First Quarter Report

May 31, 2005

ING Prime Rate Trust

ING Prime Rate Trust

Dear Shareholders:

ING Prime Rate Trust (the “Trust”) is a diversified, closed-end management investment company that seeks to provide investors with as high a level of current income as is consistent with the preservation of capital. The Trust seeks to achieve this objective by investing in a professionally managed portfolio comprised primarily of senior loans.

PEFORMANCE SUMMARY

The Trust declared $0.11 of dividends during the first fiscal quarter ended May 31, 2005. Based on the average month-end net asset value (“NAV”) per share of $7.35, this resulted in an annualized distribution rate of 5.98%⁽¹⁾ for the quarter. The Trust’s total return for the first fiscal quarter, based on NAV, was 0.01%, versus a total return on the S&P/LSTA Leveraged Loan Index of 0.59% for the same quarter. The total market value return (based on full reinvestment of dividends) for the Trust’s common shares during the first fiscal quarter was –5.08%.

MARKET OVERVIEW

After a succession of very strong quarters, the non-investment grade (“leveraged”) loan market re-trenched somewhat during the Trust’s first fiscal quarter, enduring a mid-May correction prompted chiefly by Standard & Poor’s downgrade of General Motors (“GM”) and Ford debt securities to non-investment grade. The impact of the ratings actions, while not directly affecting the Trust (as it did not hold any GM or Ford obligations during the period), rippled through the non-investment grade credit markets, and in turn, caused many non-traditional buyers of loans (e.g., hedge funds) to liquidate positions in order to ensure sufficient liquidity to meet potential redemptions. Occurring over a relatively condensed time period, such selling activity had a marked deflationary effect on loan prices. At the time, the resultant correction seemed an important inflection point: the loan market had clearly come a long way in a reasonably short period of time and was arguably somewhat expensive relative to historical experience. In retrospect, however, the pullback was fairly short-lived; loan prices have since recovered most of the lost ground, buoyed by a still low default environment and persistent investor demand for ultra-short duration floating rate, secured assets. Nonetheless, while brief, the correction proved somewhat beneficial as it refocused loan investors’ attention on the importance of structural integrity (i.e., proper covenant protections) and earning an appropriate risk-adjusted return for shareholders.

⁽¹⁾         The distribution rate is calculated by annualizing dividends declared during the period 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.

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PORTFOLIO OVERVIEW

With limited exception, as compared to the fiscal quarter ended February 28, 2005, the composition of the Trust’s portfolio remained statistically unchanged during the first fiscal quarter. As noted above, performance was adversely impacted by a reduction in loan bid levels, particularly prevalent in the larger, more actively traded loans, several of which comprise the Trust’s top holdings (see table at right for percentage holdings). Generally speaking, sector weightings and issuer concentrations did not vary materially from the prior quarter, save for the introduction into the portfolio of a select number of investments in new multi-billion dollar transactions. Specifically, positions were taken in loans issued by Metro-Goldwyn-Mayer Studios, Inc. (‘Ba3/B+’), one of the largest and most prolific producers/distributors of motion pictures and television programs, Fidelity National Information Solutions, Inc. (‘Ba3/BB’), a leading provider of technology solutions and information services to the financial services and real estate industries, and Kerr-McGee Corporation (‘Ba3/BB+’), a global energy and chemical company. (See table below for percentage holdings.) Each of these issuers is now considered a bellwether of their respective sector. The Trust’s continued underweight of the automotive sector was a positive contributor to quarterly results, as auto component suppliers continue to suffer directly from escalating raw material costs, and, indirectly but perhaps more significantly, from reduced demand/production of high margin vehicles and increasing foreign competition. As of May 31, 2005, the broad automotive sector represented roughly 3.5% of the Trust’s total assets under management (or approximately 2.1% if only direct automotive OEM supplier are considered), versus approximately 4.1% for the S&P/LSTA Leveraged Loan Index.

The Trust remains well diversified. As of May 31, 2005, the average individual loan position represented approximately 0.21% of total assets, while the average industry sector exposure accounted for roughly 2.56%. Both measures are essentially unchanged from the prior quarter-end.

USE OF LEVERAGE

The Trust utilizes financial leverage to seek to increase the yield to the holders of common shares. As of May 31, 2005, the Trust had $450 million of “Aaa/AAA⁽²⁾” rated cumulative auction rate preferred shares outstanding, and $534 million of borrowings outstanding under $625 million in available credit facilities. Total leverage, as a percentage of total assets (including preferred shares), was 47.14% at

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period end. The use of leverage for investment purposes increases both investment opportunity and investment risk.

OUTLOOK

Looking ahead, the late-Spring swoon apparently behind us, the loan market and the Trust enter the middle of the year on reasonably strong footing. While the threat of a material dislocation caused by an event external to the loan and capital markets is ever-present, based on prevailing market conditions and indicators, we expect investor demand to remain robust over the intermediate term. Factors such as record oil prices and the expectation of slowing corporate earnings have, at least to this point, been comfortably offset by the strength of the housing sector and a steadily improving job market, thusly enabling economists to maintain a fairly healthy consensus GDP estimate for the balance of the year. Consequently, while there are clearly differing views, a growing number of Fed watchers are seemingly convinced the end of short-term rate hikes is not in sight yet. A further rise in rates, coupled with the expectation of continued low default rates, provides the ideal backdrop for favorable performance on the part of floating rate loans.

Investment Types

as of May 31, 2005

(as a percent of total investments)

Portfolio holdings are subject to change daily.

We thank you for your investment in ING Prime Rate Trust.

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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 Trust’s performance may be lower or higher than the performance data shown. Please log on to www.ingfunds.com or call (800) 992-0180 to get performance through the most recent month end.

Assumes rights were exercised and excludes sales charges and commissions^(b),(c)

^(a)      Performance since inception for the index is 5.22% from January 1, 1997.

^(b)      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 Value) on the last business day before the first day of the stated period, with all dividends and distributions reinvested at the actual reinvestment price.

^(c)      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.

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 report 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 report 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.

The Credit Suisse First Boston Leveraged Loan Index is an unmanaged index of below investment grade loans designed to mirror the investable universe of the U.S. dollar-denominated leveraged loan market. An investor cannot invest directly in an index.

The S&P/LSTA Leveraged Loan Index (“LLI”) is an unmanaged total return index that captures accrued interest, repayments, and market value changes. It represents a broad cross section of leveraged loans syndicated in the United States, including dollar-denominated loans to overseas issuers. Standard & Poor’s and the Loan Syndications & Trading Association (“LSTA”) conceived the LLI to establish a performance benchmark for the syndicated leveraged loan industry. An investor cannot invest directly in an index.

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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 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 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.

Principal Risk Factor(s): This closed-end Trust may invest in below investment grade senior loans. Investment in the Trust involves the risk that borrowers may default on obligations, or that lenders may have difficulty liquidating the collateral securing the loans or enforcing their rights under the terms of the senior loans. 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. The use of leverage for investment purposes increases both investment opportunity and investment risk. In the event of a general market decline in the value of assets such as those in which the Trust invests, the effect of that decline will be magnified in the Trust because of the additional assets purchased with the proceeds of the leverage.

Interest Rate Risk: Changes in short-term market interest rates will directly affect the yield on the Trust’s Common Shares. If short-term market interest rates fall, the yield on the Trust’s Common Shares will also fall. To the extent that the interest rate spreads on loans in the Trust’s portfolio experience a general decline, the yield on the Trust’s Common Shares will fall and the value of the Trust’s assets may decrease, which will cause the Trust’s NAV to decrease. Conversely, when short-term market interest rates rise, because of the lag between changes in such short-term rates and the resetting of the floating rates on assets in the Trust’s portfolio, the impact of rising rates will be delayed to the extent of such lag.

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See Accompanying Notes to Financial Statements

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See Accompanying Notes to Financial Statements

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See Accompanying Notes to Financial Statements

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See Accompanying Notes to Financial Statements

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For a common share outstanding throughout the period

⁽¹⁾         Total investment return calculations are attributable to common shares.

⁽²⁾         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 Trust’s dividend reinvestment plan.

⁽³⁾         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.

⁽⁴⁾         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.

⁽⁵⁾         Ratios do not reflect the effect of dividend payments to Preferred Shareholders; income ratios reflect income earned on assets attributable to the Preferred Shares.

⁽⁶⁾         Annualized for periods less than one year.

See Accompanying Notes to Financial Statements

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NOTE 1 — ORGANIZATION

ING Prime Rate Trust (the “Trust”), a Massachusetts business trust, is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, closed-end, management investment company. The Trust invests primarily in senior loans which are exempt from registration under the Securities Act of 1933, as amended (the “ ‘33 Act”), but which 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.

NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES

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 principals generally accepted in the United States of America for investment companies.

A.            Senior Loan and Other Security Valuation. Senior loans held by the Trust are normally valued at the mean of the means of one or more bid and ask quotations obtained from an independent pricing service or other sources determined by the Board of Trustees to be independent and believed to be reliable. Loans for which reliable market value quotations are not readily available may be valued with reference to another loan or a group of loans for which reliable quotations are 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 of the loan being valued.

The Trust has engaged an independent pricing service to provide readily available, reliable market value quotations from dealers in loans and, when such quotations are not readily available, to calculate values under the proxy procedure described above. As of May 31, 2005, 98.84% of total investments were valued based on these procedures. It is expected that most of the loans held by the Trust will continue to be valued with reference to quotations from the independent pricing service or with reference to the proxy procedure described above.

Prices from a pricing source may not be available for all loans and ING Investments, LLC (the “Investment Manager”) or ING Investment Management Co. (“ING IM”, the “Sub-Adviser”), 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 or the Sub-Adviser that the Investment Manager or the Sub-Adviser 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, Brokerage and Proxy Committee. In fair valuing a loan, consideration is given to several factors, which may include, among others, the following: (i) the characteristics 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

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NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES (continued)

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 are valued at the last reported sale price. Securities reported by NASDAQ will be valued at the NASDAQ official closing price. Securities traded in the over-the-counter market and listed securities for which no sale was reported on a valuation date are valued at the mean between the last reported bid and ask price on such exchange. Securities other than senior loans for which reliable market value quotations are not readily available and all other assets will be valued at their respective fair values as determined in good faith by, and under procedures established by, the Board of Trustees of the Trust. Investments in securities maturing in 60 days or less from the date of valuation 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 subchapter M of the Internal Revenue Code and related excise tax provisions applicable to regulated investment companies and to distribute substantially all of its net investment income and net realized capital gains to its shareholders. Therefore, no federal income tax provision is required. No capital gain distributions will be made by the Trust until any capital loss carryforwards have been fully utilized or expire.

C.            Security Transactions and Revenue Recognition. Revolver and delayed draw loans are booked on a settlement date basis. Security transactions and senior loans 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 sold. Dividend income is recognized on the ex-dividend date. 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 non-accrual senior loans are generally applied as a reduction to the recorded investment of the loan. Senior loans are generally returned to accrual status only after all past due amounts have been received. For all loans acquired prior to March 1, 2001, arrangement fees received, which represent non-refundable fees associated with the acquisition of loans, were 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, fees received are treated as discounts and are accreted whereas premiums are amortized. Fees associated with revolving credit facilities acquired subsequent to February 28, 2001 are deferred and recognized over the shorter of four years or the actual term of the loan.

D.            Distributions to Common Shareholders. The Trust declares dividends monthly from net investment income. Distributions from capital gains, if any, are declared and paid annually. The Trust may make additional distributions to comply with the distribution requirements of the Internal Revenue Code. The character and amounts of income and gains to be distributed are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America for investment companies. Dividends paid by the Trust from net investment income and distributions of net realized short-term capital gains are, for federal income tax purposes, taxable as ordinary income to shareholders. The Trust records distributions to its shareholders on the ex-dividend date.

E.             Dividend Reinvestments. Pursuant to the Trust’s Shareholder Investment Program (formerly known as the Automatic Dividend Reinvestment Plan), DST Systems, Inc., the Plan Agent,

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NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES (continued)

purchases, from time to time, shares of beneficial interest of the Trust on the open market to satisfy dividend reinvestments. Such shares are purchased on the open market only when the closing sale or bid price plus commission is less than the net asset value per share of the Trust’s common shares on the valuation date. If the market price plus commissions is equal to or exceeds the net asset value, new shares are issued by the Trust at the greater of (i) net asset value or (ii) the market price of the shares during the pricing period, minus a discount of 5%.

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

G.            Share Offerings. Beginning in 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.

NOTE 3 — INVESTMENTS

For the three months ended May 31, 2005, the cost of purchases and the proceeds from principal repayment and sales of investments, excluding short-term notes, totaled $559,469,739 and $532,672,769, respectively. At May 31, 2005, the Trust held senior loans valued at $2,032,719,457 representing 98.5% of its total investments. The market value of these assets is established as set forth in Note 2.

The senior loans acquired by the Trust typically take the form of a direct lending relationship with the borrower, and are typically acquired through an assignment of another lender’s interest in a loan. The lead lender in a typical corporate loan syndicate administers the loan and monitors the collateral securing the loan.

Common and preferred shares, and stock purchase warrants held in the portfolio were acquired in conjunction with 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 shares or warrants.

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NOTE 3 — INVESTMENTS (continued)

Dates of acquisition and cost or assigned basis of restricted securities are as follows: