PILGRIM AMERICA MASTERS SERIES INC, 497, 1996-11-06

PILGRIM AMERICA MASTERS SERIES INC
497, 1996-11-06

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<PAGE>
Rule 497(c)
File Nos. 33-91706 and 811-9040
Prospectus

Pilgrim America Masters Series, Inc.

Pilgrim America Masters
Asia-Pacific Equity Fund
[PILGRIM AMERICA
FUNDS LOGO] 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.

------------------------

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.

------------------------------

Each Fund offers three classes of shares, with varying types and amounts of
sales and distribution charges. These Pilgrim America Purchase
Options(Trademark) 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 October 30, 1996 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. 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.

------------------------

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.

------------------------

THE DATE OF THIS PROSPECTUS IS OCTOBER 30, 1996.

<PAGE>
PILGRIM AMERICA MASTERS SERIES AT A GLANCE*

<TABLE>
<S> <C> <C> <C>
FUND OBJECTIVES AND POLICIES PORTFOLIO MANAGER STRATEGY
- ------------------- --------------------------------- ----------------------------------- -----------------------------------
ASIA-PACIFIC EQUITY Long-term capital appreciation. HSBC Asset Management Americas Inc. A combination of macroeconomic
FUND Invests in equity securities of and HSBC Asset Management Hong Kong overview of region, specific
companies based in the Asia- Limited--subsidiaries of HSBC country analysis, setting target
Pacific region, which includes Holdings plc, which was founded as country weightings, industry
China, Hong Kong, Indonesia, the Hong Kong and Shanghai Banking analysis and stock selection.
Korea, Malaysia, Philippines, Corporation in 1865. Principal risk factors: exposure to
Singapore, Taiwan and Thailand, Manages over $36 billion. financial and market risks that
but does not include Japan or Clients include pension funds, accompany an investment in
Australia. institutional investors and high equities, and exposure to changes
Normally fully invested. net worth individuals throughout in currency exchange rates and
the world. Minimum investment for other risks of foreign investment.
private accounts: $10 million. You can expect fluctuation in the
value of the Fund's portfolio
securities and the Fund's shares.*

MIDCAP VALUE FUND Long-term capital appreciation. CRM Advisors, LLC--affiliate of A 'value' manager that seeks to
Invests in equity securities of Cramer Rosenthal McGlynn, Inc., identify middle capitalization
companies believed to be which was established in 1973. companies having one or more of the
undervalued that have a market Manages $2.4 billion. following characteristics: they are
capitalization of between $200 Clients include high net worth undergoing fundamental change; are
million and $5 billion. individuals, foundations, endowment undervalued; and are misunderstood
Normally fully invested. funds, pension plans and others. by the investment community.
Minimum investment for private Investment prospects are viewed on
accounts: $5 million. a long-term basis and not on market
timing.
Principal risk factors: exposure to
financial and market risks that
accompany an investment in
equities. You can expect
fluctuation in the value of the
Fund's portfolio securities and the
Fund's shares.*

LARGECAP VALUE FUND Long-term capital appreciation. Ark Asset Management Co., Inc., A 'value' manager that uses a
Invests in equity securities formerly the institutional combination of 'top-down'
issued by companies believed to be investment management division of macroeconomic analysis and
undervalued that generally have a Lehman Brothers (established 1929). 'bottom-up' fundamental analysis;
market capitalization of at least Manages $21.4 billion. establishes specific upside price
$5 billion. Clients include pension plans, objectives and performs downside
Normally fully invested. endowment funds, private review to help temper losses in
foundations, other institutions and declining markets.
high net worth individuals. Principal risk factors: exposure to
Minimum investment for private financial and market risks that
accounts: $50 million. accompany an investment in
equities. You can expect
fluctuation in the 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 set forth 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.

<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 3.50%(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
DISTRIBUTION (AFTER TOTAL FUND
ASIA-PACIFIC MANAGEMENT (12B-1) EXPENSE OPERATING
EQUITY FUND FEES FEES(1) REIMBURSEMENT) EXPENSES(2)
- ------------------- ----------- ------------- --------------- --------------
<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%

OTHER
EXPENSES
MIDCAP VALUE FUND DISTRIBUTION (AFTER TOTAL FUND
AND MANAGEMENT (12B-1) EXPENSE OPERATING
LARGECAP VALUE FUND FEES FEES(1) REIMBURSEMENT) EXPENSES(2)
- ------------------- ----------- ------------- --------------- --------------
<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) 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 until June 30, 1997. Prior
to the waiver and reimbursement of Fund expenses, the total annualized fund
operating expenses, excluding interest, taxes, brokerage, and extraordinary
expenses, for the ten months ended June 30, 1996 were 3.47%, 4.10%, and
3.88% of the average net assets of the Class A, Class B, and Class M shares,
respectively, of Asia-Pacific Equity Fund, 4.91%, 5.32%, and 4.72% of the
average net assets of the Class A, Class B, and Class M shares,
respectively, of MidCap Value Fund and 5.44%, 5.79% and 5.90% of the average
net assets of the Class A, Class B and Class M shares, respectively, of
LargeCap Value Fund.

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.

<PAGE>
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):

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.

FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING FOR THE PERIOD SEPTEMBER 1, 1995* THROUGH JUNE 30, 1996

The following table presents condensed financial information about each Fund.
This information has been derived from the financial statements that are in the
Annual Report dated June 30, 1996. The information in the table below has been
audited by KPMG Peat Marwick LLP, independent auditors. Further information
about each Fund's performance is contained in the Annual Report, which may be
obtained free of charge.

<TABLE>
<CAPTION>
ASIA-PACIFIC EQUITY FUND MIDCAP VALUE FUND LARGECAP VALUE FUND
---------------------------- ----------------------------- -----------------------------
CLASS A CLASS B CLASS M CLASS A CLASS B CLASS M CLASS A CLASS B CLASS M
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period........................... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
Income (loss) from investment
operations:
Net investment income (loss)..... 0.03 (0.01) 0.00 0.13 0.07 0.06 0.07 0.06 0.06
Net realized and unrealized gain
on investments and foreign
currency transactions.......... 0.34 0.32 0.33 1.91 1.90 1.91 1.87 1.81 1.83
------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations................... 0.37 0.31 0.33 2.04 1.97 1.97 1.94 1.87 1.89
------- ------- ------- ------- ------- ------- ------- ------- -------
Less distributions:
Net investment income............ -- -- -- 0.05 0.03 0.04 0.07 0.06 0.06
In excess of net investment
income......................... 0.02 -- 0.01 -- -- -- 0.01 0.01 0.01
Realized gains on investments.... -- -- -- -- -- -- 0.09 0.09 0.09
------- ------- ------- ------- ------- ------- ------- ------- -------
Total distributions............ 0.02 -- 0.01 0.05 0.03 0.04 0.17 0.16 0.16
------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of period..... $ 10.35 $ 10.31 $ 10.32 $ 11.99 $ 11.94 $ 11.93 $ 11.77 $ 11.71 $ 11.73
------- ------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL RETURN(B).................... 3.76% 3.19% 3.32% 20.48% 19.80% 19.82% 19.56% 18.85% 19.06%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)....................... $18,371 $17,789 $ 6,476 $ 2,389 $ 2,123 $ 1,731 $ 2,530 $ 1,424 $ 1,240
Ratios to average net assets:
Expenses(a)(c)................... 2.00% 2.75% 2.50% 1.75% 2.50% 2.25% 1.75% 2.50% 2.25%
Net investment income
(loss)(a)(c)................... 0.33% (0.38)% (0.16)% 2.00% 1.27% 1.16% 0.65% (0.25)% 0.06%
Portfolio turnover rate............ 15% 15% 15% 60% 60% 60% 59% 59% 59%
</TABLE>
- ------------------
* Commencement of operations.
(a) Annualized.
(b) Total return is calculated assuming reinvestment of all dividends and
capital gain distributions at net asset value and excluding the deduction of
sales charges. Total return information for less than one year is not
annualized.

(c) Prior to the waiver and reimbursement of expenses, the annualized ratio of
expenses to average net assets was 3.47%, 4.10% and 3.88% for Asia-Pacific
Equity Fund Class A, B and M, respectively; 4.91%, 5.32% and 4.72% for
MidCap Value Fund Class A, B and M, respectively; and 5.44%, 5.79% and 5.90%
for LargeCap Value Fund Class A, B and M, respectively. Prior to the waiver
and reimbursement of expenses, the annualized ratio of net investment income
(loss) to average net assets was (1.14)%, (1.73)% and (1.53)% for
Asia-Pacific Equity Fund Class A, B and M, respectively; (1.17)%, (1.56)%
and (1.32%) for MidCap Value Fund Class A, B and M, respectively; and
(3.04)%, (3.53)% and (3.59)% for LargeCap Value Fund Class A, B and M,
respectively.

<PAGE>
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. For more
information on Express America, please see the Statement of Additional
Information. 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 over
approximately $36 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 $2.4 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 13.9% 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. Ark manages approximately $21.4 billion, including $11.3 billion in
large capitalization value portfolios, for more than 200 institutional and
individual clients, with a minimum investment size for private accounts of $50
million.

<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 James B. McHugh B.S., Montclair State 12 HSBC Americas--2
FUND/HSBC Director, University
Client Investment M.B.A., Seton Hall
Services, University
HSBC Americas

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 VALUE C. Charles Hetzel B.S., University of Utah 30 Ark--30
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>

<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
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 June 30, 1996 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 June 30, 1996 as compared to a relevant unmanaged
market index. The performance shown below is adjusted to give effect to the
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.

<PAGE>
HSBC Asia-Pacific Advisory Accounts with Similar Policies

Growth of an initial investment
of $10,000, with reinvestment (1)

[LINE GRAPH]

MSCI
Calendar Far East HSBC
------------ ex Japan Asia-Pacific
Year Quarter (Free) Index Composite
---- ------- ------------ ------------
1987 4 $10,000 $10,000
1988 1 11,218 11,305
2 12,689 13,619
3 11,952 13,241
4 13,000 14,392
1989 1 14,770 17,465
2 13,976 17,685
3 15,984 21,884
4 17,177 22,144
1990 1 17,955 21,980
2 19,367 23,666
3 14,936 18,041
4 16,053 18,905
1991 1 19,912 22,440
2 19,449 22,512
3 19,113 22,262
4 21,026 23,268
1992 1 23,133 25,041
2 26,121 27,901
3 25,124 26,258
4 25,612 27,187
1993 1 28,013 29,713
2 31,447 32,702
3 35,627 36,574
4 52,092 53,756
1994 1 40,770 42,118
2 42,532 42,459
3 47,783 47,737
4 42,984 42,605
1995 1 42,455 42,218
2 46,467 46,921
3 45,735 46,653
4 46,787 47,875
1996 1 51,312 51,461
2 51,183 50,535

Average Annualized Returns One Three Five Inception Date Ten
Ended 6/30/96: Year Years Years of Index (3) Years
-------------------------- ------ ------ ------ -------------- ------
HSBC Asia-Pacific 7.70% 15.61% 17.55% 20.99% 21.81%
Composite (2)
MSCI Far East ex Japan 10.14% 17.61% 21.32% 21.18% n/a (3)
(Free) Index

(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
June 30, 1996, 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, excluding applicable sales charges.

(3) The unamanaged MSCI Far East ex Japan (Free) Index was created in January,
1988, and thus is not available for a ten year comparison.

<PAGE>
CRM MidCap Value Advisory Accounts with Similar Policies

Growth of an initial investment
of $10,000, with reinvestment (1)

[LINE GRAPH]

Calendar Russell CRM MidCap
------------ MidCap(tm) Value
Year Quarter Index Composite
---- ------- ---------- ----------
1986 2 $10,000 $10,000
3 9,292 9,056
4 9,569 9,189
1987 1 11,498 11,106
2 11,706 11,457
3 12,398 11,934
4 9,591 8,827
1988 1 10,762 10,050
2 11,542 10,971
3 11,435 11,088
4 11,490 11,494
1989 1 12,348 12,447
2 13,477 13,631
3 14,762 15,094
4 14,509 14,433
1990 1 13,947 13,388
2 14,463 14,339
3 11,595 11,452
4 12,841 12,344
1991 1 15,470 14,514
2 15,550 14,505
3 16,702 15,645
4 18,171 16,576
1992 1 18,454 17,684
2 18,415 17,423
3 19,132 17,582
4 21,140 19,898
1993 1 22,289 21,854
2 22,641 22,167
3 23,853 23,753
4 24,164 24,673
1994 1 23,449 23,600
2 22,942 23,258
3 24,247 25,024
4 23,658 24,109
1995 1 26,120 25,732
2 28,306 27,753
3 30,815 28,988
4 31,807 29,644
1996 1 33,722 32,097
2 34,673 34,312

Average Annualized Returns One Three Five Ten
Ended 6/30/96: Year Years Years Years
------------------------------ ------ ------ ------ ------
CRM MidCap Value Composite (2) 23.63% 15.68% 18.79% 13.18%
Russell MidCap(tm) Index 22.49% 15.26% 17.39% 13.24%

(1) The line graph shows the value of $10,000 invested on June 30, 1986, and
held through June 30, 1996 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, excluding applicable sales charges.

<PAGE>
Ark LargeCap Value Advisory Accounts with Similar Policies

Growth of an initial investment
of $10,000, with reinvestment (1)

[LINE GRAPH]

Calendar Standard Ark LargeCap
------------ & Poor's Value
Year Quarter 500 Index Composite
---- ------- --------- ------------
1986 2 $10,000 $10,000
3 9,305 9,410
4 9,806 10,000
1987 1 11,895 11,951
2 12,509 12,564
3 13,335 13,351
4 10,313 10,512
1988 1 10,906 11,265
2 11,619 11,982
3 11,662 12,249
4 12,015 12,512
1989 1 12,858 13,184
2 13,989 14,184
3 15,479 15,304
4 15,791 15,423
1990 1 15,308 15,279
2 16,273 16,124
3 14,027 13,883
4 15,287 15,441
1991 1 17,513 17,563
2 17,477 17,014
3 18,416 17,863
4 19,956 18,025
1992 1 19,447 18,355
2 19,829 18,956
3 20,444 19,559
4 21,489 20,940
1993 1 22,416 21,981
2 22,526 22,439
3 23,104 23,079
4 23,638 24,174
1994 1 22,738 23,621
2 22,827 24,254
3 23,949 25,029
4 23,952 24,421
1995 1 26,282 27,164
2 28,793 29,156
3 31,082 31,766
4 32,954 33,273
1996 1 34,723 36,438
2 36,282 37,215

Average Annualized Returns One Three Five Ten
Ended 6/30/96: Year Years Years Years
-------------------------------- ------ ------ ------ ------
Ark LargeCap Value Composite (2) 27.64% 18.37% 16.95% 14.10%
Standard & Poor's 500 Index 26.00% 17.21% 15.73% 13.79%

(1) The line graph shows the value of $10,000 invested on June 30, 1986, and
held through June 30, 1996 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, excluding applicable sales charges.

<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

11
<PAGE>
for the shares of comparable companies and what a 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

13
<PAGE>
Policies and Investment Techniques--Options on Securities' and '--Foreign
Currency Exchange Transactions' in the Statement of Additional Information.

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 in 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(TRADEMARK)

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 AUTOMATIC
MAXIMUM SALES DISTRIBUTION MAXIMUM 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 5.00% (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 in
excess of $250,000 and $1,000,000, 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.

<PAGE>
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.'

<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:

<TABLE>
<CAPTION>
YEAR OF
REDEMPTION
AFTER PURCHASE CDSC
- -------------------------- ----
<S> <C>
First..................... 5%
Second.................... 4%
Third..................... 3%
Fourth.................... 3%
Fifth..................... 2%
Sixth..................... 1%
Seventh and following..... 0%
</TABLE>

To determine the CDSC payable on redemptions of Class B shares, a Fund will
first redeem shares in accounts 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.

15
<PAGE>
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.

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)
('Rights of Accumulation'). 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
or the Statement of Additional Information 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 a
CDSC 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 may

16
<PAGE>
be waived for Class B Shares redeemed pursuant to a Systematic Withdrawal Plan,
up to a maximum of 12% per year of a shareholder's account value based on the
value of the account at the time the plan is established and annually
thereafter, provided all dividends and distributions are reinvested and the
total redemptions do not exceed 12% annually. In determining whether a CDSC is
applicable, it will be assumed that shares held in the shareholder's account
that are not subject to such charge are redeemed first.

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
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 of 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 90 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 90 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. 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. These
shareholders 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 broker-dealers or registered representatives thereof
or 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
America 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 any
Fund alone or in any combination of shares of any Fund plus Class A
shares of certain other Participating Funds as described herein under
'Pilgrim America Purchase Options(Trademark)--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 12 month period following the transaction.

8) Accounts as to which a banker or broker-dealer charges an account
management fee ('wrap accounts').

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.

17
<PAGE>
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
lodging) incurred by sales personnel 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.

In addition, the Distributor will, at its own expense, pay concessions in
addition to those described above to dealers that satisfy certain criteria
established from time to time by the Distributor. These conditions relate to
increasing sales of shares of the Funds over specified periods and to certain
other factors. These payments may, depending on the dealer's satisfaction of the
required conditions, be periodic and may be up to (1) 0.25% of the value of the
Funds' shares sold by the dealer during a particular period, and (2) 0.10% of
the value of the Funds' shares held by the dealer's customers for more than one
year, calculated on an annual basis.

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 each 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 0.35%, 1.00%, and
1.00%, respectively, of the average daily net assets of each of the Funds.
Currently, the Board of Directors has approved annual fees of 0.25%, 1.00%, and
0.75%, respectively, which are accrued daily and paid monthly. Of these amounts,
fees equal to an annual rate of 0.25% of the average daily net assets 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 0.75% 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 0.25% 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 0.25%, 0.25%, and 0.65% 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 on the anniversary date in the 1st month following the date of
purchase of Class M shares, and they cease upon exchange (or purchase) into
Pilgrim America Money Market Shares. The payments are also subject to the

continuation of the relevant distribution plan, the terms of service agreements
between dealers and the Distributor, and any applicable limits imposed by the
National Association of Securities Dealers, Inc.

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.

<PAGE>
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.

The Fund reserves the right to liquidate sufficient shares to recover annual
Transfer Agent fees should the investor fail to maintain his/her account value
at a minimum of $1,000.00 ($250.00 for IRA's).

<TABLE>
<CAPTION>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENT
- ------------------ -------------------------------------------------- --------------------------------------------------
<S> <C> <C>
By contacting your The minimum initial investment in a Fund is $1,000 The minimum for additional investment in a Fund is
Authorized Dealer ($250 for IRAs). $100.

Visit or consult an Authorized Dealer. Visit or consult your Authorized Dealer.

By mail Make your check payable to the Fund and mail it, Fill out the account additions form included on
along with a completed New Account Application, to the bottom of your account statement along with
the address indicated on the New Account your check payable to the Fund and mail them in
Application. Please indicate an Authorized Dealer the envelope provided with the account statement.
on the application. Remember to write your account number on the
check.

By wire Call the Pilgrim America Order Department at (800) Call the Pilgrim America Order Department at (800)
336-3436 to obtain an account number and indicate 336-3436 to obtain a wire reference number. Give
an Authorized Dealer on the account. Instruct your that number to your bank and have them wire the
bank to wire funds to the Fund in care of: funds in the same manner described under 'Initial
Investment.'
Investors Fiduciary Trust Co.
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
</TABLE>

The Funds and the Distributor reserve the right to reject any purchase order.

Please note third party checks will not be accepted.

The Manager reserves the right to waive the minimum investment amounts.

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<PAGE>
PRICE OF SHARES. Purchase, sale and exchange orders are effected at NAV for the
respective class of shares of each 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 Funds will not be issued
unless you request them in writing.

DETERMINATION OF NET ASSET VALUE. The NAV of each class of a 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 a
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 quotation in effect at
the time NAV is computed. The calculation of NAV for Masters Series may not take
place contemporareously 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. Master 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

20
<PAGE>
organizations. Investors Fiduciary Trust Company ('IFTC') acts as the custodian
under these plans. For further information, contact the Shareholder Servicing
Agent at (800) 331-1080. IFTC currently receives a $12.00 custodian fee annually
for maintenance of IRA accounts.

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. Master 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 Master Series and its Transfer Agent do not employ these
procedures, they may be liable for any losses due to unauthorized or fraudulent
telephone instructions. Telephone redemptions may be executed on all accounts
other than retirement accounts.

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. There is
no specific limit on exchange frequency; however, the Funds are intended for

long term investment and not as a trading vehicle. The Investment Manager
reserves the right to prohibit excessive exchanges (more than four per year).
The Investment Manager reserves the right, upon 60 days' prior notice, to
restrict the frequency of, otherwise modify, or impose charges of up to $5.00
upon exchanges. The total value of shares being exchanged must at least equal
the minimum investment requirement of the fund into which they are being
exchanged.

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
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 acquired may be legally
sold.

SYSTEMATIC EXCHANGE PRIVILEGE

Subject to the information and limitations outlined above, you may elect to have
a specified dollar amount of shares systematically exchanged, monthly,
quarterly, semi-annually or annually (on or about the 10th of the applicable
month), from your account to an identically registered account in the same class
of any other Pilgrim America Fund. The exchange privilege may be modified at any
time or terminated upon 60 days written notice to shareholders.

HOW TO REDEEM SHARES

Shares of each Fund will be redeemed at the NAV (less any applicable CDSC and/or
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.

<PAGE>
<TABLE>
<CAPTION>
METHOD PROCEDURES
- ------------------------ ----------------------------------------------------------------------------------------------------
<S> <C>
Redemption By Contacting Authorized Dealers may communicate redemption orders by wire or telephone to the Distributor. These
Your Authorized Dealer firms may charge for their services in connection with your redemption request but neither the Funds
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 an address which has been on record
with Pilgrim America for at least 60 days. 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. This option is not available for retirement accounts.
</TABLE>

SYSTEMATIC WITHDRAWAL PLAN. You may elect to have monthly, quarterly,
semi-annual 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 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 a Fund are redeemed under the
Plan, you may realize a capital gain or loss for income tax purposes. A
Systematic Withdrawal Plan may be modified at any time by the Fund or terminated
upon written notice by you or the relevant 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

22
<PAGE>
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, Master 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
Fund's 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 Equity Fund. These fees
are computed and accrued daily and paid 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 0.50% of the average
daily net assets of the Asia-Pacific Equity, MidCap Value and Large Cap Value
Funds, respectively.

23
<PAGE>
DISTRIBUTOR. In addition to providing for the expenses discussed above, the
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 will, 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 & TAXES

DIVIDENDS AND DISTRIBUTIONS. 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 that 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.

You 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 a Fund invested into a
Pilgrim America Fund which offers Class A, B or M shares. Both accounts must be
of the same class. If you are a shareholder of Pilgrim America Prime Rate Trust,
whose shares are not held in a broker or nominee account, you may, upon written
request, elect to have all dividends invested into a pre-existing Class A
account of any Pilgrim America Fund which offers Class A, B or M shares.
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.

24
<PAGE>
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 ordinary 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 a Fund's investment
income.

This is a brief summary of some of the tax laws that affect your investment in a
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 and current yield 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.

ADDITIONAL INFORMATION

MORE ABOUT MASTERS SERIES. 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.

25
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<PAGE>
[PILGRIM AMERICA FUNDS LOGO]

NEW ACCOUNT APPLICATION

SEND COMPLETED APPLICATION TO:
PILGRIM AMERICA FUNDS, P.O. BOX 419368, KANSAS CITY, MISSOURI 64141-6368

SECTIONS 1 THROUGH 6 MUST BE COMPLETED FOR YOUR ACCOUNT TO BE ESTABLISHED.
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1. ACCOUNT REGISTRATION

TYPE OF ACCOUNT
(Check one only)

/ / INDIVIDUAL

____________________ _______ ______________________ _______________________
First Name Middle Last Name Social Security Number*
Initial (first individual only)

/ / JOINT TENANT

_________________________ _______ _______________________________
Joint Tenant's First Name Middle Last Name
Initial

/ / GIFT/TRANSFER TO MINOR

_____________________________________________ _______________________________
Custodian's Name (one only) Minor's Name (one only)

/ / GUARDIANSHIP/CONSERVATORSHIP

_____________________________________________________ _______________________
Under Uniform Gift/Transfers to Minors Act of (State) Minor's Social Security
Number*

____________________________ _______________________ _______________________
Guardian/Conservator Ward/Incompetent or Ward/Incompetent or
Minor's Name (one only) Minor's Social Security
Number*

/ / CORPORATION, PARTNERSHIP, TRUST OR OTHER ORGANIZATION

_____________________________________________________ _______________________
Exact Name of Corporation, Partnership or Tax Identification
other Organization Number*

______________________________________________________________________________
Trustee Accounts Only: Name of all Trustees required by trust agreement to
sell/purchase shares

_______________ ____________________________________ _______________________
Date of Trust Name of Trust Tax Identification
Agreement 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 or Taxpayer Identification Number' box.
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2. MAILING ADDRESS

______________________________________________________________________________
Street Address Apartment City State Zip Code
Number

(___)_________________ (___)_________________
Business Phone Home Phone

27
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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, ACCOUNT MUST HAVE IDENTICAL
REGISTRATIONS, CLASS OF SHARES AND OPTIONS. IF NO CLASS OF SHARES IS SELECTED,
CLASS A SHARES WILL BE AUTOMATICALLY SELECTED.

FUND NAME AMOUNT CLASS OF SHARES (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)

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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 capital I request the payable
gains. distributions be: (Check one.)
/ / Pay all capital gains in cash and / / Sent to the address in
reinvest dividends. Section 2.
/ / Pay all dividends and capital gains. / / Directly deposited in my
(IF ANY PAY OPTION IS SELECTED, bank account. (Please attach
COMPLETE INFORMATION AT RIGHT) a avoided check to Section
6). If voided check is not
enclosed, will be sent to
address in Section 2.
/ / Sent to a special payee
listed in Section 9.

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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

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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 the
Exchange Privileges and Restrictions and How to Redeem Shares sections in the
Prospectus for procedures. I am of legal age. Sign below exactly as printed in
Section 1. 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 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.

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7. PURCHASE OPTIONS

REDUCED SALES CHARGE

/ / I qualify for Reduced Sales Charge with the account(s) listed below.
Included are the account numbers of all classes of shares of Pilgrim America
Funds that I or my immediate family (spouse and children under age 21) already
own.

_________________________________________________ _____________________________
Fund Name Account Number

29
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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.) I agree to the terms of the Letter of
Intent as set forth in the Prospectus and Statement of Additional
Information, and grant Pilgrim America Securities, Inc. a security
interest in the escrowed shares as set forth in the Statement of
Additional Information. I understand that I am not obligated to invest
an aggregate amount equal to the amount checked below, but if I do not,
Pilgrim America Securities, Inc. may deduct the amount of any sales
charge owed from the escrowed shares.

/ / 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
and Statement of Additional Information. 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

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PRE-AUTHORIZED INVESTMENT PLAN -- AUTOMATIC INVESTING

/ / I wish to invest on a monthly, quarterly, semi-annual or annual basis,
directly from my checking account into the following fund(s).
(PLEASE COMPLETE THE PRE-AUTHORIZED INVESTMENT PLAN AGREEMENT HEREIN AND
ATTACH A VOIDED CHECK TO SECTION 6.)

______________________ ___________________________ _______________________
Fund Name Fund Name Fund Name

Amount $___________, to start / / 5th or / / 20th of _______________, ____
Minimum $100 Month Year

/ / monthly / / quarterly / / semi-annual / / annual

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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. UNLESS YOU DECLINE THIS
PRIVILEGE BY CHECKING THE BOX BELOW, YOU WILL AUTOMATICALLY BE ASSIGNED IT.*

/ / I decline telephone exchange, and do not want this privilege. (See
Exchange Privileges and Restrictions section for procedures.)

- --------------------------------------------------------------------------------
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.

* Pilgrim America is authorized to act upon instructions received from you or
anyone other than yourself representing himself as acting as your
representative who can provide personal identification information as it
appears in Pilgrim America's records.

Pilgrim America will employ reasonable procedures to confirm that instructions
communicated over the telephone are genuine. The Funds and their agents will
not be liable for any loss, injury, damage, or expense incurred as a result of
instructions communicated by telephone reasonably believed to be genuine. By
accepting this privilege, you agree to hold the Funds and

30
<PAGE>
their agents harmless from any loss, claims, or liability arising from their
compliance with such instructions. Telephone exchange and expedited redemption
privileges are subject to the terms and conditions set forth in the Prospectus
and each Fund's Statement of Additional Information.

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SYSTEMATIC EXCHANGE PRIVILEGE

/ / I have at least $5,000 in my Pilgrim America ________________ Fund
account, for which no certificates have been issued and I would like to
exchange:

$______ (min. of $50) into the ________________ Fund, Account #_____________

on a / / monthly or / / quarterly basis starting in the month of ___________

(Systematic Exchange Privilege is only available within the same Class of
Shares)

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SYSTEMATIC WITHDRAWAL PLAN (SWP)

(Minimum account balance for a SWP is $10,000.)
(Class B SWP's are processed free of contingent deferred sales charge if 12%
or less of account value is redeemed on an annual basis.)

/ / 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
_________. (Withdrawal will occur about 5 business days prior to the end
of the month.)

/ / Sent to the payee listed in Section 9. To begin _____________ of
_________. (Withdrawal will occur about 5 business days prior to the end
of the month.)

/ / Directly deposited in my bank account. (Please attach a voided check to
Section 6.)
To begin _____________ of _________. (Withdrawal will occur about 5
business days prior to the end of the month.)

- --------------------------------------------------------------------------------
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

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THIS APPLICATION IS NOT A PART OF THE PROSPECTUS.

31
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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.
PilgrimAmerica 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
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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 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_______________________________________________________________________________

__________________________________________________________________________ 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__________________________________________________________

33
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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 FUNDS, P.O. BOX 419368,
KANSAS CITY, MISSOURI 64141-6368.

This New Account Application may not be used to open a qualified retirement plan
account 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.

35
<PAGE>
7 PILGRIM AMERICA PURCHASE OPTIONS(TRADEMARK)
- --------------------------------------------------------------------------------
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 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.

The Systematic Exchange Privilege allows you to automatically exchange shares of
one fund for shares of the same class of another fund in regular pre-determined
amounts and at regular pre-determined intervals.

The Systematic Withdrawal Plan allows you to automatically have a specific share
or dollar amount ($100 minimum) liquidated from your account monthly, quarterly,
semi-annually, 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 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).

<PAGE>
PILGRIM AMERICA FUNDS 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 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 and 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 ___________________________________________________________________

Name(s) ________________________________________________________________

________________________________________________________________________
(Please Print)

MAIL THE COMPLETED WAIVER FORM TO:
PILGRIM AMERICA FUNDS, 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 peron 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 ____________________
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 ______________________________

37
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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.

- ------------------------------------------ ------------------------------------
GUIDELINES FOR DETERMINING PROPER GIVE THE SOCIAL SECURITY
NUMBER 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
individuals(1)

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, minor person(3)
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 not
a legal or valid trust under state The actual owner(1)
law
8. Sole proprietorship account The owner(1)
- ------------------------------------------ ------------------------------------

(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.

- ------------------------------------------ ------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER OF--
- ------------------------------------------ ------------------------------------
9. A valid trust, estate or pension trust Legal entity (Do not furnish the
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 educational The organization
organization account

12. Partnership account held in the name The partnership
of the business

13. Association, club or other tax exempt The organization
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
- ------------------------------------------ ------------------------------------

<PAGE>

PILGRIM AMERICA MASTERS
SERIES, INC.

PILGRIM AMERICA MASTERS ASIA-PACIFIC [PILGRIM AMERICA
EQUITY FUND FUNDS LOGO]

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

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE FUNDS................................................... 1
PILGRIM AMERICA MASTERS SERIES AT A GLANCE.................. 2
SUMMARY OF EXPENSES......................................... 3
FINANCIAL HIGHLIGHTS........................................ 4
THE MANAGERS................................................ 5
Masters Series: Access to Private Money Managers.......... 5
The Investment Manager.................................... 5
The Portfolio Managers.................................... 5
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(Trademark)............... 14
Purchasing Shares......................................... 19
Exchange Privileges and Restrictions...................... 21
Systematic Exchange Privilege............................. 21
How to Redeem Shares...................................... 21
MANAGEMENT OF THE FUNDS..................................... 23
DIVIDENDS, DISTRIBUTIONS AND TAXES.......................... 24
PERFORMANCE INFORMATION..................................... 25
ADDITIONAL INFORMATION...................................... 25
NEW ACCOUNT APPLICATION..................................... 27
</TABLE>

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
OCTOBER 30, 1996