
19,550 Liberty House, Inc. (Hawaiian department store chain) Term B 06/30/02 19,550,000
6,761 Peebles, Inc. (department store chain) Term A 04/30/01 6,760,875
7,879 Peebles, Inc. Term B 04/30/02 7,879,301
------------
105,961,370
------------
Healthcare Services: 4.8%
7,260 Community Health Systems (hospitals) Term B 12/31/03 7,260,274
7,260 Community Health Systems Term C 12/31/04 7,260,274
5,479 Community Health Systems Term D 12/31/05 5,479,452
6,000 Covenant Care, Inc. (long-term healthcare facilities) Term 06/30/99 6,000,000
4,706 H.E.C. Investments, Inc. (health club operator) Term A 12/31/99 4,705,882
7,000 H.E.C. Investments, Inc. Term B 12/31/00 7,000,000
9,000 Hanger Orthopedics Group (orthopedic and
prosthetic services) Term B 12/31/01 9,000,000
10,000 Mediq/PRN Life Support Inc. (hospital equipment leasing) Term 09/28/98 10,000,000
-----------
56,705,882
------------
Health & Beauty Products: 4.6%
9,875 Eye Care Centers, Inc. (retail eye care products and services) Term 09/26/02 9,875,000
17,313 ICON Health & Fitness Co. (exercise equipment) Term B 11/14/01 17,312,500
2,465 IMED/IVAC Corp. (infusion pumps) Term B 11/30/03 2,465,000
2,465 IMED/IVAC Corp. Term C 11/30/04 2,465,000
2,320 IMED/IVAC Corp. Term D 05/31/05 2,320,000
</TABLE>
13
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Pilgrim America Prime Rate Trust
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PORTFOLIO OF INVESTMENTS as of November 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
------- ----------------- ---- -------- -----
<S> <C> <C> <C> <C>
Health & Beauty Products (continued)
$ 10,000 Medtech Products, Inc. (non-prescription
consumer medications) Term B 10/15/02 $ 10,000,000
10,000 Revlon Inc. (cosmetics manufacturer) Term 12/31/00 10,000,000
-------------
54,437,500
-------------
Industrial Chemicals: 2.0%
9,158 Cedar Chemical Corp. (specialized chemicals) Term B 10/30/03 9,157,500
10,000 Sterling Chemicals (industrial chemicals) Term B 09/30/04 10,000,000
4,972 Texas Petrochemical Corp. (industrial chemicals) Term B 06/30/04 4,972,222
-------------
24,129,722
-------------
Industrial Equipment: 5.1%
2,829 Calmar (non-aerosol fluid dispensing systems) Term A 09/15/03 2,828,572
2,121 Calmar Term B 03/15/04 2,121,428
8,200 Columbus McKinnon (industrial lifts and hoists) Term B 03/01/04 8,200,000
9,915 Graphic Controls Corp. (industrial and medical charts) Term B 09/28/03 9,914,952
4,490 Intermetro Industries Inc. (storage and material
transport products) Term B 06/30/03 4,490,217
3,492 Intermetro Industries Inc. Term C 06/30/04 3,492,391
4,948 Jackson Products, Inc. (industrial safety equipment
manufacturer) Term B 09/01/03 4,947,827
4,950 Jackson Products, Inc. Term C 09/01/02 4,950,000
1,350 Jackson Products, Inc. Term D 09/01/02 1,350,000
4,800 Mettler-Toledo (weigh scale manufacturer) Term B 12/31/03 4,800,000
3,600 Mettler-Toledo Term C 12/31/04 3,600,000
9,895 Schrader, Inc. (fluid/air control valve manufacturer) Term B 11/30/02 9,894,801
------------
60,590,188
------------
Industrial Services: 0.8%
10,000 Clean Harbors (environmental services) Term 05/08/00 10,000,000
------------
Media/Broadcast: 9.1%
4,436 Benedek Broadcasting Corp. (broadcasting) Axel A (A) 12/05/02 4,435,714
4,461 Benedek Broadcasting Corp. Axel B (A) 12/05/02 4,461,207
15,000 Citicasters, Inc. (radio station operator) Term B 06/15/04 15,000,000
10,000 Eller Media Company (outdoor advertising) Term B 12/31/04 10,000,000
10,000 FrontierVision (cable television) Term B 06/30/05 10,000,000
10,000 Intermedia Partners IV (cable television) Term 01/01/05 10,000,000
4,769 Maryland Cable (cable television) Term A 12/31/02 4,769,463
7,788 Maryland Cable Term B 12/31/02 7,788,206
10,000 Metro-Goldwyn-Mayer, Inc. (film library) Term B 10/10/03 10,000,000
11,688 Outdoor Systems, Inc. (outdoor advertising) Term A 12/31/02 11,687,500
3,896 Outdoor Systems, Inc. Term B 12/31/03 3,895,833
4,800 Panavision International, Inc. (motion picture cameras) Term B 03/31/04 4,800,000
9,883 Phoenix Associates, Inc. (cable television) Term B 12/31/99 9,883,333
------------
106,721,256
------------
</TABLE>
14
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of November 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
------- ----------------- ---- -------- -----
<S> <C> <C> <C> <C>
Metal Products: 3.3%
$ 6,000 Cable Systems International (cable wire manufacturer) Term B 10/04/02 $ 6,000,000
9,900 GS Technologies (metal products fabricator) Term 09/30/02 9,900,000
9,444 Hayes Wheels International (automotive wheels) Term B 07/31/04 9,444,444
7,556 Hayes Wheels International Term C 07/31/04 7,555,556
451 National Refractories Inc. (kiln lining materials) Term B 09/30/99 451,279
5,000 National Refractories Inc. Term C 09/30/99 5,000,000
-------------
38,351,279
-------------
Miscellaneous Companies: 2.2%
4,255 Dade International (medical testing equipment manufacturer) Term B 12/31/04 4,254,545
4,255 Dade International Term C 12/31/04 4,254,545
4,491 Dade International Term D 12/31/04 4,490,909
250 General Aquatics, Inc. (swimming pool manufacturer) Term 06/30/00 250,128
13,000 Outsourcing Solutions (accounts receivable management) Term B 11/06/03 13,000,000
-------------
26,250,127
-------------
Paper Products: 2.3%
2,414 RIC Holdings, Inc. (packaging and paper products) Term A 02/28/03 2,413,884
17,857 RIC Holdings, Inc. Term B 02/27/04 17,857,143
7,143 RIC Holdings, Inc. Term C 08/31/04 7,142,857
-------------
27,413,884
-------------
Publishing and Information Services: 1.5%
7,450 NBC Acquisition (wholesale and retail textbooks) Term 08/31/03 7,450,000
5,000 Softworld Services (software fulfillment services) Term A 06/30/00 4,850,000
5,000 Softworld Services Term B 06/30/01 4,850,000
-------------
17,150,000
-------------
Restaurants: 1.3%
12,636 America's Favorite Chicken Co. (food service franchisor) Term A 10/31/01 12,636,376
2,608 Long John Silvers Inc. (quick service seafood
restaurant chain) Term B 09/30/02 2,608,222
-------------
15,244,598
-------------
Specialty Retailing: 3.0%
340 American Blind & Wallpaper (home furnishings retailer) Term 10/31/96 340,409
11,000 CSK Auto, Inc. (auto part retailer) Term 10/31/03 11,000,000
7,093 Color Tile, Inc. (home improvement retailer) (3) Term A 12/31/98 5,461,867
8,035 Color Tile, Inc. (3) Term C 12/31/98 6,186,861
729 Color Tile, Inc. (D.I.P.) (3) Revolver 12/31/96 728,696
2,484 M & H Drugs, Inc. (Midwestern retail drugstores) Term 12/31/96 2,422,080
8,803 Murray's Discount Auto Parts (auto parts retailer) Term 09/30/01 8,802,573
-------------
34,942,486
-------------
Textile & Leather Products: 2.1%
1,920 Blackstone Capital (carpet manufacturer) Term 01/13/97 1,920,000
580 Blackstone Capital Term 01/13/97 580,000
10,000 Glenoit Mills, Inc. (specialty and decorative fabrics) Term 03/31/00 10,000,000
</TABLE>
15
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of November 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
------- ----------------- ---- -------- -----
<S> <C> <C> <C> <C>
Textile & Leather Products (continued)
$ 5,860 Targus Group, Int'l. (computer luggage manufacturer) Term A 01/18/02 $ 5,859,873
4,140 Targus Group Int'l. Term B 01/18/03 4,140,127
2,500 Wasserstein (carpet manufacturer) Term 01/13/97 2,500,000
-------------
25,000,000
-------------
Transportation Services: 3.3%
5,000 Cruise Ship L.L.C. (cruise ship operator) Sr. Note 07/01/01 5,000,000
7,500 International Logistics (logistics/freight forwarding) Term B 12/31/03 7,500,000
16,057 RCTR Holdings, Inc. (truck rental) Term A 10/16/01 16,057,143
4,850 Sky Chef's International, Inc. (airline food service) Term B 09/15/01 4,861,703
1,066 Sky Chef's International, Inc. Term C 09/15/03 1,069,141
3,889 Sky Chef's International, Inc. Term B 09/15/01 3,898,320
-------------
38,386,307
-------------
Total Senior Loan Interests - 98.9% 1,163,413,335
(Cost $1,171,072,006) -------------
OTHER CORPORATE DEBT
Diversified Manufacturing: 0.5%
6,000 Capital Tool & Design (brake backing plates) Sub. Note 07/26/03 6,000,000
-------------
Food Stores: 0.0%
1,111 @ New Almac's Inc. (formerly Almac's, Rhode Island
supermarkets) (3) Sub. Note 11/18/04 --
-------------
Total Other Corporate Debt - 0.5% 6,000,000
(Cost $6,848,197) -------------
COMMON STOCK AND PREFERRED STOCK
Shares
------
Diversified Manufacturing: 0.0%
2,633 @ KDI Corp.---common (defense and leisure products) (2) --
-------------
Restaurants: 0.3%
413,980 @ America's Favorite Chicken Co.---common (quick service restaurant chain) (R) 1,373,141
24,848 America's Favorite Chicken Co.---preferred (quick service restaurant chain) (R) 2,484,800
17,664 @ Flagstar, Inc.---common (family restaurants, institutional food service companies) 20,147
-------------
3,878,088
-------------
Textiles: 0.2%
12,764 @ Dan River (Braelan) Corp.---common (diversified textiles) (R) 2,288,045
-------------
Total Common Stock and Preferred Stock - 0.5% 6,166,133
(Cost $ 4,268,876) -------------
</TABLE>
16
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of November 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
------ -----
STOCK PURCHASE WARRANTS AND OTHER SECURITIES
<S> <C> <C>
1 @ Autotote Systems, Inc., Warrant representing 48,930 common
shares (designer and manufacturer of wagering equipment),
Expires 10/30/03 (R) $ 38,360
80,634 @ Capital Tool & Design, Warrants representing 80,634 common shares
(brake backing plates) (R) 143,529
19,000 @ Covenant Care, Inc., Warrants representing 19,000 common shares
(long-term healthcare facilities) (R) 285,000
1 @ Cruise Ship, L.L.C., Warrant representing 4,105 voting shares
(cruise ship operator) (R) --
1 @ Cruise Ship, L.L.C., Warrant representing 4,666 non-voting shares (R) --
26,606 @ KDI Corp. Units of Trust (defense and leisure products) (R)(2) --
1 @ Staff Capital, L.P., Warrant to purchase 0.5% of the Common Limited
Partnership Units (payroll and human resource services),
Expires 11/05/03 (R) 614,789
1 @ Staff Capital, L.P., Warrant to purchase 0.5% of the Preferred
Limited Partnership Units, Expires 11/05/03 (R) 61,000
45,000 @ Victory Holding Corp., Warrants representing 45,000 common shares
(Rhode Island supermarkets), Expires 12/01/01 (R)(3) --
--------------
Total Stock Purchase Warrants and Other Securities - 0.1% 1,142,678
(Cost $61,100) --------------
Total Investments - 100.0% $1,176,722,146
(Cost $1,182,250,179) ==============
</TABLE>
- --------------------
@ Non-income producing security
(A) Axel describes an amortizing extended term loan with limited call
protection.
(R) Restricted security
* Senior loan interests, while exempt from registration under the Securities
Act of 1933, contain certain restrictions on resale and cannot be sold
publicly. These senior loan interests 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.
(1) The borrower is restructuring and interest is being recognized as cash
payments are received.
(2) The borrower filed for protection under Chapter 7 of the U.S. Federal
bankruptcy code and is in the process of developing a plan of liquidation.
(3) The borrower filed for protection under Chapter 11 of the U.S. Federal
bankruptcy code and is in the process of developing a plan of
reorganization.
(4) For Federal income tax purposes, which is the same for financial reporting
purposes, cost of investments is $1,182,250,179 and net unrealized
depreciation consists of the following:
<TABLE>
<S> <C>
Gross Unrealized Appreciation $ 4,814,514
Gross Unrealized Depreciation (10,342,547)
--------------
Net Unrealized Depreciation $ (5,528,033)
==============
</TABLE>
17
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
FUND ADVISORS AND AGENTS
- --------------------------------------------------------------------------------
INVESTMENT MANAGER INSTITUTIONAL INVESTORS AND ANALYSTS
Pilgrim America Investments, Inc. Call Pilgrim America Prime Rate Trust
Two Renaissance Square 1-800-336-3436, Extension 8256
40 North Central Avenue
Suite 1200
Phoenix, AZ 85004-4424
SHAREHOLDER SERVICING AGENT TRANSFER AGENT
Pilgrim America Group, Inc. Investors Fiduciary Trust Company
Two Renaissance Square c/o DST Systems, Inc.
40 North Central Avenue P.O. Box 419368
Suite 1200 Kansas City, Missouri 64141
Phoenix, AZ 85004-4424
1-800-331-1080
WRITTEN REQUESTS
Please mail all account inquiries and other comments to:
Pilgrim America Prime Rate Trust Account Services
c/o Pilgrim America Group, Inc.
Two Renaissance Square
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004-4424
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 1-800-331-1080.
18
<PAGE>
Pilgrim America Funds
Masters Series
--------------
Pilgrim America Masters
Asia-Pacific Equity Fund
Pilgrim America Masters
MidCap Value Fund
Pilgrim America Masters
LargeCap Value Fund
Elite Series
------------
Pilgrim America
MagnaCap Fund
Pilgrim America
High Yield Fund
Pilgrim Government
Securities Income Fund
Pilgrim America
Funds
"Our goal is for every investor to have a successful investment experience."
Prospectuses containing more complete information regarding the funds, including
charges and expenses, may be obtained by calling Pilgrim America Securities,
Inc. Distributor at 1-800-334-3444. Please read the prospectuses carefully
before you invest or send money.
13-SS-011497 012997
