PASADENA INVESTMENT TRUST, 497, 1996-05-01

PASADENA INVESTMENT TRUST
497, 1996-05-01

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<PAGE>

RULE 497(e):
File Nos. 33-1922; 811-4506

[LOGO] THE PASADENA GROUP
OF MUTUAL FUNDS

TAKE TIME TO GROW-Registered Trademark-

PROSPECTUS

MAY 1, 1996

__________________________________________________

THE PASADENA
GROWTH
FUND-Registered Trademark-

________________

THE PASADENA
NIFTY FIFTY
FUND-Registered Trademark-
________________

THE PASADENA
BALANCED RETURN FUND-Registered Trademark-

__________________________________________________

MANAGED BY
ROGER ENGEMANN MANAGEMENT CO., INC.
600 NORTH ROSEMEAD BOULEVARD
PASADENA, CALIFORNIA 91107-2133
(800) 648-8050

DISTRIBUTED BY PASADENA FUND SERVICES, INC.

REMCO-043
<PAGE>

<TABLE>
<S> <C>
THE PASADENA GROUP THE PASADENA
OF MUTUAL FUNDS-Registered Trademark- GROWTH
[Logo] FUND-Registered Trademark-
THE PASADENA
NIFTY FIFTY
FUND-Registered Trademark-
THE PASADENA
BALANCED RETURN
FUND-Registered Trademark-
</TABLE>

THE PASADENA GROWTH FUND seeks to achieve long-term capital appreciation by
emphasizing investments in companies with rapidly growing earnings per share,
some of which may be smaller emerging growth companies.

THE PASADENA NIFTY FIFTY FUND seeks to achieve long-term capital
appreciation by investing in approximately 50 different securities which its
Manager believes offer the best potential for long-term growth of capital.

THE PASADENA BALANCED RETURN FUND seeks to maximize a total investment
return consistent with reasonable risk through a balanced approach using
moderate asset allocation by its Manager.

Roger Engemann Management Co., Inc. is the investment manager for the Funds.
Each Fund is a separate series of the Pasadena Investment Trust (the "Trust"),
and each offers three classes of shares (Class A, Class B and Class C shares).
See "Synopsis -- Purchase and Redemption of Shares" below. The minimum initial
investment for each Fund is $1,000 per account ($250 for individual retirement
and minor's custodial accounts and for initial purchases under a Systematic
Purchase Plan). Minimum subsequent investments are $50. See "Purchase of
Shares."

This Prospectus sets forth concisely the information about the Funds that a
prospective investor should know before investing. Please read it and retain it
for future reference. Additional information about the Funds and the Trust is
included in the Trust's Statement of Additional Information dated May 1, 1996,
as may be amended from time to time. The Statement of Additional Information,
which is incorporated by reference into this Prospectus, has been filed with the
Securities and Exchange Commission and is available without charge upon request
to the Trust at 600 North Rosemead Boulevard, Pasadena, California 91107-2133
(telephone: (818) 351-9686 or (800) 648-8050).

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

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.

PROSPECTUS MAY 1, 1996
<PAGE>
SYNOPSIS

The following synopsis is qualified in its entirety by the detailed
information contained elsewhere in this Prospectus or the Statement of
Additional Information.

THE FUNDS. The Pasadena Group of Mutual Funds consists of five separate
series of the Pasadena Investment Trust (the "Trust"), a Massachusetts business
trust, organized as a diversified, open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"). The three series (each a "Fund", and collectively the "Funds") described
in this single Prospectus are:

- The Pasadena Growth Fund (the "Growth Fund")

- The Pasadena Nifty Fifty Fund (the "Nifty Fifty Fund")

- The Pasadena Balanced Return Fund (the "Balanced Return Fund")

The fourth and fifth series of the Trust, The Pasadena Global Growth Fund
and The Pasadena Small & Mid-Cap Fund, are covered by separate Prospectuses.

THE MANAGER. Roger Engemann Management Co., Inc. (the "Manager") provides
investment advice to the Funds and manages the Funds' investments. The Manager's
annual management fee, which is computed and prorated daily, equals 1.00% of the
average daily net assets of each Fund up to $30 million, plus 0.80% of net
assets over $30 million up to $100 million, plus 0.60% of net assets over $100
million up to $500 million, plus 0.40% of net assets over $500 million. The
Manager also performs and/or assumes the expenses for all of the Funds'
administrative and most shareholder services, for which it receives an annual
administration fee equal to 1.05% of the average daily net assets of each Fund
up to $30 million, plus 0.85% over $30 million up to $100 million, plus 0.65%
over $100 million up to $500 million, plus 0.60% of net assets over $500
million. The combined rate of fees is higher than that paid by most investment
companies to their manager. However, the Funds will not incur any other expenses
in connection with their normal operations other than (i) a fee paid by each
class of shares to dealers and others for servicing shareholder accounts equal
to 0.25% per annum of the aggregate average daily net assets of each Fund
attributable to that class, and (ii) an ongoing distribution fee payable by
Class B and Class C shares at an annual rate of 0.75% of each Fund's average
daily net assets attributable to each such class. The management fee for each
Fund also is subject to a more restrictive limitation imposed by the law of a
state in which each Fund is registered to sell its shares. See "Management."

PURCHASE AND REDEMPTION OF SHARES. The Funds offer their shares
continuously and redeem their shares upon a shareholder's request. Each Fund
offers three classes of shares (each a "Class"). As of January 1, 1994, all of
the previously outstanding shares of each Fund were redesignated as Class A
shares without any other changes, and Class B and Class C shares became
available. Shares may be purchased through authorized investment dealers at the
public offering price next determined after the Fund's sub-transfer agent,
Boston Financial Data Services, Inc. (the "Sub-Transfer Agent"), the Fund, or
another authorized agent or subagent of the Fund, receives a purchase order. The
public offering price of the Class A shares is the net asset value per share
plus a maximum front-end sales charge of 5.50% of the offering price, reduced on
purchases of $50,000 or more. The public offering price of the Class B and Class
C shares is their net asset value per share. The Class B shares are subject to a
contingent deferred sales charge (sometimes referred to as the "CDSC") of up to
5% of the offering price imposed on most redemptions made within four years of
purchase. Orders for Class B and Class C shares of more than $100,000 per Fund
will not be accepted. For more information about the different purchase
arrangements, see "Alternative Purchase Arrangements." For more information
about the various expenses borne by each Class, see "Comparison of Classes" and
"Expense and Fee Tables."

The minimum initial investment is $1,000 per account ($250 for individual
retirement and minor's custodial accounts and for initial purchases under a
Systematic Purchase Plan). Minimum subsequent investments are $50. See "Purchase
of Shares."

2
<PAGE>
Shares are redeemed at their net asset value per share next determined after the
Sub-Transfer Agent, the applicable Fund, or another authorized agent or subagent
of the Fund, receives a redemption request in proper form (less the CDSC, if
any, with respect to the Class B shares). See "Redemption of Shares."

COMPARISON OF CLASSES.

The following table compares certain aspects relating to the purchase of
shares of the three Classes:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
--------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
Sales Charges.............. Initial sales charge at CDSC of 5% to 3% applies to No initial sales charge; no
time of investment of up to any shares redeemed within CDSC.
5.50%, depending on amount first four years following
of investment. their purchase; no CDSC
On investments of $1 after four years.
million or more, no initial
sales charge.
12b-1 Distribution Fee..... None. 0.75% for first six years. 0.75% each year. No
At the beginning of seventh conversion to Class A
year, Class B shares shares.
convert automatically to
Class A shares (with no
sales charge).
Service Fee................ 0.25% each year. 0.25% each year. 0.25% each year.
</TABLE>

RISKS. Every investment carries some market risk. An investment in the
Funds is subject to the risk that market prices or interest rates will not agree
with the Manager's estimation of fundamental security values or market trends.
The Funds are designed to be long-term investments. Therefore, because each
Fund's net asset value per share will fluctuate with daily changes in the market
prices of its portfolio securities, an investment in the Funds may not be
suitable for investors with specific short-term investment return needs. Each
Fund also may invest part of its assets in securities with special risks, such
as foreign securities and securities representing special situations. See
"Investment Objectives and Policies."

Shares of the Funds are not deposits or obligations of, or guaranteed or
endorsed by, any financial institution, and are not insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
Shares of the Funds involve investment risk, including possible loss of
principal.

EXPENSE AND FEE TABLES

Expenses are one of several factors to consider when investing in the Funds.
The purpose of the following tables is to provide an understanding of the
various costs and expenses that shareholders of each Class of each Fund will
bear directly or indirectly. Because Rule 12b-1 distribution charges are
accounted for on a Class-level basis (and not on an individual shareholder-level
basis), individual long-term investors in the Class B and Class C shares of a
Fund may over time pay more than the economic equivalent of the maximum
front-end sales charge permitted by the National Association of Securities
Dealers, Inc. ("NASD"), even though all shareholders of those Classes in the
aggregate will not. This is recognized and permitted by the NASD.

3
<PAGE>
GROWTH FUND

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
----------- ----------- -----------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on Purchases (as percentage of offering price).......... 5.50% None None
Maximum Sales Charge Imposed on Reinvestment of Distributions........................ None None None
Maximum Deferred Sales Charge........................................................ None 5.00% None
Redemption Fees*..................................................................... None None None
Exchange Fees........................................................................ None None None
ANNUAL FUND OPERATING EXPENSES:
Administration Fees.................................................................. 0.71% 0.71% 0.71%
Management Fees...................................................................... 0.66% 0.66% 0.66%
12b-1 Fees........................................................................... None 0.75% 0.75%
Service Fees......................................................................... 0.25% 0.25% 0.25%
--- --- ---
Total Fund Operating Expenses.................................................... 1.62% 2.37% 2.37%
--- --- ---
--- --- ---
</TABLE>

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

* A $10.00 fee may be charged for redemptions made by bank wire (see p. 20).

EXAMPLES

An investor would bear the following transaction and operating
expenses in each Class of the Growth Fund over different time
periods, assuming a $1,000 investment, a 5% annual return, and
redemption at the end of each time period:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
----------- ----------- -----------
<S> <C> <C> <C>
1 year............................................ $ 70 $ 74 $ 24
3 years........................................... 103 104 74
5 years........................................... 138 127 127
10 years........................................... 236 235** 271
</TABLE>

An investor would bear the following transaction and operating
expenses on the same $1,000 investment, assuming no redemption at
the end of each time period:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
----------- ----------- -----------
<S> <C> <C> <C>
1 year............................................ $ 70 $ 24 $ 24
3 years........................................... 103 74 74
5 years........................................... 138 127 127
10 years........................................... 236 235** 271
</TABLE>

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

** Ten-year figure assumes conversion of Class B shares to Class A shares at end
of sixth year following the date of purchase.

THE EXAMPLES SHOWN ABOVE SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR
FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
IN ADDITION, FEDERAL REGULATIONS REQUIRE THE EXAMPLE TO ASSUME A 5% ANNUAL
RETURN, BUT THE ACTUAL RETURN MAY BE HIGHER OR LOWER. SEE "PURCHASE OF SHARES"
AND "MANAGEMENT."

4
<PAGE>
NIFTY FIFTY FUND

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
----------- ----------- -----------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on Purchases (as percentage of offering price).......... 5.50% None None
Maximum Sales Charge Imposed on Reinvestment of Distributions........................ None None None
Maximum Deferred Sales Charge........................................................ None 5.00% None
Redemption Fees*..................................................................... None None None
Exchange Fees........................................................................ None None None
Annual Fund Operating Expenses:
Administration Fees.................................................................. 0.84% 0.84% 0.84%
Management Fees...................................................................... 0.78% 0.78% 0.78%
12b-1 Fees........................................................................... None 0.75% 0.75%
Service Fees......................................................................... 0.25% 0.25% 0.25%
--- --- ---
Total Fund Operating Expenses.................................................... 1.87% 2.62% 2.62%
--- --- ---
--- --- ---
</TABLE>

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

* A $10.00 fee may be charged for redemptions made by bank wire (see p. 20).

EXAMPLES

An investor would bear the following transaction and operating
expenses in each Class of the Nifty Fifty Fund over different time
periods, assuming a $1,000 investment, a 5% annual return, and
redemption at the end of each time period:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
----------- ----------- -----------
<S> <C> <C> <C>
1 year............................................ $ 73 $ 77 $ 27
3 years........................................... 110 111 81
5 years........................................... 150 139 139
10 years........................................... 262 261** 295
</TABLE>

An investor would bear the following transaction and operating
expenses on the same $1,000 investment, assuming no redemption at
the end of each time period:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
----------- ----------- -----------
<S> <C> <C> <C>
1 year............................................ $ 73 $ 27 $ 27
3 years........................................... 110 81 81
5 years........................................... 150 139 139
10 years........................................... 262 261** 295
</TABLE>

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

** Ten-year figure assumes conversion of Class B shares to Class A shares at end
of sixth year following the date of purchase.

5
<PAGE>
BALANCED RETURN FUND

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
----------- ----------- -----------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Charge Imposed on Purchases (as percentage of offering price).......... 5.50% None None
Maximum Sales Charge Imposed on Reinvestment of Distributions........................ None None None
Maximum Deferred Sales Charge........................................................ None 5.00% None
Redemption Fees*..................................................................... None None None
Exchange Fees........................................................................ None None None
ANNUAL FUND OPERATING EXPENSES:
Administration Fees.................................................................. 0.96% 0.96% 0.96%
Management Fees...................................................................... 0.90% 0.90% 0.90%
12b-1 Fees........................................................................... None 0.75% 0.75%
Service Fees......................................................................... 0.25% 0.25% 0.25%
--- --- ---
Total Fund Operating Expenses.................................................... 2.11% 2.86% 2.86%
--- --- ---
--- --- ---
</TABLE>

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

* A $10.00 fee may be charged for redemptions made by bank wire (see p. 20).

EXAMPLES

An investor would bear the following transaction and operating
expenses in each Class of the Balanced Return Fund over different
time periods, assuming a $1,000 investment, a 5% annual return,
and redemption at the end of each time period:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
----------- ----------- -----------
<S> <C> <C> <C>
1 year............................................ $ 75 $ 79 $ 29
3 years........................................... 117 119 89
5 years........................................... 162 151 151
10 years........................................... 286 284** 319
</TABLE>

An investor would bear the following transaction and operating
expenses on the same $1,000 investment, assuming no redemption at
the end of each time period:

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
----------- ----------- -----------
<S> <C> <C> <C>
1 year............................................ $ 75 $ 29 $ 29
3 years........................................... 117 89 89
5 years........................................... 162 151 151
10 years........................................... 286 284** 319
</TABLE>

- ------------------------
** Ten-year figure assumes conversion of Class B shares to Class A shares at end
of sixth year following the date of purchase.

6
<PAGE>
FINANCIAL HIGHLIGHTS

The following tables contain information for one Class A, Class B and Class
C share of beneficial interest outstanding throughout each indicated period for
each of the Funds since the inception of such Class for each Fund, which has
been audited by Coopers & Lybrand L.L.P., independent accountants. The
accountants' unqualified report for each of the periods ended December 31
(except for the initial period of the Growth Fund ended December 31, 1986 and
the years 1987, 1988, 1989 and 1990, the initial period of the Nifty Fifty Fund
ended December 31, 1990, and the initial period of the Balanced Return Fund
ended December 31, 1987 and the years 1988, 1989 and 1990) appears in the Funds'
Annual Report for the year ended December 31, 1995. The financial highlights
should be read in conjunction with the financial statements contained in the
Funds' Annual Report for the year ended December 31, 1995 which is incorporated
by reference in the Statement of Additional Information. The remaining data has
also been audited, but are not covered by the accountants' current report.
<TABLE>
<CAPTION>
THE PASADENA GROWTH FUND
----------------------------------------------------------------------------------------
FOR THE
YEAR
ENDED
DECEMBER
FOR THE YEAR ENDED DECEMBER 31, 31,
---------------------------------------------------------------------------- ---------
1995 1994 1993 1992
------------------------------- ------------------------------ --------- ---------
CLASS CLASS
CLASS A CLASS B CLASS C CLASS A B(2) C(2)
--------- -------- -------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value,
beginning of
period........... $ 15.40 $ 15.28 $ 15.28 $ 16.00 $15.89 $15.89 $ 17.00 $ 16.80
--------- -------- -------- --------- -------- ------- --------- ---------
Gain (Loss) from
Investment
Operations:
Net investment
loss(3).......... (.06) (.20) (.20) (.03) (.14) (.14) (.02) (.05)
Net realized and
unrealized gain
(loss) on
investments...... 4.24 4.21 4.21 (.57) (.47) (.47) (.98) .43
--------- -------- -------- --------- -------- ------- --------- ---------
Total gain (loss)
from investment
operations......... 4.18 4.01 4.01 (.60) (.61) (.61) (1.00) .38
--------- -------- -------- --------- -------- ------- --------- ---------
Less Distributions:
Distributions from
capital gains.... (.30) (.30) (.30) -- -- -- -- (.18)
--------- -------- -------- --------- -------- ------- --------- ---------
Total
distributions.... (.30) (.30) (.30) -- -- -- -- (.18)
--------- -------- -------- --------- -------- ------- --------- ---------
Net asset value, end
of period.......... $ 19.28 $ 18.99 $ 18.99 $ 15.40 $15.28 $15.28 $ 16.00 $ 17.00
--------- -------- -------- --------- -------- ------- --------- ---------
--------- -------- -------- --------- -------- ------- --------- ---------
Total Return(4)..... 27.16% 26.26% 26.26% (3.75)% (3.84)% (3.84)% (5.87)% 2.24%
Ratios/Supplemental
Data:
Net assets, end of
period (in
thousands)....... $ 415,416 $ 34,786 $ 20,497 $ 391,831 $11,349 $6,136 $ 532,208 $ 625,624
Ratio of net
expenses to
average net
assets........... 1.6% 2.4% 2.4% 1.6% 2.3% 2.3% 1.6% 1.6%
Ratio of net
investment loss
to average net
assets........... (.3)% (1.1)% (1.1)% (.2)% (1.0)% (1.0)% -- (.3)%
Portfolio turnover
rate............. 65.9% 65.9% 65.9% 53.8% 53.8% 53.8% 22.9% 24.5%

<CAPTION>
THE PASADENA GROWTH FUND
--------------------------------------------------------------
INCEPTION
(JUNE
24,
1986)
TO
DECEMBER
31,
1991(1) 1990(1) 1989(1) 1988(1) 1987(1) 1986(1)
--------- -------- -------- -------- -------- -------

<S> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value,
beginning of
period........... $ 10.04 $ 10.53 $ 8.41 $ 6.19 $ 6.99 $7.73
--------- -------- -------- -------- -------- -------
Gain (Loss) from
Investment
Operations:
Net investment
loss(3).......... (.08) (.09) (.04) -- (.06) (.01)
Net realized and
unrealized gain
(loss) on
investments...... 6.89 (.39) 3.19 2.22 (.74) (.70)
--------- -------- -------- -------- -------- -------
Total gain (loss)
from investment
operations......... 6.81 (.48) 3.15 2.22 (.80) (.71)
--------- -------- -------- -------- -------- -------
Less Distributions:
Distributions from
capital gains.... (.05) (.01) (1.03) -- -- (.03)
--------- -------- -------- -------- -------- -------
Total
distributions.... (.05) (.01) (1.03) -- -- (.03)
--------- -------- -------- -------- -------- -------
Net asset value, end
of period.......... $ 16.80 $ 10.04 $ 10.53 $ 8.41 $ 6.19 $6.99
--------- -------- -------- -------- -------- -------
--------- -------- -------- -------- -------- -------
Total Return(4)..... 67.83% (4.55)% 37.75% 35.78% (11.45)% (9.21)%
Ratios/Supplemental
Data:
Net assets, end of
period (in
thousands)....... $ 323,484 $ 80,639 $ 36,722 $ 18,049 $ 10,923 $7,379
Ratio of net
expenses to
average net
assets........... 1.8% 2.2% 1.8% 1.8% 2.0% 2.0%(5)
Ratio of net
investment loss
to average net
assets........... (.6)% (.9)% (.5)% -- (.9)% (.6)%(5)
Portfolio turnover
rate............. 23.5% 32.0% 93.8% 99.3% 114.5% 41.6%
</TABLE>

- ------------------------------
Footnotes on next page.

7
<PAGE>
<TABLE>
<CAPTION>
THE PASADENA NIFTY FIFTY FUND
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE
YEAR
ENDED
DECEMBER
FOR THE YEAR ENDED DECEMBER 31, 31,
------------------------------------------------------------------- ---------
1995 1994 1993
------------------------------- --------------------------------- ---------

<CAPTION>
CLASS CLASS
CLASS A CLASS B CLASS C CLASS A B(2) C(2)
--------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value,
beginning of period... $ 17.30 $ 17.17 $ 17.17 $ 17.12 $ 17.02 $ 17.02 $ 17.21
--------- -------- -------- --------- --------- --------- ---------
Gain (Loss) from
Investment Operations:
Net investment
loss(3)............... (.05) (.21) (.21) (.03) (.14) (.15) (.06)
Net realized and
unrealized gain (loss)
on investments........ 4.93 4.89 4.89 .21 .29 .30 (.03)
--------- -------- -------- --------- --------- --------- ---------
Total gain (loss) from
investment operations... 4.88 4.68 4.68 .18 .15 .15 (.09)
--------- -------- -------- --------- --------- --------- ---------
Less Distributions:
Distributions from
capital gains......... -- -- -- -- -- -- --
--------- -------- -------- --------- --------- --------- ---------
Total distributions.... -- -- -- -- -- -- --
--------- -------- -------- --------- --------- --------- ---------
Net asset value, end of
period.................. $ 22.18 $ 21.85 $ 21.85 $ 17.30 $ 17.17 $ 17.17 $ 17.12
--------- -------- -------- --------- --------- --------- ---------
--------- -------- -------- --------- --------- --------- ---------
Total Return(4).......... 28.21% 27.26% 27.26% 1.05% .88% .88% (.52)%
Ratios/Supplemental Data:
Net assets, end of
period (in
thousands)............ $ 122,322 $ 27,462 $ 15,105 $ 100,596 $ 6,722 $ 4,283 $ 134,284
Ratio of net expenses
to average net
assets................ 1.9% 2.6% 2.6% 1.9% 2.6% 2.6% 1.8%
Ratio of net investment
loss to average net
assets................ (.3)% (1.0)% (1.0)% (.2)% (.9)% (.9)% --
Portfolio turnover
rate.................. 26.5% 26.5% 26.5% 23.2% 23.2% 23.2% 2.2%

<CAPTION>
THE PASADENA NIFTY FIFTY FUND
------------------------------------
<S> <C> <C> <C>

INCEPTION
(DECEMBER 17,
1990) TO
DECEMBER 31,
1992 1991 1990
--------- -------- -------------

<S> <C> <C> <C>
Per Share Operating
Performance:
Net asset value,
beginning of period... $ 16.60 $ 9.97 $ 10.00
--------- -------- -------------
Gain (Loss) from
Investment Operations:
Net investment
loss(3)............... (.05) (.01) --
Net realized and
unrealized gain (loss)
on investments........ .66 6.74 (.03)
--------- -------- -------------
Total gain (loss) from
investment operations... .61 6.73 (.03)
--------- -------- -------------
Less Distributions:
Distributions from
capital gains......... -- (.10) --
--------- -------- -------------
Total distributions.... -- (.10) --
--------- -------- -------------
Net asset value, end of
period.................. $ 17.21 $ 16.60 $ 9.97
--------- -------- -------------
--------- -------- -------------
Total Return(4).......... 3.67% 67.64% (.37)%
Ratios/Supplemental Data:
Net assets, end of
period (in
thousands)............ $ 195,067 $ 64,156 $ 528
Ratio of net expenses
to average net
assets................ 1.9% 1.9% 1.2%(5)
Ratio of net investment
loss to average net
assets................ (.3)% (.1)% .4%(5)
Portfolio turnover
rate.................. 12.9% 27.6% .9%
</TABLE>
<TABLE>
<CAPTION>
THE PASADENA BALANCED RETURN FUND
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------
1995 1994 1993 1992
---------------------------- ---------------------------- -------- --------

<CAPTION>
CLASS CLASS
CLASS A CLASS B CLASS C CLASS A B(2) C(2)
-------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value,
beginning of period... $ 20.54 $ 20.49 $ 20.48 $ 21.97 $21.89 $21.89 $ 21.76 $ 20.95
-------- ------- ------- -------- ------- ------- -------- --------
Gain (Loss) from
Investment Operations:
Net investment
income(3)............. .27 .08 .07 .39 .26 .25 .32 .25
Net realized and
unrealized gain (loss)
on investments........ 5.31 5.29 5.30 (1.36) (1.32) (1.31) .21 .69
-------- ------- ------- -------- ------- ------- -------- --------
Total gain (loss) from
investment operations... 5.58 5.37 5.37 (.97) (1.06) (1.06) .53 .94
-------- ------- ------- -------- ------- ------- -------- --------
Less Distributions:
Dividends paid from net
investment income..... (.29) (.16) (.13) (.46) (.34) (.35) (.32) (.13)
Distributions from
capital gains......... (.44) (.44) (.44) -- -- -- -- --
-------- ------- ------- -------- ------- ------- -------- --------
Total distributions.... (.73) (.60) (.57) (.46) (.34) (.35) (.32) (.13)
-------- ------- ------- -------- ------- ------- -------- --------
Net asset value, end of
period.................. $ 25.39 $ 25.26 $ 25.28 $ 20.54 $20.49 $20.48 $ 21.97 $ 21.76
-------- ------- ------- -------- ------- ------- -------- --------
-------- ------- ------- -------- ------- ------- -------- --------
Total Return(4).......... 27.18% 26.20% 26.23% (4.43)% (4.85)% (4.85)% 2.44% 4.49%
Ratios/Supplemental Data:
Net assets, end of
period (in
thousands)............ $ 52,028 $ 2,721 $ 2,809 $ 53,047 $1,223 $1,449 $ 84,591 $ 75,143
Ratio of net expenses
to average net
assets................ 2.1% 2.9% 2.9% 2.1% 2.9% 2.9% 2.1% 2.3%
Ratio of net investment
income to average net
assets................ 1.2% .3% .3% 1.8% 1.3% 1.3% 1.5% 1.2%
Portfolio turnover
rate.................. 51.1% 51.1% 51.1% 28.2% 28.2% 28.2% 4.8% 6.3%

<CAPTION>
THE PASADENA BALANCED RETURN FUND
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCEPTION
(JUNE 8,
1987)
FOR THE YEAR ENDED DECEMBER 31, TO
-------------------------------------- DECEMBER 31,
1991 1990 1989 1988 1987
-------- ------- ------- ------- -------------

<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value,
beginning of period... $ 15.30 $ 15.91 $ 12.51 $ 11.50 $10.00
-------- ------- ------- ------- -------------
Gain (Loss) from
Investment Operations:
Net investment
income(3)............. .24 .16 .18 .13 .16
Net realized and
unrealized gain (loss)
on investments........ 5.70 (.25) 3.94 1.38 1.34
-------- ------- ------- ------- -------------
Total gain (loss) from
investment operations... 5.94 (.09) 4.12 1.51 1.50
-------- ------- ------- ------- -------------
Less Distributions:
Dividends paid from net
investment income..... (.16) (.19) (.19) (.41) --
Distributions from
capital gains......... (.13) (.33) (.53) (.09) --
-------- ------- ------- ------- -------------
Total distributions.... (.29) (.52) (.72) (.50) --
-------- ------- ------- ------- -------------
Net asset value, end of
period.................. $ 20.95 $ 15.30 $ 15.91 $ 12.51 $11.50
-------- ------- ------- ------- -------------
-------- ------- ------- ------- -------------
Total Return(4).......... 38.89% (.39)% 32.98% 13.42% 15.00%
Ratios/Supplemental Data:
Net assets, end of
period (in
thousands)............ $ 16,020 $ 5,001 $ 3,747 $ 1,924 $ 742
Ratio of net expenses
to average net
assets................ 2.5% 2.5% 2.1% 2.0% --%(5)
Ratio of net investment
income to average net
assets................ 1.3% 1.0% 1.5% 1.7% 5.3%(5)
Portfolio turnover
rate.................. 4.9% 35.8% 24.3% 30.6% 13.1%
</TABLE>

- ------------------------------
(1) All Growth Fund per share amounts for years prior to 1992 have been
restated to reflect the 2-for-1 share split effective September 30, 1991.

(2) The beginning Class B and Class C net asset value per share equals the net
asset value per share of the Class A shares as of January 3, 1994, the first
day Class B and Class C shares were sold.

(3) This information was prepared using the average number of shares
outstanding during each period.

(4) Total return measures the change in the value of an investment over the
periods indicated. It does not include the impact of paying any otherwise
applicable front-end or CDSC. Total return for periods of less than twelve
months have not been annualized.

(5) Annualized.

8
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES

INVESTMENT OBJECTIVES AND STRATEGIES

The investment objective of the Growth Fund and the Nifty Fifty Fund is
long-term capital appreciation. The investment objective of the Balanced Return
Fund is to maximize a total investment return consistent with reasonable risk.

The investment objective for each Fund is "fundamental," meaning that it
will not be changed without the approval of a majority of that Fund's voting
securities, as defined in the 1940 Act. There is, of course, no assurance that
any of the Funds will achieve its investment objective, although they will
always follow the investment strategies discussed below.

THE GROWTH FUND. The Growth Fund emphasizes the purchase of common stocks
of domestic corporations with rapidly growing earnings per share. Some of the
companies in its portfolio may be unseasoned, although others may be well-known
and established. Many of the companies in the Growth Fund's portfolio may have a
small capitalization (i.e., less than $500 million). The Growth Fund also
invests in stocks of companies that, although not growing rapidly, are
undervalued by other criteria of their fundamental net worth in the opinion of
the Manager. The volatility of its investment portfolio is likely to be greater
than that of the Standard & Poor's 500 Stock Index and greater than that of the
Balanced Return Fund. For this reason, the net asset value per share of the
Growth Fund may fluctuate substantially, and the Fund may not be appropriate for
short-term investors. Dividend and interest income received from portfolio
securities is largely incidental.

THE NIFTY FIFTY FUND. The Nifty Fifty Fund seeks its objective through
investment in approximately 50 different securities which the Manager believes
represent the best potential to achieve long-term growth of capital. Dividend
and interest income to be received from portfolio securities is largely
incidental.

Under normal market conditions, it is expected that at least 75% of the
Nifty Fifty Fund's assets will be invested in common stocks of high-quality
growth companies (i.e., companies which generally exceed $50 million in annual
net income) which, at the time of investment, would satisfy the applicable
listing requirements of the New York Stock Exchange with respect to demonstrated
earning power, years in operation, number of publicly held shares, and net
tangible assets.

It is expected that the remaining portion of the Nifty Fifty Fund's
investment portfolio will be invested in common stocks of corporations with
rapidly growing earnings per share or in common stocks of corporations that are
believed to be undervalued by other criteria used by the Manager. Some of these
companies may be unseasoned, although others may be well-known and established.
Many of the companies in this portion of the Nifty Fifty Fund's investment
portfolio may be considered small (i.e., less than $50 million in annual net
income), and the volatility of price movements of these securities and,
accordingly, the Fund's investment portfolio as a whole is likely to be greater
than that of the Standard & Poor's 500 Stock Index. For this reason, the net
asset value per share of the Nifty Fifty Fund may also fluctuate substantially,
and the Fund may not be appropriate for short-term investors.

While the Nifty Fifty Fund anticipates being fully invested at all times,
except for temporary defensive purposes, it may for short periods of time have
more or less than 50 different securities while it is establishing or
eliminating a particular position.

THE BALANCED RETURN FUND. The Balanced Return Fund seeks its objective
through a balanced approach using moderate asset allocation by its Manager
through investments in high-quality growth companies and U.S. Government
securities.

The Manager will shift its emphasis among equity and debt investments, as
well as among various industry sectors, as it may determine based upon financial
trends and changes in economic and market conditions. The balance between
equities and U.S. Government securities at any time will be within the Manager's
sole discretion. Under normal market conditions, the Fund expects to maintain at
least 25% of its net assets in U.S. Government securities.

While the Manager considers both the opportunity for gain and the risk of
loss in making investments, its intention is to provide capital appreciation
from equities, balanced by income and capital preservation from U.S. Government
securities, to achieve less volatility than a portfolio consisting solely of
equity securities. Using a balance of equities and U.S. Government

9
<PAGE>
securities, this Fund is expected, in the long run, to entail less investment
risk and volatility (and potentially less investment return) than a mutual fund
investing exclusively in common stocks. Of course, all fixed-income securities,
like common stocks, are subject to market risk and will fluctuate in value.

The Balanced Return Fund is a more conservatively managed fund than either
the Growth Fund or the Nifty Fifty Fund, and the Manager anticipates that the
volatility of price movement of the equity securities in its investment
portfolio generally will be less than that of the securities in the Standard &
Poor's 500 Stock Index. Although the Balanced Return Fund generally will invest
in the stocks of more well-established companies with larger capitalization,
many of which will be listed on the New York Stock Exchange, it may also invest
in the securities of companies listed on any exchange or traded in the
over-the-counter market.

INVESTMENTS. The Growth Fund's investments may also include preferred
stocks, warrants, convertible debt obligations and other debt obligations that,
in the Manager's opinion, offer the possibility of capital appreciation over the
course of approximately two or more years because of the timing of such
investments. In addition to the interest received from such debt instruments, if
interest rates fall these instruments are likely to increase in value.
Conversely, if interest rates rise a decrease in value can be expected. The
Growth Fund does not, however, anticipate investing a significant portion of its
total assets in such instruments.

The debt obligations which may be acquired by the Growth Fund include direct
and indirect obligations of the U.S. Government and its agencies, states and
municipalities and their agencies, or corporate issuers. Any corporate debt
obligations in which the Growth Fund may invest must be rated at least BBB or
Baa or better by national agencies, or, if unrated, are, in the Manager's
opinion, of equivalent investment quality. Securities which are rated "BBB" or
"Baa" are generally regarded as having an adequate capacity to pay interest and
repay principal in accordance with the terms of the obligation, but may have
some speculative characteristics. In addition, such securities are generally
more sensitive to changes in economic conditions than securities rated in the
higher categories, which tend to be more sensitive to interest rate changes. In
the event that the rating for any security held in the Growth Fund's portfolio
drops below "BBB" or "Baa," such change will be considered by the Fund's Manager
in evaluating the overall composition of the Fund's portfolio. See the Appendix
in the Statement of Additional Information.

The Nifty Fifty Fund may invest in the securities of companies listed on any
exchange or traded in the over-the-counter market, and is expected to invest
principally in common stocks. This Fund's investments may also include to a
limited extent preferred stocks, warrants, and convertible debt obligations, if
deemed appropriate by the Manager in meeting the Fund's objective.

The Funds may also (subject to the limitations described below) invest in
securities of unseasoned companies, foreign companies, and special situations.
Such securities often involve greater risks than investments in more established
domestic companies, primarily because they may be more likely to experience
unexpected fluctuations in price. See "Investment Policies" below for a further
discussion of the policies regarding investments in unseasoned companies,
foreign companies, and special situations. Because prices of common stocks and
other securities fluctuate, the value of an investment in each Fund will vary,
based upon each Fund's investment performance. Each Fund attempts to reduce its
overall exposure to risk from declines in individual securities by spreading its
investments over different companies and a variety of industries.

Like any investment program, an investment in any Fund entails certain
inherent risks. The stock market tends to be cyclical, with periods when stock
prices generally rise and periods when stock prices generally decline.
Investments in debt securities are also exposed to interest rate risk -- i.e.,
fluctuations in the market value of bonds due to changing interest rates.

Each Fund may generally purchase and sell securities without regard to the
length of time the security is to be held or has been held, subject to a limit
in the Internal Revenue Code on the amount of income that may be realized on the
sale of assets held for less than three months.This factor, together with the
adjustment of the investment portfolio whenever deemed advisable, may, from time
to time, result in a relatively high rate of portfolio turnover, which is
generally not anticipated to exceed 100%. For the fiscal years ended December
31, 1994 and 1995, the Growth Fund's portfolio turnover rate was 53.8% and
65.9%, respectively,

10
<PAGE>
the Balanced Return Fund's portfolio turnover rate was 28.2% and 51.1%,
respectively, and the Nifty Fifty Fund's portfolio turnover rate was 23.2% and
26.5%, respectively. (The portfolio turnover rate is computed by dividing the
lesser of total purchases or proceeds of sales effected during the period,
excluding short-term securities, by the monthly average of the value of
portfolio securities during that period.) High portfolio activity increases the
Fund's transaction costs, including brokerage commissions.

TEMPORARY DEFENSIVE INVESTMENTS. From time to time, depending on the
Manager's analysis of market and other considerations, all or any part of the
assets of the Funds may be held in cash and short-term money market instruments,
including obligations of the U.S. Government, high-quality commercial paper,
certificates of deposit, bankers' acceptances, bank interest-bearing demand
accounts, and repurchase agreements secured by U.S. Government securities. All
such investments will be made for temporary defensive purposes to protect
against the erosion of capital and pending investment in other securities. In
any repurchase transaction in which a Fund engages, the Fund's position during
the entire term of the repurchase agreement will be fully collateralized.

INVESTMENT POLICIES

In addition to the investment criteria described above, the Funds will
follow the investment policies set forth below which, unless otherwise indicated
as an operating policy, are fundamental policies that may not be changed without
prior shareholder approval as defined in the 1940 Act. References below to
certain percentages of the Fund's total assets mean the total assets at the time
the percentage is determined.

(a) DIVERSIFICATION OF INVESTMENTS.

With respect to at least 75% of each Fund's total assets, a Fund will not
invest more than 5% of its total assets in the securities of any one issuer,
other than obligations either issued or guaranteed by the U.S. Government or its
agencies or instrumentalities. This limitation does not apply with respect to
the remaining 25% of a Fund's total assets (except that neither the Growth Fund
nor the Balanced Return Fund will invest more than 10% of its total assets in
any one non-U.S. Government issuer).

(b) CONCENTRATION OF INVESTMENTS IN AN INDUSTRY

Each Fund will not invest more than 25% of its total assets in the
securities of issuers in any one industry.

With respect to at least 75% of each Fund's total assets, a Fund will not
acquire more than 10% of the outstanding voting securities of any one issuer.
This limitation does not apply with respect to the remaining 25% of a Fund's
total assets (except for the Growth Fund and the Balanced Return Fund which will
apply this limitation to 100% of their assets; and the holdings by the other
Funds in the Pasadena Group in the same issuer will be included for purposes of
this limitation.)

(d) FOREIGN SECURITIES.

As a matter of operating policy (which may be changed upon notice to
shareholders), the Funds may occasionally purchase foreign securities that are
listed on a principal foreign securities exchange or over-the-counter market, or
that are represented by Depositary Receipts (e.g., American, European, Global,
Continental, etc.) listed on a domestic securities exchange, or are traded in
the domestic over-the-counter market. However, each Fund anticipates that
foreign securities will not be a significant part of its portfolio and will be
acquired only when the Manager believes that the prospective return clearly
warrants the special risks of such investments. Such risks may include the
effect of foreign currency exchange rates, exchange control regulations, the
availability of possibly less public information, withholding taxes on dividends
or interest payments, and any political or social instability in the country of
origin. Each of the Funds will not invest more than 15% of its total assets in
foreign securities (subject to the aggregate limitations referred to below with
respect to the Nifty Fifty Fund and the Balanced Return Fund). The possible
benefits and special risks of foreign securities are described in the Statement
of Additional Information under "Investment Objectives and Policies."

(e) SPECIAL SITUATIONS.

As a matter of operating policy, the Funds may invest in special situations
which the Manager believes present opportunities for capital growth. A special
situation arises when, in the opinion of the Manager, the securities of a
particular company will,

11
<PAGE>
within a reasonable period of time, be accorded market recognition at an
appreciated value solely by reason of a development particularly or uniquely
applicable to that company and regardless of general business conditions or
movements of the market as a whole. Developments creating special situations
might include, among others, the following: liquidations, reorganizations,
recapitalizations, mergers or tender offers; material litigation or resolution
thereof; technological breakthroughs; and new management or management policies.
Investments by the Funds in special situations may not exceed 30% of each Fund's
total assets; such investments by the Nifty Fifty Fund and the Balanced Return
Fund are subject to the aggregate limitations referred to below.

(f) UNSEASONED COMPANIES.

As a matter of operating policy, the Funds may invest in securities of
unseasoned companies. The Manager regards a company as unseasoned when, for
example, it is relatively new to or not yet well established in its primary line
of business. Such companies generally are smaller and younger than companies
whose shares are traded on the major stock exchanges. Accordingly, their shares
are often traded over-the-counter and may not be as liquid as larger capitalized
companies. Also, their share prices may be more volatile than those of larger,
exchange-listed companies. In order to avoid undue risks, the Funds normally
will not purchase securities of any company with a record of fewer than three
years' continuous operation (including that of predecessors). Investments by the
Nifty Fifty Fund and the Balanced Return Fund in such securities may not exceed
5% and 30%, respectively, of each Fund's total assets, subject to the aggregate
limitations referred to below.

(g) WARRANTS.

As a matter of operating policy, each Fund will not invest more than 5% of
its net assets in warrants, subject to the restriction that not more than 2% may
be in warrants not listed on the New York or American Stock Exchanges. While any
warrants purchased by the Funds have a readily determined market value which
will generally move in correlation with the market price of the underlying
equity security, warrants nevertheless become worthless if they are not sold or
exercised prior to their predesignated expiration date.

(h) OTHER INVESTMENT RESTRICTIONS.

The investments by the Nifty Fifty Fund and the Balanced Return Fund in
securities of foreign companies, special situations, and unseasoned companies
may not in the aggregate exceed 35% of each Fund's total assets.

Each Fund has adopted additional restrictions, both fundamental and
operating, that prohibit or restrict certain investments or practices, including
the purchase of illiquid securities and securities of issuers in which officers
or trustees of the Trust or the Manager have certain interests, and the
borrowing of not more than 5% of its total assets for temporary or emergency
purposes. These additional restrictions are described in the Statement of
Additional Information under "Investment Objectives and Policies."

Each of the Funds has reserved the right, if approved by the Board of
Trustees, to convert in the future to a "feeder" fund which would invest all of
its assets in a "master" fund having substantially the same investment
objective, policies and restrictions as currently exist for the respective Fund.
Prior notice of any such action would be given to all shareholders if and when
such a proposal is approved, although no such action has been proposed as of the
date of this Prospectus.

ALTERNATIVE PURCHASE ARRANGEMENTS

Each Fund offers investors three Classes of shares which bear sales and
distribution charges in different forms and amounts:

CLASS A SHARES. An investor who purchases Class A shares pays a sales
charge up-front at the time of purchase of up to 5.50% of the public offering
price per share. Certain purchases of Class A shares may also qualify for
reduced sales charges, and purchases of $1 million or more are made at net asset
value with no sales charge. Class A shares are not subject to any charges when
they are redeemed, nor are they subject to a 12b-1 distribution fee.
Accordingly, Class A shares generally pay correspondingly higher dividends per
share, to the extent any dividends are paid, than Class B shares or Class C
shares. However,

12
<PAGE>
because initial sales charges are deducted at the time of purchase, investors
purchasing Class A shares would not have all of their funds invested initially
and, therefore, would initially own fewer shares. See "Purchase of Shares --
Initial Sales Charge Alternative -- Class A Shares."

CLASS B SHARES. Class B shares are sold without an initial sales charge,
but are subject to a contingent deferred sales charge ("CDSC") of up to 5% if
redeemed within four years of purchase. Class B shares are subject to a 12b-1
distribution fee at the annual rate of 0.75% of the average net assets
attributable to the Class B shares. Class B shares will automatically convert
into Class A shares, based on relative net asset values, at the beginning of the
seventh year after purchase. Class B shares provide an investor the benefit of
putting all of the investor's dollars to work from the time the investment is
made, but (until conversion into Class A shares which do not pay a 12b-1
distribution fee) will have a higher expense ratio and pay lower dividends than
Class A shares due to the Class B 12b-1 distribution fee. Pasadena Fund
Services, Inc. (the "Distributor") will pay out of its own resources to the
selling dealer a commission equal to 4 1/4% of the amount of the purchase. See
"Purchase of Shares -- Deferred Sales Charge Alternative -- Class B Shares."

CLASS C SHARES. Class C shares are sold without an initial sales charge or
a CDSC. Instead, investors pay- as-they-go in the form of an ongoing 12b-1
distribution fee at the annual rate of 0.75% of the average net assets
attributable to the Class C shares. Class C shares have no conversion feature,
and therefore purchasers of Class C shares should expect to pay the 12b-1 fee
distribution fee for as long as the shares are owned. The distribution fee paid
by Class C shares will cause them to have a higher expense ratio and to pay
lower dividends, to the extent any dividends are paid, than Class A shares. The
Distributor will pay out of its own resources to the selling dealer a commission
equal to 1% of the amount of the purchase. See "Purchase of Shares -- Pay-
As-You-Go Alternative -- Class C Shares."

WHICH PURCHASE ARRANGEMENT IS BETTER FOR YOU? The decision as to which
Class of shares provides a more suitable investment for a particular investor
depends on a number of factors, including the amount and intended length of the
investment, whether the investor wishes to receive distributions in cash or to
reinvest them in additional shares of a Fund, and other circumstances. Investors
making investments that qualify for reduced sales charges might consider Class A
shares. Investors who prefer not to pay an initial sales charge and who plan to
hold their investment for more than six years might consider Class B shares.
Investors who prefer not to pay an initial sales charge and who are not sure of
their intended holding period might consider Class C shares. To assist investors
in making this determination, the tables under the caption "Expense and Fee
Tables" show examples of the charges applicable to each Class of each Fund.
Orders for Class B or Class C shares for more than $100,000 per Fund will not be
accepted. Selling dealers and sales personnel may receive different compensation
depending on which Class of shares they sell.

PURCHASE OF SHARES

GENERAL

Shares of the Funds are offered continuously for purchase through investment
dealers at the public offering price next determined after a purchase order in
proper form is received by the Sub-Transfer Agent, the Funds, or another
authorized agent or subagent of the Fund. The public offering price is effective
for orders received by the Sub-Transfer Agent, the Funds, or another authorized
agent or subagent of the Fund, prior to the time of the next determination of
the applicable Fund's net asset value. Orders received after the time of the
next determination of the applicable Fund's net asset value will be entered at
the next calculated public offering price. When purchasing shares of a Fund, you
must specify whether you wish to purchase Class A, Class B or Class C shares. An
unspecified purchase order will be considered an order for Class A shares.

The public offering price per share is equal to the net asset value per
share, plus a sales charge in the case of Class A shares as described below.
Reduced sales charges apply to quantity purchases of Class A shares made at one
time by (i) an individual, (ii) members of a family (i.e., an individual, spouse
and children or grandchildren under age 21), or (iii) a trustee or fiduciary of
a single trust estate or a single fiduciary account. (See also "Rights of
Accumulation" below.) For Class B and Class C shares, the public offering price
is equal to the net asset value per share with no initial sales charge.

13
<PAGE>
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES

The public offering price of Class A shares for purchasers choosing the
initial sales charge alternative is the net asset value per share plus a sales
charge depending upon the amount purchased, as described in the following table:

<TABLE>
<CAPTION>
SALES CHARGE AS
PERCENTAGE OF
------------------------
PUBLIC NET DEALER COMMISSION
AMOUNT OF PURCHASE OFFERING AMOUNT AS PERCENTAGE OF
AT THE PUBLIC OFFERING PRICE PRICE INVESTED THE PUBLIC OFFERING PRICE
-------------------------- ----------- ----------- -------------------------------
<S> <C> <C> <C>
Less than $50,000....................................... 5.50% 5.82% 5.00%
$50,000 but less than $100,000.......................... 4.75% 4.99% 4.25%
$100,000 but less than $250,000......................... 3.75% 3.90% 3.25%
$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%
$1,000,000 or more...................................... None None 1.00%*
</TABLE>

- ------------------------------
* Paid by the Manager from its own resources as described below under "Purchase
at Net Asset Value -- Class A."

RIGHTS OF ACCUMULATION -- CLASS A

The reduced sales charges applicable to purchases of Class A shares apply on
a cumulative basis over any period of time. Thus, the value of all Class A
shares of the Funds owned by an investor (including the investor's own account,
IRA, spousal or other account), taken at the current net asset value, can be
combined with a current purchase of Class A shares of any Fund to determine the
rate of sales charge applicable to the current purchase. In order to receive the
cumulative quantity reduction, the existing Class A shares of all Funds held by
an investor must be called to the attention of the Distributor at the time of
the current purchase. Rights of accumulation are not available for purchases of
Class B or Class C shares.

LETTER OF INTENT -- CLASS A

An investor may qualify for an immediate reduced sales charge on a purchase
of Class A shares of any publicly-offered Fund by completing the Letter of
Intent section of the Investment Application (the "Letter of Intent"), in which
the investor states an intention to purchase during the next 13 months a
specified amount of Class A shares which, if made at one time, would qualify for
a reduced sales charge. Class A shares of any of the Funds acquired within 90
days prior to the first order under the Letter of Intent may be used to satisfy
the intended purchase amount. The terms of the Letter of Intent include
provisions granting a security interest to the Distributor in 5% of the amount
of the investor's total intended purchase to assure that the full applicable
sales charge will be paid if the investor does not complete the intended
purchase. A minimum initial investment equal to 5% of the total intended amount
is required in the Class A shares of one of the publicly-offered Funds.
Additional information regarding the Letter of Intent is provided in the
Statement of Additional Information. Letters of Intent are not available for
purchases of Class B or Class C shares.

PURCHASE AT NET ASSET VALUE -- CLASS A

Class A shares may be purchased at net asset value by officers, trustees,
directors and full time employees of the Trust, the Manager, the Distributor and
affiliates of such companies, by their family members, by investment advisory
clients of the Manager's affiliate, Roger Engemann & Associates, Inc. ("REA"),
who are participants in REA's "President's Circle" program, and their family
members, and by such other persons who are determined by the Trust's Board of
Trustees to have acquired such shares under special circumstances not involving
any sales expense to a Fund or the Distributor. Class A shares may also be
purchased at net asset value by registered broker-dealers and their affiliates,
by their registered personnel and employees and by their immediate family
members, in accordance with the internal policies and procedures of the
broker-dealer. Class A shares may also be acquired at net asset value by unit
trusts, insurance companies or other separate accounts, including accounts at
broker-dealers or advisers who provide additional consulting or asset allocation
services for the benefit of their clients and funds organized and offered
outside of the United States, which acquire and hold such shares of the Funds as
part of a program or separate offering being made by them.

14
<PAGE>
Class A shares may be purchased at net asset value with no sales charge by
investors who are existing Class A shareholders of any of the Funds if their
initial purchases (excluding shares of the Balanced Return Fund purchased at net
asset value during the special 1992 and 1993 offering periods) were made at net
asset value; purchases at net asset value apply only to purchases for
preexisting accounts and new accounts which are directly or indirectly
beneficially owned by such shareholder. Such sales are made with the
understanding by the purchaser that the purchase is made for investment purposes
and that the shares will not be transferred or resold except through redemption
or repurchase by or on behalf of the Fund. An investor must indicate eligibility
for this privilege at the time of the investment. The Manager or Distributor
may, in their discretion, waive the minimum initial investment requirements for
certain of these investors.

Class A shares may be purchased by any single purchaser at net asset value
with no sales charge in amounts of $1 million or more in one or more of The
Pasadena Group of Mutual Funds, and may also be purchased at net asset value by
employee benefit plans qualified under Section 401(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), including salary reduction plans
qualified under Section 401(k) of the Code, subject to minimum requirements with
respect to number of employees or amount of purchase, which may be established
from time to time by the Distributor. Currently, the Distributor has not
established any such minimum requirements. Employee benefit plans not qualified
under Section 401(a) of the Code may be afforded the same privilege if they meet
the above requirements as well as the uniform criteria for qualified groups, if
any, established by the Distributor from time to time to enable the Distributor
to realize economies of scale in its sales efforts and sales-related expenses.

Class A shares may also be purchased at net asset value by trust companies
and other financial institutions, and bank trust departments and fee-based
financial planners and investment advisors, for funds or accounts over which
they exercise exclusive discretionary investment authority and which are held in
a fiduciary, agency, advisory, custodial or similar capacity. Such purchases are
also subject to minimum requirements with respect to amount of purchase which
may be established by the Distributor from time to time. Currently, the
Distributor has not established any such minimum requirements. Such institutions
may charge their clients transaction or other fees connected with the purchase
of Fund shares. If an investment in Class A shares meeting the above-referenced
requirements is made through a dealer who has executed a dealer agreement with
respect to the Funds, the Manager may pay out of its own resources a one-time
fee to such dealers, as follows: 1% on purchases up through $2 million, plus
0.80% on the next $1 million, plus 0.20% on the next $2 million, and 0.10% on
the excess over $5 million. The entire amount of such fee will be paid following
settlement of each purchase. Such transactions must be brought to the attention
of the Distributor at the time of the initial investment. In lieu of this
one-time fee, the Manager may pay out of its own resources to dealers or other
persons who provide certain recordkeeping and administrative services related to
qualified employee benefit plans invested in the Funds, a continuing fee of up
to 0.20% per annum of the Funds' net assets represented by such investments.

DEFERRED SALES CHARGE ALTERNATIVE -- CLASS B SHARES
GENERAL. Investors choosing the deferred sales charge alternative may
purchase Class B shares of any Fund at net asset value per share without the
imposition of a sales charge at the time of purchase. The Class B shares are
being sold without an initial sales charge so that the Fund and the investor
will realize the effect of having the full amount of the investor's purchase
payment available for investment by the Fund.

Proceeds from the CDSC assessed on shares redeemed within four years from
the date of purchase will be paid to the Distributor and used in whole or in
part by the Distributor to defray its expenses in providing distribution-related
services to a Fund in connection with the sale of its Class B shares, such as
the payments of an up-front commission by the Distributor to selected dealers
and agents for selling Class B shares. The combination of the CDSC and the Class
B distribution fee facilitates the ability of the Funds to sell the Class B
shares without a sales charge being deducted at the time of purchase.

CONTINGENT DEFERRED SALES CHARGE. Class B shares which are redeemed within
four years of purchase will be subject to a CDSC at the rates set forth below
charged as a percentage of the dollar amount subject thereto. The charge will be
assessed on an amount equal to the lesser of the original cost of the shares
being redeemed or their net asset value at the time of redemption. Accordingly,
no sales charge will be imposed on increases in net asset value above the
initial purchase price. In addition, no sales charge will be assessed on shares
derived from reinvestment of dividends or capital gains distributions.

15
<PAGE>
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Class B shares until the time of
redemption of such shares (the "CDSC Period"), as described below:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE SUBJECT TO CHARGE
- ------------------------------------------------------------------------ -------------------
<S> <C>
First................................................................... 5.00%
Second.................................................................. 4.00%
Third................................................................... 3.00%
Fourth.................................................................. 3.00%
Fifth and Thereafter.................................................... None
</TABLE>

In determining whether a CDSC is applicable to a redemption of Class B
shares, the calculation will be determined in the manner that results in the
lowest rate being charged. Therefore, it will be assumed that the redemption is
first of any Class B shares representing capital appreciation, second of Class B
shares acquired pursuant to reinvestment of dividends or distributions, and
third of Class B shares held for the longest period of time.

To illustrate, assume an investor purchased 100 shares at $10 per share (at
a cost of $1,000) and during the second year after purchase, the net asset value
per share is $12 and, during such time, the investor has acquired 10 additional
shares through reinvestment of dividends. If the investor then makes his first
redemption of 50 shares (proceeds of $600), 10 shares will not be subject to the
CDSC because they were acquired through reinvestment of dividends. With respect
to the remaining 40 shares, the charge is applied only to the original cost of
$10 per share and not to the increase in net asset value of $2 per share.
Therefore, $400 of the $600 total redemption will be charged at a rate of 4%
(the applicable rate in the second year after purchase), for a total CDSC of
$16, which will be deducted from the redemption proceeds.

WAIVERS OF CONTINGENT DEFERRED SALES CHARGE. The CDSC is waived on
redemptions of shares (i) following the death or disability (as defined in
Section 72(m)(7) of the Code) of a shareholder if redemption is made within one
year of death or disability, (ii) to the extent that the redemption represents a
minimum required distribution from an individual retirement account or other
retirement plan to a shareholder who has attained the age of 70 1/2, (iii) made
under a Systematic Withdrawal Plan (as described below), with some limitations,
(iv) followed by a reinvestment in such shares effected within 60 days of the
redemption (this allows investors who redeemed or otherwise had second thoughts
about having redeemed their Class B shares to reinvest the proceeds in such
shares plus the amount of any CDSC previously paid), and (v) by tax-exempt
employee benefit plans resulting from the enactment of any law or the
promulgation by the Internal Revenue Service ("IRS") or the Department of Labor
of any regulation pursuant to which continuation of the investment in such
shares would be improper, subject to the Funds' right to require an opinion of
counsel to the effect that the continuation of such an investment would be
improper. Upon any reinvestment made in accordance with clause (iv) above, which
is a one-time privilege, the amount reinvested will be subject to the same CDSC
to which such amount was subject prior to the redemption, and the CDSC Period
with respect to the amount will continue to run from the original reinvestment
date, but will be extended by the number of days between the redemption and the
reinvestment dates.

CLASS B CONVERSION FEATURE. Class B shares include all shares purchased
pursuant to the deferred sales charge alternative which have been outstanding
for less than the period ending on the first business day of the month next
following the sixth anniversary of their purchase (the "Class B Holding
Period"). At the end of the Class B Holding Period, Class B shares will
automatically convert to Class A shares and will no longer be subject to the
Class B distribution fee. Such conversion will be on the basis of the relative
net asset values of the two Classes, without the imposition of any sales charge,
fee or other expense. The purpose of the conversion feature is to eliminate the
distribution fee paid by the holders of Class B shares that have been
outstanding for a period of time sufficient for the Distributor to have been
compensated for having incurred the initial distribution expenses related to
those Class B shares.

16
<PAGE>
For purposes of conversion to Class A shares, Class B shares purchased
through the reinvestment of dividends and distributions paid in respect of Class
B shares in a shareholder's account will be considered to be held in a separate
sub-account. Each time any Class B shares in the shareholder's account (other
than those in the sub-account) convert to Class A, a pro rata portion of the
Class B shares in the sub-account will also convert to Class A shares.

Conversion of Class B shares to Class A shares is subject to the continuing
availability of a ruling of the IRS or an opinion of counsel to the effect that
(i) payment of different dividends on Class A and Class B shares does not result
in a Fund's dividends or distributions constituting "preferential dividends"
under the Code, and (ii) the conversion of shares does not constitute a taxable
event under federal income tax law. The conversion of Class B shares to Class A
shares may be suspended if such a ruling or opinion is no longer available. In
that event, no further conversions of Class B shares would occur, and the Class
B shares might continue to be subject to the distribution fee for as long as the
shares are owned, which may extend beyond the Class B Holding Period.

PAY-AS-YOU-GO ALTERNATIVE -- CLASS C SHARES

Investors choosing the pay-as-you-go alternative purchase Class C shares at
the net asset value per share without the imposition of a sales charge either at
the time of purchase or upon redemption. Class C shares are sold without an
initial sales charge so that the Fund will receive the full amount of the
investor's purchase payment and without a CDSC so that the investor will receive
as proceeds upon redemption the entire net asset value of his or her Class C
shares. The continuing 12b-1 distribution fee, which the Distributor intends to
reallow to the selling dealer in addition to an up-front commission paid by the
Distributor from its own resources, enables the Fund to sell Class C shares
without either an initial or CDSC. Class C shares redeemed within the first
twelve months after their purchase may not be repurchased by the same investor
until at least twelve months have elapsed from the date of their redemption.
Class C shares do not convert to any other Class of shares of the Fund, and will
thus have a higher expense ratio and pay correspondingly lower dividends, if
any, than Class A shares.

PURCHASE PROCEDURE

The principal underwriter and distributor for the shares of the Funds is
Pasadena Fund Services, Inc., 600 North Rosemead Boulevard, Pasadena, California
91107-2133 (the "Distributor"). Generally, shares may be purchased only through
investment dealers that have selling agreements with the Distributor. It is the
responsibility of such investment dealers to transmit orders so they will be
received by the Distributor, in care of the Sub-Transfer Agent, on a timely
basis. Orders placed with dealers prior to that day's determination of the
applicable Fund's offering price must be received by the Distributor (c/o the
Sub-Transfer Agent) prior to its close of business on the same day.

Investment applications, accompanied by a check, in U.S. dollars, payable to
the "Pasadena Group of Mutual Funds," should be sent by the investment dealer to
the Distributor in care of the Sub-Transfer Agent, at P.O. Box 8505, Boston,
Massachusetts 02266-8505. No subscriptions will be accepted without payment.
Third party checks will only be accepted if they are payable to an existing
shareholder of the Fund who is an individual and if they are endorsed over to
the Pasadena Group of Mutual Funds. When purchases are made by check or periodic
automatic investment, redemptions will not be allowed until the investment being
redeemed has been in the account for at least 15 calendar days. For direct
purchases by an investment dealer for its client, payment for the shares
purchased must be made by the investor directly to the dealer. Full and
fractional shares will be issued for the amount of the purchase. Purchase orders
must specify which Class of each Fund are being purchased, or they will be
deemed orders for the purchase of Class A shares.

The minimum initial investment for each Fund is $1,000 per account ($250 for
individual retirement accounts and custodial accounts for minors under the
Uniform Transfers to Minors Act and for the initial purchase under a Systematic
Purchase Plan). Minimum additional investments are $50. The Distributor may, in
its discretion, waive the minimum investment requirements for 401(k), 403(b),
employee benefit or other systematic or periodic purchase plans.

The Funds and the Distributor each reserve the right in its sole discretion
to reject any purchase order in whole or in part, and may suspend the offering
of each Fund's shares at any time. For investors wishing to purchase shares by
wire, please call the Funds or your investment dealer for information on the
procedures to be followed.

17
<PAGE>
SHAREHOLDERS' OPEN ACCOUNTS

When an investor purchases shares in a Fund, the appropriate Fund opens a
Shareholder's Open Account for that investor or for the investment dealer
holding the Fund's shares for the investor. Any additional shares purchased are
likewise credited to the Shareholder's Open Account.

The Funds maintain a continuous permanent record of each Shareholder's Open
Account and send a written statement of every transaction in the account,
including information concerning the status of the account. These statements
provide an annual record of investments in shares of each Fund, which are held
for the shareholder in uncertificated form by the appropriate Fund's transfer
agent. No share certificates are issued.

SYSTEMATIC PURCHASE PLAN

Under the Funds' Systematic Purchase Plan, an investor may arrange to make
additional purchases (minimum $50) of Fund shares automatically on a monthly
basis by electronic funds transfer from the shareholder's checking account if
the bank which maintains the account is a member of the Automated Clearing
House, or by preauthorized checks drawn on the shareholder's bank account. A
shareholder may, of course, terminate the program at any time. Investors may
obtain more information concerning this program, including the application form,
from their investment dealer or the Funds.

The market value of the shares of each Fund is subject to fluctuation.
Before undertaking any plan for systematic investment, the investor should keep
in mind that such a program does not assure a profit or protect against a loss.

RETIREMENT PLANS

Individuals may purchase shares of the Funds through an Individual
Retirement Account Plan ("IRA") available from the Funds or through other
established retirement plans. An IRA using the trust account maintained by
Pasadena National Trust Company, an affiliate of the Manager, is available with
no separate fees.

PURCHASING SHARES

<TABLE>
<CAPTION>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
<S> <C> <C>
By mail See "Purchase Procedures" for $50 minimum for subsequent
initial minimum requirements. purchases. Complete the form at the
Complete account application in its bottom of a recent account
entirety, sign and return with your statement, make your check payable
check made payable to the Pasadena to the Pasadena Group of Mutual
Group of Mutual Funds to the address Funds, write your account number on
listed on the account application. the check and mail in the envelope
provided with your account
statement.
By wire Not currently available Instruct your bank to wire funds to:
State Street Bank and Trust
Boston, MA
ABA #011000028
DDA #99046526
Also reference:
-- Name of Pasadena Fund
specifying Class A, B or C
shares
-- Fund account number
By contacting your Visit any investment dealer who is Mail directly to your investment
investment dealer registered in the state where the dealer's address printed on your
purchase is made and who has a sales account statements, or to the
agreement with Pasadena Fund Sub-Transfer Agent at P.O. Box 8505,
Services, Inc. Boston, MA 02266-8505
</TABLE>

18
<PAGE>
EXCHANGE PRIVILEGE
GENERAL. Shares of a specific Class of one Fund may only be exchanged for
shares of that same Class of another Fund. Such exchanges will be on the basis
of the shares' relative net asset values (with no sales charge, exchange fee or
CDSC at the time of the exchange). Shares of one Fund may not be exchanged for
shares of another Fund unless the amount exchanged satisfies the minimum
investment requirement of the other Fund. Exchange instructions may be given to
the Funds in writing in care of the Sub-Transfer Agent, P.O. Box 8505, Boston,
Massachusetts 02266-8505, or to the Pasadena Group Service Center by telephone
at 800-648-8050. Exchanges, which involve the redemption of shares of one Fund
and the purchase of shares of another Fund, may only be made in states where
shares of the Funds are qualified for sale, and investors should note that an
exchange may result in recognition of a gain or loss for income tax purposes.
Exchange privileges may be modified or suspended by the Funds upon 60 days'
prior notice to shareholders.

For purposes of computing both (i) the time remaining before Class B shares
of a Fund ("new Class B Shares") acquired through an exchange for Class B shares
of another Fund ("original Class B Shares") convert to Class A shares of that
Fund and (ii) the CDSC payable upon disposition of the new Class B shares, the
holding period for the original Class B shares is added to the holding period of
the new Class B shares.

TELEPHONE EXCHANGE PRIVILEGE. Shareholders will be deemed to have elected
the telephone exchange privilege unless they indicate to the contrary by marking
the appropriate section of the Investment Application included with this
Prospectus. By electing the telephone exchange privilege, shareholders authorize
the Funds to act upon instructions by telephone to exchange shares from the Fund
account for which such service has been authorized. (See "Telephone Redemption
Privilege" below for information regarding the use of telephone authorizations.)

GENERAL

Class A shares of the Funds may, on a one-time only basis by any
shareholder, be repurchased at the then current net asset value with no
front-end sales charge up to the amount of any redemption of such shares by the
shareholder within the prior 60-day period. Shares of the Funds may also be sold
in foreign jurisdictions through financial institutions and intermediaries at
their current net asset value plus a sales charge or commission which is
different from those described in this Prospectus. Telephone orders from dealers
and requests for information from dealers or investors will be recorded for the
protection of the Funds.

The Distributor, at its expense, will from time to time also provide
additional compensation to dealers who sell shares of the publicly-offered
funds. Compensation may include financial assistance to dealers in connection
with conferences, sales training or promotional programs for their employees,
seminars for the public, advertising campaigns regarding one or more of the
publicly-offered funds in The Pasadena Group of Mutual Funds and/or other
dealer-sponsored special events. In some instances, this compensation will be
made available only to dealers whose representatives have sold or are expected
to sell significant amounts of such shares. Dealers may not use sales of a
publicly-offered fund's shares to qualify for this compensation to the extent
such may be prohibited by the laws or regulations of any state or any
self-regulatory agency, such as the NASD. Compensation may include payment for
travel expenses, including lodging at luxury resorts, incurred in connection
with trips taken by invited registered representatives and members of their
families to locations within or outside of the United States for meetings or
seminars of a business nature.

REDEMPTION OF SHARES

GENERAL

The Funds will redeem all or any portion of a shareholder's account when
requested, subject to the prior collection by the Funds' custodian of the
purchase price of the shares being redeemed. Except for any CDSC which may be
applicable to redemptions of Class B shares, there is no redemption charge, and
the redemption price will be the net asset value per share next determined after
receipt in proper form of the redemption request by the Sub-Transfer Agent, the
Funds, or another authorized agent or subagent of the Fund. See "Determination
of Net Asset Value."

19
<PAGE>
Shareholders may redeem shares by sending a signed request for redemption to
their investment dealer or to the Funds c/o Boston Financial Data Services, Inc.
at P.O. Box 8505, Boston, Massachusetts 02266-8505. If an investor owns more
than one Class of shares in a Fund, the redemption request must specify which
Class is being redeemed. Absent such specification, the investor's shares will
be redeemed in the following order: first, Class C shares; second, Class A
shares; and third, Class B shares.

The signature on the redemption request must be guaranteed by an eligible
guarantor institution, unless the proceeds are less than $50,000 and are payable
to the shareholder and sent to the shareholder's current address on the Fund's
records (provided that the shareholder's address of record has not been changed
within the preceding 30 days) or directly to a predesignated bank account (see
below). Corporations, partnerships, trusts and other fiduciaries may be required
to furnish further documentation, such as certified copies of trust documents,
corporate resolutions, or tax waivers for redemption purposes. Investment
dealers holding shares of a Fund for the account of their clients may also
require the Fund to repurchase such shares at the next determined net asset
value (less the CDSC, if any, with respect to the Class B shares).

Because of the expense of maintaining small accounts, the Fund, at its
option, may redeem accounts with a market value of $800 or less as a result of
redemptions, after prior written notice of at least 60 days to provide the
shareholder an opportunity to purchase sufficient additional shares to bring the
account up to a value of at least $1,000 ($200 and $250, respectively, for
accounts requiring an initial minimum investment of $250).

WIRE TRANSFERS

A wire transfer procedure is available for redemptions made directly through
the Funds, which permits the proceeds of a redemption of a Fund's shares to be
wired to a designated bank account by the second business day following the
redemption. A shareholder desiring to redeem shares by this procedure must
provide the Sub-Transfer Agent with a written authorization, including specific
bank account information, which instructs the Sub-Transfer Agent to honor wire
redemption requests. (Please see Sections 10 and 11 of the Investment
Application in this Prospectus.) A fee of $10 may be deducted from the proceeds
of each redemption to cover the costs of the wire transfer. This privilege may
be modified or terminated at any time by the Funds or the Sub-Transfer Agent
upon notice to shareholders.

TELEPHONE REDEMPTION PRIVILEGE

Shareholders will be deemed to have elected the telephone redemption
privilege unless they indicate to the contrary by marking the appropriate
section of the Investment Application included with this Prospectus. By electing
the telephone redemption privilege, shareholders authorize the Funds and the
Sub-Transfer Agent to act upon instructions by telephone, which are reasonably
believed to be genuine, to redeem shares from the Fund account for which such
service has been authorized and, in the case of wire redemptions, to transfer
the proceeds to the bank or other account designated in the prior authorization.
Shareholders agree that neither the Funds nor the Sub-Transfer Agent will be
liable for any loss, expense or cost suffered or incurred by shareholders
arising out of any telephone redemption or exchange request, including any
fraudulent or unauthorized requests, if reasonable procedures are followed. In
an effort to confirm that telephone requests are genuine, the Funds employ
reasonable procedures, which include requesting the taxpayer identification
number and other information known only to the shareholder, and recording the
telephone instructions.

SYSTEMATIC WITHDRAWAL PLAN

Under a Systematic Withdrawal Plan, a shareholder with an account value in
one of the Funds of $10,000 or more may receive (or send to a third party)
periodic payments of $100 or more from the shareholder's account in that Fund on
a monthly or quarterly basis. (Minimum account value for quarterly withdrawals
is $5,000.) Shares of the applicable Class of the applicable Fund will be
redeemed as necessary in order to meet withdrawal payments. Dividends and
distributions on shares of a Class held in a Systematic Withdrawal Plan account
will be reinvested in additional shares of the same Class at net asset value. A
Class B shareholder may withdraw under a Plan up to 12% annually of the
shareholder's initial account balance of Class B shares of any Fund without
incurring a CDSC on the redemptions. The initial account balance is the amount
of the shareholder's investment in the Class B shares of a Fund on the date that
the shareholder established the Systematic Withdrawal Plan for those Class B
shares.

20
<PAGE>
Purchases of additional Class A shares concurrently with periodic
withdrawals from the shareholder's account may be disadvantageous because of
sales charges applied when purchases of Class A shares are made. Purchases of
additional shares of any Class concurrently with withdrawals from the
shareholder's account may also be disadvantageous because some or all of any
loss on redemption of any Class may be disallowed under certain "wash sales"
rules for federal income tax purposes. While a Systematic Withdrawal Plan is in
effect, each additional purchase of the applicable Fund's shares must be equal
to at least three times the scheduled annual withdrawals or $5,000, whichever is
less. Shareholders should recognize that, to the extent withdrawals exceed
purchases plus any dividends and distributions reinvested, the value of their
account will be reduced and ultimately may be exhausted. Each withdrawal may
result in gain or loss for federal or state income tax purposes.

To initiate a Systematic Withdrawal Plan, a shareholder should complete the
authorization section of the Investment Application included in this Prospectus.
The Funds and the Sub-Transfer Agent reserve the right to modify or terminate
this privilege at any time upon notice to the shareholder, and the Plan will
terminate automatically if the value of the shareholder's shares in the Fund is
reduced below $800, or upon the Fund's receipt of notification of the death or
incapacity of the shareholder.

REDEEMING SHARES

<TABLE>
<CAPTION>
METHOD PROCEDURE
<S> <C>
By writing to The Pasadena Group of Send a letter of instruction specifying the name of
Mutual Funds c/o the Sub-Transfer the Fund, the number of shares or dollar amount to
Agent, P.O. Box 8505, Boston, be sold, your name and account number. For
Massachusetts 02266-8505 redemptions over $50,000, and for certain
redemptions of $50,000 or less (trusts,
corporations, partnerships and retirement plans),
additional documentation may be required and your
signature must be guaranteed by a bank, savings
association, credit union, or member firm of a
domestic stock exchange or the National Association
of Securities Dealers, Inc., that is an eligible
guarantor institution. Your should verify with the
institution that it is an eligible guarantor prior
to signing. Notarization by a Notary Public is not
an acceptable signature guarantee.
By contacting your investment dealer If you redeem shares through your investment dealer,
you may be charged for this service. Shares held for
you in your investment dealer's street name must be
redeemed through the dealer.
By telephone-contact one of our Mutual If you have previously authorized telephone
Fund Representatives at (800) 648-8050 privileges on your account application, you may
redeem up to $50,000 per account over the telephone,
provided the check is made payable to the
shareholder(s) of record and is sent to the address
of record (the address must have been in effect for
at least 30 days prior to the redemption). Certain
accounts cannot be processed over the telephone
(trusts, corporations, partnerships and retirement
plans) since additional documentation may be
required.
By wire Any redemption request that has been received in
proper order, may be wired to the shareholder(s)
bank provided the information has been previously
placed in the computer, or if accompanied by a
signature guaranteed letter requesting that funds be
wired. A fee of $10 may be deducted from the
proceeds of each redemption to cover the costs of
the wire transfer.
</TABLE>

21
<PAGE>
MANAGEMENT

The Board of Trustees of the Trust oversees the business and affairs of the
Funds and exercises all powers normally associated with running a business. The
Board has delegated the management and administration of the Funds' day-to-day
operations to the Trust's officers and the Manager.

INVESTMENT MANAGEMENT AND ADMINISTRATIVE SERVICES

The Manager is Roger Engemann Management Co., Inc., a California corporation
whose office is located at 600 North Rosemead Boulevard, Pasadena, California
91107-2138. The Manager's telephone numbers are (818) 351-9686 and (800)
882-2855 (toll-free).

Roger Engemann & Associates, Inc. ("REA"), which is a wholly-owned
subsidiary of Pasadena Capital Corporation, owns 93.5% of the Manager's capital
stock. Roger Engemann, controlling shareholder of Pasadena Capital Corporation,
is the Chairman of the Board and President of REA, the Manager and the Trust.
REA has been engaged in the investment management business since 1969, and
provides investment counseling services to retirement plans, colleges,
corporations, trusts and individuals. The portfolio managers, research analysts
and supporting staff are substantially the same for both the Manager and REA.
Combined assets under management by the Manager and REA as of December 31, 1995
were approximately $4.4 billion.

Roger Engemann, James E. Mair and John S. Tilson are primarily responsible
for the day-to-day investment management of the Funds, and have been from each
Fund's inception. Mr. Engemann has been President of the Manager since its
organization in 1985, and has been President of REA since its inception in 1969.
Messrs. Mair and Tilson are both Executive Vice Presidents and Managing
Directors of Portfolio Management of the Manager, and both have been with the
Manager since 1985 and with REA since 1983. Messrs. Engemann and Mair have been
Chartered Financial Analysts ("CFAs") since 1972, and Mr. Tilson has been a CFA
since 1974.

The Manager serves under an investment management agreement (the "Management
Agreement") with the Funds. Under the Management Agreement, the Manager
furnishes investment advice and investment management services with respect to
each Fund's portfolio of securities and investments, provides personnel, office
space, facilities and equipment as may be needed by the Funds in their
day-to-day operations, and provides the officers of the Trust. The Manager also
provides the Funds with fund accounting, including assistance and personnel
necessary to price the portfolio securities of each Fund, calculates each Fund's
net asset value, and maintains the books and records of each Funds' investment
portfolio as required by applicable law. The Manager also performs, under an
administration agreement (the "Administration Agreement"), all of the
administrative and shareholder servicing for each Fund and pays for all other
normal operating expenses of each Fund, except for the fees and expenses
associated with investment management, the service fees paid by the Funds to
dealers and others with respect to each Class, and the distribution fees paid by
Class B and Class C shares.

The Manager may consider a number of factors in determining which brokers or
dealers to use for the Funds' portfolio transactions. While these are more fully
discussed in the Statement of Additional Information, the factors may include,
but are not limited to, the reasonableness of commissions, the quality of
services and executions, sales of the Funds' shares, and the availability of
research which the Manager and its affiliates may lawfully and appropriately use
in their investment advisory capacity.

MANAGEMENT AND ADMINISTRATION FEES AND EXPENSES

For the services provided under the Management Agreement, the Manager
receives a management fee from each Fund (paid monthly) computed and prorated on
a daily basis equal to the annual rate of 1% of the Fund's average daily net
assets up to $30 million, plus 0.80% of net assets over $30 million up to $100
million, plus 0.60% of net assets over $100 million up to $500 million, plus
0.40% of net assets over $500 million. The Manager also receives under the
Administration Agreement an administration fee from each Fund equal to 1.05% per
annum of the Fund's average daily net assets up to $30 million, plus 0.85% per
annum of net assets over $30 million up to $100 million, plus 0.65% per annum of
net assets over $100 million up to $500 million, plus 0.60% of net assets over
$500 million.

22
<PAGE>
The combined rate of fees is higher than that paid to most other managers of
investment companies. However, the Manager, in its capacity as administrator of
the Funds, also bears the cost for all normal operating expenses of each Fund
(except for the fees and expenses, including brokerage, associated with
investment management services, the fees paid to dealers and others providing
services to shareholder accounts, and the distribution fees paid by Class B and
Class C shares), which are normally paid directly by other investment companies,
such as compensation of the Trust's trustees, cost of shareholder reports,
insurance, and all fees and expenses of each Fund's transfer agent and the
sub-transfer agent, dividend disbursing agent, custodian, auditors, accountants,
attorneys and other parties performing services or operational functions for the
Funds. As a result, each Fund will not incur any expenses in connection with its
normal operations other than the fees described above. (See "Expense and Fee
Tables" on pages 3-6.)

During the fiscal year ended December 31, 1995, the management fees paid by
the Growth Fund, the Nifty Fifty Fund and the Balanced Return Fund to the
Manager equaled .66%, .78% and .90%, respectively, of each Fund's average daily
net assets. The administration fees paid to the Manager during that same period
equaled .71%, .84% and .96%, respectively, of each Fund's average daily net
assets. Also, see the Statement of Additional Information -- "Investment
Management and Administrative Services."

The maximum operating expenses of each Fund also will be limited by
applicable state securities laws where shares of the Fund are sold. This
limitation may be removed or modified in the future without prior notice to
shareholders.

DISTRIBUTION PLANS

Rule 12b-1 adopted by the Securities and Exchange Commission (the
"Commission") under the 1940 Act permits an investment company directly or
indirectly to pay expenses associated with the distribution of its shares
("distribution expenses") in accordance with a plan adopted by the investment
company's Board of Trustees and approved by its shareholders. Pursuant to that
Rule, the Trust's Board of Trustees and the initial shareholder of the Class B
and Class C shares of each Fund have approved, and each Fund has entered into, a
distribution plan (each a "Plan") with the Distributor for the Class B and Class
C shares. Under the Plans, each Fund will pay distribution fees to the
Distributor at an annual rate of 0.75% of the Fund's aggregate average daily net
assets attributable to its Class B shares and Class C shares, respectively, to
reimburse the Distributor for its distribution costs with respect to those
Classes. There is no 12b-1 Plan or distribution fee for the Class A shares.

Each Plan provides that the Distributor may use the distribution fees
received from the Class covered by the Plan to pay for the distribution expenses
of that Class, including, but not limited to (i) incentive compensation paid to
the directors, officers and employees of, agents for and consultants to, the
Distributor or any other broker-dealer or financial institution that engages in
the distribution of that Class; and (ii) compensation to broker-dealers,
financial institutions or other persons for providing distribution assistance
with respect to that Class. Distribution fees may also be used for (i) marketing
and promotional activities, including, but not limited to, direct mail
promotions and television, radio, newspaper, magazine and other mass media
advertising for that Class; (ii) costs of printing and distributing
prospectuses, statements of additional information and reports of the Fund to
prospective investors in that Class; (iii) costs involved in preparing, printing
and distributing sales literature pertaining to the Fund and that Class; and
(iv) costs involved obtaining whatever information, analysis and reports with
respect to marketing and promotional activities that the Fund may, from time to
time, deem advisable with respect to the distribution of that Class.
Distribution fees are accrued daily and paid monthly, and are charged as
expenses of the Class B and Class C shares as accrued.

In adopting each Plan, the Board of Trustees determined that there was a
reasonable likelihood that such Plan would benefit the Fund and the shareholders
of the Class to which it relates. Information with respect to distribution
revenues and expenses is presented to the Board of Trustees quarterly for its
consideration in connection with its deliberations as to the continuance of the
Plans. In their review of the Plans, the Board of Trustees is asked to take into
consideration expenses incurred in connection with the distribution of each
Class of shares separately.

The Class B and Class C shares are not obligated under the Plans to pay any
distribution expense in excess of the distribution fee. Thus, if a Plan were
terminated or otherwise not continued, no amounts (other than current amounts
accrued but not yet paid) would be owed by the Class to the Distributor.

23
<PAGE>
The distribution fee attributable to the Class B shares is designed to
permit an investor to purchase Class B shares through broker-dealers without the
assessment of a front-end sales charge and at the same time to permit the
Distributor to recover its costs of paying an up-front commission to
broker-dealers in connection with the sale of the Class B shares. The
distribution fee attributable to the Class C shares is designed to permit an
investor to purchase Class C shares through broker-dealers without the
assessment of a front-end sales charge, and at the same time to permit the
Distributor to compensate broker-dealers on an ongoing basis in connection with
the sale of the Class C Shares.

Each Plan provides that it shall continue in effect from year to year
provided that a majority of the Board of Trustees of the Trust, including a
majority of the Trustees who are not "interested persons" of the Trust (as
defined in the 1940 Act) and who have no direct or indirect financial interest
in the operation of the Plan or any agreement related to the Plan (the "Rule
12b-1 Trustees"), vote annually to continue the Plan. Each Plan may be
terminated at any time by vote of a majority of the Rule 12b-1 Trustees or of a
majority of the outstanding shares (as defined in the 1940 Act) of the Class to
which the Plan applies.

All distribution fees paid by the Funds under the Plans will be paid in
accordance with Article III, Section 26 of the Rules of Fair Practice of the
NASD, as such Section may change from time to time.

SERVICE FEES

The Funds also will pay dealers and others, including the Manager and
Pasadena Fund Services, Inc. (the "Distributor"), a continuing service fee equal
to 0.25% per annum of the average net asset value of the Funds' shares held by
such persons in order to compensate them for providing certain services to their
clients, including processing redemption transactions and providing account
maintenance and certain information and assistance with respect to the Funds and
responding to shareholder inquiries.

DIVIDENDS, DISTRIBUTIONS AND TAXES

DIVIDENDS AND DISTRIBUTIONS. Each Fund declares a dividend equal to
substantially all of its net investment income (including any net short-term
capital gains realized by the Fund) and a distribution of substantially all net
realized long-term capital gains at least once each calendar year, typically in
December. Dividends paid by a Fund, if any, with respect to Class A, Class B and
Class C shares will be calculated in the same manner at the same time on the
same day, except that the distribution fees relating to Class B and Class C
shares will be borne exclusively by each such Class. The per share income
dividends and distributions, if any, on Class B shares and Class C shares
generally will be lower than the per share income dividends and distributions,
if any, on Class A shares as a result of the distribution fees applicable to the
Class B and Class C shares but not to the Class A shares.

Unless a shareholder has previously requested in writing that payment be
made in cash, dividends and capital gains distributions are reinvested in
additional shares of the applicable Fund at a purchase price equal to the net
asset value per share (without any sales charge) as of 4:00 p.m., Eastern Time,
on the dividend or distribution reinvestment date. Each shareholder's account is
subsequently credited with the purchased shares on the dividend or distribution
payment date. A shareholder may change his or her election at any time prior to
the record date for a particular dividend or distribution by written request.

Shareholders may not receive immediate confirmation of automatic dividend
and capital gain reinvestment transactions, but may instead receive confirmation
of such transactions in a periodic statement. Shareholders can also obtain
information on their accounts by calling the telephone number listed below under
"Shareholder Inquiries."

Any dividend or distribution paid by the Funds reduces the net asset value
per share by the per share amount of the dividend or distribution. Therefore, a
dividend or distribution paid shortly after a purchase of shares by an investor
would represent, in substance, a partial return of capital to the shareholder
(to the extent it is paid on the shares so purchased), even though it would be
subject to income taxes, as discussed below.

TAXES. Each Fund has qualified for and has elected to be treated as a
regulated investment company under Subchapter M of the Code for the fiscal year
ended December 31, 1995, and intends to continue to so qualify. By satisfying
certain requirements

24
<PAGE>
relating to the sources of each Fund's income and the diversification of its
assets and by distributing substantially all of its net investment income and
net realized capital gains for each fiscal year, in addition to meeting other
requirements imposed by the Code, the Funds will not be subject to any federal
income or excise taxes based on net income.

Dividends and capital gains distributions of the Funds, whether reinvested
in additional shares or received in cash, will be subject to current federal
income tax, except to tax-exempt holders which have not borrowed to purchase or
carry Fund shares. Dividends of net investment income and the excess of net
short-term capital gains over net long-term capital losses are taxable to
shareholders as ordinary income. Distributions of the excess of net long-term
capital gains over net short-term capital losses are treated as long-term
capital gains regardless of how long a shareholder has held shares of the Fund.

Distributions will be taxable in the year in which they are received except
for certain distributions received in January, which will be taxable as if
received the prior December. Shareholders will be informed annually of the
amount and nature of each Fund's distributions, the portion, if any, that
qualifies for the corporate dividends-received deduction, the portion, if any,
that should be treated as a return of capital, and the amount, if any, of income
tax withheld.

Additional information about taxes is set forth in the Statement of
Additional Information. The foregoing discussion has been prepared by the
management of the Funds, and does not purport to be a complete description of
all tax implications of an investment in any Fund. Shareholders should consult
their own advisers concerning the application of federal, state and local tax
laws to their particular situations. Heller, Ehrman, White & McAuliffe, legal
counsel to the Funds, has expressed no opinion in respect thereof.

DETERMINATION OF NET ASSET VALUE

The net asset value of the Funds is determined as of 4:00 p.m., Eastern
Time, on each day the New York Stock Exchange is open (or at such earlier time
as the Exchange may close). Net asset value per share is calculated by dividing
the total value of each Fund's investments and other assets, less all
liabilities, by the number of Fund shares outstanding. For this calculation,
each Fund's assets include accrued dividends (from their ex-dividend date) and
interest, and liabilities include accrued expenses.

In valuing a Fund's assets for calculating net asset value, portfolio
securities with readily available market quotations are valued at their market
value and other assets are valued in such manner as the Board of Trustees deems
appropriate to reflect their fair value. See the Statement of Additional
Information under "Purchase, Redemption, and Pricing of Fund Shares" for more
detailed information on the valuation of each Fund's assets.

The net asset values per share of the Class B and Class C shares of a Fund
are generally expected to be approximately the same; the net asset value per
share of the Class A shares of such Fund is expected, under normal
circumstances, to be higher due to the daily expense accruals of the
distribution fees applicable to the Class B and Class C shares but not to the
Class A shares. However, the per share net asset value of the three Classes of a
Fund may tend to converge on that Fund's ex-dividend date, and the per share
dividends will differ by approximately the amount of the expense accrual
differential among the Classes.

PERFORMANCE INFORMATION

From time to time, each Fund may publish its total return in advertisements
and communications to investors. Total return is computed separately for the
Class A, Class B and Class C shares of each Fund. Total return information will
include the total return for each Class of each Fund over the most recent fiscal
year and over the period from the inception of each Class (or from the inception
of the Fund for the Class A shares). The Funds also may advertise aggregate and
average total return information over different periods of time. Each Fund's
total return will be based upon the value of the shares acquired through a
hypothetical $1,000 investment (including the maximum initial sales charge for
Class A shares) at the beginning of the specified period and the net asset value
of such shares at the end of the period, assuming reinvestment of all
distributions at net asset value and deduction of any applicable CDSC on Class B
shares. Each Fund also may publish a cumulative return for each class over a
specified period based on the change in net asset value over such period. In
addition, each Fund may publish a distribution rate for each Class in
prospective investor communications preceded or accompanied by a copy of the
current Prospectus. The current distribution rate for each Class of the Funds
will be calculated by dividing the maximum offering price per share into the

25
<PAGE>
annualization of the total distributions made by each Class of the Funds during
the stated period. In each case, distribution rates and total return figures
will reflect all recurring charges against the Funds' income. In addition, each
Fund may compare its performance to various indices of investment performance
published by third parties.

Investors should note that the investment results of the Funds will
fluctuate over time, and any presentation of a Fund's performance for any prior
period should not be considered as a representation or prediction of what an
investor's total return may be in any future period. For further information,
including the formula and an example of the total return calculation, see the
Statement of Additional Information.

The Trust's current Annual Report to Shareholders and subsequent Semi-Annual
Report to Shareholders, if applicable, contain additional performance
information respecting the Funds and their shares. A copy of each Report is
available without charge upon request to the Trust at the address or telephone
number set forth on the front page of this Prospectus.

DESCRIPTION OF THE TRUST

Each Fund is a series of the Trust which was organized as a Massachusetts
business trust on May 28, 1986. The Trust's Agreement and Declaration of Trust
permits the Board of Trustees to issue an unlimited number of full and
fractional shares of beneficial interest without par value, which may be issued
in any number of series (called funds). The assets and liabilities of each
series are separate and distinct from any other series. Currently, the Trust
issues redeemable shares in five series (the "Funds"): The Pasadena Growth Fund,
The Pasadena Nifty Fifty Fund, The Pasadena Balanced Return Fund, The Pasadena
Global Growth Fund and The Pasadena Small & Mid-Cap Fund. Each of the three
Funds included in this Prospectus currently offers three Classes of shares:
Class A, Class B and Class C shares. The shares of The Pasadena Global Growth
Fund and The Pasadena Small & Mid-Cap Fund are offered in separate Prospectuses.
The Board of Trustees from time to time may authorize additional series or the
termination of existing series of the Trust. Shares issued by the Funds have no
preemptive, conversion, or sinking rights.

The Funds offered herein commenced a continuous public offering of their
Class B and Class C shares on January 3, 1994. Each of the Class A, Class B and
Class C shares of a Fund represents an interest in the assets of that Fund and
has identical voting, dividend, liquidation and other rights on the same terms
and conditions, except that class-specific litigation expenses related to the
distribution of each Class are borne separately by that Class and each Class has
exclusive voting rights with respect to provisions of the Rule 12b-1
distribution plan which pertains to that Class (only Class B and Class C shares
are subject to such distribution plans).

Shareholders of each Fund, as a separate series of the Trust, vote
separately on matters affecting only that Fund (e.g., approval of the Management
Agreement); shareholders of all the Funds vote as a single class on matters
affecting all Funds jointly or the Trust as a whole (e.g., election or removal
of Trustees). Voting rights are not cumulative, so the holders of more than 50%
of the shares of all Funds voting in any election of Trustees, can, if they
choose to do so, elect all of the Trustees. While the Funds are not required to,
nor do they intend to, hold annual meetings of shareholders, such meetings may
be called by the Trustees in their discretion or upon demand by the holders of
10% or more of the outstanding shares of the Trust for the purpose of electing
or removing Trustees. As noted above, the Class B and Class C shareholders of a
Fund have exclusive voting rights with respect to the provisions of the
distribution plan covering that Class.

The Trust's Board of Trustees has determined that currently no conflict of
interest exists among the Class A, Class B and Class C shares of any Fund. On an
ongoing basis, the Trust's Board of Trustees, pursuant to their fiduciary duties
under the 1940 Act and state laws, will seek to ensure that no such conflict
arises.

SHAREHOLDER INQUIRIES

Shareholder inquiries should be directed to the Funds at the Pasadena Group
Service Center, 600 North Rosemead Boulevard, Pasadena, California 91107-2133
(telephone toll free: (800) 648-8050).

26
<PAGE>
GENERAL INFORMATION

Union Bank of California serves as Custodian of the Funds' assets.

Pasadena National Trust Company ("PNTC"), which is wholly-owned by Mr. Roger
Engemann, is the Transfer and Dividend Disbursing Agent for the Funds. PNTC has
entered into a Sub-Transfer Agency and Service Agreement with State Street Bank
and Trust Company, which will perform (through its affiliate, Boston Financial
Data Services, Inc.) on behalf of PNTC certain of the shareholder accounting,
recordkeeping and administrative functions required by the Funds.

Coopers & Lybrand L.L.P. serves as independent auditors for the Funds.
Reports containing financial statements, at least one of which will be audited,
will be sent to shareholders twice during each fiscal year of the Funds, which
ends on December 31. Only one copy of each report may be sent to shareholders at
the same address, and statements for accounts having the same address may be
consolidated in single mailings unless otherwise requested.

The validity of the shares offered by the Prospectus will be passed on by
Heller, Ehrman, White & McAuliffe, 333 Bush Street, San Francisco, California
94104.

Shares of each of the Funds may be purchased by one or more investment funds
organized outside the jurisdiction of the United States, whose shares are
offered to investors who are not residents or citizens of the United States. The
percentage of each Fund's shares owned by any such offshore fund will be
disclosed in this Prospectus and/or the Statement of Additional Information, as
it may be amended from time to time. To the extent the number of shares of a
Fund owned by such an offshore fund becomes a significant percentage of that
Fund's outstanding shares, a risk to such Fund may exist to the extent the Fund
is forced to liquidate portfolio securities quickly to meet any significant
redemption requests by the offshore fund. However, as of the date of this
Prospectus no such ownership exists, and even in the event a substantial
percentage of any Fund's outstanding shares subsequently are held by such an
offshore fund, the ability of the Fund to redeem its shares in kind (as
described in the Statement of Additional Information) should substantially
reduce any adverse effect on the Fund of any significant redemption of Fund
shares by the offshore fund.

No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and information
or representations not herein contained, if given or made, must not be relied
upon as having been authorized by the Fund. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy securities in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction.

BACKUP WITHHOLDING INSTRUCTIONS

You are required by law to provide the Funds with your correct social
security or taxpayer identification number (each a "TIN"), regardless of whether
you file tax returns. Failure to do so may subject you to certain penalties.
Failure to provide your correct TIN and to complete the section of the
Investment Application entitled "Taxpayer Identification Number Certification
and Signature(s)" could result in backup withholding by the Fund of federal
income tax at the rate of 31% with respect to distributions, redemptions and
other payments made with respect to your account.

Any tax withheld may be credited against taxes owed on your federal income
tax return.

If you do not have a TIN, you should apply for one immediately by contacting
your local office of the Social Security Administration or the IRS. Backup
withholding could apply to payments made to your account while you are awaiting
receipt of a TIN.

Special rules apply for certain entities. For example, for an account
established under the Uniform Transfers to Minors Act, the TIN of the minor
should be furnished.

If you have been notified by the IRS that you are subject to backup
withholding because you have failed to report interest or dividend income on
your tax return and you have not been notified by the IRS that such withholding
should cease, you should strike clause (2) of section (12) entitled "Taxpayer
I.D. Number Certification/Signatures." If you are an exempt recipient, you
should furnish your TIN and check the appropriate box in that section. Exempt
recipients include corporations, financial institutions, registered securities
and commodities dealers and others.

For further information regarding backup withholding, see Section 3406 of
the Code and consult your tax adviser.

27
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Synopsis..................................... 2
Expense and Fee Tables....................... 3
Financial Highlights......................... 7
Investment Objectives and Policies........... 9
Alternative Purchase Arrangements............ 12
Purchase of Shares........................... 13
Redemption of Shares......................... 19
Management................................... 22
Dividends, Distributions and Taxes........... 24
Determination of Net Asset Value............. 25
Performance Information...................... 25
Description of the Trust..................... 26
Shareholder Inquiries........................ 26
General Information.......................... 27
Backup Withholding Instructions.............. 27
</TABLE>

[INSERT ARTWORK]

PAS 312065
<PAGE>
MAY 1, 1996
------------
<PAGE>

INFORMATION AND INSTRUCTIONS

Please do not use this application for an IRA. If you
have questions about completing this application or need
an IRA application, please call Shareholder Services:

(800) 648-8050

Mail your completed application to:

THE PASADENA GROUP OF MUTUAL FUNDS
P.O. BOX 8505
BOSTON, MA 02266-8505

__________________________________________________

PLEASE TEAR HERE
_______________________________________________________________________________
__________________________________________

[LOGO] THE PASADENA GROUP INVESTMENT APPLICATION
OF MUTUAL FUNDS __________________________________________
Application must be signed in Section 12
TAKE TIME TO GROW on opposite side of form.
-Registered Trademark- This application will not establish an IRA.

/ / New account / / Changes to an existing account
(signature guarantee required)

PLEASE PRINT

1. ACCOUNT REGISTRATION (X ONE BOX ONLY)

/ / INDIVIDUAL / / JOINT TENANT / / COMMUNITY PROPERTY
(FOR CO-OWNERS, JOINT TENANCY WITH RIGHT OF SURVIVORSHIP IS PRESUMED UNLESS
OTHERWISE SPECIFIED.)

_______________________________________________________________________________
Owner's Name (FIRST, INITIAL, LAST)

_______________________________________________________________________________
Owner's Occupation

_______________________________________________________________________________
Owner's Social Security Number

_______________________________________________________________________________
Co-Owner Name (FIRST, INITIAL, LAST)

_______________________________________________________________________________
Co-Owner's Social Security Number

/ / TRANSFER TO A MINOR (ONLY ONE CUSTODIAN AND MINOR)

_______________________________________________________________________________
Custodian's Name (ONE NAME ONLY -- FIRST, INITIAL, LAST)

_______________________________________________________________________________
Minor's Name (ONE NAME ONLY -- first, initial, last)

Under the __________________________ Uniform Gifts/Transfers to Minors Act
(STATE OF MINOR'S RESIDENCE)

Minor's Social Security Number ________________________________________________

Minor's Date of Birth _________________________________________________________

/ / TRUST OR RETIREMENT ACCOUNT

_______________________________________________________________________________
Trustee(s)' Name

_______________________________________________________________________________
Name of Trust Agreement or Retirement Plan

_______________________________________________________________________________
Beneficiary's Name

_______________________________________________________________________________
Taxpayer I.D. Number Full Date of Trust Agreement

/ / CORPORATION, PARTNERSHIP OR OTHER ENTITY

_______________________________________________________________________________
Name of Corporation or Other Entity

_______________________________________________________________________________
Taxpayer I.D. Number

2. ACCOUNT MAILING ADDRESS

_______________________________________________________________________________
Street/Post Office Box Number

_______________________________________________________________________________
City State Zip

_______________________________________________________________________________
Home Phone Business Phone

3. ELIGIBILITY FOR EXEMPTION FROM SALES CHARGE

/ / If you are eligible for exemption from sales charges as described in the
Prospectus, check here and complete separate eligibility form available from The
Pasadena Group of Mutual Funds.

4. INITIAL INVESTMENT

(Fund #)
/ / The Growth Fund $__________ / / A Shares (85)
/ / B Shares (40)
/ / C Shares (70)

/ / The Nifty Fifty Fund $__________ / / A Shares (86)
/ / B Shares (72)
/ / C Shares (79)

/ / The Balanced Return Fund $__________ / / A Shares (87)
/ / B Shares (88)
/ / C Shares (91)

Total $__________

Unspecified orders will be considered Class A Shares.
B and C shares have a maximum purchase of $100,000 per Fund.

I (We) being of legal age and having legal capacity wish to purchase Shares of
the Fund(s) in the amounts indicated above. Enclosed is my (our) total initial
investment for $_______________ (minimum for each Fund Account $1,000; $250 for
IRAs, Custodial Accounts for Minors and Systematic Purchase Plan) payable to
"The Pasadena Group of Mutual Funds." I (We) understand that this purchase will
be executed at the applicable offering price for each Fund as described in the
Prospectus.

5. DISTRIBUTION OPTION (X ONE BOX ONLY)

/ / Please reinvest dividends and capital gains distributions in additional
shares at net asset value.

/ / Please pay my dividends and capital gains distributions in cash.

IF NO SELECTION IS MADE, DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS WILL BE
AUTOMATICALLY REINVESTED AT NET ASSET VALUE.

6. RIGHTS OF ACCUMULATION (A SHARES ONLY)

I (We) apply for reduced sales charges, subject to the Transfer Agent's
confirmation of the following eligible holdings:

_______________________________________________________________________________
Fund Name

_______________________________________________________________________________
Shareholder Name

_______________________________________________________________________________
Account Number

7. LETTER OF INTENT (A SHARES ONLY)

I (We) agree to the terms of the Letter of Intent and provisions for reservation
of shares and grant the Distributor the security interest set forth in the
Prospectus. Although I am not obligated to do so, it is my intention to invest
over a thirteen (13) month period in Shares of one or more Funds in The Pasadena
Group of Mutual Funds an aggregate amount at least equal to that which is
checked below.

Account No. (If applicable) ___________________________________________________

/ / $50,000 -- $99,999 / / $250,000 -- $499,000

/ / $100,000 -- $249,999 / / $500,000 -- $999,000

/ / $1,000,000 or more

<PAGE>

8. SYSTEMATIC PURCHASE PLAN

The undersigned hereby authorizes monthly investments in the following Funds
directly from my bank account as indicated below. ($50 minimum):

/ / Growth Fund $________________________________________________

/ / Nifty Fifty Fund $________________________________________________

/ / Balanced Return Fund $________________________________________________

_______________________________________________________________________________
Fund Account Number (IF APPLICABLE)

_______________________________________________________________________________
Registered Owner

_______________________________________________________________________________
Registered Co-owner

_______________________________________________________________________________
Address

_______________________________________________________________________________
City State Zip

PREFERRED MONTHLY DATE OF TRANSFER:
/ / 3rd business day / / 15th business day
(COMPLETE SECTION 10 FOR BANK INFORMATION)

9. SYSTEMATIC WITHDRAWAL PLAN

/ / Growth Fund $________________________________________________

/ / Nifty Fifty Fund $________________________________________________

/ / Balanced Return Fund $________________________________________________

Existing Account Number (IF APPLICABLE)

You are hereby authorized to redeem shares from the above Funds commencing on or
about the first business day of _______________ and send the proceeds in the
amount indicated as follows:

/ / monthly or / / quarterly

/ / To the undersigned at the address of record on the Fund's books.

/ / To the following bank/person*

_______________________________________________________________________________
Name of Bank/Person

_______________________________________________________________________________
Street/Post Office Box Number

_______________________________________________________________________________
City State Zip
Minimum initial investment: $10,000 ($5,000 if quarterly withdrawals)

*(IF A BANK, ALSO COMPLETE SECTION 10)

10. BANK INFORMATION

Please complete this section if you wish to invest automatically under a
Systematic Purchase Plan (Section 8), or if you want proceeds under a Systematic
Withdrawal Plan (Section 9) or by Telephone Redemption (Section 11) sent to your
bank.

_______________________________________________________________________________
Bank Name

_______________________________________________________________________________
Bank Address

_______________________________________________________________________________
ABA Number

_______________________________________________________________________________
City State Zip

_______________________________________________________________________________
Bank Account in Name of

_______________________________________________________________________________
Bank Account Number

Please attach a voided, unsigned check from this account.

11. TELEPHONE SERVICES

Unless the boxes below are checked, by signing this Application, the investor
authorizes the Funds and their Transfer Agent to act on the investor's telephone
instructions, or on telephone instructions from any person representing to be an
authorized agent of the investor and requesting a redemption or exchange on the
investor's behalf. The undersigned agrees that any redemption or exchange made
pursuant to this authorization shall be subject to the provisions of the current
Prospectus of the Funds, and that neither the Funds nor their Transfer Agent
will be liable for any loss, expense or cost suffered or incurred by the
investor which may arise out of any telephone redemption or exchange request,
including any fraudulent or unauthorized requests, if reasonable procedures are
followed. In an effort to confirm that telephone requests are genuine, the
Funds will employ reasonable procedures, which will include requesting the
taxpayer identification number and other information known only to the
shareholder, plus recording the telephone instructions. Redemption proceeds may
be wired to the shareholder's bank upon request if Section 10 is completed.
(See Prospectus for details.)

(X ONLY if you do NOT want to use telephone authorization.)

/ / I do not elect the telephone exchange privilege

/ / I do not elect the telephone redemption privileges.

12. SIGNATURES/TAXPAYER I.D. NUMBER CERTIFICATION

Under the penalties of perjury, I (we) certify (1) that Social Security
Number(s) or Taxpayer Identification Number(s) shown in Section 1 of this form
is (are) my (our) correct Taxpayer Identification Number(s) and (2) that I (we)
am (are) not subject to backup withholding either because I (we) have not been
notified that I (we) am (are) subject to backup withholding as a result of a
failure to report all interest or dividend income, or the Internal Revenue
Service has not notified me (us) that I (we) am (are) no longer subject to
backup withholding. (Strike clause (2) if it is not correct.)

/ / I (We) am (are) exempt from information reporting and backup withholding
requirements.

I (We) have received and read the Prospectus of the Funds and agree to the terms
thereof. The Funds and any agent thereof are hereby authorized to answer
without liability requests for information about the account established by this
application.

_______________________________________________________________________________
Owner's Signature Date

_______________________________________________________________________________
Co-Owner's Signature Date

13. SIGNATURE GUARANTEE (IF REQUIRED)

A signature guarantee is not required if you are establishing a new account. A
signature guarantee is required if you are adding a Systematic Withdrawal Plan
or making changes to options listed in Sections 9 or 10. We are unable to
accept notarizations.

Signature(s) Guaranteed by:

_______________________________________________________________________________
Name of Institution

_______________________________________________________________________________
Name of Authorized Officer

_______________________________________________________________________________
Signature of Authorized Officer
Guarantor's Stamp:

14. FOR COMPLETION BY YOUR INVESTMENT DEALER

BROKER/DEALER (PLEASE PRINT)
We hereby submit this application for purchase of shares in accordance with the
terms of our Selling Agreement with Pasadena Fund Services, Inc. and with the
Prospectus for the Funds.

_______________________________________________________________________________
Investment Dealer Name

_______________________________________________________________________________
Main Office Address

_______________________________________________________________________________
Branch Number Rep Number

_______________________________________________________________________________
Representative's Name

_______________________________________________________________________________
Branch Address Phone Number

_______________________________________________________________________________
City State Zip

_______________________________________________________________________________
Authorized Signature of Investment Dealer

_______________________________________________________________________________
Title Phone Number

Accepted: Pasadena Fund Services, Inc.

By ____________________________________________________________________________

Date __________________________________________________________________________

REMCO-015

[LOGO] THE PASADENA GROUP
OF MUTUAL FUNDS

TAKE TIME TO GROW-Registered Trademark-

_______________________________________________________________________________
_______________________________________________________________________________

INVESTMENT APPLICATION
_______________________________________________________________________________
_______________________________________________________________________________

<PAGE>

RULE 497(e):
File Nos. 33-1922; 811-4506

THE PASADENA GROUP OF MUTUAL FUNDS-Registered Trademark-

THE PASADENA GROWTH FUND-Registered Trademark-
THE PASADENA NIFTY FIFTY FUND-Registered Trademark-
THE PASADENA BALANCED RETURN FUND-Registered Trademark-

600 North Rosemead Boulevard
Pasadena, California 91107-2133
800-648-8050 (Toll-Free)
818-351-9686

STATEMENT OF ADDITIONAL INFORMATION

May 1, 1996

The Pasadena Investment Trust (the "Trust") is a diversified, open-end
management investment company offering redeemable shares of beneficial interest
in five separate series. The three series covered by this Statement of
Additional Information are: The Pasadena Growth Fund (the "Growth Fund"), The
Pasadena Nifty Fifty Fund (the "Nifty Fifty Fund") and The Pasadena Balanced
Return Fund (the "Balanced Return Fund") (sometimes referred to herein
individually as a "Fund," and collectively as the "Funds"). The fourth and
fifth series of the Trust, The Pasadena Global Growth Fund and The Pasadena
Small & Mid-Cap Fund, are covered by separate prospectuses and statements of
additional information.

The Growth Fund and the Nifty Fifty Fund each have an investment objective
of long-term capital appreciation. In seeking its objective, the Growth Fund
invests primarily in securities issued by companies that Roger Engemann
Management Co., Inc. (the "Manager") believes are rapidly growing or are
undervalued by the market. The Nifty Fifty Fund seeks to achieve its objective
by investing in approximately 50 different securities which the Manager believes
offer the best potential for long-term capital appreciation. The Balanced
Return Fund seeks to maximize a total investment return consistent with
reasonable risk through a balanced approach using moderate asset allocation by
its Manager.

B-1

<PAGE>

This Statement of Additional Information is not a prospectus. It contains
information which supplements the combined Prospectus for the Growth Fund, the
Balanced Return Fund and the Nifty Fifty Fund dated May 1, 1996, as it may be
amended from time to time. This Statement of Additional Information is to be
read in conjunction with such Prospectus, which is hereinafter referred to as
the "Prospectus." Some of the information required in this Statement of
Additional Information has been included in the Prospectus. A copy of the
Prospectus may be obtained from the Trust, 600 North Rosemead Boulevard,
Pasadena, California 91107-2133.

TABLE OF CONTENTS
-----------------
PAGE
----
The Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-2
Investment Objectives and Policies . . . . . . . . . . . . . . . . . B-2
Management of the Trust. . . . . . . . . . . . . . . . . . . . . . . B-8
Investment Management and Administrative Services. . . . . . . . . . B-11
Brokerage Allocation and Other Practices . . . . . . . . . . . . . . B-15
Principal Underwriter. . . . . . . . . . . . . . . . . . . . . . . . B-17
Class B and Class C Distribution Plans . . . . . . . . . . . . . . . B-19
Purchase, Redemption, and Pricing of Fund Shares . . . . . . . . . . B-20
Distributions and Tax Status . . . . . . . . . . . . . . . . . . . . B-25
Performance Information. . . . . . . . . . . . . . . . . . . . . . . B-28
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-32
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . B-33
Appendix "A" . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-34

THE TRUST

The Pasadena Investment Trust (the "Trust") is an open-end diversified
management investment company organized as a Massachusetts business trust. The
Trust issues shares of beneficial interest in five series, three of which are
the "Funds" covered by this Statement of Additional Information. Each Fund has
a separate investment objective and policies, and maintains a separate
investment portfolio. Each Fund offers three classes of shares (Class A, Class
B and Class C shares) (each a "Class"). As of January 1, 1994, all of the
previously outstanding shares of each Fund were redesignated as Class A shares
without any other changes.

INVESTMENT OBJECTIVES AND POLICIES

The following information concerning the investment objectives and policies
of the Funds supplements the Prospectus. The information contained in the
Prospectus section relating to

B-2

<PAGE>

each Fund's Investment Objective and Policies is incorporated herein by
reference.

ADDITIONAL INVESTMENT POLICIES

REPURCHASE AGREEMENTS. The Funds may, for temporary defensive purposes,
invest their assets in eligible U.S. Government securities and concurrently
enter into repurchase agreements with respect to such securities. Under such
agreements, the seller of the security agrees to repurchase it at a mutually
agreed upon time and price. The repurchase price may be higher than the
purchase price, the difference being income to the Fund, or the purchase and
repurchase prices may be the same, with interest at a stated rate due to the
Fund together with the repurchase price on repurchase. In either case, the
income to the Fund is unrelated to the interest rate on the U.S. Government
security itself. Such repurchase agreements will be made only with banks with
assets of $1 billion or more that are insured by the Federal Deposit Insurance
Corporation or with Government securities dealers recognized by the Federal
Reserve Board as primary dealers and registered as broker-dealers with the
Securities and Exchange Commission ("SEC") or exempt from such registration. In
addition, to the extent a Fund has over $10 million in assets, the Fund will
limit the amount of its transactions with any one bank or Government securities
dealer to a maximum of 25% of its assets. Any repurchase agreements entered
into by the Funds will be of short duration, from overnight to one week,
although the underlying securities generally have longer maturities. A Fund may
not enter into a repurchase agreement with more than seven days to maturity if,
as a result, more than 10% of the value of the Fund's total assets would be
invested in such repurchase agreements and other illiquid assets.

For purposes of the Investment Company Act of 1940 (the "1940 Act"), a
repurchase agreement is deemed to be a loan from a Fund to the seller of the
U.S. Government security subject to the repurchase agreement. In the event of
commencement of bankruptcy or insolvency proceedings with respect to the seller
of the U.S. Government security before its repurchase under a repurchase
agreement, the Fund may encounter delays and incur costs before being able to
sell the security. Delays may involve loss of interest or a decline in price of
the U.S. Government security. If a court characterizes the transaction as a
loan and the Fund has not perfected a security interest in the U.S. Government
security, the Fund may be required to return the security to the seller's estate
and be treated as an unsecured creditor of the seller. As an unsecured
creditor, the Fund would be at risk of losing some or all of the principal and
income involved in the transaction. As with any unsecured debt instrument
purchased for a Fund, the Manager seeks to minimize the risk of loss through

B-3

<PAGE>

repurchase agreements by analyzing the creditworthiness of the obligor, in this
case the seller of the U.S. Government security.

Apart from the risk of bankruptcy or insolvency proceedings, there is also
the risk that the seller may fail to repurchase the security. However, a Fund
will always receive as collateral, for any repurchase agreement to which it is a
party, U.S. Government securities acceptable to it, the market value of which is
equal to at least 100% of the amount invested by the Fund plus accrued interest,
and the Fund will make payment against such securities only upon physical
delivery or evidence of book entry transfer to the account of its Custodian or
other entity authorized by the Trust's Board of Trustees to have custody for
purposes of repurchase agreement transactions. If the market value of the U.S.
Government security subject to the repurchase agreement becomes less than the
repurchase price (including interest), the Fund will direct the seller of the
U.S. Government security to deliver additional securities so that the market
value of all securities subject to the repurchase agreement will equal or exceed
the repurchase price. It is possible that a Fund will be unsuccessful in
seeking to impose on the seller a contractual obligation to deliver additional
securities, however.

FOREIGN SECURITIES. Each Fund may purchase foreign securities that are
listed on a principal foreign securities exchange or over-the-counter market,
are represented by Depositary Receipts (e.g. American Depositary Receipts,
European Depositary Receipts, Global Depositary Receipts, Continental Depositary
Receipts or other forms of Depositary Receipts) listed on a domestic securities
exchange, or are traded in the domestic over-the-counter market. Such
securities may include foreign debt obligations. While none of these Funds
anticipates investing a significant portion of its assets in foreign securities,
each Fund reserves the right to invest up to 15% of the value of its total
assets (at time of purchase, giving effect thereto) in the securities of foreign
issuers and obligors.

Investments in foreign securities may offer benefits not available from
investments solely in securities of domestic issuers. Such benefits include the
opportunity to invest in foreign securities that appear to the Manager to offer
better opportunities for long-term capital appreciation than investments in
domestic securities, the opportunity to invest in securities reflecting foreign
countries' economic policies or business cycles different from those of the
United States, and the opportunity to reduce fluctuations in portfolio value by
taking advantage of foreign stock markets that do not move in a manner parallel
to U.S. markets.

Investors should recognize that investments in foreign companies involve
certain considerations not typically associated with domestic investments.
Foreign investments may be affected

B-4

<PAGE>

by changes in currency exchange rates and in exchange control regulations (E.G.,
currency blockage). There may be less publicly available information about a
foreign company. Foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards comparable to those
applicable to domestic companies. Some foreign stock markets have substantially
less trading volume than the New York Stock Exchange, and securities traded on
such foreign markets may therefore be less liquid than securities of comparable
domestic companies. Also, commissions on transactions in foreign securities may
be higher than on similar transactions on domestic stock markets. There is
generally less government regulation of stock exchanges, brokers, and listed and
unlisted companies in foreign countries than in the United States. In addition,
with respect to certain foreign countries, there is a possibility of
expropriation or confiscatory taxation, imposition of withholding taxes on
dividend or interest payments, limitations on the removal of funds or other
assets of each Fund, political or social instability, or diplomatic developments
that could adversely affect investments in those countries. Individual foreign
economies may differ favorably or unfavorably from the United States' economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.

Each of the Funds may convert U.S. dollars into foreign currency, but only
to effect transactions in foreign securities and not to hold foreign currency as
an investment. The Funds will not invest in forward foreign currency contracts.

SPECIAL SITUATIONS. Subject to the limitations in the Prospectus, each
Fund may invest in special situations that the Manager believes present
opportunities for capital growth. Such situations most typically include
corporate restructurings, mergers, and tender offers.

A special situation arises when, in the opinion of the Manager, the
securities of a particular company will, within a reasonably estimable period of
time, be accorded market recognition at an appreciated value solely by reason of
a development particularly or uniquely applicable to that company and regardless
of general business conditions or movements of the market as a whole.
Developments creating special situations might include, among others, the
following: liquidations, reorganizations, recapitalizations, mergers, or tender
offers; material litigation or resolution thereof; technological breakthroughs;
and new management or management policies. Although large and well-known
companies may be involved, special situations often involve much greater risk
than is inherent in ordinary investment securities.

B-5

<PAGE>

OTHER INVESTMENT RESTRICTIONS. Unless otherwise noted, the following
restrictions have been adopted as matters of fundamental policy for each Fund.
These fundamental policies may not be changed for any of the Funds without the
approval of the lesser of (i) two-thirds or more of the voting securities
present at a duly held meeting at which at least 50% of the outstanding voting
securities of that Fund are present in person or by proxy, or (ii) more than
one-half of the outstanding voting securities of that Fund. Each Fund MAY NOT:

1. Underwrite the securities of other issuers;

2. Purchase or sell real estate or interests in real estate, but a
Fund may purchase marketable securities or publicly traded limited partnership
interests of companies or partnerships holding real estate or interests in real
estate. As a matter of operating policy, the Funds have undertaken with a state
securities agency that they "may not purchase or sell real property (including
limited partnership interests, but excluding readily marketable interests in
real estate investment trusts or readily marketable securities of companies
which invest in real estate)." As long as this operating policy is in effect
and to the extent the operating policy is more restrictive than the fundamental
policy, the Fund will observe the operating policy;

3. Purchase or sell financial futures, commodities or commodity
contracts, including futures contracts on physical commodities;

4. Except as otherwise permitted, make loans to persons except by
the purchase of a portion of an issue of publicly or privately distributed
bonds, debentures, or other debt securities. However, no Fund may invest in any
illiquid securities, a term which means securities that cannot be disposed of
within seven days in the normal course of business at approximately the amount
at which the Fund has valued the securities, including certain privately sold
bonds, debentures or other debt securities or other illiquid assets, including
repurchase agreements maturing in over seven (7) days, which would cause the
then aggregate value of all such securities to exceed 10% of such Fund's total
assets (at the time of investment, giving effect thereto);

5. Purchase securities on margin, but the Fund may obtain such
short-term credits as may be necessary for the clearance of transactions for
purchases and sales of its portfolio securities;

6. Borrow money, except from banks for temporary or emergency (not
leveraging) purposes, including meeting redemption requests that might otherwise
require the untimely disposition of securities, in an aggregate amount not
exceeding 5% of the value

B-6

<PAGE>

of the Fund's total assets at the time any borrowing is made, or except to the
extent allowed by its investment policies;

7. Make short sales of securities;

8. Purchase or sell puts and calls on securities (this is an
operating policy);

9. Participate on a joint or joint and several basis in any
securities trading account (this is an operating policy);

10. Purchase the securities of any other investment company except
(1) in an initial public offering or in the open market or in privately
negotiated transactions where, in any case, to the best information of the Fund,
no commission, profit or sales charge to a sponsor or dealer (other than the
customary broker's commission or underwriting discount) results from such
purchase, but no such purchase shall exceed 5% of the Fund's total assets in
either category (not in the aggregate), or (2) if such purchase is part of a
merger, consolidation, or acquisition of assets, or (3) so-called "prime" and
"score" components of unit investment trusts;

11. Purchase the securities of issuers with less than three years
continuous operation in an amount in excess of 5% (30% for the Balanced Return
Fund) of the Fund's total assets;

12. Purchase the voting securities of any issuer in an amount in
excess of 10% of the voting securities of such issuer at the time of purchase;

13. Invest in or hold securities of any issuer if, to the knowledge
of the Fund, any officers or Trustees of the Trust or the Manager own
individually more than 1/2 of 1% of the securities of such issuer or if such
persons collectively own more than 5% of the securities of such issuer; and

14. Invest in interests in oil, gas or other mineral leases or
exploration or development programs, but a Fund may purchase marketable
securities of companies or partnerships holding such interests (this is an
operating policy).

Each Fund, notwithstanding any other investment policy or limitation
(whether or not fundamental), may invest all of its assets in the securities or
beneficial interests of a single pooled investment fund having substantially the
same objectives, policies and limitations as the Fund.

Some of the practices referred to above, even if approved by shareholders,
are subject to restrictions contained in the 1940 Act. In addition to the
restrictions described above, each of the Funds may from time to time agree to
additional investment

B-7

<PAGE>

restrictions for purposes of compliance with the securities laws of those states
and foreign jurisdictions where that Fund intends to offer or sell its shares.
Any such additional restrictions that would have a material bearing on a Fund's
operations will be reflected in the Prospectus or a Prospectus supplement and
may require shareholder approval.

MANAGEMENT OF THE TRUST

The Trustees of the Trust have been appointed for an indefinite term. They
are responsible for the overall management of the Trust, including general
supervision and review of each Fund's investment activities. The Trustees, in
turn, elect the officers of the Trust who are responsible for administering the
day-to-day operations of the Trust and each Fund. The current Trustees and
officers of the Trust and their principal occupations during the last five years
are the following:

Positions(s) Held Principal Occupation(s)
Name, Address and Age With the Trust During Past Five Years
- --------------------- ----------------- -----------------------
<S> <C> <C>
Roger Engemann* Chairman of the President of Roger
600 North Rosemead Board, President and Engemann & Associates,
Boulevard Trustee Inc., an investment
Pasadena, management firm, since
California 91107 1972, and the Manager
(55) since 1985. President
and a Director of
Pasadena Capital
Corporation.

John S. Tilson* Chief Financial Executive Vice
600 North Rosemead Officer, Secretary President, Portfolio
Boulevard and Trustee Manager and Securities
Pasadena, Analyst with Roger
California 91107 Engemann & Associates,
(52) Inc. since 1983 and the
Manager since 1985.
Officer and a Director
of Pasadena Capital
Corporation.

Barry E. McKinley Trustee Certified Public
201 South Lake Accountant; head of
Avenue, Suite 400 B.E. McKinley &
Pasadena, Associates since its
California 91101 inception in 1971.
(60)

B-8

<PAGE>

Positions(s) Held Principal Occupation(s)
Name, Address and Age With the Trust During Past Five Years
- --------------------- ----------------- -----------------------
<S> <C> <C>
Robert L. Peterson Trustee Private investor. From
P.O. Box 80784 1988 - 1995, Regional
San Marino, Manager for Commercial
California 94118 Real Estate Brokerage
(58) in the Pasadena office
of Jon Douglas Company.
Prior thereto he was
associated with the
real estate brokerage
firm of R.A. Rowan & Co.

Michael Stolper*+ Trustee President of Stolper
525 "B" Street, and Company, Inc., an
Suite 1080 investment adviser and
San Diego, broker-dealer since
California 92101 1975, and President of
(50) Seaport Venturers,
Inc., a venture capital
firm since 1982.
Director of Pasadena
Capital Corporation
since February 1994.

Richard C. Taylor Trustee President of Richard
2485 Huntington Taylor Company, Inc., a
Drive, #2 food ingredients
San Marino, broker, since 1987.
California 91108
(49)

Angela Wong Trustee Since 1986, Ms. Wong
11355 West Olympic has been of counsel to
Boulevard the law firm of Manatt,
Los Angeles, Phelps, Phillips &
California 90064 Kantor, specializing in
(44) employee benefits.

B-9

<PAGE>

Positions(s) Held Principal Occupation(s)
Name, Address and Age With the Trust During Past Five Years
- --------------------- ----------------- -----------------------
<S> <C> <C>
Richard A. Watson Controller - Fund Vice President and
600 North Rosemead Accounting and Controller - Fund
Boulevard Assistant Secretary Accounting of Roger
Pasadena, Engemann Management
California 91107 Co., Inc. From
(42) September 1988 to June
1993, Mutual Fund
Operations Manager of
The Pasadena Group of
Mutual Funds and Chief
Financial Officer of
Roger Engemann
Management Co., Inc. A
Director of Pasadena
Capital Corporation.
Prior thereto,
Mr. Watson was an Audit
Manager with Coopers &
Lybrand.
- ----------
</TABLE>

* TRUSTEE WHO IS AN "INTERESTED PERSON," AS DEFINED IN THE 1940 ACT.

+ MR. STOLPER IS ALSO A DIRECTOR OF BDI INVESTMENT COMPANY, A REGISTERED
INVESTMENT COMPANY THAT INVESTS PRIMARILY IN TAX-EXEMPT SECURITIES; OF
MERIDIAN FUND, INC., A REGISTERED INVESTMENT COMPANY THAT NORMALLY INVESTS
PRIMARILY IN EQUITY SECURITIES; AND OF JANUS CAPITAL CORPORATION SINCE
1984, WHICH MANAGES THE JANUS GROUP OF MUTUAL FUNDS.

As shown in the following table, the Manager pays the fees of the Trustees
who are not affiliated with the Manager, which currently are $1,250 per quarter
plus $1,250 for each meeting attended. The officers of the Trust and the
Trustees affiliated with the Manager receive no direct compensation for
performing the duties of such offices, except that Mr. Stolper receives fees
from the Manager at the same rates as the disinterested Trustees. However,
those officers and Trustees who are affiliated with the Manager may receive
remuneration indirectly because the Manager receives management fees from the
Funds. The table provides information regarding all series of The Pasadena
Group of Mutual Funds for the fiscal year ended December 31, 1995. The officers
and Trustees of the Trust as a group, together with officers of the Manager,
beneficially owned or controlled less than 1% of the outstanding shares of each
of the Funds as of December 31, 1995.

B-10

<PAGE>

<TABLE>
<CAPTION>
Total
Pension or Compensation
Retirement Respecting
Benefits Estimated Registrant
Accrued As Annual And
Name of Part of Benefits Fund Complex
Person, Aggregate Fund Upon Paid to
Position Compensation Expenses Retirement Trustees
- -------- ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C>
Roger Engemann None None None None
Chairman of the Board, President
and Trustee

John S. Tilson None None None None
Chief Financial Officer,
Secretary and Trustee

Barry E. McKinley $10,000 None None $10,000
Trustee

Robert L. Peterson $10,000 None None $10,000
Trustee

Michael Stolper $10,000 None None $10,000
Trustee

Richard C. Taylor $10,000 None None $10,000
Trustee

Angela Wong $10,000 None None $10,000
Trustee

Richard A. Watson None None None None
Controller -Fund Accounting and
Assistant Secretary

</TABLE>

INVESTMENT MANAGEMENT AND ADMINISTRATIVE SERVICES

The following information concerning the investment management and
administrative services provided to each of the Funds supplements the
information contained in the section in the Prospectus entitled "Management."

INVESTMENT MANAGEMENT AGREEMENT. The Manager, Roger Engemann Management
Co., Inc., has entered into an Investment Management Agreement (the "Management
Agreement") with the Trust, on behalf of each of the Funds, to provide
investment advice and investment management services with respect to the assets
of each Fund, provide personnel, office space, facilities and equipment as may
be needed by the Funds in their day-to-day operations, provide the officers of
the Trust, and provide the Funds with fund accounting, including assistance and
personnel necessary to price the portfolio securities of each Fund, calculate
each

B-11

<PAGE>

Fund's net asset value, and maintain the books and records of each Fund's
investment portfolio as required by applicable law. The Management Agreement
has been approved by the Board of Trustees of the Trust with respect to each
Fund, including a majority of the Trustees who are not a party to the Management
Agreement or interested persons of a party to the Management Agreement, and by a
majority of the outstanding voting shares of each Fund.

The Management Agreement dated March 1, 1993, currently is in effect
through February 28, 1997. The Management Agreement may be continued thereafter
for successive periods not to exceed one year, provided that such continuance is
specifically approved annually by a vote of a majority of each Fund's
outstanding voting securities or by the Board of Trustees, and by the vote of a
majority of the Trustees who are not parties to the Management Agreement or
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval.

EXPENSES. Except as set forth in the separate Administration Agreement
discussed below, the Manager is not responsible under the Management Agreement
for any expenses related to the operation of the Funds.

Under the Management Agreement, each Fund is responsible and has assumed
the obligation for paying all of its expenses, including but not limited to:
(i) brokerage and commission expenses, (ii) federal, state, or local taxes,
including issue and transfer taxes, incurred by or levied on the Fund,
(iii) interest charges on borrowings, (iv) charges and expenses of the Fund's
custodian and transfer agent, (v) payment of all investment advisory and
management fees, (vi) insurance premiums on the Fund's property and personnel,
including the fidelity bond and liability insurance for officers and Trustees,
(vii) printing and mailing of all reports, including semi-annual and annual
reports, prospectuses, and statements of additional information to existing
shareholders, (viii) fees and expenses of registering the Fund's shares under
the federal securities laws and of qualifying its shares under applicable state
securities (Blue Sky) laws subsequent to the Fund's initial fiscal period,
including expenses attendant upon renewing and increasing such registrations and
qualifications, (ix) legal fees and expenses, (x) auditing expenses, including
auditing fees of independent public accountants, (xi) all costs associated with
shareholders meetings and the preparation and dissemination of proxy
solicitation materials, except for meetings called solely for the Manager's
benefit, (xii) payments due under the Administration Agreement between the Trust
and the Manager, (xiii) dues and other costs of membership in industry
associations, subject to the approval of any such membership by the Board of
Trustees, (xiv) service fees to be paid to dealers and other shareholder service
providers pursuant to Services Agreements between the

B-12

<PAGE>

Trust and such service providers, and (xv) any extraordinary and non-recurring
expenses, except as otherwise prescribed therein. In addition, the Class B and
Class C shares of each Fund are subject to annual distribution fees pursuant to
plans adopted in accordance with Rule 12b-1 under the 1940 Act. See "Class B
and Class C Distribution Plans."

As compensation for its services under the Management Agreement, the
Manager is paid a monthly fee at an annual rate equal to 1.0% of each Fund's
average daily net assets up to $30 million, which rate is reduced at higher
levels of net assets as set forth in the Prospectus. For the years ended
December 31, 1993, 1994, and 1995, pursuant to the then-effective investment
management agreements with the Manager, the Growth Fund paid management fees to
the Manager of approximately $3,981,000, $2,951,000, and $2,985,000,
respectively. For the years ended December 31, 1993, 1994, and 1995, pursuant
to the then-effective investment management agreements with the Manager, the
Balanced Return Fund paid management fees to the Manager of approximately
$773,000, $596,000, and $512,000, respectively. For the years ended December
31, 1993, 1994, and 1995 pursuant to the then-effective investment management
agreement, the Nifty Fifty Fund paid management fees to the Manager of
approximately $1,386,000, $940,000, and $1,131,000, respectively.

The Management Agreement is terminable on 60-days' written notice by vote
of a majority of each Fund's outstanding shares, by vote of a majority of the
Board of Trustees, or by the Manager on 60-days' written notice. The Management
Agreement automatically terminates in the event of its assignment under the 1940
Act. The Management Agreement provides that in the absence of willful
misfeasance, bad faith, or gross negligence on the part of the Manager, or of
reckless disregard of its obligations thereunder, the Manager is not liable for
any action or failure to act in accordance with its duties.

ADMINISTRATION AGREEMENT. The Manager also has entered into an
Administration Agreement with the Trust on behalf of each of the Funds. Under
the Administration Agreement, the Manager, in its capacity as Administrator (a)
furnishes each Fund with various administrative and shareholder services
including, but not limited to (i) preparing and distributing all shareholder
reports, (ii) preparing all tax returns and other regulatory filings, and (iii)
blue sky compliance services, and (b) pays for all of the normal operating fees
and expenses of each Fund (as referenced above under "Expenses"), except for the
fees and expenses related to the services to be provided by the Manager under
the Investment Management Agreement, the fees under the Administration
Agreement, the services fees paid under the Services Agreements, the
distribution fees paid under the Class B and Class C Rule 12b-1 distribution
plans, and brokerage and

B-13

<PAGE>

commission expenses. See "Class B and Class C Distribution Plans." As
compensation for its services and obligations under the Administration
Agreement, the Administrator is paid a monthly fee at an annual rate equal to
1.05% of each Fund's average daily net assets up to $30 million, which rate is
reduced at higher levels of net assets. The Administration Agreement dated
March 1, 1993, was approved, with respect to each Fund, by the Board of Trustees
of the Trust, including a majority of the Trustees who are not parties to the
Administration Agreement, and continues in effect until terminated on behalf of
any Fund by either party on 60-days' written notice. For the year ended
December 31, 1993, the Growth Fund, the Balanced Return Fund and the Nifty Fifty
Fund paid administrative fees to the Manager of approximately $3,887,000,
$749,000, and $1,306,000, respectively. For the year ended December 31, 1994,
the Growth Fund, the Balanced Return Fund and the Nifty Fifty Fund paid
administrative fees to the Manager of approximately $3,179,000, $630,000, and
$997,000, respectively. For the year ended December 31, 1995, the Growth Fund,
the Balanced Return Fund and the Nifty Fifty Fund paid administrative fees to
the Manager of approximately $3,212,000, $541,000, and $1,203,000, respectively.

SERVICES AGREEMENTS. Under the Services Agreements, each Fund will pay a
continuing service fee to service providers, in an amount, computed and prorated
on a daily basis, equal to 0.25% per annum of each Fund's average daily net
assets, which will include the Manager or the Distributor for shareholder
accounts not serviced by other service providers. Such amounts are compensation
for providing certain services to clients owning shares of the Funds, including
personal services such as processing purchase and redemption transactions,
assisting in change of address requests and similar administrative details, and
providing other information and assistance with respect to a Fund, including
responding to shareholder inquiries. For the year ended December 31, 1994, the
Growth Fund, the Balanced Fund and the Nifty Fifty Fund paid service fees of
approximately $1,124,000, $168,000, and $284,000, respectively, of which
approximately $191,000, $31,000, and $41,000, respectively, were received by the
Manager or the Distributor. For the year ended December 31, 1995, the Growth
Fund, the Balanced Return Fund and the Nifty Fifty Fund paid service fees of
approximately $1,133,000, $140,000, and $363,000, respectively, of which
approximately $199,000, $24,000, and $51,000, respectively, were received by the
Manager or the Distributor.

Notwithstanding the above-described division of expenses, the Manager will
reduce its fees to each Fund under the Management Agreement for the amount, if
any, by which each respective Fund's annual operating expenses, expressed as a
percentage of average daily net assets, exceed the most restrictive limitation
imposed by any state in which such Fund's shares are then qualified for sale.
Currently the most

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<PAGE>

restrictive such limitation is 2-1/2% of the first $30 million of average net
assets of the Fund, plus 2% of the next $70 million, plus 1-1/2% of the average
net assets in excess of $100 million. Operating expenses for these purposes
include the Manager's management and administration fee but do not include any
taxes, interest, brokerage commissions, expenses incurred in connection with any
merger or reorganization, the distribution fees paid under the Class B and Class
C Rule 12b-1 distribution plans, and, with the prior written approval of any
state securities commission requiring the same, any extraordinary expenses, such
as litigation. The Manager also may choose, in its discretion, to reimburse or
waive expenses specific to one or more Classes on a temporary basis. The amount
of any such expenses waived or reimbursed by the Manager may vary from Class to
Class. In addition, the Manager in its discretion may waive or reimburse Trust
expenses and/or Fund expenses (with or without a waiver or reimbursement of
Class-specific expenses) on a temporary basis, but only if the same
proportionate amount of Trust expenses and/or Fund expenses are waived or
reimbursed for each Class.

The Manager also may act as an investment adviser to other persons,
entities, and corporations, including other investment companies. Personnel of
the Manager are affiliated with another investment adviser that has numerous
advisory clients and will devote portions of their time to such clients.

BROKERAGE ALLOCATION AND OTHER PRACTICES

The Manager, in connection with advising each Fund on its portfolio
decisions and subject to instructions of the Board of Trustees, will select the
broker or dealer for each Fund's portfolio transactions. In executing each
Fund's portfolio transactions, the Manager seeks to obtain the total costs or
proceeds in each transaction which are more favorable under all the
circumstances, taking into account such factors as the net economic result to
the Fund (involving both price paid or received and any commission or spread and
other costs paid), the efficiency of the transaction execution, the ability to
effect the transaction when a large block of securities is involved, the known
practices of brokers and their availability to execute possibly difficult
transactions in the future, and the financial strength and stability of the
broker or dealer. While the Manager generally seeks reasonably competitive
commission rates or spreads as part of this policy, a Fund may not necessarily
pay the lowest commission or spread available for a particular transaction.

Each Fund and the Manager may direct portfolio transactions to persons or
firms because of research and investment services provided by such persons or
firms if the commissions or spreads on the transactions are reasonable in
relation to the value of

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<PAGE>

the investment information provided. Among such research and investment
services are those that brokerage houses customarily provide to institutional
investors and include statistical and economic data and research reports on
companies and industries. Such research provides lawful and appropriate
assistance to the Manager in the performance of its investment decision-making
responsibilities. The Manager may use these services in connection with all of
its investment activities, and some services obtained in connection with a
Fund's transactions may be used in connection with other investment advisory
clients of the Manager, including other mutual funds, other series of the Trust,
or the Manager's affiliates.

Each Fund may invest in securities that are traded exclusively on the over-
the-counter market. The Funds may also purchase securities listed on a national
securities exchange through the "third market" (I.E., through markets other than
the exchanges on which the securities are listed). When executing transactions
in the over-the-counter market or the third market, the Manager will seek to
execute transactions through brokers or dealers that, in the Manager's opinion,
will provide the best overall price and execution so that the resultant price to
the Fund is as favorable as possible under prevailing market conditions.

None of the Funds allocates brokerage business in return for sales of a
Fund's shares, although such sales may be a factor in selecting broker-dealers
for portfolio transactions, provided the Fund is receiving best execution.
Neither the Manager, the Distributor nor any affiliated person thereof will
participate in commissions or spreads paid by a Fund to brokers or dealers nor
will they receive any reciprocal business, directly or indirectly, as a result
of such commissions or spreads.

Stolper & Company, Inc., of which Michael Stolper, a Trustee of the Trust
and a Director of Pasadena Capital Corporation, is the sole shareholder, has in
the past received brokerage business from Roger Engemann & Associates, Inc.
Mr. Stolper owns 6.5% of the Manager and is a director of Pasadena Capital
Corporation. Stolper & Company, Inc. assists its clients in selecting an
investment adviser and offers a service measuring the performance of investment
advisers, in return for which the client pays cash or directs the investment
adviser to execute a portion of the brokerage business through Bear, Stearns &
Company for the credit of Stolper & Company, Inc. Stolper & Company, Inc. and
Roger Engemann & Associates, Inc. anticipate that such brokerage allocation from
Roger Engemann & Associates, Inc. will continue. However, neither Michael
Stolper nor Stolper & Company, Inc. will receive or participate in commissions
paid by any of the Funds nor receive any reciprocal business as a result of
commissions paid by the Funds, although a Fund may pay usual and customary

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brokerage commissions to Bear, Stearns & Company for brokerage business by the
Funds.

It is possible that purchases or sales of securities for each Fund also may
be considered for other clients of the Manager or its affiliates, including the
Trust's other series. Any transactions in such securities at or about the same
time will be allocated among the participating Funds and such other clients in a
manner deemed equitable to all by the Manager, taking into account the
respective sizes of the Fund or Funds and the other clients' accounts, and the
amount of securities to be purchased or sold. It is recognized that it is
possible that in some cases this procedure could have a detrimental effect on
the price or volume of the security so far as the participating Fund is
concerned. However, in other cases, it is possible that the ability to
participate in volume transactions and to negotiate lower commissions will be
beneficial to the participating Fund.

The Board of Trustees of the Trust periodically monitors the operation of
these brokerage policies by reviewing the allocation of brokerage orders. The
total brokerage commissions paid by the Growth Fund during 1993, 1994, and 1995,
were $969,099, $1,411,544, and 839,679, respectively. For the years ended
December 31, 1993, 1994, and 1995, the Balanced Return Fund paid $23,347,
$94,899, and $33,853, respectively, in brokerage commissions. For the years
ended December 31, 1993, 1994, and 1995, the Nifty Fifty Fund paid $89,808,
$123,205, and $132,426, respectively, in brokerage commissions. The amounts
shown for each Fund for 1993 and 1994 include mark-ups paid by the Fund on
principal trades.

PRINCIPAL UNDERWRITER

Pasadena Fund Services, Inc. (the "Distributor"), acts as the principal
underwriter for each of the Funds in a continuous offering of each Fund's
shares. The Distributor uses its best efforts to distribute the Funds' shares,
primarily through investment dealers, and is not obligated to purchase or
distribute any specified number of shares.

An underwriting agreement (the "Underwriting Agreement") dated August 12,
1994, as amended, between the Trust, on behalf of each of the Funds, and the
Distributor is currently in effect through February 28, 1997. The Underwriting
Agreement shall continue in effect thereafter for periods not exceeding one year
if approved at least annually by (i) the Board of Trustees or a vote of a
majority of the outstanding shares of the Trust (as defined in the 1940 Act) and
(ii) a majority of the Trustees who are not interested persons of any such
party, in each case cast in person at a meeting called for the purpose of voting
on such approval. The Underwriting Agreement may be terminated without

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<PAGE>

penalty by the parties thereto upon 60-days' written notice, and is
automatically terminated in the event of its assignment as defined in the 1940
Act.

Pursuant to the Underwriting Agreement, the Distributor is entitled to
receive a front-end sales charge in connection with certain sales of Class A
shares, and a contingent deferred sales charge in connection with certain
redemptions of Class B shares. The Distributor reallows all or a portion of the
sales charges to selected dealers and agents for selling Class A shares.

For the year ended December 31, 1993, the Distributor received front-end
sales charges of $666,826, $59,696, and $79,723, after reallowance to dealers of
$5,044,333, $478,711, and $561,836, respectively, for sales of the Growth Fund,
the Balanced Return Fund, and the Nifty Fifty Fund, respectively. For the year
ended December 31, 1994, the Distributor received front-end sales charges of
$116,677, $18,160, and $34,210, after reallowance to dealers of $754,323,
$52,840, and $198,790, respectively, for sales of Class A shares of the Growth
Fund, the Balanced Return Fund, and the Nifty Fifty Fund, respectively. For the
year ended December 31, 1995, the Distributor received front-end sales charges
of $67,982, $6,600, and $36,183, after reallowances of front-end sales charges
to dealers of $857,929, $55,177, and $491,687, respectively, for sales of Class
A shares of the Growth Fund, the Balanced Return Fund, and the Nifty Fifty Fund,
respectively. In some instances dealers may receive 100% of the sales charge
for sales of shares of a Fund and may, therefore, be deemed "underwriters" under
the Securities Act of 1933, as amended.

For the year ended December 31, 1994, the Distributor received contingent
deferred sales charges of $6,132, $196, and $6,662 for redemptions of the Class
B shares of the Growth Fund, the Balanced Return Fund, and the Nifty Fifty Fund,
respectively. For the year ended December 31, 1995, the Distributor received
contingent deferred sales charges of $77,111, $18,276, and $71,711 for
redemptions of the Class B shares of the Growth Fund, the Balanced Return Fund,
and the Nifty Fifty Fund, respectively.

The Distributor is responsible for certain expenses of distribution of the
shares of each Fund, including advertising expenses, costs of printing sales
material and prospectuses used to offer such shares to the public and expenses
of preparing and printing amendments to the Trust's registration statement if
the amendment is necessitated by the actions of the Distributor. The Class B
and Class C shares of each Fund pay distribution fees to the Distributor to
reimburse the Distributor for its distribution costs with respect to those
Classes. See "Class B and Class C Distribution Plans."

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<PAGE>

The Distributor is a wholly-owned subsidiary of Pasadena Capital
Corporation.

CLASS B AND CLASS C DISTRIBUTION PLANS

Pursuant to separate Distribution Plans (each a "Plan" and collectively the
"Plans") adopted by each Fund pursuant to Rule 12b-1 under the 1940 Act, the
Distributor incurs the expenses of distributing each Fund's Class B and Class C
shares. See "Principal Underwriter."

Prior to January 3, 1994, the Funds offered only Class A shares. On
July 13, 1993, the Board of Trustees of the Trust, including a majority of the
Trustees who are not interested persons of the Trust and who have no direct or
indirect financial interest in the operation of the Plans or in any agreement
related to any Plan (the "Rule 12b-1 Trustees"), at a meeting called for the
purpose of voting on each Plan, adopted a Plan of distribution for the Class B
and Class C shares of each Fund. The initial shareholder of the Class B and
Class C shares of each Fund approved the Plan covering each Class as of
January 3, 1994.

Under the Plans, each Fund pays distribution fees to the Distributor at an
annual rate of 0.75% of the Fund's aggregate average daily net assets
attributable to its Class B shares and Class C shares, respectively, to
reimburse the Distributor for its expenses in connection with the promotion and
distribution of those Classes.

Each Plan provides that the Distributor may use the distribution fees
received from the Class of the Fund covered by that Plan only to pay for the
distribution expenses of that Class. Distribution fees are accrued daily and
paid monthly, and are charged as expenses of the Class B and Class C shares as
accrued.

Class B and Class C shares are not obligated under the Plans to pay any
distribution expense in excess of the distribution fee. Thus, if a Plan were
terminated or otherwise not continued, no amounts (other than current amounts
accrued but not yet paid) would be owed by the Class to the Distributor.

Each Plan provides that it shall continue in effect from year to year
provided that a majority of the Board of Trustees of the Trust, including a
majority of the Rule 12b-1 Trustees, vote annually to continue the Plan. Each
Plan (and any distribution agreement between the Distributor and a selling agent
with respect to the Class C shares) may be terminated without penalty upon at
least 60-days' notice by the Distributor, or by the Fund by vote of a majority
of the Rule 12b-1 Trustees, or by vote of a

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<PAGE>

majority of the outstanding shares (as defined in the 1940 Act) of the Class to
which the Plan applies.

All distribution fees paid by the Funds under the Plans will be paid in
accordance with Article III, Section 26 of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., as such Section may change
from time to time. Pursuant to each Plan, the Board of Trustees will review at
least quarterly a written report of the distribution expenses incurred by the
Distributor on behalf of the Class B and Class C shares of each Fund. In
addition, as long as the Plans remain in effect, the selection and nomination of
Trustees who are not interested persons (as defined in the 1940 Act) of the
Trust shall be made by the Trustees then in office who are not interested
persons of the Trust.

For the year ended December 31, 1994, the Distributor received distribution
fees of $39,764, $5,918, and $18,699, respectively, with respect to the Class B
shares of the Growth Fund, the Balanced Return Fund, and the Nifty Fifty Fund.
For the year ended December 31, 1995, the Distributor received distribution fees
of $183,948, $14,223, and $135,151, respectively, with respect to the Class B
shares of the Growth Fund, the Balanced Return Fund, and the Nifty Fifty Fund.
Such amounts were used by the Distributor in connection with the distribution of
the Funds' Class B shares to compensate dealers for the sale of such shares.

For the year ended December 31, 1994, the Distributor retained distribution
fees of $204, $32, and $95, respectively, with respect to the Class C shares of
the Growth Fund, the Balanced Return Fund, and the Nifty Fifty Fund, after
reallowances to dealers of $23,519, $5,940, and $12,102, respectively. For the
year ended December 31, 1995, the Distributor retained distribution fees of
$729, $47, and $1,254, respectively, with respect to the Class C shares of the
Growth Fund, the Balanced Return Fund, and the Nifty Fifty Fund, after
reallowances to dealers of $92,591, $13,900, and $68,639, respectively. Such
amounts were used by the Distributor in connection with the distribution of the
Funds' Class C shares to compensate dealers for the sale of such shares.

PURCHASE, REDEMPTION, AND PRICING OF FUND SHARES

Reference is made to the information under the captions "Alternative
Purchase Arrangements," "Purchase of Shares," "Redemption of Shares,"
"Determination of Net Asset Value," and "Dividends, Distributions, and Taxes" in
the Prospectus. The Prospectus sets forth certain minimum investment and other
requirements. From time to time, each Fund's management in its discretion may
elect to waive such requirements in connection

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<PAGE>

with individual purchases and sales. The following is additional information
regarding purchase, redemption, and pricing of Fund shares:

ALTERNATIVE PURCHASE ARRANGEMENTS. Each Fund offers investors three
Classes of shares which bear sales and distribution charges in different forms
and amounts. Class A shares are subject to a maximum front-end sales charge at
time of purchase of 5.50% of the public offering price per share. Certain
purchases of Class A shares may qualify for reduced sales charges. Class A
shares do not pay a 12b-1 distribution fee, and redemptions of Class A shares
are not subject to a contingent deferred sales charge. Class B shares are sold
without an initial sales charge, but are subject to a contingent deferred sales
charge of up to 5.00% if redeemed within four years of purchase. Class B shares
are subject to a 12b-1 distribution fee at the annual rate of 0.75% of the
average net assets attributable to the Class B shares. Class B shares will
automatically convert into Class A shares, based on relative net asset values,
at the beginning of the seventh year after purchase. Class C shares are not
subject to a front-end sales charge or to a contingent deferred sales charge,
but are subject to an ongoing 12b-1 distribution fee at the annual rate of 0.75%
of the average net assets attributable to the Class C shares. Class C shares
have no conversion feature, and therefore purchasers of Class C shares should
expect to pay the 12b-1 distribution fee for as long as the shares are owned.

DETERMINATION OF NET ASSET VALUE. The net asset value of each Fund is
determined once daily as of 4:00 p.m. New York City Time on each day the New
York Stock Exchange (the "Exchange") is open for trading (or such earlier time
if the Exchange closes early for any reason). It is expected that during 1996
the Exchange will be closed on Saturdays and Sundays and on Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. No Fund expects to determine the net asset value of its shares
on any day when the Exchange is not open for trading even if there is sufficient
market movement with respect to its portfolio securities on such days to
materially affect the net asset value per share.

In valuing the Funds' assets for the purpose of calculating net asset
value, portfolio securities listed on a national securities exchange or on
Nasdaq for which market quotations are readily available are valued at the last
sale price on the exchange or Nasdaq on the day as of which such value is being
determined. If there has been no sale on such exchange or on Nasdaq on such
day, the security is valued at the last sale price on the business day the
security was last traded. Securities traded only in the over-the-counter
market, and not on Nasdaq, for which market quotations are readily available are
valued at the current or last bid price. If no bid price is quoted on such

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<PAGE>

day, the security is valued by such method as the Board of Trustees shall
determine in good faith to reflect the security's fair value. All other assets
of each Fund are valued in such manner as the Board of Trustees in good faith
deems appropriate to reflect their fair value.

U.S. Government securities are traded in the over-the-counter market and
will be valued as follows: securities having a maturity of 60 days or less will
be valued at cost with interest accrued or discount amortized to date of
valuation included in the interest receivable; securities having a maturity of
more than 60 days and for which market quotations are readily available will be
valued at the last reported bid price; securities having a maturity of over 60
days and for which market quotations are not readily available will be valued on
the basis of market quotations for securities of comparable maturity, quality
and type. Securities for which reliable quotations are not readily available
and all other assets will be valued at their respective fair value as determined
in good faith by, or under procedures established by, the Board of Trustees.

Occasionally, events affecting the values of a Fund's securities may occur
between the times at which the values are determined and the close of trading,
and the effect of these events will not be reflected in the computation of net
asset value. If events materially affecting the value of such securities occur
during such period, then their valuation may be adjusted to reflect their fair
value at the close of trading as determined in good faith by, or under
procedures established by, the Board of Trustees. The Funds may utilize a
pricing service, bank, or broker/dealer experienced in such matters to perform
any of the pricing functions under procedures approved by the Board of Trustees.

PURCHASE OF SHARES. If an order for the purchase of a Fund's shares,
together with payment in proper form, is received directly by Boston Financial
Data Services, Inc. (the "Sub-Transfer Agent"), the Fund, or another authorized
agent or subagent of the Fund, before 4:00 p.m., New York City time, Fund shares
will be purchased at the public offering price (I.E., net asset value, plus the
applicable front-end sales charge set forth in that Fund's Prospectus for Class
A shares only) determined on that day. Otherwise, Fund shares will be purchased
at the offering price determined as of the close of trading on the next business
day. It is the responsibility of any securities firm to transmit orders placed
through it so that they will be received by the Sub-Transfer Agent on a timely
basis as described in the Prospectus. If an application for the purchase of
shares of any Fund is received by the Sub-Transfer Agent, the Fund, or another
authorized agent or subagent of the Fund, without the appointment of an
investment dealer, the Distributor intends to assign the account to an
investment dealer, which may include the

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Distributor, for servicing and pay the applicable dealer concession to such
firm. The appointment of a dealer of record does not change or affect in any
way the price at which shares of the Fund are purchased or the rights of the
shareholder, and the shareholder may change at any time the designation of the
dealer of record to any other dealer by written notice to the Fund.

When purchasing shares of a Fund, an investor must specify whether he
wishes to purchase Class A, Class B or Class C shares. Orders for Class B or
Class C shares in the aggregate for more than $100,000 per Fund will not be
accepted.

PURCHASE OF CLASS A SHARES AT NET ASSET VALUE. Certain family members of
officers, trustees, directors and full-time employees of the Trust, the Manager,
the Distributor and their affiliates and such other persons who are determined
by the Board of Trustees under circumstances not involving any sales expense to
the Funds or the Distributor may purchase Class A shares of the Funds at net
asset value. Family members are defined as current spouse, children, parents,
grandchildren, grandparents, uncles, aunts, siblings, nephews, nieces, step
relatives, relations at law and cousins.

LETTER OF INTENT -- CLASS A SHARES ONLY. An investor may qualify for an
immediate reduced front-end sales charge on the purchase of Class A shares of
any of the funds in The Pasadena Group of Mutual Funds by completing the Letter
of Intent section of the application for investment (the "Letter of Intent" or
"Letter"), in which the investor states its intention to purchase during the
following 13 months a specified amount of Class A shares which, if made at one
time, would qualify for a reduced sales charge. A minimum initial investment
equal to 5% of such specified amount is required in one of the Funds. After the
investor files the Letter of Intent, each additional investment made in Class A
shares of any of the Funds will be entitled to the sales charge applicable to
the level of investment indicated in the Letter of Intent as described above.
Sales charge reductions based upon purchases of Class A shares in more than one
fund in The Pasadena Group of Mutual Funds will be included in the Letter of
Intent only if notification is given to the Distributor that the investment
qualifies for a discount. Investments in Class A shares of the Funds within 90
days before the Letter of Intent is filed will be counted towards completion of
the Letter of Intent but will not be entitled to a retroactive downward
adjustment of the sales charge. If the Letter of Intent is not completed within
the 13-month period, there will be an upward adjustment of the sales charge as
specified below, depending upon the amount actually purchased during the period.

The Letter of Intent requires that five percent (5%) of the amount of the
total intended purchase will be reserved in Class A shares of the applicable
Fund, registered in the investor's name,

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<PAGE>

to assure that the full applicable sales charge will be paid if the investor
does not complete the intended purchase. However, the reserved shares will be
included in the total Class A shares owned as reflected on the monthly
statement, and any income and capital gain distributions on the reserved shares
will be paid as directed. The reserved shares will not be available for
disposal by the investor until the Letter of Intent has been completed, or the
higher sales charge paid. If the total purchases equal or exceed the amount
specified under the Letter, the reserved Class A shares will be deposited to the
investor's Open Account. If the total amount of purchases exceeds the amount
specified under the Letter and is an amount which would qualify for a further
quantity discount, a retroactive price adjustment will be made by the
Distributor and the dealer through whom purchases were made pursuant to the
Letter of Intent (to reflect such further quantity discount) on purchases of
Class A shares made after filing the Letter. The resulting difference in
offering price will be applied to the purchase of additional Class A shares at
the offering price applicable to a single purchase or the dollar amount of the
total purchases. If the total purchases are less than the amount specified
under the Letter, the investor will remit to the Distributor an amount equal to
the difference in the dollar amount of sales charge actually paid and the amount
of sales charge which would have applied to the aggregate purchases of Class A
shares if the total of such purchases had been made at a single time. Upon such
remittance, the reserved Class A shares held for the investor's account will be
deposited to its Open Account. If within 20 days after written request such
difference in sales charge is not paid, the redemption of an appropriate number
of reserved Class A shares to realize such difference will be made. In the
event of a total redemption of the Class A shares in the account prior to
fulfillment of the Letter of Intent, the additional sales charge due will be
deducted from the proceeds of the redemption and the balance will be forwarded
to the investor.

By completing the Letter of Intent section of the application the investor
grants to the Distributor a security interest in the reserved Class A shares and
agrees to irrevocably appoint the Distributor as its attorney-in-fact to
surrender for redemption any or all such shares with full power of substitution.
This power of attorney is coupled with an interest. The investor or its dealer
must inform the Distributor that this Letter of Intent is in effect each time a
purchase is made.

REDEMPTION OF SHARES. The right of redemption may not be suspended and the
date of payment upon redemption postponed for more than seven days (or such
shorter period as may be required by applicable law or regulation) after a
shareholder's redemption request made in accordance with the procedures set
forth above, except for any period during which the Exchange is closed (other

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<PAGE>

than customary weekend and holiday closings) or during which the SEC determines
that trading thereon is restricted, or for any period during which an emergency
(as determined by the SEC) exists as a result of which disposal by a Fund of
securities owned by it is not reasonably practicable or as a result of which it
is not reasonably practicable for such Fund fairly to determine the value of its
net assets, or for such other period as the SEC may by order permit for the
protection of security holders of the Fund.

Each Fund may pay the redemption price (net of any CDSC imposed on Class B
shares) either in cash or in portfolio securities of the Fund (selected in the
discretion of the Board of Trustees and taken at their value used in determining
net asset value), or partly in cash and partly in portfolio securities. As a
practice, each Fund will redeem shares wholly in cash unless the Board of
Trustees believes that economic conditions make cash redemption detrimental to
that Fund's interests. If payment for redeemed shares is made wholly or partly
in portfolio securities, the shareholder will ordinarily incur brokerage costs
in converting the securities to cash. The Trust has filed a formal election
with the SEC stating that each Fund may effect a redemption in portfolio
securities provided it pays redemptions in cash during any 90-day period for any
shareholder equal to the lesser of $250,000 or 1% of that Fund's total net
assets at the beginning of such period. Each Fund currently expects, however,
that the amount of a redemption request would have to be significantly greater
than $250,000 or 1% of total net assets before the Fund would make a redemption
in portfolio securities. Any such redemptions will be subject to receipt by the
Fund of any necessary regulatory approvals.

Class B shares are subject to payment of a contingent deferred sales charge
of up to 5.00% if redeemed within four years of purchase. See "Alternative
Purchase Arrangements."

If an investor owns more than one class of shares in a Fund, the redemption
request must specify which class is being redeemed. Absent such specification,
the investor's shares will be redeemed in the following order: First, Class C
shares; second, Class A shares; third, Class B shares.

DISTRIBUTIONS AND TAX STATUS

Reference is made to the information contained under the captions
"Dividends, Distributions, and Taxes" in the Prospectus, which is incorporated
herein by reference. The following is additional information with reference to
each Fund's distributions and tax status:

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DIVIDENDS AND DISTRIBUTIONS. The Funds declare and pay income dividends
and any capital gains distributions at least once a year as stated in the
Prospectus.

Each shareholder may elect either to receive dividends and distributions in
cash or to have them reinvested in additional whole or fractional shares of the
Fund which was the source of the dividend or distribution. The election to
receive dividends and distributions in cash or shares is made at the time of the
subscription order. A shareholder may change such election at any time prior to
the record date for a particular dividend or distribution by written request to
the applicable Fund. The value of whole and fractional shares shall be computed
in accordance with the provisions of "Determination of Net Asset Value." No
sales or other types of charge will be assessed in connection with the
reinvestment of dividends and capital gains distributions.

TAXES. Each of the Funds is treated as a separate entity for federal
income tax purposes. Each Fund has elected to be treated as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), has qualified as such for the fiscal year ended
December 31, 1995 and intends to continue to so qualify. Qualification as a
"regulated investment company" does not involve supervision of the Funds'
management or investment practices or policies by any governmental agency. By
distributing substantially all of its net investment income and realized net
capital gains for any fiscal year and by satisfying certain other requirements
relating to the sources of its income and diversification of its assets, each
Fund will not be liable for federal income taxes, to the extent its earnings are
distributed, or excise taxes based on net income, with respect to such year.

Dividends of net investment income (including any net realized short-term
capital gains) paid by each Fund are taxable to the recipient shareholders as
ordinary income. In the case of corporate shareholders, such distributions may
qualify for the corporate dividends-received deduction to the extent each Fund
designates the amount distributed as a qualifying dividend. Availability of the
deduction is subject to certain holding period and debt-financing limitations.
The aggregate amount so designated cannot, however, exceed the aggregate amount
of qualifying dividends received by the Fund for its taxable year. In view of
each Fund's investment policies, it is expected that dividends from domestic
corporations will be part of the Funds' gross income and that, accordingly, part
of such distributions by the Funds may be eligible for the dividends-received
deduction for corporate shareholders; however, the portion of each Fund's gross
income attributable to qualifying dividends is largely dependent on that Fund's
investment activities for a particular year and therefore cannot be predicted
with any certainty.

B-26

<PAGE>

Distributions of net capital gains (I.E., the excess of net long-term
capital gains over net short-term capital losses) by each Fund are taxable to
the recipient shareholders as a long-term capital gain, without regard to the
length of time a shareholder has held Fund shares. Capital gain distributions
are not eligible for the dividends-received deduction referred to in the
preceding paragraph. Any loss on a sale or exchange of shares held for six
months or less will be treated as long-term capital loss to the extent of such
long-term capital gain distributions with respect to those shares.

Exchanges and redemptions of shares of a Fund may result in gains or losses
for tax purposes to the extent of the difference between the proceeds from the
shares disposed of and the shareholder's adjusted tax basis for such shares. If
a shareholder of a Fund exercises the exchange privilege within 90 days of
acquiring shares in such Fund, any loss that would otherwise be recognized on
the exchange will be reduced (or any gain increased) to the extent the sales
charge paid on the purchase of the shares surrendered reduces any sales charge
that would be payable on the purchase of the new shares in the absence of the
exchange privilege. Instead, the amount of the reduction in loss (or increase
in gain) will be treated as an amount paid for the new shares. Pursuant to a
ruling issued by the IRS to the Funds, the conversion of Class B shares of a
Fund into Class A shares of the same Fund will not result in gains or losses for
federal income tax purposes.

Foreign exchange gains and losses realized by a Fund in connection with
certain transactions involving foreign currency denominated securities are
subject to Section 988 of the Code, which will generally cause such gains and
losses to be treated as ordinary income and losses rather than capital gains and
losses and may affect the amount, timing and character of distributions to
shareholders.

If more than 50% of a regulated investment company's assets at year end
consist of securities issued by foreign corporations, the regulated investment
company may elect under the Code to pass through to its shareholders certain
taxes paid by it to foreign countries. It is not anticipated that any Fund will
qualify to make this election.

An investment by a Fund in certain "passive foreign investment companies"
could subject the Fund to additional U.S. federal income tax or other charge on
the proceeds from the disposition of its investment in such a company. This tax
can be avoided, however, by the Fund making an election to mark such investments
to market annually, or to treat the passive foreign investment company as a
"qualified electing fund" which passes its annual income through to the Fund
regardless of whether the company makes distributions.

B-27

<PAGE>

A shareholder of each Fund who does not fall within one of certain exempt
categories may be subject to backup withholding at the rate of 31% with respect
to dividends and capital gains distributions paid to shareholders or reinvested
by that Fund and other amounts distributed by that Fund, including proceeds of
redemptions, unless such shareholder provides a social security or taxpayer
identification number, certifies as to exemption from backup withholding, and
otherwise complies with applicable requirements of the Code.

Reports containing appropriate federal income tax information (relating to
the tax status of dividends and capital gain distributions by each Fund) will be
furnished to each shareholder following the close of the calendar year during
which the payments are made.

The discussions herein and in the Prospectus have been prepared by the
management of the Trust, are general by nature and do not purport to be a
complete description of all tax implications of an investment in one or more of
the Funds. Investors should consult their own tax advisers for further details
and for the application of federal, state and local tax laws to their particular
situations. Heller, Ehrman, White & McAuliffe has expressed no opinion in
respect thereof.

PERFORMANCE INFORMATION

From time to time, each Fund may state its total return in advertisements
and investor communications. Total return is computed separately for the
Class A, Class B and Class C shares of each Fund. Total return may be stated
for any relevant period as specified in the advertisement or communication. Any
statements of total return or other performance data for any Class of a Fund
will be accompanied by information on that Class's average annual compounded
rate of return over the most recent four calendar quarters and the period from
the inception of the Class (or from the inception of operations of the Fund for
the Class A shares). Each Fund may also advertise aggregate and average total
return information over different periods of time.

B-28

<PAGE>

Each Fund's average annual compounded rate of return is determined by
reference to a hypothetical $1,000 investment that includes capital appreciation
and depreciation for the stated period, according to the following formula:

n
P(1+T) = ERV

Where: P = a hypothetical initial purchase order of $1,000 from which
the maximum front-end sales charge is deducted (Class A
shares only)

T = average annual total return

n = number of years

ERV = ending redeemable value of the hypothetical $1,000 purchase
at the end of the period from which the maximum applicable
contingent deferred sales charge is deducted (Class B shares
only)

Aggregate total return is calculated in a similar manner, except that the
results are not annualized. Each calculation assumes that the maximum front-end
sales charge (Class A shares only) is deducted from the initial $1,000
investment at the time it is made and that all dividends and distributions are
reinvested at net asset value on the reinvestment dates during the period. Each
calculation for Class B shares also assumes that the maximum applicable
contingent deferred sales charge has been paid upon redemption at the end of the
period.

The average annual compounded rates of return, or total return, for the
Class A, Class B and Class C shares of each of the Funds for the indicated
periods ended December 31, 1995 were as follows:

CLASS A

One Five Inception(1) to
Year Years December 31, 1995
---- ----- -----------------
<S> <C> <C> <C>

The Growth Fund 20.14% 13.31% 10.92%

The Balanced 20.16% 11.29% 13.47%
Return Fund

The Nifty Fifty 21.14% 16.18% 15.97%
Fund

</TABLE>

B-29

<PAGE>

CLASS B

One Inception(2) to
Year December 31, 1995
---- -----------------
<S> <C> <C>
The Growth Fund 21.26% 8.38%

The Balanced
Return Fund 21.20% 7.76%

The Nifty
Fifty Fund 22.26% 11.56%

</TABLE>

CLASS C

One Inception(2) to
Year December 31, 1995
---- -----------------
<S> <C> <C>
The Growth Fund 26.26% 10.22%

The Balanced
Return Fund 26.23% 9.62%

The Nifty
Fifty Fund 27.26% 13.34%

</TABLE>

1 The inception dates of the Funds are as follows:
Growth Fund -- June 24, 1986
Balanced Return Fund -- June 8, 1987
Nifty Fifty Fund -- December 17, 1990

2 The inception date for Class B and Class C shares was January 1, 1994.

Each Fund may also state its yield in advertisements and investor
communications. Yield is computed separately for each Class of each Fund. The
yield computation is determined by dividing the net investment income per share
of the Class earned during the period by the maximum offering price per share of
the Class on the last day of the period and annualizing the resulting figure,
according to the following formula:

6
Yield = 2 [((a-b) + 1) -1]
-------
cd
where

a = dividends and interest earned during the period;

B-30

<PAGE>

b = expenses accrued for the period (net of reimbursements);

c = the average daily number of shares outstanding during the period that were
entitled to receive dividends;

d = the maximum offering price per share on the last day of the period.

Yield calculations for Class A shares assume the maximum front-end sales
charge applicable to purchases of those shares. Yield calculations for Class B
shares assume the maximum contingent deferred sales charge applicable to
redemptions of those shares. Actual yield may be affected by variances in sales
charges on investments. Until such time as this Statement of Additional
Information is amended to include the amount of yield for each Fund for the
30-day period ended December 31, 1995, the amount of such yield will not be
advertised on behalf of that Fund.

Each Fund may also, from time to time, include a reference to the current
distribution rate of each Class of shares in investor communications and sales
literature preceded or accompanied by a prospectus for that Fund, reflecting the
amounts actually distributed to shareholders of each Class which could include
capital gains and other items of income, as well as interest and dividend income
received by the Fund and distributed to the shareholders. All calculations of a
Class's distribution rate are based on the distributions per share which are
declared, but not necessarily paid, during the fiscal year. The distribution
rate for a Class is determined by dividing the distributions declared during the
period with respect to that Class by the maximum offering price per share of the
Class on the last day of the period and annualizing the resulting figure. The
distribution rate does not reflect capital appreciation or depreciation in the
price of each Fund's shares and should not be confused with yield or considered
to be a complete indicator of the return to the investor on his investment.

The performance of the Funds may be compared to that of various indices of
investment performance published by third parties (including, for example and
not limited to, the Dow Jones Industrial Index, Standard & Poor's 500 Stock
Index, Nasdaq Composite Index, the Value Line Arithmetic Index, the Value Line
Geometric Index, Russell 1000, Russell 2000, Russell 3000, Wilshire 4500,
Wilshire 5000, Salomon Brothers High-Grade Bond Index, Goldman Sachs Convertible
100 Index, Lipper Non-Government Money Market Average and Lipper Government
Money Market Average). Furthermore, the Funds' standard performance may also be
compared to the Funds' performance calculated as if no sales charges were
deducted.

B-31

<PAGE>

From time to time, information concerning each Fund's performance by
independent sources such as Morningstar and similar organizations may also be
used in advertisements and in information furnished to present or prospective
investors in the Funds.

Investors should note that the investment results of a Fund will fluctuate
over time, and any presentation of a Fund's current yield, total return or
distribution rate for any period should not be considered as a representation of
what an investment may earn or what an investor's total return, yield or
distribution rate may be in any future period.

GENERAL

Each Fund is a separate and distinct series of the Pasadena Investment
Trust, a Massachusetts business trust. The shareholders of a Massachusetts
business trust could, under certain circumstances, be held personally liable as
partners for the obligations of the Trust. However, the Trust's Amended and
Restated Agreement and Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Trust and each Fund. The
Declaration of Trust also provides for indemnification and reimbursement of
expenses out of Trust assets, including the Funds, for any shareholder held
personally liable for obligations of the Trust. The Declaration of Trust
provides that the Trust shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Trust and satisfy
any judgment thereon. All such rights are limited to the assets of the Fund of
which a shareholder holds shares. The Declaration of Trust further provides
that the Trust may maintain appropriate insurance (for example, fidelity bonding
and errors and omissions insurance) for the protection of the Trust, its
shareholders, trustees, officers, employees, and agents to cover possible tort
and other liabilities. Furthermore, the activities of the Trust as an
investment company as distinguished from an operating company would not likely
give rise to liabilities in excess of the Trust's total assets. Thus, the risk
of a shareholder's incurring financial loss on account of shareholder liability
is limited to circumstances in which both inadequate insurance exists and the
Trust itself is unable to meet its obligations.

The Trust is registered with the Securities and Exchange Commission as a
management investment company. Such a registration does not involve supervision
of the management or policies of the Funds. The Prospectus and this Statement
of Additional Information omit certain information contained in the Registration
Statement of the Trust filed with the Securities and Exchange Commission.
Copies of such information may be obtained from the Commission upon payment of
the prescribed fee.

B-32

<PAGE>

As of March 31, 1996 the following shareholders, to the Trust's knowledge,
owned of record 5% or more of each Fund's outstanding shares by class, as noted:

Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
THE GROWTH FUND
Merrill Lynch, Pierce, 50.33% 48.07% 75.75%
Fenner & Smith, Inc.*
Attn: Book Entry
4801 Deer Lake Drive East
Jacksonville, Florida 32246-6485

THE BALANCED RETURN FUND
Merrill Lynch, Pierce, 29.76% 36.67% 68.59%
Fenner & Smith, Inc.*
Attn: Book Entry
4801 Deer Lake Drive East
Jacksonville, Florida 32246-6485

Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
THE PASADENA NIFTY FIFTY FUND

Merrill Lynch, Pierce, 57.71% 51.17% 63.62%
Fenner & Smith, Inc.*
Attn: Book Entry
4801 Deer Lake Drive East
Jacksonville, Florida 32216

</TABLE>

- ----------

* Record owner only for its individual customers. To the Trust's knowledge,
no customer beneficially owned 5% or more of the total outstanding shares
of any Class of any Fund.

FINANCIAL STATEMENTS

The Funds' audited financial statements contained in their Annual Reports
to Shareholders for the period ended December 31, 1995 (the "Reports"), are
incorporated herein by reference to the Reports which have been filed with the
Securities and Exchange Commission. Any person not receiving the Reports with
this Statement of Additional Information should call or write to the Trust to
obtain a free copy.

B-33

<PAGE>

APPENDIX "A"
BOND RATINGS

MOODY'S INVESTORS SERVICE. Bonds which are rated Aaa are judged to be the
best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong positions of such issues.
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as "high
grade" bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
Bonds which are rated A possess many favorable investment attributes and are to
be considered as "upper medium grade" obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Bonds which are rated Baa are considered "medium grade" obligations, I.E.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time; such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well. Bonds which are rated Ba are
judged to have speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this class. Bonds
which are rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.

In Moody's corporate bond rating system, Moody's applies numerical
modifiers, 1, 2, and 3, in each generic rating classification from Aa through B.
The modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic rating
category.

In Moody's municipal bond rating system, those bonds in the Aa, A, Baa, Ba,
and B groups which Moody's believes possess the

B-34

<PAGE>

strongest investment attributes are designated by the symbols Aa 1, A 1, Baa 1,
Ba 1, and B 1.

STANDARD & POOR'S CORPORATION. Bonds which are rated AAA have received the
highest rating assigned by Standard & Poor's to a debt obligation, indicating an
extremely strong capacity to pay interest and repay principal. Debt rated AA
has a very strong capacity to pay interest and repay principal and differs from
the higher rated issues only in a small degree. Debt rated A has a strong
capacity to pay interest and repay principal although it is somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in the higher rated categories. Debt rated BBB is regarded
as having adequate capacity to pay interest and repay principal. Whereas such
rating normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to weakened
capacity to pay interest and repay principal for debt in this category than in
higher rated categories. Debt rated in categories below BBB (I.E., BB, B, CCC,
and CC) is considered to be predominately speculative with respect to capacity
to pay interest and repay principal in accordance with the terms of the
obligation. BB indicates the lowest degree of speculation and CC the highest
degree of speculation.

B-35