Prospectus
Pilgrim America Masters Series, Inc.
Pilgrim America Pilgrim America Masters Asia-Pacific Equity Fund
Funds Pilgrim America Masters MidCap Value Fund
Pilgrim America Masters LargeCap Value Fund
Two Renaissance Square, 40 North Central Avenue, Suite 1200,
Phoenix, Arizona 85004
(800) 331-1080
Pilgrim America Masters Series, Inc. (Masters Series) is an open-end management
investment company that currently offers three separate, diversified investment
portfolios (Funds), each with its own investment objectives and policies. The
Funds are designed to give investors access to private money managers (Portfolio
Managers) who typically manage similar portfolios only for high net worth
individuals and institutional investors.
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THE FUNDS
Pilgrim America Masters Asia-Pacific Equity Fund (Asia-Pacific Equity
Fund) seeks long-term capital appreciation. The Fund invests primarily
in the equity securities of companies based in the Asia-Pacific region.
The Portfolio Managers of the Fund are HSBC Asset Management Americas
Inc. and HSBC Asset Management Hong Kong Limited, both part of the
global advisory business of the financial institution that was founded
as the Hong Kong and Shanghai Banking Corporation.
Pilgrim America Masters MidCap Value Fund (MidCap Value Fund) seeks
long-term capital appreciation. The Fund invests primarily in equity
securities of companies that have a market capitalization between $200
million and $5 billion and that the Portfolio Manager believes are
undervalued based on fundamental analysis and other factors. The
Portfolio Manager of the Fund is CRM Advisors, LLC, an affiliate of
Cramer Rosenthal McGlynn, Inc.
Pilgrim America Masters LargeCap Value Fund (LargeCap Value Fund) seeks
long-term capital appreciation. The Fund invests primarily in equity
securities of companies that have a market capitalization in excess of
$5 billion and that the Portfolio Manager believes sell at reasonable
prices relative to their projected earnings. The Portfolio Manager of
the Fund is Ark Asset Management Co., Inc.
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Each Fund offers three classes of shares, with varying types and amounts of
sales and distribution charges. These Pilgrim America Purchase Options(TM)
permit you to choose the method of purchasing shares that best suits your
investment strategy.
This Prospectus presents information you should know before investing. Please
keep it for future reference. A Statement of Additional Information about
Masters Series, dated July 25, 1995, as supplemented November 24, 1995 has been
filed with the Securities and Exchange Commission and is incorporated by
reference into this Prospectus (that is, it is legally considered a part of this
Prospectus). The Statement of Additional Information is available free upon
request by calling Pilgrim America Group, Inc. (Shareholder Servicing Agent) at
(800) 331-1080.
Investment in the Funds involves investment risk, including the risk of loss of
principal. (See "Investment Practices and Risk Considerations," including "Use
of Derivatives.") The Funds' shares are not obligations, deposits or accounts of
a bank and are not guaranteed by a bank. In addition, the Funds' shares are not
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other agency.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this Prospectus is July 25, 1995.
As Supplemented November 24, 1995
<PAGE>
PILGRIM AMERICA MASTERS SERIES AT A GLANCE*
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Fund Objective and Policies Portfolio Manager Strategy
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Asia-Pacific Long-term capital appreciation. HSBC Asset Management A combination of macroeconomic
Equity Fund Invests in equity securities of Americas Inc. and HSBC Asset overview of region, specific
companies based in the Asia- Management Hong Kong country analysis, setting
Pacific region, which includes Limited--subsidiaries of HSBC target country weightings,
China, Hong Kong, Indonesia, Holdings plc, which was industry analysis and stock
Korea, Malaysia, Philippines, founded as the Hong Kong and selection.
Singapore, Taiwan and Thailand, Shanghai Banking Corporation Principal risk factors:
but does not include Japan or in 1865. exposure to financial and
Australia. Manages $31 billion. market risks that accompany
Normally fully invested. Clients include pension investment in equities, and
funds, institutional exposure to changes in
investors and high net worth currency exchange rates and
individuals throughout the other risks of foreign
world. investment. You can expect
Minimum investment fluctuation in the value of
for private accounts: the Fund's portfolio
$10 million. securities and the Fund's
shares.*
- ------------------------------------------------------------------------------------------------------------------------------------
MidCap Long-term capital appreciation. CRM Advisors, LLC--affiliate A "value" manager that seeks
Value Fund Invests in equity securities of of Cramer Rosenthal McGlynn, to identify middle
companies believed to be Inc., which was established capitalization companies
undervalued that have a market in 1973. having one or more of the
capitalization of between $200 Manages $1.6 billion. following characteristics:
million and $5 billion. Clients include high net they are undergoing
Normally fully invested. worth individuals, fundamental change; are
foundations, endowment undervalued; and are
funds, pension plans and misunderstood by the
others. investment community.
Minimum investment Investment prospects are
for private accounts: viewed on a long-term basis
$5 million. and not on market timing.
Principal risk factors:
exposure to financial and
market risks that accompany
investment in equities. You
can expect fluctuation in the
value of the Fund's portfolio
securities and the Fund's
shares.*
- ------------------------------------------------------------------------------------------------------------------------------------
LargeCap Long-term capital appreciation. Ark Asset Management Co., A "value" manager that uses
Value Fund Invests in equity securities Inc., formerly the a combination of "top-down"
issued by companies believed to institutional investment macroeconomic analysis and
be undervalued that generally management division of "bottom-up" fundamental
have a market capitalization of Lehman Brothers (established analysis; establishes specific
at least $5 billion. 1929). upside price objectives and
Normally fully invested. Manages $19.2 billion. performs downside review to
Clients include pension help temper losses in
plans, endowment funds, declining markets.
private foundations, other Principal risk factors:
institutions and high net exposure to financial and
worth individuals. market risks that accompany
Minimum investment investment in equities. You
for private accounts: can expect fluctuation in the
$25 million. value of the Fund's portfolio
securities and the Fund's
shares.*
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* These summary descriptions should be read in conjunction with the more
complete descriptions of each Fund's investment objectives and policies and
the Portfolio Managers elsewhere in this Prospectus. For information
regarding the purchase and redemption of shares of each Fund, refer to the
"Shareholder Guide." For information regarding the risk factors of each
Fund, refer to "Investment Practices and Risk Considerations" below,
including "Use of Derivatives."
2
<PAGE>
SUMMARY OF EXPENSES
Shares of the Funds are available through independent financial professionals,
national and regional brokerage firms and other financial institutions
(Authorized Dealers). You may select from three separate classes of shares:
Class A, Class B and Class M.
Shareholder Transaction Expenses (All Funds)
<TABLE>
<CAPTION>
Class A Class B Class M
------- ------- -------
<S> <C> <C> <C>
Maximum initial sales charge imposed on
purchases (as a percentage of offering price) ............ 5.75% (a) None 3.5% (a)
Maximum contingent deferred sales charge
(CDSC) (at the lower of original purchase price
or the redemption proceeds) .............................. None (b) 5.00% (c) None
</TABLE>
The Funds have no redemption fees, exchange fees or sales charges on reinvested
dividends.
- ----------
(a) Reduced for purchases of $50,000 and over. See "Class A Shares: Initial
Sales Charge Alternative" and "Class M Shares: Lower Initial Sales Charge
Alternative."
(b) A CDSC of no more than 1.00% for shares redeemed in the first or second
year, depending on the amount of purchase, is assessed on redemptions of
Class A shares that were purchased without an initial sales charge as part
of an investment of $1 million or more. See "Class A Shares: Initial Sales
Charge Alternative."
(c) Imposed upon redemption within 6 years from purchase. Fee has scheduled
reductions after the first year. See "Class B Shares: Deferred Sales Charge
Alternative."
Annual Operating Expenses (As a Percentage of Average Net Assets)
<TABLE>
<CAPTION>
Other
Expenses
(After
Expense Total Fund
Asia-Pacific Management Distribution Reimburse- Operating
Equity Fund Fees (12b-1) Fees(1) ment)(2) Expenses
----------- -------- ----------------- ---------- ---------
<S> <C> <C> <C> <C>
Class A ................. 1.25% 0.25% 0.50% 2.00%
Class B ................. 1.25% 1.00% 0.50% 2.75%
Class M ................. 1.25% 0.75% 0.50% 2.50%
</TABLE>
<TABLE>
<CAPTION>
Other
Expenses
(After
MidCap Value Fund Expense Total Fund
and Management Distribution Reimburse- Operating
LargeCap Value Fund Fees (12b-1) Fees(1) ment)(2) Expenses
------------------- -------- ----------------- ---------- ---------
<S> <C> <C> <C> <C>
Class A ................. 1.00% 0.25% 0.50% 1.75%
Class B ................. 1.00% 1.00% 0.50% 2.50%
Class M ................. 1.00% 0.75% 0.50% 2.25%
</TABLE>
(1) As a result of distribution (Rule 12b-1) fees, a long-term investor may pay
more than the economic equivalent of the maximum sales charge allowed by
the Rules of the National Association of Securities Dealers, Inc. (NASD).
(2) Other expenses are based upon estimates through the end of Masters Series'
first (partial) fiscal year, net of Investment Manager reimbursement. For
the first year of each Fund's operations, the Investment Manager has
voluntarily agreed to limit expenses excluding distribution fees, interest,
taxes, brokerage and extraordinary expenses to 1.75%, 1.50% and 1.50% for
all classes of shares of the Asia-Pacific Equity Fund, MidCap Value Fund
and LargeCap Value Fund, respectively. This expense limitation will apply
to each Fund individually only until such Fund reaches $50 million in net
assets. It is estimated that total annualized fund operating expenses,
excluding interest, taxes, brokerage, and extraordinary expenses, through
the end of Masters Series' first (partial) fiscal year of operations, will
be approximately 2.43%, 3.18%, and 2.93% of the average net assets of the
Class A, Class B, and Class M shares, respectively, of Asia-Pacific Equity
3
<PAGE>
Fund and 2.21%, 2.96%, and 2.71% of the average net assets of the Class A,
Class B, and Class M shares, respectively, of MidCap Value Fund and
LargeCap Value Fund. Absent reimbursement, the other expenses for
Asia-Pacific Equity Fund, MidCap Value Fund, and LargeCap Value Fund would
be 0.93%, 0.96%, and 0.96%, respectively.
The purpose of the table is to assist you in understanding the various costs and
expenses that you will bear directly or indirectly as a shareholder in a Fund.
For more complete descriptions of the various costs and expenses, please refer
to appropriate sections of this Prospectus.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (i) 5%
annual return and (ii) redemption at the end of the period (unless otherwise
noted):
<TABLE>
<CAPTION>
Asia-Pacific MidCap LargeCap
Equity Fund Value Fund Value Fund
----------------- ------------------ -------------------
1 Year 3 Years 1 Year 3 Years 1 Year 3 Years
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Class A .................. $77 $117 $74 $109 $74 $109
Class B .................. 78 115 75 108 75 108
Class B (assuming
no redemption) ......... 28 85 25 78 25 78
Class M .................. 59 110 57 103 57 103
</TABLE>
Use of the assumed 5% return is required by the Securities and Exchange
Commission. The example is not an illustration of past or future investment
results. This example should not be considered a representation of past or
future expenses; actual expenses may be more or less than those shown.
THE MANAGERS
Masters Series: Access to Private Money Managers
Masters Series is intended to provide investors with access to some of the most
respected institutional investment advisers in the world. For portfolios similar
to the Funds, these firms usually require large investment minimums to open an
account, and their services for these types of portfolios are typically
available only to wealthy individuals and large institutional clients. Portfolio
Managers for the Masters Series have been selected primarily on the basis of
their successful application of a consistent, well-defined, long-term investment
approach over a period of several market cycles.
The Investment Manager
Pilgrim America Investments, Inc. (Investment Manager) serves as Investment
Manager to each Fund. The Investment Manager has screened the Portfolio
Managers, recommended them to Masters Series' Board of Directors and monitors
their performance. The Investment Manager is responsible for managing the
general day-to-day operations of the Masters Series. For more information, see
"Management of the Funds."
The Investment Manager and Pilgrim America Securities, Inc. (Distributor), the
Funds' principal underwriter, are indirect, wholly-owned subsidiaries of Express
America Holdings Corporation (Express America) (NASDAQ: EXAM). Through its
subsidiaries, Express America engages in the financial services business,
focusing primarily on providing investment advisory, administrative and
distribution services to open-end and closed-end investment companies. The
investment companies managed or administered by the Investment Manager are
collectively referred to as the Pilgrim America Group.
The Portfolio Managers
Asia-Pacific Equity Fund. HSBC Asset Management Americas Inc. and HSBC Asset
Management Hong Kong Limited (collectively, HSBC) serve jointly as Portfolio
Manager to the Asia-Pacific Equity Fund. The firms are part of HSBC Asset
Management, the global investment advisory and fund management business unit of
HSBC Holdings plc (founded as the Hong Kong and Shanghai Banking Corporation in
1865) which, with headquarters in London, is one of the world's largest banking
and financial organizations. HSBC Asset Management manages approximately $31
4
<PAGE>
billion of assets worldwide for a wide variety of institutional, retail and
private clients, with a minimum investment size for private accounts of $10
million for Asia-Pacific investors. HSBC Asset Management has advisory
operations in Hong Kong and Singapore, among other locations. Its parent company
has over a century of operations in local economies throughout the Asia-Pacific
region.
MidCap Value Fund. CRM Advisors, LLC (CRM), an affiliate of Cramer Rosenthal
McGlynn, Inc. (Cramer Rosenthal), serves as Portfolio Manager to the MidCap
Value Fund. CRM was organized as a New York limited liability company in June
1995. Although a newly-formed organization, the principal shareholders and
investment personnel of CRM have significant experience in money management
through its affiliate, Cramer Rosenthal. That firm was founded in 1973 to manage
portfolios for a select number of high net worth individuals and their related
foundations, endowment funds, pension plans and other entities, and manages
approximately $1.6 billion for more than 170 individual and institutional
clients, with a minimum investment size for private accounts of $5 million. The
three founding principals of Cramer Rosenthal have spent an average of 33 years
in the investment business. The firm has managed investments in small and middle
capitalization companies for 22 years. Accounts managed by Cramer Rosenthal own
in the aggregate approximately 10% of the outstanding voting securities of
Express America.
LargeCap Value Fund. Ark Asset Management Co., Inc. (Ark) serves as Portfolio
Manager to the LargeCap Value Fund. Located in New York, Ark's predecessor was
established in 1929 as the private money management division of Lehman Brothers.
In 1989, the division became an independent company when the employees purchased
the institutional money management business from Lehman Brothers. As of
September 30, 1995, Ark managed approximately $19.2 billion, including $8.8
billion in large capitalization value portfolios, for more than 200
institutional and individual clients, with a minimum investment size for private
accounts of $25 million.
5
<PAGE>
Investment Personnel. Investment personnel with HSBC, CRM and Ark who are
primarily responsible for portfolio management of the Funds are shown in the
chart below.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Years Experience
---------------------------------
Fund/Portfolio Investment Recent
Manager Individual/Title Education Experience Experience
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asia-Pacific Equity Stanley Vyner Honors Degree, Econ. 9 HSBC Group--9
Fund/HSBC CEO, HSBC University of Edinburgh
Americas Fellow of the Faculty of
Actuaries
Leo P. Grohowski Magna Cum Laude, Econ. 15 HSBC Americas--8
CIO, HSBC Americas Drew University
M.B.A., Finance
New York University
Stella S.M. Yiu B.A., Cambridge University 11 HSBC Hong Kong--6
Dir., HSBC Hong Kong
- ------------------------------------------------------------------------------------------------------------------------------------
MidCap Value Gerald B. Cramer B.S., Syracuse University 38 Cramer Rosenthal--22
Fund/CRM Chairman, Founder Attended Wharton Graduate
School
Edward J. Rosenthal B.A., Cornell University 32 Cramer Rosenthal--22
Vice Chairman, M.B.A., Columbia University
Founder
Ronald H. McGlynn B.A., Williams College 29 Cramer Rosenthal--22
Pres., CEO, Founder M.B.A., Columbia University
Jay B. Abramson B.S.E., Wharton School 10 Cramer Rosenthal--10
EVP J.D., University of
Pennsylvania Law School
- ------------------------------------------------------------------------------------------------------------------------------------
LargeCap C. Charles Hetzel B.S., University of Utah 30 Ark--30
Value Fund/Ark Vice Chairman M.B.A., Columbia Business
School
John E. Bailey B.A., University of 15 Ark--2
Managing Director Pennsylvania Loomis, Sayles--9
M.B.A., Harvard Business
School
Steven M. Steiner B.S., Penn State University 26 Ark--5
Managing Director M.B.A., Northwestern Equitable Life--9
Graduate School
Wm. G. Steuernagel B.S., M.B.A. 23 Ark--10
Managing Director Boston University
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
PAST PERFORMANCE OF THE PORTFOLIO MANAGERS
The tables and line graphs that follow present performance data for each of the
Portfolio Managers. Information presented is based on performance data provided
by each Portfolio Manager for accounts (Accounts) it manages that have
investment objectives, policies, styles and strategies substantially similar to
the ones that will be employed in the pertinent Masters Series Fund. The
information does not represent any Fund's performance, as each is newly
organized and has no performance record of its own. The Accounts are primarily
managed for tax-exempt investors, and are not subject to diversification and
other requirements that apply to mutual funds under applicable securities, tax
and other laws. As a result, portfolio management strategies used on the
Accounts and those used on the Funds may vary in some respects. The information
should not be considered a prediction of the future performance of any of the
Funds. The actual performance may be higher or lower than that shown.
The tables show the total returns for various periods ended September 30, 1995
of the Accounts managed by each Portfolio Manager. The line graphs depict the
cumulative value of an initial investment of $10,000 held for ten years or other
periods, as indicated, through September 30, 1995 as compared to a relevant
unmanaged market index. The performance shown below is adjusted to give effect
to the projected annual expenses for a Fund's Class A shares during its initial
fiscal period. The following information has not been adjusted to reflect
deduction of the initial sales charge payable on a Fund's Class A shares, nor
does it give effect to the higher expense levels or any CDSC of a Fund's Class B
or Class M shares. Performance would be lower if adjusted for these charges and
expenses.
7
<PAGE>
HSBC Asia-Pacific Advisory Accounts with Similar Policies
{Pursuant to Rule 304(a) of Regulation S-T, the following table replaces a line
graph showing growth of an initial investment of $10,000, with reinvestment (see
footnote 1), in both the HSBC Asia-Pacific Composite and the MSCI Far East ex
Japan (Free) Index.}
HSBC MSCI Far East
Asia-Pacific ex Japan
Composite (Free) Index
--------- ------------
1/1/88 ........... $10,000 $10,000
9/30/88 .......... 13,241 11,952
9/30/89 .......... 21,884 15,984
9/30/90 .......... 18,041 14,936
9/30/91 .......... 22,262 19,113
9/30/92 .......... 26,258 25,124
9/30/93 .......... 36,574 35,627
9/30/94 .......... 47,737 47,783
9/30/95 .......... 46,653 45,735
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Average Annualized Returns One Three Five Inception Date Ten
Ended 9/30/95: Year Years Years of Index (3) Years
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
HSBC Asia-Pacific Composite (2) -2.27% 21.12% 20.93% 21.99% 22.22%
- --------------------------------------------------------------------------------------------------
MSCI Far East ex Japan (Free) Index -4.29% 22.10% 25.08% 21.67% n/a (3)
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) The line graph shows the value of $10,000 invested on January 1, 1988 (the
first year of the MSCI Far East ex Japan (Free) Index), and held through
September 30, 1995, compared to the MSCI Far East ex Japan (Free) Index.
(2) Represents the composite returns of the accounts managed by HSBC with
substantially similar investment objectives, policies, styles, and
strategies as the Asia-Pacific Equity Fund, as adjusted for Total Fund
Operating Expenses for Class A shares, shown on page 3.
(3) The unmanaged MSCI Far East ex Japan (Free) Index was created in January,
1988, and thus is not available for a ten year comparison.
8
<PAGE>
CRM MidCap Value Advisory Accounts with Similar Policies
{Pursuant to Rule 304(a) of Regulation S-T, the following table replaces a line
graph showing growth of an initial investment of $10,000, with reinvestment (see
footnote 1), in both the CRM MidCap Value Composite and the Russell Midcap (tm)
Index.}
CRM
MidCap Value Russell Midcap
Composite (tm) Index
--------- ------------
9/30/85 .......... $10,000 $10,000
9/30/86 .......... 12,597 13,395
9/30/87 .......... 16,599 17,872
9/30/88 .......... 15,422 16,485
9/30/89 .......... 21,089 21,280
9/30/90 .......... 16,149 16,715
9/30/91 .......... 22,353 24,077
9/30/92 .......... 25,458 27,579
9/30/93 .......... 34,845 34,385
9/30/94 .......... 37,161 34,953
9/30/95 .......... 42,871 44,421
- --------------------------------------------------------------------------------
Average Annualized Returns One Three Five Ten
Ended 9/30/95: Year Years Years Years
- --------------------------------------------------------------------------------
CRM MidCap Value Composite (2) 15.37% 18.97% 21.56% 15.67%
- --------------------------------------------------------------------------------
Russell Midcap (tm) Index 27.09% 17.22% 21.59% 16.08%
- --------------------------------------------------------------------------------
(1) The line graph shows the value of $10,000 invested on September 30. 1985,
and held through September 30, 1995, compared to the unmanaged Russell
MidCap (tm) Index.
(2) Represents the composite returns of the accounts managed by CRM with
substantially similar investment objectives, policies, styles, and
strategies as the MidCap Value Fund, as adjusted for Total Fund Operating
Expenses for Class A shares, shown on page 3.
9
<PAGE>
Ark LargeCap Value Advisory Accounts with Similar Policies
{Pursuant to Rule 304(a) of Regulation S-T, the following table replaces a line
graph showing growth of an initial investment of $10,000, with reinvestment (see
footnote 1), in both the Ark LargeCap Value Composite and the Standard & Poor's
500 Index.}
Ark LargeCap
Value Standard & Poor's
Composite 500 Index
--------- -----------------
9/30/85 .......... $10,000 $10,000
9/30/86 .......... 13,169 13,144
9/30/87 .......... 18,683 18,837
9/30/88 .......... 17,141 16,473
9/30/89 .......... 21,416 21,866
9/30/90 .......... 19,428 19,814
9/30/91 .......... 24,998 26,014
9/30/92 .......... 27,371 28,879
9/30/93 .......... 32,297 32,636
9/30/94 .......... 35,025 33,830
9/30/95 .......... 44,458 43,906
- --------------------------------------------------------------------------------
Average Annualized Returns One Three Five Ten
Ended 9/30/95: Year Years Years Years
- --------------------------------------------------------------------------------
Ark LargeCap Value Composite (2) 26.93% 17.55% 18.01% 16.09%
- --------------------------------------------------------------------------------
Standard & Poor's 500 Index 29.78% 14.99% 17.25% 15.95%
- --------------------------------------------------------------------------------
(1) The line graph shows the value of $10,000 invested on September 30. 1985,
and held through September 30, 1995, compared to the unmanaged Standard &
Poor's 500 Index.
(2) Represents the composite returns of the accounts managed by ARK with
substantially similar investment objectives, policies, styles, and
strategies as the LargeCap Value Fund, as adjusted for Total Fund Operating
Expenses for Class A shares, shown on page 3.
10
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES
Pilgrim America Masters Asia-Pacific Equity Fund. This Fund's investment
objective is long-term capital appreciation. The Fund seeks to achieve this
objective through investment in equity securities listed on stock exchanges in
countries in the Asia-Pacific region or issued by companies based in this
region. Asia-Pacific countries in which the Fund invests include, but are not
limited to, China, Hong Kong, Indonesia, Korea, Malaysia, Philippines,
Singapore, Taiwan and Thailand, but do not include Japan and Australia. The
equity securities in which the Fund may invest include common stock, convertible
securities, preferred stock, warrants, American Depositary Receipts (ADRs),
European Depositary Receipts and other depositary receipts. The Fund will
normally be invested as fully as practicable (at least 80%) in equity securities
of Asia-Pacific issuers. The Fund may also invest in high-quality debt
securities, as described in "Investment Techniques--Temporary Defensive and
Other Short-Term Positions."
The Fund will be managed using the investment philosophy that the Portfolio
Manager, HSBC, employs in managing private Asia-Pacific portfolios. Investment
decisions are based upon a disciplined approach that takes into consideration
the following factors: (i)macroeconomic overview of the region; (ii) specific
country analysis; (iii) setting target country weightings; (iv) evaluation of
industry sectors within each country; and (v) selection of specific stocks.
Decisions on company selection include analysis of such fundamental factors as
absolute rates of change of earnings growth, earnings growth relative to the
market and industry, quality of earnings and stability of earnings growth,
quality of management and product line, interest rate sensitivity and liquidity
of the stock. HSBC seeks to take profits when the Portfolio Manager believes
that a market or stock has risen fairly or disproportionately to other
investment opportunities.
The criteria used by the Fund to determine whether an issuer is based in the
Asia-Pacific region are: (1) the country in which the issuer was organized; (2)
the country in which the principal securities market for that issuer is located;
(3) the country in which the issuer derives at least 50% of its revenues or
profits from goods produced or sold, investments made, or services performed; or
(4) the country in which the issuer has at least 50% of its assets situated.
Pilgrim America Masters MidCap Value Fund. This Fund's investment objective is
long-term capital appreciation. The Fund seeks to achieve this objective through
investment in equity securities issued by companies with middle market
capitalizations, i.e., market capitalizations between $200 million and $5
billion, although the Fund may also invest to a limited degree in companies that
have larger or smaller market capitalizations. The equity securities in which
the Fund may invest include common stock, convertible securities, preferred
stock and warrants. The Fund will normally be invested as fully as practicable
(at least 80%) in equity securities of companies with middle market
capitalizations. The Fund may also invest in high-quality debt securities, as
described in "Investment Techniques--Temporary Defensive and Other Short-Term
Positions."
The Fund is managed in accordance with the disciplined investment style that the
Portfolio Manager, CRM, and its affiliate employ in managing midcap value
portfolios. As a value adviser, CRM does not attempt to time market
fluctuations; rather it relies on stock selection to achieve investment results,
seeking out those stocks that are undervalued and, in some cases, neglected by
financial analysts. The Portfolio Manager's investment philosophy is to take
advantage of periodic inefficiencies that develop in the valuation of publicly
traded companies. Generally, its approach to finding such companies is to first
identify dynamic change that can be material to a company's operations. Dynamic
change means change within a company that is likely to have a material impact on
its operations. Examples include new senior management, new products or markets,
or any material divestitures, acquisitions, or mergers. The philosophy is that
this type of change often creates misunderstanding in the marketplace that can
result in a company's stock being undervalued relative to its future prospects
and peer group. The Portfolio Manager seeks to identify this change at an early
stage and conduct an evaluation of the company's business. In applying this
approach, the Portfolio Manager focuses on middle capitalization companies where
dynamic change can be material.
CRM seeks companies that it believes will look different in the future in terms
of their operations, finances, and/or management. Once change is identified, the
Portfolio Manager conducts an evaluation of a company that includes creating a
financial model based principally upon projected cash flow, as opposed to
reported earnings. The company's stock is evaluated in the context of what the
market is willing to pay for the shares of comparable companies and what a
11
<PAGE>
strategic buyer would pay for the whole company. CRM also evaluates the degree
of investor recognition of a company by monitoring the number of sell side
analysts who closely follow the company and the nature of the shareholder base.
Before deciding to purchase a stock CRM conducts a business analysis to
corroborate its observations and assumptions, including, in most instances,
discussions with management, customers and suppliers. Also an important
consideration is the extent to which management holds an ownership interest in a
company. In its overall assessment, CRM seeks stocks that have a favorable
risk/reward ratio over an 18 to 24 month holding period.
Pilgrim America Masters LargeCap Value Fund. This Fund's investment objective is
long-term capital appreciation. The Fund seeks to achieve this objective through
investing at least 80% of its assets in equity securities and at least 65% of
its assets in equity securities issued by companies with large market
capitalizations that the Portfolio Manager believes sell at reasonable prices
relative to their projected earnings. The Portfolio Manager's investment goal is
to participate in up markets while cushioning the portfolio during a downturn. A
company with a market capitalization (outstanding shares multiplied by price per
share) of over $5 billion is considered to have large market capitalization,
although the Fund may also invest to a limited degree in companies that have a
market capitalization between $1 billion and $5 billion. The equity securities
in which the Fund may invest include common stock, convertible securities,
preferred stock, ADRs, and warrants. The Fund will normally be invested as fully
as practicable (at least 80%) in equity securities and will normally invest at
least 65% of its assets in companies with large market capitalizations. The Fund
may also invest in high-quality debt securities, as described in "Investment
Techniques--Temporary Defensive and Other Short-Term Positions."
The Fund will be managed in accordance with the investment philosophy that the
Portfolio Manager, Ark, has employed for more than ten years in managing large
capitalization, value-oriented accounts. As a value adviser, Ark seeks large
capitalization issues that sell at attractive prices relative to their projected
earnings. Ark believes this approach will permit the Fund to participate in
rising markets and help temper losses in declining markets. In managing the
Fund, Ark seeks to outperform the S&P 500 Index over a full market cycle with
particular emphasis on minimizing losses during declining markets.
INVESTMENT PRACTICES AND RISK CONSIDERATIONS
The following pages contain information about certain types of securities in
which one or more of the Funds may invest and strategies the Funds may employ in
pursuit of their investment objective. See the Statement of Additional
Information for more detailed information on these investment techniques and
information on certain types of securities in which a Fund may invest, including
U.S. Government securities, convertible securities, ADRs, forward foreign
currency contracts, options and others.
Risk Considerations
The investment objective and policies of each Fund described above should be
carefully considered before investing. There is no assurance that any Fund will
achieve its investment objective. As with any security, an investment in a
Fund's shares involves certain risks, including loss of principal. Each Fund is
subject to varying degrees of financial, market and credit risks.
Foreign Investments. The Asia-Pacific Equity Fund will invest in securities of
foreign issuers based in the Asia-Pacific region. There are certain risks in
owning foreign securities, including those resulting from: (i) fluctuations in
currency exchange rates; (ii) devaluation of currencies; (iii) future political
or economic developments and the possible imposition of currency exchange
blockages or other foreign governmental laws or restrictions; (iv) reduced
availability of public information concerning issuers; (v) accounting, auditing
and financial reporting standards or other regulatory practices and requirements
that are not uniform when compared to those applicable to domestic companies;
(vi) settlement and clearance procedures in some countries that may not be
reliable and can result in delays in settlement; (vii) higher transactional and
custodial expenses than for domestic securities; and (viii) limitations on
foreign ownership of equity securities. Also, securities of many foreign
companies may be less liquid and the prices more volatile than those of domestic
companies. The Fund will not invest more than 15% of its net assets in illiquid
securities. With certain foreign countries, there is the possibility of
expropriation, nationalization, confiscatory and other taxation and limitations
on the use or removal of funds or other assets of the Funds, including the
withholding of taxes on dividends.
12
<PAGE>
Emerging Market Investments. Asia-Pacific Equity Fund may invest in emerging
market securities issued by companies based in emerging market countries in the
Asia-Pacific region. An emerging market country is generally considered to be a
country whose economy is less developed or mature than economies in other more
developed countries or whose markets are undergoing a process of relatively
basic development. "Emerging market countries" consist of all countries
determined by the World Bank or the United Nations to have developing or
emerging economies and markets. Because of less developed markets and economies
and, in some countries, less mature governments and governmental institutions,
the risks of investing in foreign securities can be intensified in the case of
investments in issuers domiciled or doing substantial business in emerging
market countries.
In addition to the risks generally of investing in emerging market securities,
there are particular risks associated with investing in developing Asia-Pacific
countries including: (i) certain markets, such as those of China, being in the
earliest stages of development; (ii) high concentration of market capitalization
and trading volume in a small number of issuers representing a limited number of
industries, as well as a high concentration of investors and financial
intermediaries; (iii) political and social uncertainties;(iv) over-dependence on
exports, especially with respect to primary commodities, making these economies
vulnerable to changes in commodity prices; (v) overburdened infrastructure and
obsolete financial systems; (vi) environmental problems; (vii) less well
developed legal systems than many other industrialized nations; and (viii) less
reliable custodial services and settlement practices.
MidCap Company Equity Securities. The MidCap Value Fund will invest
substantially all of its assets in the equity securities of middle
capitalization companies. Investment in middle capitalization companies may
involve greater risk than is customarily associated with securities of larger,
more established companies. These securities may be less marketable and subject
to more abrupt or erratic market movements than securities of larger companies.
Investment Techniques
Borrowing. A Fund may borrow from banks solely for temporary or emergency
purposes, but not in an amount exceeding 33 1/3% of its total assets. Borrowing
may exaggerate the effect on net asset value (NAV) of any increase or decrease
in the NAV of a Fund, and money borrowed will be subject to interest costs.
Foreign Currency Transactions. Substantially all of the assets of the
Asia-Pacific Equity Fund will be invested in securities denominated in foreign
currencies and a corresponding portion of the Fund's revenues will be received
in such currencies. Unfavorable changes in the relationship between the U.S.
dollar and the relevant foreign currencies, therefore, will adversely affect the
value of the Fund's shares. The Asia-Pacific Equity Fund ordinarily will not
engage in hedging transactions to guard against the risk of currency
fluctuation. However, the Fund reserves the right to do so, and, toward this
end, may enter into forward foreign currency contracts. This investment
technique is described in the Statement of Additional Information.
Use of Derivatives. Generally, derivatives can be characterized as financial
instruments whose performance is derived, at least in part, from the performance
of an underlying asset or assets. The Funds will not invest in derivatives that
are highly volatile in response to changes in interest rates. It is expected
that derivatives will not ordinarily be used for any of the Funds, but a Fund
may make occasional use of certain derivatives for hedging. For example, any of
the Funds may purchase put options, which give the Fund the right to sell a
security it holds at a specified price. A Fund would purchase an option to
attempt to preserve the value of securities that it holds, which it could do by
exercising the option if the price of the security falls below the "strike
price" for the option. The Funds will not engage in any other type of options
transactions.
Another use of derivatives that only may be employed by the Asia-Pacific Equity
Fund is to enter into forward currency contracts and foreign exchange futures
("futures") contracts, which provide for delivery of a certain amount of foreign
currency to the Fund on a specified date. The Fund would enter into a forward
currency or futures contract when it intends to purchase or sell a security
denominated in a foreign currency and it desires to "lock in" the U.S. dollar
price of the security. The Funds will not engage in any other type of forward
contracts or futures contracts. For additional information on options and
foreign currency contracts, see "Supplemental Discussion of Risks Associated
with the Funds' Use of Investment Policies and Investment Techniques--Options on
Securities" and "--Foreign Currency Exchange Transactions" in the Statement of
Additional Information.
13
<PAGE>
Temporary Defensive and Other Short-Term Positions. Each Fund's assets may be
invested in U.S. Government securities and in certain short-term, high-quality
debt instruments for the following purposes: (i) to meet anticipated day-to-day
operating expenses; (ii) pending the Portfolio Manager's ability to invest cash
inflows; (iii) to invest if Fund assets are insufficient for effective
investment in equities; (iv) to permit the Fund to meet redemption requests; and
(v) for temporary defensive purposes. The Funds will normally invest in
short-term debt instruments that do not have a maturity of greater than one
year. The short-term instruments in which a Fund may invest include: (i)
short-term obligations of the U.S. Government and its agencies,
instrumentalities, authorities or political subdivisions; (ii) other
high-quality short-term debt securities; (iii) commercial paper, including
master notes; (iv) bank obligations, including certificates of deposit, time
deposits and bankers' acceptances; (v) money market funds; and (vi) repurchase
agreements. The Asia-Pacific Equity Fund may also invest in short-term
obligations of foreign governments and their agencies, instrumentalities,
authorities, or political subdivisions.
All Funds: Diversification and Changes in Policies
Each Fund is diversified, so that with respect to 75% of the assets of each
Fund, it may not invest more than 5% of its assets (measured at market value at
the time of investment) in securities of any one issuer, except that this
restriction does not apply to U.S. Government securities.
The first sentence in the description of each Fund under "The Funds' Investment
Objectives and Policies," above, states the Fund's investment objectives. These
investment objectives are "fundamental." Fundamental policies may only be
changed with the approval of a majority of shareholders of the pertinent Fund.
Other investment policies of any of the Funds may be changed by the Board of
Directors. Each Fund is subject to investment restrictions that are described in
the Statement of Additional Information under "Investment Restrictions." Some of
those restrictions are designated as "fundamental." These fundamental
restrictions as well as the diversified status of each Fund require a vote of a
majority of the shareholders of the relevant Fund to be changed.
SHAREHOLDER GUIDE
Pilgrim America Purchase Options(TM)
You may select from three separate classes of shares: Class A, Class B and Class
M, each of which represents an identical interest in a Fund's investment
portfolio, but are offered with different sales charges and distribution fee
(Rule 12b-1) arrangements. These sales charges and fees are shown and contrasted
in the chart below.
<TABLE>
<CAPTION>
Annual
Maximum Sales Distribution Maximum Automatic Conversion
Class Charge on Purchases (a) CDSC Fees (d) Purchase to Class A
----- ----------------------- ---- ------------ -------- --------------------
<S> <C> <C> <C> <C> <C>
A 5.75% None (b) 0.25% Unlimited N/A
B None 5% (c) 1.00% $ 250,000 8 Years
M 3.50% None 0.75% $1,000,000 N/A
</TABLE>
- ----------
(a) Imposed upon purchase. Reduced for purchases of $50,000 or more.
(b) For investments of $1 million or more, a CDSC of no more than 1% is
assessed on redemptions made within one or two years from purchase,
depending on the amount of purchase. See "Class A Shares: Initial Sales
Charge Alternative."
(c) Imposed upon redemption within 6 years from purchase. Fee has scheduled
reductions after the first year. See "Class B Shares: Deferred Sales Charge
Alternative."
(d) Annual asset-based distribution charge.
When choosing between classes, investors should carefully consider the ongoing
annual expenses along with the initial sales charge or CDSC. The relative impact
of the initial sales charges and ongoing annual expenses will depend on the
length of time a share is held. Orders for Class B shares and Class M shares of
$250,000 and $1,000,000 or more, respectively, will be accepted as orders for
Class A shares or declined. You should discuss which Class of shares is right
for you with your Authorized Dealer.
Class A Shares: Initial Sales Charge Alternative. Class A shares of the Funds
are sold at the NAV per share in effect plus a sales charge as described in the
following table. For waivers or reductions of the Class A shares sales charges,
see "Special Purchases without a Sales Charge" and "Reduced Sales Charges."
14
<PAGE>
<TABLE>
<CAPTION>
Dealers'
Reallowance as
As a % of Offering As a % of a % of
Amount of Transaction Price Per Share NAV Offering Price
--------------------- ------------------ --------- --------------
<S> <C> <C> <C>
Less than $50,000 .......................... 5.75% 6.10% 5.00%
$50,000 but less than $100,000 ............. 4.50% 4.71% 3.75%
$100,000 but less than $250,000 ............ 3.50% 3.63% 2.75%
$250,000 but less than $500,000 ............ 2.50% 2.56% 2.00%
$500,000 but less than $1,000,000 .......... 2.00% 2.04% 1.75%
</TABLE>
There is no initial sales charge on purchases of $1,000,000 or more. However,
the Distributor will pay Authorized Dealers of record commissions at the rates
shown in the table below for purchase payments subject to a CDSC. If shares are
redeemed within one or two years of purchase, depending on the amount of the
purchase, a CDSC will be imposed on certain redemptions as follows:
<TABLE>
<CAPTION>
Dealer Period During
On Purchases of: CDSC Allowance Which CDSC Applies
---------------- ---- --------- ------------------
<S> <C> <C> <C>
$1,000,000 but less than $2,500,000 ................. 1.00% 1.00% 2 Years
$2,500,000 but less than $5,000,000 ................. 0.50% 0.50% 1 Year
$5,000,000 and over ................................. 0.25% 0.25% 1 Year
</TABLE>
Class B Shares: Deferred Sales Charge Alternative. If you choose the deferred
sales charge alternative, you will purchase Class B shares at their NAV per
share without the imposition of a sales charge at the time of purchase. Class B
shares that are redeemed within six years of purchase, however, will be subject
to a CDSC as described in the table that follows. Class B shares of each Fund
are subject to a distribution fee at an annual rate of 1.00% of the average
daily net assets of the Class, which is higher than the distribution fees of
Class A or Class M shares. The higher distribution fees mean a higher expense
ratio, so Class B shares pay correspondingly lower dividends and may have a
lower NAV than Class A or Class M shares. In connection with sales of Class B
shares, the Distributor compensates Authorized Dealers at a rate of 4% of
purchase payments subject to a CDSC. Orders for Class B shares in excess of
$250,000 will be accepted for Class A shares or declined.
The amount of the CDSC charge is determined as a percentage of the lesser of the
NAV of the Class B shares at the time of purchase or redemption. No charge will
be imposed for any net increase in the value of shares purchased during the
preceding six years in excess of the purchase price of such shares or for shares
acquired either by reinvestment of net investment income dividends or capital
gain distributions. The percentage used to calculate the CDSC will depend on the
number of years since you invested the dollar amount being redeemed according to
the following table:
Year of
Redemption
After Purchase CDSC
-------------- ----
First ............................................ 5%
Second ........................................... 4%
Third ............................................ 3%
Fourth ........................................... 3%
Fifth ............................................ 2%
Sixth ............................................ 1%
Seventh and following ............................ 0%
To determine the CDSC payable on a redemption of Class B shares, a Fund will
first redeem shares in an account that are not subject to a CDSC; second, shares
acquired through reinvestment of net investment income dividends and capital
gain distributions; third, shares purchased more than 6 years prior to
redemption; and fourth, shares subject to a CDSC in the order in which such
shares were purchased. Using this method, your sales charge, if any, will be at
the lowest possible CDSC rate.
Class B shares will automatically convert into Class A shares approximately
eight years after purchase. For additional information on the CDSC and the
conversion of Class B shares, see the Statement of Additional Information.
15
<PAGE>
Class M Shares: Lower Initial Sales Charge Alternative. An investor who
purchases Class M shares pays a sales charge at the time of purchase that is
lower than the sales charge applicable to Class A shares and does not pay any
CDSC upon redemption. Class M shares have a higher annual distribution fee than
Class A shares, but lower than Class B. The higher distribution fees mean a
higher expense ratio than Class A but lower than Class B. Class M shares pay
correspondingly lower dividends and may have a lower NAV per share than Class A
shares, but generally pay higher dividends and have a higher NAV per share than
Class B shares. Orders for Class M shares in excess of $1,000,000 will be
accepted as an order for Class A shares or declined. The public offering price
of Class M shares is the NAV of the Fund plus a sales charge, which, as set
forth below, varies based on the size of the purchase:
<TABLE>
<CAPTION>
Dealers'
Reallowance as
As a % of Offering As a % of a % of
Amount of Transaction Price Per Share NAV Offering Price
--------------------- ------------------ --------- --------------
<S> <C> <C> <C>
Less than $50,000 .......................... 3.50% 3.63% 3.00%
$50,000 but less than $100,000 ............. 2.50% 2.56% 2.00%
$100,000 but less than $250,000 ............ 1.50% 1.52% 1.00%
$250,000 but less than $500,000 ............ 1.00% 1.01% 1.00%
$500,000 and over .......................... None None None
</TABLE>
Class M shares do not convert to Class A.
Reduced Sales Charges. An investor may immediately qualify for a reduced sales
charge on a purchase of Class A or Class M shares for any of the Funds or for
other funds in the Pilgrim America Group which offer Class A shares, Class M
shares or shares with front-end sales charges ("Participating Funds") by
completing the Letter of Intent section of the New Account Application.
Executing the Letter of Intent expresses an intention to invest during the next
13 months a specified amount, which, if made at one time, would qualify for a
reduced sales charge. An amount equal to the Letter amount multiplied by the
maximum sales charge imposed on purchases of the applicable fund and class will
be restricted within your account to cover additional sales charges that may be
due if your actual total investment fails to qualify for the reduced sales
charges. See the New Account Application or the Statement of Additional
Information for details on the Letter of Intent option or contact the
Shareholder Servicing Agent at (800) 331-1080 for more information.
The sales charge for your investment may also be reduced by taking into account
the current value of your existing holdings in the Fund or any other funds in
the Pilgrim America Group (excluding Pilgrim America Money Market shares). The
reduced sales charges apply to quantity purchases made at one time or on a
cumulative basis over any period of time by: (i) an investor; (ii) the
investor's spouse and children under the age of majority; (iii) the investor's
custodian account(s) for the benefit of a child under the Uniform Gifts to
Minors Act; (iv) a trustee or other fiduciary of a single trust estate or a
single fiduciary account (including a pension, profit-sharing and other employee
benefit plans qualified under Section 401 of the Internal Revenue Code); and (v)
trust companies, registered investment advisers, banks and bank trust
departments for accounts over which they exercise exclusive discretionary
investment authority and which are held in a fiduciary, agency, advisory,
custodial or similar capacity. See the New Account Application for details or
contact the Shareholder Servicing Agent at (800) 331-1080 for more information.
For purposes of Rights of Accumulation and the Letter of Intent Privilege,
shares held by investors in the Pilgrim America Group of Funds which impose
CDSC's may be combined with Class A or Class M shares for a reduced sales charge
but will not affect any CDSC which may be imposed upon the redemption of shares
of a fund which imposes a CDSC.
Waivers of CDSCs. The CDSC on Class A or Class B shares will be waived in the
case of a redemption following the death or permanent disability of a
shareholder if made within one year of death or initial determination of
permanent disability. The waiver is available for total or partial redemptions
of shares of a Fund owned by an individual or an individual in joint tenancy
(with rights of survivorship), but only for those shares held at the time of
death or initial determination of permanent disability.
The CDSC also will be waived in the case of a total or partial redemption of
shares of a Fund in connection with any mandatory distribution from a
tax-deferred retirement plan or an IRA. The shareholder must have attained the
16
<PAGE>
age of 70 1/2 to qualify for the CDSC waiver relating to mandatory
distributions. The waiver does not apply in the case of a tax-free rollover or
transfer of assets, other than one following a separation from service. The
shareholder must notify the Transfer Agent either directly or through the
Distributor, at the time of redemption, that the shareholder is entitled to a
waiver of the CDSC. The CDSC Waiver Form included in the New Account Application
must be completed and provided to the Transfer Agent at the time of the
redemption request. The waiver will be granted subject to confirmation of the
grounds for the waiver. The foregoing waivers may be changed at any time.
Reinstatement Privilege. Class B shareholders who have redeemed their shares in
any Pilgrim America Group mutual fund within the previous 30 days may repurchase
Class B shares at NAV (at the time of reinstatement) in an amount up to the
redemption proceeds. Reinstated Class B shares will retain their original cost
and purchase date for purposes of the CDSC. The amount of any CDSC also will be
reinstated.
To exercise this privilege, a written order for the purchase of shares must be
received by the Transfer Agent or be postmarked within 30 days after the date of
redemption. This privilege can be used only once per calendar year. If a loss is
incurred on the redemption and the reinstatement privilege is used, some or all
of the loss may not be allowed as a tax deduction. See "Tax Considerations" in
the Statement of Additional Information.
Special Purchases without a Sales Charge. The Class A or Class M shares may be
purchased at NAV without a sales charge by:
1) Class A or Class M shareholders who have redeemed their shares in any
Pilgrim America Group mutual fund within the previous 90 days may
repurchase shares at NAV in an amount equal to their net redemption
proceeds. Authorized Dealers who handle these purchases may charge
fees for this service.
2) Any person who can document that Fund shares were purchased with
proceeds from the redemption (within the previous 90 days) of shares
from any unrelated mutual fund on which a sales charge was paid or
which were subject at any time to a CDSC.
3) Any charitable organization or governmental entity that has determined
that the Fund is a legally permissible investment and which is
prohibited by applicable law from paying a sales charge or commission
in connection with the purchase of shares of any mutual fund.
4) Officers, directors and full-time employees of Express America and its
subsidiaries.
5) Certain fee based registered investment advisers under certain
circumstances making investments on behalf of their clients.
6) Shareholders who have authorized the automatic transfer of dividends
from the same class of another Participating Fund or from Pilgrim
Prime Rate Trust.
7) Registered investment advisors, trust companies and bank trust
departments investing in Class A shares on their own behalf or on
behalf of their clients, provided that the aggregate amount invested
in the Fund alone or in any combination of shares of the Fund and
Class A shares of certain other Participating Funds as described
herein under "Pilgrim America Purchase Options--Reduced Sales
Charges", during the 13 month period commencing with the first
investment pursuant hereto equals at least $1 million. The Distributor
may pay Authorized Dealers through which purchases are made an amount
up to 0.50% of the amount invested, over a twelve month period
following the transaction.
Masters Series may terminate or amend the terms of offering shares of the Funds
at NAV to these investors at any time. For additional information, contact the
Shareholder Servicing Agent at (800) 331-1080 , or see the Statement of
Additional Information.
Incentives. The Distributor, at its expense, will provide additional promotional
incentives to Authorized Dealers in connection with sales of shares of the Funds
and other mutual funds in the Pilgrim America Group. In some instances,
additional compensation or promotional incentives will be offered to Authorized
Dealers that have sold or may sell significant amounts of shares during
specified periods of time. Such compensation and incentives may include, but are
not limited to, cash, merchandise, trips and financial assistance in connection
with pre-approved conferences or seminars, sales or training programs for
invited sales personnel, payment for travel expenses (including meals and
17
<PAGE>
lodging) incurred by sales personnel and members of their families, or other
invited guests, to various locations for such seminars or training programs,
seminars for the public, advertising and sales campaigns regarding one or more
of the Funds or other mutual funds in the Pilgrim America Group and/or other
events sponsored by Authorized Dealers.
Rule 12b-1 Plan. Masters Series has a distribution plan pursuant to Rule 12b-1
under the 1940 Act applicable to each class of shares of the Fund (Rule 12b-1
Plan). Under the Rule 12b-1 Plan, the Distributor may receive from each Fund an
annual fee in connection with the offering, sale and shareholder servicing of
Class A, Class B and Class M shares at an annual rate of up to .35%, 1.00%, and
1.00%, respectively, of the average daily NAV of each of the Funds. Currently,
the Board of Directors has approved annual fees of .25%, 1.00%, and .75%,
respectively, which are accrued daily and paid monthly. Of these amounts, fees
equal to an annual rate of .25% of the average daily NAV of each of the Funds is
for shareholder servicing for each of the classes. Fees paid under the Rule
12b-1 Plan may be used to cover the expenses of the Distributor from the sale of
Class A, Class B or Class M shares of the Funds, including payments to
Authorized Dealers, and for shareholder servicing. These fees may be used to pay
the costs of the following: payments to Authorized Dealers; promotional
activities; preparation and distribution of advertising materials and sales
literature; expenses of organizing and conducting sales seminars; personnel
costs and overhead of the Distributor; printing of prospectuses and statements
of additional information (and supplements thereto) and reports for other than
existing shareholders; supplemental payments to Authorized Dealers that provide
shareholder services; interest on accrued distribution expenses; and costs of
administering the Rule 12b-1 Plan. No more than .75% per annum of a Fund's
average net assets may be used to finance distribution expenses, exclusive of
shareholder servicing payments, and no Authorized Dealer may receive shareholder
servicing payments in excess of .25% per annum of a Fund's average net assets
held by the Authorized Dealer's clients or customers. The Distributor will
receive payment under the Rule 12b-1 Plans without regard to actual distribution
expenses that it incurs. Fees paid by one of the Funds under the Rule 12b-1 Plan
may be used to finance distribution of the shares of that Fund and the servicing
of shareholders of that Fund as well as the other Funds of Masters Series.
Under the Rule 12b-1 Plans, ongoing payments will be made on a quarterly basis
to Authorized Dealers for both distribution and shareholder servicing at the
annual rate of .25%, .25%, and .65% of a Fund's average daily NAV of Class A,
Class B, and Class M shares, respectively, that are registered in the name of
that Authorized Dealer as nominee or held in a shareholder account that
designates that Authorized Dealer as the dealer of record. Rights to these
ongoing payments begin to accrue in the 13th month following a purchase of Class
A or B shares and in the 1st month following purchase of Class M shares.
Other Expenses. In addition to the management fee and other fees described
previously, each Fund pays other expenses, such as legal, audit, transfer agency
and custodian out-of-pocket fees, proxy solicitation costs, and the compensation
of Directors who are not affiliated with the Investment Manager. Most Fund
expenses are allocated proportionately among each of the classes of each Fund.
However, the Rule 12b-1 Plans' fees for each class of shares are charged
proportionately only to the outstanding shares of that class.
Purchasing Shares
Your Authorized Dealer can help you establish and maintain your account, and the
Shareholder Servicing Agent is available to assist you with any questions you
may have.
18
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Method Initial Investment Additional Investment
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
The minimum initial investment in a Fund is The minimum for additional investment in
$1,000 ($250 for IRAs). a Fund is $100.
------------------------------------------------------------------------------------------------------------
By contacting your Visit or consult an Authorized Dealer. Visit or consult your Authorized Dealer.
Authorized Dealer
- ------------------------------------------------------------------------------------------------------------------------------------
By mail Make your check payable to the Fund and mail it, Fill out the account additions form
along with a completed New Account Application, included on the bottom of your account
to the address indicated on the New Account statement along with your check payable
Application. Please indicate an Authorized to the Fund and mail them in the envelope
Dealer on the application. provided with the account statement.
Remember to write your account number on
the check.
- ------------------------------------------------------------------------------------------------------------------------------------
By wire Call the Pilgrim America Order Department at Call the Pilgrim America Order Department
(800) 336-3436 to obtain an account number and at (800) 336-3436 to obtain a wire
indicate an Authorized Dealer on the account. reference number. Give that number to
Instruct your bank to wire funds to the Fund in your bank and have them wire the funds in
care of: the same manner described under "Initial
Investors Fiduciary Trust Co. Investment."
ABA #101003621 Kansas City, MO credit to:
Pilgrim America Masters Series, Inc.
------------------------------------
(Name of Fund)
A/C #752-4854; for further credit to:
Shareholder A/C #______________________
(A/C # you received over the telephone)
Shareholder Name:
--------------------------------------
(Your Name Here)
After wiring funds you must complete the
New Account Application and send it to:
Pilgrim America Order Dept.
P.O. Box 419368
Kansas City, MO 64141-6368
- ------------------------------------------------------------------------------------------------------------------------------------
The Fund and the Distributor reserve the right to reject any purchase order.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
Price of Shares. Purchase, sale and exchange orders are effected at NAV for
the respective class of shares of the Fund, determined after the order is
received by the Transfer Agent or Distributor, plus any applicable sales
charge (Public Offering Price).
Purchases of each class of a Fund's shares are effected at the Fund's Public
Offering Price determined after a purchase order has been received in proper
form. A purchase order will be deemed to be in proper form when all of the
required steps have been completed. In the case of an investment by wire,
however, the order will be deemed to be in proper form after the telephone
notification and the federal funds wire have been received. A shareholder who
purchases by wire must submit an application form in a timely fashion. If an
order or payment by wire is received after the close of the New York Stock
Exchange, 4:00 p.m. Eastern Time (1:00 p.m., Pacific Time), the shares will not
be credited until the next Business Day.
You will receive a confirmation of each new transaction in your account, which
also will show you the number of Fund shares you own including the number of
shares being held in safekeeping by the Transfer Agent for your account. You
may rely on these confirmations in lieu of certificates as evidence of your
ownership. Certificates representing shares of the Fund will not be issued
unless you request them in writing.
Determination of Net Asset Value. The NAV of each class of each Fund's shares
will be determined daily as of the close of trading on the New York Stock
Exchange (usually at 4:00 p.m. New York City time) on each day that it is open
for business. Each class' NAV represents that class' pro rata share of the
Fund's net assets as adjusted for any class specific expenses (such as fees
under a Rule 12b-1 plan), and divided by that class' outstanding shares. In
general, the value of each Fund's assets is based on actual or estimated
market value, with special provisions for assets not having readily available
market quotations and short-term debt securities. The net asset values per
share of each class of each Fund will fluctuate in response to changes in
market conditions and other factors. Portfolio securities for which market
quotations are readily available are stated at market value. Short-term debt
securities having a maturity of 60 days or less are valued at amortized cost,
unless the amortized cost does not approximate market value. Securities prices
may be obtained from automated pricing services. In other cases, securities
are valued at their fair value as determined in good faith by the Board of
Directors of Masters Series, although the actual calculations will be made by
persons acting under the supervision of the Board.
The value of the foreign securities traded on exchanges outside the United
States is based upon the price on the exchange as of the close of business of
the exchange preceding the time of valuation (or, if earlier, at the time of a
Fund's valuation). Quotations of foreign securities in foreign currency are
converted to U.S. dollar equivalents using the foreign exchange quotation in
effect at the time NAV is computed. The calculation of NAV of Masters Series
may not take place contemporaneously with the determination of the prices of
certain portfolio securities of foreign issuers used in such calculation.
Further, the prices of foreign securities are determined using information
derived from pricing services and other sources. Information that becomes
known to Masters Series or its agents after the time that NAV is calculated on
any business day may be assessed in determining NAV per share after the time
of receipt of the information, but will not be used to retroactively adjust
the price of the security so determined earlier or on a prior day. Events
affecting the values of portfolio securities that occur between the time their
prices are determined and the time when a Fund's NAV is determined may not be
reflected in the calculation of NAV. If events materially affecting the value
of such securities occur during such period, then these securities may be
valued at fair value as determined by the management and approved in good
faith by the Board of Directors.
Pre-Authorized Investment Plan. You may establish a pre-authorized investment
plan to purchase shares with automatic bank account debiting. For further
information on pre-authorized investment plans, see the New Account
Application or contact the Shareholder Servicing Agent at (800) 331-1080.
Retirement Plans. Masters Series has available prototype qualified retirement
plans for both corporations and for self-employed individuals. It also has
available prototype IRA plans (for both individuals and employers), Simplified
Employee Pension Plans, Pension and Profit Sharing Plans and Tax Sheltered
Retirement Plans for employees of public educational institutions and certain
non-profit, tax-exempt organizations. Investors Fiduciary Trust Company acts
as the custodian under these plans. For further information, contact the
Shareholder Servicing Agent at (800) 331-1080.
20
<PAGE>
Telephone Orders. Masters Series and its Transfer Agent will not be
responsible for the authenticity of phone instructions or losses, if any,
resulting from unauthorized shareholder transactions if they reasonably
believe that such instructions were genuine. Masters Series and its Transfer
Agent have established reasonable procedures to confirm that instructions
communicated by telephone are genuine. These procedures include: (i) recording
telephone instructions for exchanges and expedited redemptions; (ii) requiring
the caller to give certain specific identifying information; and (iii)
providing written confirmation to shareholders of record not later than five
days following any such telephone transactions. If Masters Series and its
Transfer Agent do not employ these procedures, they may be liable for any
losses due to unauthorized or fraudulent telephone instructions.
Exchange Privileges and Restrictions
An exchange privilege is available. Exchange requests may be made in writing
to the Transfer Agent or by calling the Transfer Agent at (800) 992-0180.
Masters Series in its sole discretion may terminate or modify the exchange
privileges and begin imposing a charge of up to $5.00 for each exchange.
Shares of one class of a Fund may be exchanged for shares of that same class
of any other Pilgrim America Group mutual fund other than Pilgrim America
Money Market Shares ("Money Market"), at NAV without payment of any additional
sales charge. If you exchange and subsequently redeem your shares, any
applicable CDSC fee will be based on the full period of the share ownership.
Shares of a Fund that are not subject to a CDSC may be exchanged for shares of
Money Market, and shares of Money Market acquired in the exchange may
subsequently be exchanged for shares of a mutual fund in the Pilgrim America
Group of the same class as the original shares acquired. Shares of a Fund that
are subject to a CDSC may be redeemed to purchase shares of Money Market upon
payment of the CDSC. Shareholders exercising the exchange privilege with any
of Pilgrim America Group's other funds should carefully review the prospectus
of that fund. Exchanges of shares are sales and may result in a gain or loss
for federal and state income tax purposes. You will automatically be assigned
the telephone exchange privilege unless you mark the box on the New Account
Application that signifies that you do not wish to have this privilege. The
exchange privilege is only available in states where shares of the Fund being
offered may be legally sold. The exchange privilege may be modified or
terminated at any time, upon 60 days' written notice to shareholders.
21
<PAGE>
How to Redeem Shares
Shares of the Fund will be redeemed at the NAV (less any applicable CDSC,
and/or any Federal income tax withholding) next determined after receipt of a
redemption request in good form on any day the New York Stock Exchange is open
for business.
- --------------------------------------------------------------------------------
Method Procedures
- --------------------------------------------------------------------------------
Redemption By Contacting Your Authorized Dealers may communicate redemption
Authorized Dealer orders by wire or telephone to the Distributor.
These firms may charge for their services in
connection with your redemption request but
neither the Fund nor the Distributor imposes any
such charge.
- --------------------------------------------------------------------------------
Redemption By Mail A written request for redemption must be
received by the Transfer Agent in order to
constitute a valid tender. If certificated
shares have been issued, the certificate must
accompany the written request. The Transfer
Agent may also require a signature guarantee by
an eligible guarantor. It will also be necessary
for corporate investors and other associations
to have an appropriate certification on file
authorizing redemptions by a corporation or an
association before a redemption request will be
considered in proper form. A suggested form of
such certification is provided on the New
Account Application. If you are entitled to a
CDSC waiver, you must complete the CDSC waiver
form in the New Account Application. To
determine whether a signature guarantee or other
documentation is required, shareholders may call
the Shareholder Servicing Agent at
(800) 331-1080.
- --------------------------------------------------------------------------------
Expedited Redemption The Expedited Redemption privilege allows you to
effect a liquidation from your account via a
telephone call and have the proceeds (maximum
$50,000) mailed to your address of record. This
privilege is automatically assigned to you
unless you check the box on the New Account
Application which signifies that you do not wish
to utilize such option. The Expedited Redemption
Privilege additionally allows you to effect a
liquidation from your account and have the
proceeds (minimum $5,000) wired to your
pre-designated bank account. But, this aspect of
the Expedited Redemption Privilege will NOT
automatically be assigned to you. If you want to
take advantage of this aspect of the privilege,
please check the appropriate box and attach a
voided check to the New Account Application.
Under normal circumstances, proceeds will be
transmitted to your bank on the second business
day following receipt of your instructions,
provided redemptions may be made. To effect an
Expedited Redemption, please call the Transfer
Agent at (800) 992-0180. In the event that share
certificates have been issued, you may not
request a wire redemption by telephone or wire.
- --------------------------------------------------------------------------------
Systematic Withdrawal Plan. You may elect to have monthly, quarterly or annual
payments in any fixed amount in excess of $100 made to yourself, or to anyone
else you properly designate, as long as the account has a current value of at
least $10,000. During the withdrawal period, you may purchase additional
shares for deposit to your account if the additional purchases are equal to at
least one year's scheduled withdrawals, or $1,200, whichever is greater. There
22
<PAGE>
are no separate charges to you under this Plan, although a CDSC may apply if
you purchased Class A or B shares.
The number of full and fractional shares equal in value to the amount of the
payment will be redeemed at NAV (less any applicable CDSC). Such redemptions
are normally processed on the fifth day prior to the end of the month, quarter
or year. Checks are then mailed or proceeds are forwarded to your bank account
on or about the first of the following month. Shareholders who elect to have a
systematic cash withdrawal must have all dividends and capital gains
reinvested. To establish a systematic cash withdrawal, please complete the
Systematic Withdrawal Plan section of the New Account Application. To have
funds deposited to your bank account, follow the instructions on the New
Account Application.
You may change the amount, frequency and payee, or terminate this plan by
giving written notice to the Transfer Agent. As shares of the Fund are
redeemed under the Plan, you may realize a capital gain or loss for income tax
purposes. A Systematic Withdrawal Plan may be terminated or modified at any
time upon written notice by you or the Fund.
Payments. Payment to shareholders for shares redeemed or repurchased
ordinarily will be made within seven days after receipt by the Transfer Agent
of a written request in good order. A Fund may delay the mailing of a
redemption check until the check used to purchase the shares being redeemed
has cleared which may take up to 15 days or more. To reduce such delay, all
purchases should be made by bank wire of federal funds. A Fund may suspend the
right of redemption under certain extraordinary circumstances in accordance
with the Rules of the Securities and Exchange Commission. Due to the
relatively high cost of handling small investments, Masters Series reserves
the right upon 30 days' written notice to redeem, at NAV, the shares of any
shareholder whose account (except for IRAs) has a value of less than $1,000,
other than as a result of a decline in the NAV per share. Each Fund intends to
pay in cash for all shares redeemed, but under abnormal conditions that make
payment in cash unwise, a Fund may make payment wholly or partly in securities
at their then current market value equal to the redemption price. In such
case, a Fund could elect to make payment in securities for redemptions in
excess of $250,000 or 1% of its net assets during any 90-day period for any
one shareholder. An investor may incur brokerage costs in converting such
securities to cash.
MANAGEMENT OF THE FUNDS
Management of Masters Series. Masters Series is a registered investment
company that was organized as a Maryland corporation in April, 1995. It is
governed by a Board of Directors, which oversees the operations of the Funds.
The majority of Directors are not affiliated with the Investment Manager or
any Portfolio Manager.
Investment Manager. The Investment Manager has overall responsibility for the
management of the Funds. Masters Series and the Investment Manager have
entered into an agreement that requires the Investment Manager to provide or
oversee all investment advisory and portfolio management services for the
Funds. It also requires the Investment Manager to assist in managing and
supervising all aspects of the general day-to-day business activities and
operations of Masters Series, including custodial, transfer agency, dividend
disbursing, accounting, auditing, compliance and related services. Organized
in December 1994, the Investment Manager is registered as an investment
adviser with the Securities and Exchange Commission.
The Investment Manager also monitors the Portfolio Managers' investment
programs and results and coordinates the activities of the various service
providers to the Funds and oversees compliance with regulatory requirements.
In addition, the Investment Manager provides the Masters Series with the
office space, equipment and personnel necessary to administer the Funds. The
Portfolio Managers, subject to the supervision of the Board of Directors and
the Investment Manager, are responsible for determining the investment program
for the Funds, including the portfolio securities to purchase and sell for the
Funds, and for placing the Funds' portfolio transactions. The agreement with
the Investment Manager can be canceled by the Board of Directors of Masters
Series upon 60 days' written notice.
The Investment Manager bears its expenses of providing the services described
above and pays the fees of each Fund's Portfolio Manager. The Funds pay the
Investment Manager a fee at an annual rate of 1.00% of the Fund's average
daily net assets for the MidCap Value Fund and the LargeCap Value Fund, and
1.25% of the Fund's average daily net assets for the Asia-Pacific Fund. These
23
<PAGE>
fees are computed and accrued daily andpaid monthly.
The Portfolio Managers. Each Portfolio Manager serves the pertinent Fund under
an agreement with the Investment Manager. Each Portfolio Manager has
discretion to purchase and sell securities for the portfolio of its respective
Fund in accordance with that Fund's objectives, policies and restrictions.
Although the Portfolio Managers are subject to the general supervision by the
Board of Directors and the Investment Manager, the Board and/or the Investment
Manager do not evaluate the investment merits of specific securities
transactions. The agreement with each Portfolio Manager may be terminated by
the Board of Directors of Masters Series, by the Investment Manager or by the
Portfolio Manager. Thus, it is possible that in the future, one or more of the
current Portfolio Managers would no longer be engaged for a Fund. It is not
anticipated that Portfolio Managers will be replaced in the ordinary course of
operations.
As compensation for their services to the Funds, the Investment Manager (and
not the Fund) pays HSBC, CRM, and Ark fees at annual rates of .50% of the
average daily net assets of the Asia-Pacific Equity, MidCap Value and LargeCap
Value Funds, respectively.
Distributor. In addition to providing for the expenses discussed above, each
Rule 12b-1 Plan also recognizes that the Investment Manager may use its
investment management fees or other resources to pay expenses associated with
activities primarily intended to result in the promotion and distribution of
the Fund's shares. The Distributor may, from time to time, pay to Authorized
Dealers in connection with the sale or distribution of shares of a Fund
material compensation in the form of merchandise or trips. Salespersons and
any other person entitled to receive any compensation for selling or servicing
Fund shares may receive different compensation with respect to one particular
class of shares over another in a Fund.
Portfolio Transactions. Each Portfolio Manager will place its own orders to
execute the securities transactions that are designed to implement the
applicable investment objectives and policies. The Portfolio Manager will use
its reasonable efforts to place all purchase and sale orders with brokers,
dealers and banks ("brokers") that provide "best execution" of these orders.
In placing purchase and sale transactions, a Portfolio Manager may consider
brokerage and research services provided by a broker to the Portfolio Manager
or the Investment Manager or their affiliates, and a Fund may pay a commission
for effecting a securities transaction that is in excess of the amount another
broker would have charged if the Portfolio Manager determines in good faith
that the amount of commission is reasonable in relation to the value of the
brokerage and research services provided by the broker. Consistent with this
policy, portfolio transactions may be executed by brokers affiliated with a
Portfolio Manager, so long as the commission paid to the affiliated broker is
reasonable and fair compared to the commission that would be charged by an
unaffiliated broker in a comparable transaction. In addition, the Investment
Manager may direct a Portfolio Manager to place securities transactions with
brokers that provide certain services to the Funds. A Portfolio Manager also
may consider a broker's sale of Fund shares if the Portfolio Manager is
satisfied that the Fund would receive best execution of the transaction from
that broker.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Dividends and Distribution. Dividends and distributions from net investment
income and capital gains, if any, will be determined on a class basis for each
Fund and paid at least annually.
Any dividends and distributions paid by a Fund will be automatically
reinvested in additional shares of the respective class of such Fund, unless
you elect to receive distributions in cash. When a dividend or distribution is
paid, the NAV per share is reduced by the amount of the payment.
A shareholder may, upon written request or by completing the appropriate
section of the New Account Application in this Prospectus, elect to have all
dividends and other distributions paid on a Class A, B or M account in the
Fund invested into a pre-existing Class A, B or M account in any of the
Participating Funds listed under "Pilgrim America Purchase Options--Reduced
Sales Charges". Both accounts must be of the same class. A shareholder of
Pilgrim Prime Rate Trust, whose shares are not held in a broker or nominee
account, may, upon written request, elect to have all dividends invested into
24
<PAGE>
a pre-existing Class A account of any of the Participating Funds.
Distributions are invested into the selected funds at the net asset value as
of the payable date of the distribution only if shares of such selected funds
have been registered for sale in the investor's state.
Federal Taxes. Each Fund intends to operate as a "regulated investment
company" under the Internal Revenue Code. In any fiscal year in which a Fund
so qualifies and distributes to shareholders all of its net investment income
and net capital gains, the Fund itself is relieved of federal income tax.
All dividends and capital gains are taxable whether they are reinvested or
received in cash, unless you are exempt from taxation or entitled to tax
deferral. Early each year, you will be notified as to the amount and federal
tax status of all dividends and capital gains paid during the prior year. Such
dividends and capital gains may also be subject to state or local taxes.
Dividends declared in October, November, or December with a record date in
such month and paid during the following January will be treated as having
been paid by a Fund and received by shareholders on December 31 of the
calendar year in which declared, rather than the calendar year in which the
dividends are actually received.
If you have not furnished a certified correct taxpayer identification number
(generally your Social Security number) and have not certified that
withholding does not apply, or if the Internal Revenue Service has notified
the Fund that the taxpayer identification number listed on your account is
incorrect according to their records or that you are subject to backup
withholding, federal law generally requires the Fund to withhold 31% from any
dividends and/or redemptions (including exchange redemptions). Amounts
withheld are applied to your federal tax liability; a refund may be obtained
from the Service if withholding results in overpayment of taxes. Federal law
also requires the Fund to withhold 30% or the applicable tax treaty rate from
dividends paid to certain nonresident alien, non-U.S. partnership and non-U.S.
corporation shareholder accounts.
Asia-Pacific Equity Fund may be required to pay withholding and other taxes
imposed by various countries in connection with its investments outside the
U.S. generally at rates from 10% to 40%, which would reduce the Fund's
investment income.
This is a brief summary of some of the tax laws that affect your investment in
the Fund. Please see the Statement of Additional Information and your tax
adviser for further information.
PERFORMANCE INFORMATION
From time to time, a Fund may advertise its average annual total return over
various periods of time. These total return figures show the average
percentage change in value of an investment in the Fund from the beginning
date of the measuring period. These figures reflect changes in the price of
the Fund's shares and assume that any income dividends and/or capital gains
distributions made by the Fund during the period were reinvested in shares of
the Fund. Figures will be given for one, five and ten year periods (if
applicable) and may be given for other periods as well (such as from
commencement of the Fund's operations, or on a year-by-year basis). Total
returns are based on past results and are not necessarily a prediction of
future performance.
Additional Performance Quotations. Advertisements of total return will always
show a calculation that includes the effect of the maximum sales charge but
may also show total return without giving effect to that charge. Because these
additional quotations will not reflect the maximum sales charge payable, these
performance quotations will be higher than the performance quotations that
reflect the maximum sales charge.
25
<PAGE>
ADDITIONAL INFORMATION
More about Masters Series. The Registrant commenced operations as of the date of
this Prospectus and therefore has no operating history. In addition, Masters
Series' Articles of Incorporation permit the Directors to authorize the creation
of additional funds, each of which may issue separate classes of shares. A Fund
may be terminated and liquidated under certain circumstances.
Voting Rights. Shareholders have certain voting rights. Each share of each
Fund is given one vote. Matters to be acted upon that affect a particular
Fund, including approval of new investment advisory agreements and changes in
fundamental policies of a Fund will require the affirmative vote of the
shareholders of such Fund. Matters affecting a certain class of a Fund will
only be voted on by shareholders of that particular class and Fund. As a
Maryland corporation, Masters Series is not required to hold annual
shareholder meetings, although special shareholder meetings may be held from
time to time.
26
<PAGE>
Pilgrim America
Funds
NEW ACCOUNT APPLICATION
Send Completed Application to: The Pilgrim America Group, P.O. Box 419368,
Kansas City, Missouri 64141-6368
SECTIONS 1 THROUGH 6 MUST BE COMPLETED FOR YOUR ACCOUNT TO BE ESTABLISHED.
================================================================================
1. ACCOUNT REGISTRATION
TYPE OF ACCOUNT
(Check one only)
|_| Individual
__________________ ______________ _____________ _______________________
First Name Middle Initial Last Name Social Security Number*
(first individual only)
|_| Joint Tenant
____________________________ ______________ ________________________
Joint Tenant's First Name Middle Initial Last Name
|_| Gift/Transfer to Minor
______________________________________ ____________________________
Custodian's Name (one only) Minor's Name (one only)
|_| Guardianship/Conservatorship
______________________________________ _______________________________
Under Uniform Gift/Transfers Minor's Social Security Number*
to Minors Act of (State)
____________________ _______________________ ___________________________
Guardian/Conservator Ward/Incompetent or Ward/Incompetent or Minor's
Minor's Name (one only) Social Security Number*
|_| Corporation, Partnership, Trust or Other Organization
____________________________________________ __________________________
Exact Name of Corporation, Tax Identification Number*
Partnership or other Organization
_________________________________________________________________________
Trustee Accounts Only: Name of all Trustees required by
trust agreement to sell/purchase shares
________________________ ___________________ __________________________
Date of Trust Agreement Name of Trust Tax Identification Number*
|_| Other
|_| Check here if you are subject to backup withholding.
|_| Check here if you are awaiting the issuance of Social
_______________ Security or Taxpayer Identification Number.
* Pilgrim America reserves the right to reject any application which does not
include a certified Social Security Number or Taxpayer Identification
Number, or does not indicate that such number has been applied for by
checking the "awaiting Social Security orTaxpayer Identification Number"
box.
================================================================================
2. MAILING ADDRESS
______________________________ __________ __________ ________ __________
Street Address Apartment City State Zip Code
Number
(___)__________________ (___)__________________
Business Phone Home Phone
27
<PAGE>
================================================================================
3. INVESTMENT INFORMATION
Please indicate dollar amount and Fund in spaces provided. $1,000 minimum
for each Fund. If more than one Fund is selected, accounts must have
identical registrations, class of shares and options. If no class of shares
is selected, Class A shares will be automatically selected.
Class of Shares
Fund Name Amount (Check one)
1._____________________________________ $ ________________ A |_| B |_| M |_|
2._____________________________________ $ ________________ A |_| B |_| M |_|
3._____________________________________ $ ________________ A |_| B |_| M |_|
4._____________________________________ $ ________________ A |_| B |_| M |_|
5._____________________________________ $ ________________ A |_| B |_| M |_|
6._____________________________________ $ ________________ A |_| B |_| M |_|
|_| A check payable to the Pilgrim America Group is included for $______.
|_| Payment has been made by Dealer purchase on _______ $_______ _____________
(Date) (Amount)(Order Number)
|_| Payment has been made by
Federal funds wire ______________ on _______ ______________ $_____________
(Reference No.) (Date) (Account No.) (Amount)
================================================================================
4. DIVIDEND AND DISTRIBUTION OPTIONS
(Check one only) -- If no option is selected, all distributions will be
reinvested.
|_| Reinvest all dividends and capital gains.
|_| Reinvest all dividends and capital gains into an existing account in
another Pilgrim America Account using the Dividend Transfer Option.
____________________________________________ ________________________________
Fund Name Account Number
|_| Pay all dividends and reinvest I request the payable distributions be:
capital gains. (Check one.)
|_| Pay all capital gains in cash |_| Sent to the address in Section 2.
and reinvest dividends |_| Directly deposited in my bank
|_| Pay all dividends and capital account. (Please attach a voided
gains.(If either pay option is check to Section 6.) If voided
selected, complete information check is not enclosed, will be sent
at right) to address in Section 2.
|_| Sent to a special payee listed in
Section 9.
================================================================================
5. AUTHORIZED DEALER INFORMATION
_________________________________ __________________________________________
Authorized Dealer Name Registered Representative's Name
_________________________________ __________________________________________
Branch Office Address Registered Representative's Number
_________________________________ ________________________ ________________
City State Zip Code
_________________________________ __________________________________________
Registered Representative's Phone Authorized Signature of Authorized Dealer
28
<PAGE>
================================================================================
6. SIGNATURES
I have read the prospectus and application for the Fund in which I am
investing and agree to its terms. I am also aware that a Telephone Exchange
and Redemption Privileges exist and that these privileges are automatically
available unless affirmatively declined. I also understand that if Pilgrim
America, the Fund, the Transfer Agent or the Sub-Transfer Agent fail to
follow the procedures outlined in the prospectus and in the Telephone
Transaction Authorization hereto, such entity may be liable for losses due to
unauthorized or fraudulent instructions. I further understand that I must
carefully review each account confirmation statement or other documentation
of transaction that I receive to ensure that my instructions have been
properly acted upon. If any discrepancies are noted, I agree to notify
Pilgrim America, the Fund, the Transfer Agent or the Sub-Transfer Agent in a
timely manner, but in no event more than 15 days from receipt of such
confirmation statement or documentation of transaction. Failure to notify one
of the above entities on a timely basis will relieve such entities of any
liability with respect to the transaction and any discrepancy. See Exchange
Privileges and Restrictions and Expedited Redemption sections for procedures.
I am of legal age. Sign below exactly as printed in registration. For joint
registration, all must sign. Under penalty of perjury, I certify with my
signature below that the number shown in Section 1 is my correct taxpayer
identification number. Also, I have not been notified by the Internal Revenue
Service that I am currently subject to backup withholding unless otherwise
indicated.
Attach Voided Check Here
(If Appropriate) -->
For Corporations, Trusts, or Partnerships: We hereby certify that each of the
persons listed below have been duly elected, and are now legally holding the
offices set forth opposite his/her name and have the authority to make this
authorization. Please print titles below if signing on behalf of a business
or trust to establish this account.
______________________________ ____________________________________________
Signature Date President, Trustee, General Partner or Title
______________________________ ____________________________________________
Signature Date Co-owner, Secretary of Corporation,
Co-Trustee, etc.
CHECK THE APPROPRIATE BOXES BELOW AND PROVIDE THE REQUESTED INFORMATION
|_| I am a United States Citizen
|_| I am a non-resident alien* (a Form W-8 will be provided to you by Pilgrim
America. Please complete it as requested as soon as possible).
|_| I am a resident alien and a social security number has been supplied on
page one of this New Account Application (a Form 1078 will be provided to
you by Pilgrim America. Please complete it and return it as requested).
|_| If not a United States Citizen, please indicate what country you are a
permanent tax resident of:
_________________________________________________________________________
* If the Pilgrim America account will be registered in joint registration
with another individual or individuals, each non-resident alien must
complete and return a Form W-8.
================================================================================
7. PURCHASE OPTIONS
Reduced Sales Charge
|_| I qualify for Reduced Sales Charge with the account(s) listed below.
_______________________________________ ____________________________________
Fund Name Account Number
_______________________________________ ____________________________________
Fund Name Account Number
_______________________________________ ____________________________________
Fund Name Account Number
29
<PAGE>
Letter of Intent (Check one only)
|_| I wish to establish a new Letter of Intent. (If Reduced Sales Charge or
90-day backdate privilege is applicable, provide the amount and
account(s) information below.)
|_| Please apply this purchase to an existing Letter of Intent with the
account(s) listed below.
|_| Please amend my existing Letter of Intent with the new amount indicated
below.
If establishing a Letter of Intent, you will need to purchase over a
thirteen-month period in accordance with the provisions of the prospectus.
The aggregate amount of these purchases will be at least equal to the amount
listed below:
|_| $50,000 |_| $100,000 |_| $250,000 |_| $500,000 |_| $1,000,000
_______________________________________ ____________________________________
Fund Name Account Number
_______________________________________ ____________________________________
Fund Name Account Number
================================================================================
Pre-Authorized Investment Plan -- Automatic Monthly Investing
|_| I wish to invest on a monthly basis, directly from my checking account
into the following fund(s).
(Please complete the Pre-Authorized Investment Plan Agreement herein.)
_______________________ _____________________ ___________________________
Fund Name Fund Name Fund Name
Amount $______________, to start |_| 5th or |_| 20th of _________, _________
Minimum $100 Month Year
================================================================================
Special Purchase Without a Sales Charge
|_| I (We) declare that the investment referenced herein is exempt from the
imposition of the normal front-end sales charge for the reason(s) listed
below (please refer to the "Special Purchases Without a Sales Charge"
section of the prospectus):
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
The privilege will only be granted upon confirmation of your entitlement.
================================================================================
8. ADDITIONAL OPTIONS
Telephone Exchange Privilege -- If accepted accounts must have the same
account information, options and class of shares.
|_| I decline telephone exchange, and do not want this privilege. (See
Exchange Privileges and Restrictions section for procedures.)
30
<PAGE>
Systematic Withdrawal Plan
(Minimum account balance for a SWP is $10,000.)
|_| I wish to automatically withdraw $__________________ from this account.
Minimum $100
|_| Monthly |_| Quarterly |_| Semi-Annually |_| Annually
I request this distribution be: (Check One)
|_| Sent to the address listed in Section 2. To begin _________ of ________.
(Will occur about 5 business days prior to Month Year
the end of the month.)
|_| Sent to the payee listed in Section 9. To begin _________ of _______
Month Year
|_| Directly deposited in my bank account. (Please attach a voided check to
Section 6.)
To begin _______________ of __________. (Will occur about 5 business
Month Year days prior to the end of the
month.)
================================================================================
Expedited Redemption Privilege -- Available on all non-retirement accounts.
Unless you decline this privilege, you will automatically be assigned the
ability to request, via the telephone, redemption proceeds to be sent to the
address in Section 2.
|_| I wish to redeem shares by telephone and request that the proceeds be
directly deposited into my bank account.(Please attach a voided check to
Section 6.) (If voided check is not enclosed, will be sent to address in
Section 2.)
|_| I decline telephone redemption, and do not want this privilege.
See Expedited Redemption section for procedures.
================================================================================
9. INTERESTED PARTY MAIL/DIVIDEND MAIL
|_| I wish to have my distributions sent to the address listed below.
|_| I wish to have duplicate confirmation statements sent to the interested
party listed below.
_____________________________________________________________________________
Name of Individual
_____________________________________________________________________________
Street Address
______________________________ __________________________ _________________
City State Zip Code
================================================================================
This application is not a part of the prospectus.
31
<PAGE>
<PAGE>
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32
<PAGE>
TELEPHONE TRANSACTION AUTHORIZATION
Authorization and Agreement
I (we), the "Investor" hereby authorizes Pilgrim America to accept and act
conclusively upon telephone instructions from the Investor, anyone other than
the Investor representing himself to be the Investor, or any person purporting
to represent the Investor in effecting a redemption of specified share or
dollar amounts or in effecting exchanges of shares of one (or more) Pilgrim
America fund(s) (the "Fund" or "Fund(s)" or "Funds") for which such an
exchange is available. Pilgrim America, the Fund and its Transfer Agent employ
procedures considered by them to be reasonable to confirm that instructions
communicated by telephone are genuine. Such procedures include requiring
certain personal identification information prior to acting upon telephone
instructions, tape recording telephone communications and providing written
confirmation of instructions communicated by telephone. If reasonable
procedures are employed, neither Pilgrim America, the Fund, its Transfer Agent
or its Sub-Transfer Agent will be liable for following telephone instructions
which it reasonably believes to be genuine. Pilgrim America, the Fund and its
Transfer Agent may be liable for any losses due to unauthorized or fraudulent
instructions if reasonable procedures are not followed. The Investor
understands and agrees to indemnify and hold harmless Pilgrim America, the
Funds, their Transfer Agent or their Sub-Transfer Agent from any liability
(including attorney's fees) arising directly or indirectly from any act or
omission to act hereunder not occasioned by their gross negligence or willful
misconduct. The Investor understands that the redemption and/or exchange
privilege may be modified or terminated at any time. The Investor also
understands that these privileges are subject to the conditions and provisions
set forth herein and in the current prospectuses of the Funds. For each
exchange, the Investor will have received and read a copy of the then current
prospectus of the Fund being purchased. The Investor(s) or their
representatives certify that they have the power and authority to select the
privileges requested and to effect telephone transactions. All persons submit
as representatives warrant as individuals that each person is an authorized
representative of the Investor and that all privileges have been duly
authorized and that all signatures are genuine and that all persons are
authorized to sign and the organization has the authority to transact
telephone exchanges. The Investor will notify Pilgrim America of any change in
such authority. Telephone Redemptions may be executed on all accounts other
than retirement accounts.
This Authorization shall be effective upon receipt by Pilgrim America. It
shall in all respects be interpreted, enforced and governed under the laws of
the State of Arizona. Any suit, claim or action hereunder against Pilgrim
America and the Funds shall have as its sole venue the County of Maricopa,
State of Arizona. Any suit, claim or action hereunder against the Transfer
Agent or Sub-Transfer Agent shall have as if sole venue, the County of
Jackson, State of Missouri.
If any provision of this Authorization is declared by any court to be
illegal or invalid, the validity of the remaining parts shall not be affected
thereby, and the illegal or invalid portion shall be deemed stricken from this
Authorization.
Conditions
1. Telephone redemption and/or exchange instructions received in good order
before the pricing of the Fund on any day on which the New York Stock Exchange
is open for business (a "Business Day"), but not later than 4:00 p.m. eastern
time, will be processed at that day's closing net asset value. For each
exchange my account shall be charged an exchange fee noted in the then current
prospectus. There is no fee for telephone redemption; however, redemptions of
Class A and Class B shares may be subject to a contingent deferred sales
charge (See "Redemption of Shares" in the appropriate Funds' prospectus.)
2. Telephone redemption and/or exchange instructions should be made by dialing
1-800-992-0180.
3. Exchanges will not be requested in violation of any of the terms and
conditions of any of the Funds' prospectuses and I agree to indemnify Pilgrim
America, the Funds and the Transfer Agent against any harm occasioned by their
compliance with an improper order under any of the Fund's prospectuses.
4. Telephone redemption requests must meet the following conditions to be
accepted by Pilgrim America:
(a) Proceeds of the redemption may be directly deposited into a
predetermined bank account, or mailed to the current address on the
registration. This address cannot reflect any change within the previous
sixty (60) days.
(b) Certain account information will need to be provided for
verification purposes before the redemption will be executed.
(c) Only one telephone redemption (where proceeds are being mailed to
the address of record) can be processed within a 30 day period.
(d) The maximum amount which can be liquidated and sent to the address
of record at any one time is $50,000.
5. If the exchange involves the establishment of a new account, the dollar
amount being exchanged must at least equal the minimum investment requirement
of the Fund being acquired.
6. Any new account established through the exchange privilege will have the
same account information and options except as stated in the current
prospectus and subject to this authorization.
7. Certificated shares cannot be redeemed or exchanged by telephone but must
be forwarded to Pilgrim America and deposited into the Investor's account
before any transaction may be processed.
8. If a portion of the shares to be exchanged are held in escrow in
connection with a Letter of Intent, the smallest number of full shares of the
Fund to be purchased on the exchange having the same aggregate net asset value
as the shares being exchanged shall be substituted in the escrow account.
33
<PAGE>
Shares held in escrow may not be redeemed until the Letter of Intent has
expired and/or the appropriate adjustments have been made to the account.
9. Shares may not be exchanged and/or redeemed unless an exchange and/or
redemption privilege is offered pursuant to each Fund's current prospectus.
10. The Investor agrees that his/her ability to exchange and/or redeem under
this authorization may be cancelled, modified or restricted at any time
indiscriminately at the sole discretion of Pilgrim America or by the Fund(s)
by written notice to the address of record.
11. Proceeds of a redemption may be delayed up to 15 days or longer until
the check used to purchase the shares being redeemed has been paid by the Bank
upon which it was drawn.
INFORMATION PERTAINING TO THE LETTER OF INTENT
Subject to conditions specified below, each purchase of shares of the Fund
or Funds within the Pilgrim America Funds during the 13-month period
subsequent to the effective date of this Application will be made at the
public offering price applicable to a single transaction of the dollar amount
indicated, as described in the then effective prospectus. The offering price
may be further reduced if Pilgrim America is advised of any shares of this or
other Pilgrim America fund(s) previously purchased and still owned (excluding
Pilgrim America Money Market Shares). The Investor may at any time during the
period revise upward the stated intention by substituting a written request to
this effect. Such revision shall provide for the escrowing of additional
shares. The original period of the Letter, however, shall remain unchanged.
Each separate purchase made pursuant to the Letter is subject to the terms and
conditions contained in the prospectus in effect at the time of that
particular purchase. It is understood that the Investor makes no commitment to
purchase additional shares, but that if those shares previously purchased,
within 90 days of the date of the Letter of Intent, at public offering price,
together with purchases so made within thirteen months from this date do not
aggregate the amount specified when valued at the public offering price, the
purchaser will pay the increased amount of sales charge prescribed in the
terms of escrow. The Investor's Authorized Dealer must refer to this Letter of
Intent in placing each future order for shares while this Letter is in effect.
It is understood that, when remitting funds directly to Pilgrim America on the
Transfer Agent for investment in an account, specific reference must be made
to this Letter. This cancels and supersedes any previous instructions which
the purchaser may have given inconsistent with the above.
TERMS OF ESCROW
1. To assure compliance with provisions of the Investment Company Act of
1940, out of the initial purchase an amount equal to the maximum front-end
sales charge of the dollar amount indicated on the Application will be held in
escrow in the form of shares (computed to the nearest full share at the
applicable public offering price) registered in the purchaser's name. These
shares will be held at Pilgrim America and be subject to the terms of escrow.
2. If total purchases pursuant to this Letter equal the amount specified at
the expected aggregate purchases, escrow shares will be released from escrow.
3. If the total purchases pursuant to this Letter are less than the amount
specified, the Investor shall remit to Pilgrim America an amount equal to the
difference between the dollar amount of sales charge actually paid and the
amount of sales charge which would have been paid on the total purchases if
all such purchases had been made at a single time. If Pilgrim America, within
10 business days after request, does not receive said difference in sales
charge, Pilgrim America will redeem an appropriate number of escrow shares to
realize such difference. If the proceeds from this redemption are inadequate,
the purchaser will be liable to Pilgrim America for the difference. The
remaining shares after the redemption will be deposited to the Investor's
account unless otherwise instructed.
4. The Investor hereby irrevocably constitutes and appoints Pilgrim America
as attorney to surrender for redemption any or all shares on the books of the
Fund, under the conditions previously outlined, with full power of
substitutions in the premises and authorizes the Fund's Transfer Agent or
Sub-Transfer Agent to receive and redeem shares and pay the proceeds thereof
as directed by Pilgrim America.
PROVISIONS FOR PRICE ADJUSTMENT
If total purchases made under this Letter of Intent are large enough to
qualify for a lower sales charge than that applicable to the amount initially
specified, or if trades not initially made under this Letter subsequently
qualify for a lower sales charge through the 90-day back-dating provisions, an
adjustment will be made at the expiration of this Letter to give effect to the
lower charge. Such adjustment in sales charge will be used to purchase
additional shares for the shareowner at the applicable discount category.
CANCELLATION OR LIQUIDATION
If at any time prior to or after completion of this Letter of Intent the
Investor wishes to cancel this Letter, the Investor must notify Pilgrim
America in writing. If at any time prior to the completion of this Letter of
Intent the purchaser requests Pilgrim America to liquidate his total shares, a
cancellation of this Letter will be effected automatically. Under either of
the above conditions the total purchased pursuant to this Letter may be less
than the amount specified as the expected aggregate purchases. If so, Pilgrim
America will redeem at NAV an appropriate number of escrow shares to remit to
the Distributor and to the appropriate Authorized Dealer an amount equal to
the difference between the dollar amount of sales charge actually paid and the
amount of sales charge which would have been paid on the total purchases if
all such purchases would have been made at a single time.
34
<PAGE>
AUTHORIZED DEALER AGREEMENT
Under these plans, the Authorized Dealer signing the application acts as
principal in all purchases of Fund shares and appoints Pilgrim America as its
agent to execute the purchases and to confirm each purchase to the Investor.
Pilgrim America remits semi-monthly to the Authorized Dealer the amount of its
commissions. The Authorized Dealer hereby guarantees the genuineness of the
signature(s) on the application and represents that he is a duly licensed
Authorized Dealer and may lawfully sell Fund shares in the state designated by
the Investor's mailing address, and that he has entered into a Selling Group
Agreement with the Distributor with respect to the sale of fund shares. The
Authorized Dealer signature on the Application, signifies acceptance of the
concession terms, and acceptance of responsibility for obtaining additional
sales charges if specified purchases are not completed.
Cut on perforated line
- --------------------------------------------------------------------------------
DETACH HERE AND RETURN THIS TO YOUR BANK IF YOU ARE
ESTABLISHING A PRE-AUTHORIZED INVESTMENT PLAN
(Authorization to honor checks or debit instructions drawn by DST Systems, Inc.,
on behalf of The Pilgrim America Group of Funds, for Automatic Purchase Plan)
PRE-AUTHORIZED INVESTMENT PLAN AGREEMENT
As a convenience, I (we) hereby request and authorize you to pay and charge
to my (our) account checks or debit instructions drawn on my (our) account by
DST Systems, Inc., the Fund's Agent and payable to the order of the Fund
provided there are sufficient collected funds in said account to pay the same
upon presentation: I (we) agree that your rights with respect to each such
check or debit instruction shall be the same as if it were a check or debit
instructions drawn on you and signed personally by me (us). This authority is
to remain in effect until revoked in writing and until you actually receive
such notice. I (we) agree that you shall be fully protected in honoring any
such checks or debit instructions.
I (we) further agree that if any such check or debit instruction is
dishonored, whether with or without cause and whether intentionally or
inadvertently, you shall be under no liability whatsoever.
Signature(s) of Depositor(s) (signed exactly as shown on bank records)
X_______________________________________________________________________________
X_______________________________________________________________________________
_____________________________________________________________________19_________
Date Signed
(Please Print)
Name of Depositor (as shown on bank records)____________________________________
Bank Account Number_____________________________________________________________
Name of Bank____________________________________________________________________
Address of Bank_________________________________________________________________
City/State/Zip of Bank__________________________________________________________
35
<PAGE>
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36
<PAGE>
Pilgrim America
Funds
Instructions for Completing the New Account Application
================================================================================
This New Account Application can be used to open a new Pilgrim America
Account, establish Shareholder privileges on existing accounts and be used in
providing documentation for certain transactions. The completed Application
should be forwarded along with your investment check payable to the Pilgrim
America Group, or other appropriate documentation to: Pilgrim America Group of
Funds, P.O. Box 419368, Kansas City, Missouri 64141-6368.
This New Account Application may not be used to open a qualified retirement
plan acount for which Investors Fiduciary Trust Company acts as custodian.
1 Account Registration
- --------------------------------------------------------------------------------
Check the appropriate box and provide the information requested. Unless
specified, accounts with more than one owner will be assumed to be "Joint
Tenants With Rights of Survivorship".
All investors must sign the Account Application, and authorize the requested
privileges.
For a child who is under the age of majority in your state of residence,
"Gift/transfer to minor" registration must be utilized.
2 Mailing Address
- --------------------------------------------------------------------------------
This is the address of record for your account. All account confirmation
statements will be forwarded to this address.
3 Investment Information
- --------------------------------------------------------------------------------
State the fund(s) in which you are investing and the dollar amount of the
investment. (Minimum initial investment is $1,000).
4 Dividend and Distribution Options
- --------------------------------------------------------------------------------
Pilgrim America offers several options for the treatment of dividends and
capital gains distributions, if any, from your Pilgrim America investment.
You can have these payments distributed to you, or any other recipient you
choose, in cash; in additional shares of the Fund which is paying the
distribution or; in shares of another Pilgrim America Fund, at NAV without
sales charge, via the Dividends Transfer Option. The Dividend Transfer Option
is available only for open-end funds within the Pilgrim America Group.
5 Authorized Dealer Information
- --------------------------------------------------------------------------------
Your financial professional can complete this section.
6 Signatures
- --------------------------------------------------------------------------------
All investors and authorized signers should sign in order to process the New
Account Application and to certify your Social Security, Tax identification
Number or if applicable, your foreign status.
37
<PAGE>
7 Pilgrim America Purchase Options(TM)
- --------------------------------------------------------------------------------
You can qualify for reduced sales charges via the Letter of Intent or
Cumulative Discount privileges.
The Letter of Intent allows you to qualify for reduced sales charges
immediately.
Cumulative Discount allows you to use the total of all of your Pilgrim America
open-end fund investments in determining the sales charge of a current
investment.
The Pre-Authorized Investment Plan provides a systematic method of investing
periodically in the Pilgrim America Fund(s) of your choice. Minimum
investments of at least $100 can be automatically debited from your bank
account periodically for investment purposes.
8 Additional Options
- --------------------------------------------------------------------------------
The Telephone Exchange privilege will automatically be assigned to you unless
you check the box in Section 8 which states that you do not wish to have this
privilege.
The Systematic Withdrawal Plan allows you to automatically have a specific
share or dollar amount ($100 minimum) liquidated from your account monthly,
quarterly or annually and forwarded to you or the payee of your choosing as
long as the account has a current value of at least $10,000. Amounts
designated for deposit to your bank account can be forwarded via the Automated
Clearing House system by attaching a voided check for such basic account to
Section 7 of the New Account Application. The Expedited Redemption privilege
allows you to effect a liquidation from your account via a telephone call and
have the proceeds (Maximum of $50,000) mailed to your address of record. This
privilege is automatically assigned to you unless you check the box in this
section which states you do not want to take advantage of this privilege.
The Expedited Redemption privilege additionally allows you to effect a
liquidation from your account and have the proceeds (minimum $5,000) wired to
your pre-designated bank account. This privilege is NOT automatically assigned
to you. If you want to take advantage of this privilege, please check the
appropriate box and attach a voided check to section 6 of the New Account
Application.
9 Interested Party Mail/Dividend Mail
- --------------------------------------------------------------------------------
You may authorize an additional party to receive copies of your confirmation
statements (your Authorized Dealer will automatically receive such copies). If
you wish to have additional copies of your confirmation statements mailed to
an address other than your address of record, check the appropriate box in
Section 9 and indicate such address.
You may have your cash dividend payments forwarded to an address other than
your address of record by so indicating in Section 9. (If you wish your cash
dividends to be forwarded to a bank for deposit to an account, refer to
Section 4 of the New Account Application).
38
<PAGE>
PILGRIM AMERICA GROUP CLASS A AND B
CONTINGENT DEFERRED SALES CHARGE WAIVER FORM
(To be completed ONLY if the undersigned believes that he is entitled
to a waiver of the Contingent Deferred Sales Charge.)
If you believe you are entitled to a waiver of the Contingent Deferred
Sales Charge in accordance with the terms set forth in the prospectus, you
must complete this Contingent Deferred Sales Charge Waiver Form and send it to
the Fund's Transfer Agent at its address given below. The waiver will only be
granted upon confirmation of your entitlement.
Check the item below which the undersigned is relying upon for a waiver
of the Contingent Deferred Sales Charge and send any required documents
specified therein:
/_/ Redemption is made upon the death or permanent disability of
shareholder. (Enclose either a certified death certificate or
certification of permanent disability (see below), whichever is
appropriate).
/_/ Redemption is made in connection with mandatory distributions (upon
attainment of age 70 1/2) from an IRA or other qualified retirement
plan. (Enclose a certified birth certificate. Please contact Pilgrim
America for a Distribution Request Form for IRA or other qualified
retirement plan accounts where IFTC acts as custodian which must
accompany this Contingent Deferred Sales Charge Waiver Form).
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Signature_______________________________________________________________________
(Exactly as on Account Registration)
DATE _____________________________________________________________________, 1995
Name(s)_________________________________________________________________________
________________________________________________________________________________
(Please Print)
Mail the completed Waiver Form to:
Pilgrim America Group, P.O. Box 419368, Kansas City, MO 64141-6368
DEFINITION OF DISABILITY
An individual will be considered disabled if he meets the definition
thereof in Section 72(m)(7) of the Internal Revenue Code, which in pertinent
part defines a person as disabled if such person is unable to engage in any
substantial gainful activity by reason of any medically determinable physical
or mental impairment which can be expected to result in death or to be of long
continued and indefinite duration.
CERTIFICATION OF DISABILITY
I ________________________________ certify that I am a Licensed Physician in the
Licensed Physician Name
State of _________________, License #__________ and that_______________________
Investor/Patient
is under my care and is unable to perform the material duties of his or her
regular occupation or employment; or is unable to engage in any substantial
gainful activity by reason of a physical or mental impairment which may result
in death or be of continued and indefinite duration. Date of determination of
disability _________________
Physician Signature ____________________________________ Date__________________
39
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40
<PAGE>
Important Information Regarding Completion of the Application
Effective in 1989, the Fund, and other payers, must, according to IRS
regulations, withhold 31% of reportable dividends (whether paid or accrued) and
redemption payments if a shareholder fails to provide a taxpayer identification
number, and a certification that he is not subject to backup withholding in the
SHAREHOLDER CERTIFICATION section of the Account Application form.
(Section references are to the Internal Revenue Code, as amended).
Backup Withholding
You are subject to backup withholding if:
(1) You fail to furnish your taxpayer identification number to the Fund in
the manner required, OR
(2) The Internal Revenue Service notifies the Fund that you furnished an
incorrect taxpayer identification number, OR
(3) You are notified that you are subject to backup withholding under
section 3406(a)(1)(C), OR
(4) For an interest or dividend account opened after December 31, 1983, you
fail to certify to the payer that you are not subject to backup withholding
under (3) above, or fail to certify your taxpayer identification number.
For payments other than interest or dividends, you are subject to backup
withholding only if (1) or (2) above applies.
Obtaining a Number
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, application for a Social Security Number Card, or Form
SS-4, application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number. Write "applied for" in the space provided for a taxpayer identification
number on the application. Circle paragraph 3(b) of the Shareholder
Certification section.
What Number to Give
Give the social security number or employer identification number of the record
owner of the account. If the account belongs to you as an individual, give your
social security number. If the account is in more than one name or is not in the
name of the actual owner, see the chart below for guidelines on which number to
report in completing the account registration section:
1 List first and circle the name of the person whose number you furnish.
2 Circle the minor's name and furnish the minor's social security number.
3 Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
4 Show the name of the owner.
5 List first and circle the name of the legal trust, estate, or pension trust.
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) Failure to Report Certain Dividend and Interest Payments.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
underpayment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) Civil Penalty for False Information With Respect to Withholding.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) Criminal Penalty for Falsifying Information.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
Payees Exempt from Backup Withholding
Certain payees are specifically exempted from backup withholding on ALL
payments. Write "exempt payee" after paragraph (3) of the Shareholder
Certification and Signature Certification section if your account falls into one
of the following categories. We will still need your taxpayer identification
number.
o A corporation
o A financial institution.
o An organization exempt from tax under section 501(a), or an individual
retirement plan.
o A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
o A real estate investment trust.
o A common trust fund operated by a bank under section 584(a).
o An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
o An entity registered at all times under the Investment Company Act of 1940.
Payments of dividends not generally subject to backup withholding include
the following:
o Payments to nonresident aliens subject to withholding under section 1441.
o Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
Privacy Act Notice.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Beginning January 1, 1984, payers
must generally withhold 31% of taxable interest, dividend, and certain other
payments to a payee who does not furnish a taxpayer identification number to a
payer. Certain penalties may also apply.
================================================================================
Guidelines for determining Give the
proper number SOCIAL SECURITY
for this type of account: number of --
- --------------------------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of the account or,
account) if combined funds any one of the
individuals1
3. Husband and wife (joint account) The actual owner of the account or,
if joint funds, either person(1)
4. Custodian account to a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor The adult or if the minor is the only
contributor, the minor(1)
6. Account in the name of guardian or The ward, minor, or incompetent
committee for a designated ward, person(3)
minor or incompetent person
7. a. The usual revocable savings trust The grantor-trustee(5)
account (grantor is also trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust under
state law
8. Sole proprietorship account The owner(1)
- --------------------------------------------------------------------------------
================================================================================
Give the EMPLOYER
IDENTIFICATION
For this type of account: number of --
- --------------------------------------------------------------------------------
9. A valid trust, estate or pension Legal entity (Do not furnish the
trust identifying number of the personal
representative or trustee unless the
legal entity itself is not designated in
the account title.)5
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization account
12. Partnership account held in the The partnership
name of the business
13. Association, club or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a state or local
government, school district, or
prison) that receives agricultural
program payments
- --------------------------------------------------------------------------------
41
<PAGE>
PILGRIM AMERICA MASTERS
SERIES, INC.
PILGRIM AMERICA MASTERS ASIA-PACIFIC
EQUITY FUND
PILGRIM AMERICA MASTERS MIDCAP VALUE FUND
PILGRIM AMERICA MASTERS LARGECAP VALUE FUND
Two Renaissance Square, 40 North Central Avenue,
Suite 1200, Phoenix, Arizona 85004
1-800-331-1080
Table of Contents
Page
----
THE FUNDS ........................................ 1
PILGRIM AMERICA MASTERS SERIES
AT A GLANCE ..................................... 2
SUMMARY OF EXPENSES .............................. 3
THE MANAGERS ..................................... 4
Masters Series: Access to Private Money
Managers ....................................... 4
The Investment Manager .......................... 4
The Portfolio Managers .......................... 4
PAST PERFORMANCE OF THE PORTFOLIO
MANAGERS ........................................ 7
THE FUNDS' INVESTMENT OBJECTIVES
AND POLICIES .................................... 11
INVESTMENT PRACTICES AND RISK
CONSIDERATIONS .................................. 12
Risk Considerations ............................. 12
Investment Techniques ........................... 13
All Funds: Diversification and Changes
in Policies .................................... 14
SHAREHOLDER GUIDE ................................ 14
Pilgrim America Purchase Options(TM)............. 14
Purchasing Shares ............................... 18
Exchange Privileges and Restrictions ............ 21
How to Redeem Shares ............................ 22
MANAGEMENT OF THE FUNDS .......................... 23
DIVIDENDS, DISTRIBUTIONS AND TAXES ............... 24
PERFORMANCE INFORMATION .......................... 25
ADDITIONAL INFORMATION ........................... 25
NEW ACCOUNT APPLICATION .......................... 27
Pilgrim America
Funds
Investment Manager
Pilgrim America Investments, Inc.
Two Renaissance Square
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004
Distributor
Pilgrim America Securities, Inc.
Two Renaissance Square
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004
1-800-334-3444
Shareholder Servicing Agent
Pilgrim America Group, Inc.
Two Renaissance Square
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004
1-800-331-1080
Transfer Agent
Investors Fiduciary Trust Company
c/o DST Systems, Inc.
P.O. Box 419368
Kansas City, Missouri 64141-6368
Custodian
Investors Fiduciary Trust Company
127 W. 10th Street/14th Floor
Kansas City, Missouri 64105
Legal Counsel
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005
Independent Auditors
KPMG Peat Marwick LLP
725 South Figueroa Street
Los Angeles, California 90017
PROSPECTUS
JULY 25, 1995
As Supplemented November 24, 1995
