<PAGE>
Pilgrim America Prime Rate Trust
[ART WORK]
First Quarter Report
May 31, 1997
<PAGE>
Pilgrim America Prime Rate Trust
First Quarter Report
May 31, 1997
-----
Table of Contents
Letter to Shareholders.............. 2
Shareholder Letter Footnotes........ 5
Statistics and Performance.......... 6
Performance Footnotes............... 8
Additional Notes and Information.... 9
Portfolio of Investments............10
Fund Advisor and Agents.............18
-----
1
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
Dear Fellow Shareholders,
Pilgrim America Prime Rate Trust (the "Trust") continued to be ranked first in
the Loan Participation Fund cagetory established by Lipper Analytical Services,
Inc. ("Lipper") among seven, five and five funds for the one, three and
five-year periods ended May 31, 1997, respectively.(1) Dividends declared during
the quarter totaled $0.21, which based on ending net asset value ("NAV") equates
to a rate of 8.74% per annum.(2) During the period the Prime Rate averaged 8.43%
and 60-day LIBOR averaged 5.63%.(3) The Trust's dividend adjusted month-end NAV
ranged between $9.34 and $9.36 reflecting the impact of asset revaluations
during the period. Thus the Trust accomplished its objective of providing a high
current yield consistent with the preservation of capital.
Market Place
The Trust is highly dependent on the primary market for investments. During the
first quarter, the primary market was relatively subdued. This tendency reversed
towards the end of the quarter and the flow of new, attractive deals increased
dramatically in May.
Meanwhile, new investors continued to enter the market exerting further downward
pressure on pricing. In addition to the continuous growth of other prime funds,
insurance companies, high yield mutual funds and pension funds, we have also
seen exponential growth of specialized investment vehicles known as
"Collateralized Debt Obligations". These vehicles are similar in structure to
Collateralized Mortgage Obligations. They invest in various types of bonds,
senior loans and other instruments. They are funded through several tranches of
structured capital each designed to meet rating agency parameters to achieve a
given rating. These vehicles are forced to invest very quickly and with
pre-ordained diversity. Rapid and full investment is achieved at a significant
cost to yield. The result is unnatural pressure on prices and spreads in the
primary market for senior loans. Because of the Trust's long history in this
market, and as a result of its larger size following the rights offering and use
of leverage, the Trust has been able to maintain its important market position
and has been able to select the transactions in which it has invested. We have
decided to forgo margin but have chosen to value the maintenance of credit
quality more highly than reaching for the last 50 basis points of yield.
Asset Quality
On February 28, 1997 non-performing loans represented 2.35% of net assets or
1.86% of total assets. On May 31, 1997 these percentages had declined to 1.84%
and 1.39%, respectively. Our valuation procedures ensure that all assets,
including those which are impaired, are carried on the books of the Trust
2
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
at fair value. The Trust's NAV thus reflects management's view of the value
which will be realized at maturity, through workout, sale or liquidation, as
applicable in each case. The composition of the Trust's non-performing assets
changed during the quarter as one transaction was worked out and no new problem
credits developed. In general, the condition of the portfolio remains stable.
As we have observed before, a key to NAV stability is diversification. The
Trust's industry concentration as of May 31, 1997 is shown in Chart One. By
means of comparison, Chart Two shows by industry sector how the primary market
was concentrated during the first quarter. As you can see, the Trust has avoided
the high degree of focus on Media / Communications which was represented in the
primary market.
- --------------------------------------------------------------------------------
CHART ONE: Trust Concentration*
% of total senior loans
General Industry 31%
Personal, Food and Miscellaneous Services 27%
Healthcare, Education and Childcare 10%
Media/Communications 10%
Electronics 7%
Chemicals, Plastics and Rubber 6%
Leisure, Amusements, Motion
Pictures, and Entertainment 6%
Home and Office Furnishings, Housewares and
Durable Consumer Products 3%
- --------------------------------------------------------------------------------
CHART TWO: Market Concentration
Media/Communications 30%
General Industry 19%
Healthcare, Education and Childcare 12%
Electronics 9%
Home and Office Furnishings, Housewares and
Durable Consumer Products 7%
Personal, Food and Miscellaneous Services 7%
Chemicals, Plastics and Rubber 5%
Buildings and Real Estate 4%
Machinery 4%
Leisure, Amusements, Motion Pictures, and Entertainment 3%
- --------------------------------------------------------------------------------
* In these charts, we have amalgamated certain concentrations to conform to the
market concentrations computed by NationsBank.
3
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Portfolio Changes
During the quarter new investments included Duo-Tang, Inc., Huntsman Chemical,
Del Monte Corporation, GEO Specialty Chemicals, Evergreen International, Laidlaw
Environmental Services, Inc. and Interstate Hotels Corporation. Transactions
repaid or sold included Smith's Food & Drug Co., Continental Micronesia, Glenoit
Mills, Inc., Liggett Group, Inc., Eller Media Company, CSK Auto, Inc. and
America's Favorite Chicken Co.
Outlook
We expect a continuation of the trend towards lower spreads and fees which has
been evident for the last year. This will tend to lower investment income. We
expect to maintain our use of leverage while asset quality remains acceptable
and while the Trust's access to appropriate assets results from its significant
size and buying power. This allows a marginal increase in returns to the Trust.
Interest rates seem likely to remain relatively stable. We believe that lack of
inflation, improved operating efficiency of corporations, steady corporate
profitability and increasing evidence that non-inflationary GDP growth may be
sustainable even with unemployment below 5% gives the Federal Reserve little
reason to increase rates further. If the economic model has indeed shifted,
allowing for an even longer cyclical upswing, short-term interest rates may have
a tendency to fall slightly. Hence, we see a relatively stable environment for
interest rates and in consequence, for the Trust's dividends. Any bias for
change in the general level of dividends is likely to result from marginally
lower short-term interest rates and further downward pressure on spreads.
On behalf of the entire team of Pilgrim America professionals, we thank you for
your support and interest. We welcome your comments and questions.
Sincerely,
/s/: Howard Tiffen /s/: Robert Stallings
Howard Tiffen Robert Stallings
President and Chairman and CEO
Senior Portfolio Manager Pilgrim America Investments, Inc.
Pilgrim America Investments, Inc. June 20, 1997
June 20, 1997
4
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
SHAREHOLDER LETTER FOOTNOTES
- --------------------------------------------------------------------------------
(1) Lipper Analytical Services, Inc. ranked the Trust for total return, without
deducting sales charges and assuming reinvestment of all dividends and capital
gains distributions but not reflecting the January 1995 and November 1996 rights
offerings. The Trust's expenses were partially waived for the fiscal year ended
February 29, 1992.
(2) 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.
(3) Source: Bloomberg Financial Markets. LIBOR is the London Inter-Bank Offered
Rate and is the benckmark for determining the interest paid on more than 90% of
the senior loans in the Trust's portfolio.
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, only
through the end of the period of the report as stated on the cover. The
manager's views are subject to change at any time based on market and other
conditions.
5
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
STATISTICS AND PERFORMANCE as of May 31, 1997
- --------------------------------------------------------------------------------
Portfolio Characteristics
Net Assets $1,032,102,177
---------------------------------------------------------------
Assets Invested in Senior Loans $1,321,447,107
---------------------------------------------------------------
Total Number of Senior Loans 128
---------------------------------------------------------------
Average Amount Outstanding per Loan $10,323,806
---------------------------------------------------------------
Total Number of Industries 27
---------------------------------------------------------------
Quarterly Portfolio Turnover Rate 22%
---------------------------------------------------------------
Average Loan Amount per Industry $ 48,942,485
---------------------------------------------------------------
Weighted Average Days to Interest Rate Reset 49 days
---------------------------------------------------------------
Average Loan Maturity 66 months
---------------------------------------------------------------
Average Age of Loans Held in Portfolio 11 months
---------------------------------------------------------------
*Includes loans and other debt received through restructures
Top 10
Industries as a
% of Net Assets
Aerospace Products & Services 12.6%
Electronic Equipment 9.4%
Food / Tobacco Products & Serv. 8.3%
Diversified Serv. / Entertainment 8.2%
Health & Beauty Products 7.8%
Media/Broadcast 7.7%
Industrial Equipment 6.5%
Food Stores 6.3%
Healthcare Services 5.6%
Diversified Manufacturing 5.4%
Top 10
Senior Loans
as a % of Net Assets
MAFCO Financial Corp. 4.1%
Favorite Brands International 3.4%
Silgan Corp. 2.8%
Ralph's Grocery Co. 2.6%
Boston Chicken, Inc. 2.4%
Community Health Systems 2.4%
Huntsman Chemical 2.2%
Dade International 2.2%
Atlas Freighter Leasing 1.9%
International Home Foods 1.9%
6
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
STATISTICS AND PERFORMANCE as of May 31, 1997
- --------------------------------------------------------------------------------
Distribution Rates
30-Day 30-Day Annualized Annualized
Prime Yield at Yield at Distribution Distribution
Quarter-ended Rate NAV(A,D) MKT(A,D) Rate at NAV(B,D) Rate at MKT(B,D)
August 31, 1996 8.25% 8.41% 8.17% 8.56% 8.32%
November 30, 1996 8.25% 9.64% 9.72% 8.78% 8.85%
February 28, 1997 8.25% 8.44% 7.97% 8.69% 8.22%
May 31, 1997 8.50% 9.72% 9.15% 8.74% 8.23%
This table sets forth the Trust's monthly dividend performance which is
summarized quarterly.
- --------------------------------------------------------------------------------
Average Annual Total Returns
NAV MKT
Year To Date 3.35% 5.55%
1 Year 7.79% 13.62%
3 Years 8.55% 10.44%
5 Years 7.90% 11.00%
Since Trust Inception (G,I) 8.49% N/A
Since Intitial Trading on NYSE (H) N/A 11.35%
Assumes rights were exercised and excludes sales charges and
commissions.(C,D,E,F)
See performance footnotes on page 8.
7
<PAGE>
Pilgrim America 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 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 dividends declared in
each 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 returns assume 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
May 31, 1997 were 7.24% and 8.13% 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) As part of the 1996 rights offering (see F), the Investment Manager has
voluntarily reduced its management fee for the period from November 1996
through November 1999.
(E) 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 charges against the offering proceeds.
(F) 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.
(G) Inception date - May 12, 1988.
(H) Initial trading on NYSE - March 9, 1992.
(I) Reflects a partial waiver of fees.
Performance data represents past performance and is no guarantee of
future results. Investment return and principal value of an investment in the
Trust will fluctuate. Shares, when sold, may be worth more or less than their
original cost.
8
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
ADDITIONAL NOTES AND INFORMATION
- --------------------------------------------------------------------------------
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:
DECLARATION DATE EX-DATE PAYABLE DATE
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
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.
9
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of May 31, 1997
- --------------------------------------------------------------------------------
SENIOR LOANS*
(Dollar weighted portfolio interest reset period is 49 days)
<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
--------- ----------------- ---- -------- -----
<S> <C> <C> <C> <C>
Aerospace Products & Services: 12.6%
$ 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
20,000 Atlas Freighter Leasing (air cargo carrier) Term 05/29/04 20,000,000
14,925 Banner Aerospace (aerospace fasteners) Term B 07/01/03 14,925,000
9,680 Continental Airlines (airline) Term 12/31/06 9,680,487
9,000 Erickson Air-Crane Co. (heavy lift helicopters) Term B 12/31/04 9,000,000
15,000 Evergreen International (air cargo carrier) Term B 05/07/03 15,000,000
8,839 Fiberite, Inc. (plastic composite manufacturer) Term B 12/31/01 8,839,286
2,936 Grimes Aerospace Corp. (aerospace products) Revolver 12/31/99 2,935,669
16,119 Grimes Aerospace Corp. Term 12/31/99 16,118,731
4,988 Mag Aerospace Industries (aircraft component supplier) Term B 06/15/03 4,987,500
7,212 Technetics Corp. (aircraft engine components) Term 06/20/02 7,212,121
14,500 Tri Star/Odyssey, Inc. (aerospace hardware distributor) Term 09/30/03 14,500,000
----------------------
130,098,794
----------------------
Apparel Products: 2.4%
6,895 Humphreys, Inc. (belts and personal leather goods) Term B 11/15/03 6,895,000
7,137 Scovill Fasteners (metal fasteners for apparel products) Term B 01/24/03 7,136,898
4,804 Scovill Fasteners Lease 10/15/02 4,803,700
6,300 The William Carter Co. (children's clothing) Term B 10/31/03 6,300,000
----------------------
25,135,598
----------------------
Communications: 3.0%
7,920 Executone Business Solutions (telecommunication service) Term B 07/01/03 7,920,000
9,714 Shared Technologies, Inc. (communication services) Term B 03/31/03 9,714,286
3,500 Sprint Spectrum L.P. (wireless telephone operator) Term 02/10/06 3,500,000
10,000 Teletouch Communications (rural paging services) Term A 11/30/03 10,000,000
----------------------
31,134,286
----------------------
Construction Products and Services: 0.5%
4,000 The Presley Companies (homebuilder) Revolver 05/20/98 4,000,000
1,455 United Building Materials, Inc. (stone and concrete
products)(4) Term 04/30/96 1,418,271
----------------------
5,418,271
----------------------
Container Products: 2.8%
1,172 Silgan Corp. (metal and plastic containers) Term A 03/15/01 1,172,154
27,373 Silgan Corp. Term B 03/15/02 27,372,673
----------------------
28,544,827
----------------------
Diversified Manufacturing: 5.4%
5,645 Cambridge Industries, Inc. (automotive plastics) Term B 05/17/02 5,644,977
6,350 Cambridge Industries, Inc. Term C 11/17/03 6,350,273
2,822 Cambridge Industries, Inc. Term D 05/17/04 2,822,414
9,969 Capital Tool & Design (brake backing plates) Term B 07/19/03 9,968,750
</TABLE>
10
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of May 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
--------- ----------------- ---- -------- -----
<S> <C> <C> <C> <C>
Diversified Manufacturing (continued)
$ 6,967 Desa International (specialty equipment manufacturing) Term A 08/31/01 $ 6,967,005
7,432 Desa International Term B 02/28/03 7,432,365
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
2,764 Rayovac Corp. (battery manufacturer) Term B 09/30/03 2,763,889
2,764 Rayovac Corp. Term C 09/30/04 2,763,889
7,375 @ Rowe International, Inc. (vending, jukebox, currency
machines) (1) Term C 12/31/96 4,056,250
7,157 Worldwide Sports & Recreation Corp. (optics, sports
products) Term B 03/31/01 6,977,665
----------------------
55,777,455
----------------------
Diversified Services/Entertainment: 8.2%
7,094 AMF Group (bowling centers and equipment) Axel A (A) 05/01/03 7,165,283
4,434 AMF Group Axel B (A) 05/01/04 4,478,578
6,825 Bankers Systems, Inc. (compliance services to banking
industry) Term B 11/01/02 6,825,000
6,428 Doubletree Corp. (hotel management) Term B 05/08/04 6,428,453
7,000 Interstate Hotels Corp. (hotel management and ownership) Term C 06/25/04 7,000,000
42,400 MAFCO Financial Corp. (diversified services and
entertainment) Term 03/20/99 42,400,000
10,570 Sunset Station Hotel and Casino, Inc. (gaming) Term 09/30/00 10,570,000
----------------------
84,867,314
----------------------
Electronic Equipment: 9.4%
7,500 Celestica (diversified electronic device manufacturer) Term B 06/30/03 7,500,000
6,006 Details, Inc. (circuit board manufacturer) Term 02/13/01 6,006,356
12,375 Dictaphone Acquisition, Inc. (dictation and recording
equipment) Term 06/30/02 12,375,000
4,178 Elgar Electronics (electronic testing equipment) Term B 03/31/03 4,177,781
7,458 Fairchild Semiconductor Corp. (electronic equipment) Term B 03/11/03 7,458,333
8,780 Intesys Technologies, Inc. (contract engineering and
manufacturing) Term B 12/31/01 8,780,488
9,857 OK Industries (circuit board soldering systems) Term 10/31/02 9,857,143
5,000 Packard Bioscience Co. (analytical instrument manufacturer) Term B 03/13/03 5,000,000
9,975 Phase Metrics, Inc. (computer testing equipment) Term A 11/30/01 9,975,000
14,850 PSC Incorporated (scanning equipment) Term B 06/28/02 14,850,000
6,000 Telex Communications Group (electronic equipment) Term B 11/06/04 6,000,000
5,000 Viasystems, Inc. (electronic equipment) Term A 04/11/07 5,000,000
----------------------
96,980,101
----------------------
Energy: 3.6%
3,846 Centennial Resources (coal mining) Term A 03/31/02 3,846,154
8,654 Centennial Resources Term B 03/31/04 8,653,846
5,000 GEO Specialty Chemicals (specialty chemicals) Term A 09/25/02 5,000,000
10,000 GEO Specialty Chemicals Term B 03/25/04 10,000,000
10,000 IRI International Co. (oil field services) Term A 03/31/02 10,000,000
----------------------
37,500,000
----------------------
Food/Tobacco Products and Services: 8.3%
2,563 Bumble Bee Seafoods, Inc. (canned seafood)(4) Term A 09/15/96 2,562,500
3,750 Bumble Bee Seafoods, Inc.(4) Term B 09/15/96 3,750,000
</TABLE>
11
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of May 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
--------- ----------------- ---- -------- -----
<S> <C> <C> <C> <C>
Food/Tobacco Products and Services(continued)
$ 8,100 Del Monte Corp. (food manufacturing and distribution) Term B 03/31/05 $ 8,100,000
4,444 Edward's Baking Co. (food service bakery) Term B 09/30/02 4,443,750
30,506 Favorite Brands International (confectionary manufacturer) Term B 08/01/04 30,506,013
5,000 Favorite Brands International (confectionary manufacturer) Term C 02/01/05 5,000,000
10,797 International Home Foods (food product manufacturer) Term B 10/30/04 10,797,297
9,176 International Home Foods Term C 10/30/05 9,175,676
7,074 Van De Kamp's (frozen foods) Term B 04/30/03 7,074,464
4,433 Van De Kamp's Term C 09/30/03 4,432,990
----------------------
85,842,690
----------------------
Food Stores: 6.3%
1,094 Pathmark Stores, Inc. (northeastern states supermarkets) Revolver 07/31/98 1,092,383
1,865 Pathmark Stores, Inc. Term A 07/31/98 1,863,018
27,000 Ralph's Grocery Co. (Southern California supermarkets) Term B 02/15/04 27,000,000
15,000 Schwegmann Giant Supermarket (Louisiana supermarkets) Term B 01/31/04 15,000,000
16,282 Star Markets Co., Inc. (Boston area supermarkets) Term B 12/31/01 16,281,694
3,500 Star Markets Co., Inc. Term C 12/31/03 3,500,000
----------------------
64,737,095
----------------------
Furniture & Garden Products: 2.0%
13,916 Lifestyle Furnishings International (furniture) Term B 06/20/04 13,916,034
6,957 Simmons Company (mattress manufacturer) Term B 03/31/03 6,956,774
----------------------
20,872,808
----------------------
General Merchandise Retailing: 3.2%
19,250 Liberty House, Inc. (Hawaii department store chain) Term B 06/30/02 19,250,000
6,444 Peebles, Inc. (department store chain) Term A 04/30/01 6,444,250
7,836 Peebles, Inc. Term B 04/30/02 7,836,400
----------------------
33,530,650
----------------------
Healthcare Services: 5.6%
9,007 Community Health Systems (hospitals) Term B 12/31/03 9,006,849
9,007 Community Health Systems Term C 12/31/04 9,006,849
6,781 Community Health Systems Term D 12/31/05 6,780,822
6,000 Covenant Care, Inc. (long-term healthcare facilities) Term 06/30/99 6,000,000
9,929 Mediq/PRN Life Support, Inc. (hospital equipment leasing) Term 09/28/98 9,929,474
5,000 Prime Medical Supplies (lithotripter services) Term B 04/30/03 5,000,000
12,000 24-Hour Fitness, Inc. (health club operator) Term 05/31/00 12,000,000
----------------------
57,723,994
----------------------
Health & Beauty Products: 7.8%
5,139 Dade International (medical testing equipment manufacturer) Term B 12/31/02 5,139,491
5,139 Dade International Term C 12/31/03 5,139,491
12,397 Dade International Term D 12/31/04 12,397,091
9,250 Eye Care Centers, Inc. (retail eye care products and services) Term 09/26/02 9,250,000
8,866 Hanger Orthopedics Group (orthopedic and prosthetic services) Term B 12/31/01 8,865,638
17,067 ICON Health & Fitness Co. (exercise equipment) Term B 11/14/01 17,067,435
</TABLE>
12
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of May 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
--------- ----------------- ---- -------- -----
<S> <C> <C> <C> <C>
Health & Beauty Products (continued)
$ 4,144 IMED/IVAC Corp. (infusion pumps) Term B 11/30/03 $ 4,144,175
4,144 IMED/IVAC Corp. Term C 11/30/04 4,144,175
3,900 IMED/IVAC Corp. Term D 05/31/05 3,900,400
10,000 Medtech Products, Inc. (non-prescription consumer
medications) Term B 10/15/02 10,000,000
----------------------
80,047,896
----------------------
Industrial Chemicals: 3.6%
9,111 Cedar Chemical Corp. (specialty chemicals) Term B 10/30/03 9,111,250
15,000 Huntsman Chemical (specialty chemicals) Term 03/15/07 15,000,000
3,929 Huntsman Chemical Term B 03/15/04 3,928,571
3,929 Huntsman Chemical Term C 03/15/05 3,928,571
4,917 Texas Petrochemical Corp. (industrial chemicals) Term B 06/30/04 4,916,667
----------------------
36,885,059
----------------------
Industrial Equipment: 6.5%
2,814 Calmar, Inc. (non-aerosol fluid dispensing systems) Axel A (A) 09/15/03 2,814,286
2,111 Calmar, Inc. Axel B (A) 03/15/04 2,110,714
8,000 CNB International (metal stamping press manufacturer) Term 10/18/04 8,000,000
9,967 Columbus McKinnon (industrial lifts and hoists) Term B 03/01/04 9,966,667
9,867 Graphic Controls Corp. (industrial and medical charts) Term B 09/28/03 9,866,586
4,270 Intermetro Industries, Inc. (storage and material
transport products) Term B 06/30/03 4,270,109
3,321 Intermetro Industries, Inc. Term C 06/30/04 3,321,196
4,922 Jackson Products, Inc. (industrial safety equipment
manufacturer Term B 09/01/02 4,921,740
4,925 Jackson Products, Inc. Term C 09/01/03 4,925,000
1,343 Jackson Products, Inc. Term D 09/01/03 1,343,250
5,700 Mettler-Toledo (weigh scale manufacturer) Term B 12/31/04 5,700,000
9,827 Schrader, Inc. (fluid/air control valve manufacturer) Term B 11/30/02 9,827,259
----------------------
67,066,807
----------------------
Industrial Services: 3.6%
1,880 Allied Waste Industries, Inc. (waste management) Axel A (A) 06/23/03 1,879,951
3,760 Allied Waste Industries, Inc. Axel B (A) 06/23/04 3,759,902
3,760 Allied Waste Industries, Inc. Axel C (A) 06/23/05 3,759,902
8,500 Clean Harbors (environmental services) Term 05/08/00 8,500,000
9,000 Coinmach Corp. (commercial laundry operator) Term B 06/08/04 9,000,000
5,000 Laidlaw Environmental Services, Inc. (waste management) Term B 05/15/04 5,000,000
5,000 Laidlaw Environmental Services, Inc. Term C 05/15/05 5,000,000
----------------------
36,899,755
----------------------
Media/Broadcast: 7.7%
4,070 Benedek Broadcasting Television Corp. (broadcasting) Axel A (A) 12/05/02 4,069,763
4,220 Benedek Broadcasting Television Corp. Axel B (A) 12/05/02 4,219,589
889 Classic Cable (rural cable system operator) Revolver 06/30/03 889,042
5,124 Classic Cable Term B 06/30/05 5,124,179
7,500 Entravision (Spanish broadcast television) Term B 12/31/04 7,500,000
</TABLE>
13
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of May 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
--------- ----------------- ---- -------- -----
<S> <C> <C> <C> <C>
Media/Broadcast (continued)
$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
15,000 Jacor Communications (radio broadcasting) Term B 06/15/04 15,000,000
9,950 Metro-Goldwyn-Mayer, Inc. (film library) Term B 10/10/03 9,950,000
3,109 Outdoor Systems, Inc. (outdoor advertising) Term B 12/31/03 3,108,875
9,850 Phoenix Associates, Inc. (cable television) Term B 12/31/99 9,850,000
----------------------
79,711,448
----------------------
Metal Products: 4.5%
7,500 American Bumper and Manufacturing Co. (automotive bumpers) Term B 04/30/04 7,500,000
5,985 Cable Systems International (cable wire manufacturer) Term B 10/04/02 5,985,000
9,850 GS Technologies (metal products) Term 09/30/02 9,850,000
9,421 Hayes Wheels International (automotive wheels) Term B 07/31/03 9,420,833
7,537 Hayes Wheels International Term C 07/31/04 7,536,667
1,304 National Refractories, Inc. (kiln lining materials) Term B 09/30/99 1,304,257
4,980 National Refractories, Inc. Term C 09/30/99 4,979,726
----------------------
46,576,483
----------------------
Miscellaneous Companies: 1.9%
12,908 Outsourcing Solutions (accounts receivable management) Term B 11/06/03 12,908,451
6,580 Staff Capital, L.P. (employee leasing) Term 12/08/99 6,580,000
----------------------
19,488,451
----------------------
Paper Products: 3.4%
4,534 Duo-Tang, Inc. (report cover manufacturer) Term A 12/31/02 4,534,413
5,379 Duo-Tang, Inc. Term B 12/31/02 5,379,151
7,414 RIC Holdings, Inc. (packaging and paper products) Term A 02/28/03 7,413,884
5,727 RIC Holdings, Inc. Term B 02/27/04 5,726,708
4,273 RIC Holdings, Inc. Term C 08/31/04 4,273,292
3,634 St. Laurent Paper Products (linerboard manufacturer) Term B 05/31/03 3,634,021
3,866 St. Laurent Paper Products Term C 05/31/04 3,865,979
----------------------
34,827,448
----------------------
Publishing and Information Services: 2.4%
6,100 Anacomp, Inc. (document storaging and imaging) Term 02/28/01 6,100,000
7,430 NBC Acquisition (wholesale and retail textbooks) Term 08/31/03 7,430,000
5,000 @ Softworld Services (software fulfillment services) Term A 06/30/00 2,000,000
5,000 @ Softworld Services Term B 06/30/01 2,000,000
3,571 Von Hoffman Press, Inc. (textbook manufacturer) Term B 05/29/04 3,571,429
3,571 Von Hoffman Press, Inc. Term C 05/29/05 3,571,429
----------------------
24,672,858
----------------------
Restaurants: 4.4%
24,938 Boston Chicken, Inc. (quick service restaurant chain) Lease/ 12/12/01 24,937,500
Term C
7,981 Denamerica Corp. (quick service restaurant franchisee) Term 12/31/01 7,981,347
</TABLE>
14
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of May 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
--------- ----------------- ---- -------- -----
<S> <C> <C> <C> <C>
Restaurants (continued)
$ 2,594 Long John Silvers, Inc. (quick service seafood
restaurant chain) Term B 09/30/02 $ 2,593,594
4,871 Papa Gino's, Inc. (quick service restaurants) Term A 02/19/02 4,871,324
4,984 Papa Gino's, Inc. Term B 02/19/04 4,984,375
----------------------
45,368,140
----------------------
Specialty Retailing: 2.9%
8,035 @ Color Tile, Inc. (home improvement retailer) (3) Term C 12/31/98 5,785,117
7,093 @ Color Tile, Inc. (3) Term D 12/31/98 5,107,200
4,706 Color Tile, Inc. (D.I.P.) (3) Revolver 12/30/97 4,706,185
2,371 M & H Drugs, Inc. (Midwestern retail drugstores)(4) Term 12/31/96 2,311,380
12,500 Murray's Discount Auto Parts (auto parts retailer) Term 06/30/03 12,500,000
----------------------
30,409,882
----------------------
Textile & Leather Products: 1.0%
5,702 Targus Group, Int'l. (computer luggage manufacturer) Term A 01/18/02 5,702,510
4,103 Targus Group, Int'l. Term B 01/18/03 4,102,660
----------------------
9,805,170
----------------------
Transportation Services: 5.0%
4,716 Cruise Ship L.L.C. (cruise ship operator) Sr. Note 07/01/01 4,715,789
7,484 International Logistics (logistics/freight forwarding) Term B 12/31/03 7,484,375
16,057 RCTR Holdings, Inc. (truck rental) Term A 10/16/01 16,057,143
4,000 Safelite Glass Corp. (automobile windshield replacement) Term B 12/20/04 4,000,000
3,580 Sky Chef's International, Inc. (airline food service) Term A 09/15/00 3,579,623
8,603 Sky Chef's International, Inc. Term B 09/15/01 8,624,980
1,059 Sky Chef's International, Inc. Term C 09/15/03 1,061,917
6,000 TravelCenters of America (road transport service centers) Term B 03/27/05 6,000,000
----------------------
51,523,827
----------------------
Total Senior Loans - 128.0% 1,321,447,107
(Cost $1,334,536,265) ----------------------
</TABLE>
OTHER CORPORATE DEBT
<TABLE>
<CAPTION>
Principal
Amount Loan Stated
(000's) Industry/Borrower Type Maturity Value
--------- ----------------- ---- -------- -----
<S> <C> <C> <C> <C>
Diversified Manufacturing: 0.6%
$ 6,000 Capital Tool & Design (brake backing plates) Sub. Note 07/26/03 $ 6,000,000
Electronic Equipment: 1.4%
15,000 Viasystems, Inc. (electronic equipment) Sub. Note 04/11/07 15,000,000
----------------------
Total Other Corporate Debt - 2.0% 21,000,000
(Cost $21,000,000) ----------------------
</TABLE>
15
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of May 31, 1997
- --------------------------------------------------------------------------------
COMMON STOCK AND PREFERRED STOCK
<TABLE>
<CAPTION>
Shares
------
<S> <C> <C>
Apparel Products: 0.0%
$13,924 @ Butterick Company, Inc. $ 13,000
----------------------
Diversified Manufacturing: 0.0%
2,633 @ KDI Corp.---common (defense and leisure products) (2) --
----------------------
Restaurants: 0.4%
413,980 @ America's Favorite Chicken Co.---common (quick service restaurant chain) (R) 3,645,645
17,664 @ Flagstar, Inc.---common (family restaurants, institutional food service companies) 8,280
----------------------
3,653,925
----------------------
Textiles: 0.2%
12,764 @ Dan River (Braelan) Corp.---common (diversified textiles) (R) 2,288,045
----------------------
Total Common Stock and Preferred Stock - 0.6% 5,954,970
----------------------
(Cost $1,784,116 )
<CAPTION>
<S> <C>
STOCK PURCHASE WARRANTS AND OTHER SECURITIES
1 @ Autotote Systems, Inc., Warrant representing 48,930 common shares (designer and
manufacturer of wagering equipment), Expires 10/30/03 (R) 28,281
1 @ Autotote Systems, Inc., Option representing 0.248% common shares issued
and outstanding (R) --
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 @ Medtech Products, Warrants (R) --
1 @ Staff Capital, L.P., Common Limited Partnership Unit (employee leasing) (R) 614,789
1 @ Staff Capital, L.P., Preferred Limited Partnership Unit (R) 61,000
----------------------
Total Stock Purchase Warrants and Other Securities - 0.1% 1,132,599
----------------------
(Cost $61,100)
Total Investments (Cost $1,357,381,481) (5) 130.7% $ 1,349,534,676
Liabilities in Excess of Cash and Other Assets-Net (30.7) (317,432,499)
------------- ----------------------
Net Assets 100.0% $ 1,032,102,177
============= ======================
</TABLE>
- ----------------------
@ Non-income producing security
(A) Axel describes an amortizing extended term loan with limited call
protection.
(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.
16
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS as of May 31, 1997
- --------------------------------------------------------------------------------
(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) The borrower has entered into a forebearance agreement pending sale of
the company or refinance of this debt.
(5) For Federal income tax purposes, which is the same for financial reporting
purposes, cost of investments is $1,357,381,481 and net unrealized
depreciation consists of the following:
<TABLE>
<S> <C> <C>
Gross Unrealized Appreciation $ 6,491,092
Gross Unrealized Depreciation (14,337,897)
---------------
Net Unrealized Depreciation $ (7,846,805)
===============
</TABLE>
17
<PAGE>
Pilgrim America Prime Rate Trust
- --------------------------------------------------------------------------------
FUND ADVISORS AND AGENTS
- --------------------------------------------------------------------------------
INVESTMENT MANAGER
Pilgrim America Investments, Inc.
Two Renaissance Square
40 North Central Avenue
Suite 1200
Phoenix, AZ 85004-4424
SHAREHOLDER SERVICING AGENT
Pilgrim America Group, Inc.
Two Renaissance Square
40 North Central Avenue
Suite 1200
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, AZ 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.
INSTITUTIONAL INVESTORS AND ANALYSTS
Call Pilgrim America Prime Rate Trust
1-800-336-3436, Extension 8256
TRANSFER AGENT
DST Systems, Inc.
P.O. Box 419368
Kansas City, Missouri 64141
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-062397 072997
<PAGE>
[This page intentionally left blank.]
<PAGE>
[This page intentionally left blank.]
