<PAGE>
MESSAGE FROM THE CHAIRMAN
DEAR FELLOW SHAREHOLDERS:
The bull market continues! 1996 marked the second year in a
row of strong returns, both for the stock market and for The
[PHOTO]
Pasadena Group of Mutual Funds.
For the period ended December 31, 1996, each of the funds in
The Pasadena Group surpassed the performance of the Lipper(1)
Index for its investment objective. We are particularly pleased that the two
most recent additions to our fund family, Pasadena Global Growth and Pasadena
Small & Mid-Cap Growth, appeared on Lipper top-ranking charts. For complete
performance information, please see the following sections on each fund.
After two excellent years for stocks, the question most investors are asking
is, can the market continue to climb? We believe it can. In order to determine
whether stock prices are too high, it is important for investors to understand
the economic background against which valuations are being measured.
We are experiencing one of the longest economic expansions in the U.S. since
World War II. When will it come to an end? No one knows, but let's focus on the
current environment. Inflation is running at the lowest rate in 30 years. The
unemployment rate is at a 23-year low, and the budget deficit is at its lowest
point in 22 years. With all these positive factors in place, we believe the
economy will continue to grow at a moderate pace in 1997.
One of the most compelling characteristics of the current U.S. economic
expansion is that inflation has remained firmly under control. Historically, low
inflation has proven to be an extremely attractive backdrop against which to
value stocks. An example of an era when inflation ranged between 2 and 3 percent
for an extended time is 1962 through 1972. During this period, the S&P 500
Index(2) traded consistently at P/E (price/earnings) multiples ranging from 15
to 20 times earnings.
At the end of 1995 we believed earnings growth for the AVERAGE company in the
S&P 500 Index was likely to decelerate. Although earnings figures are not yet
available for all of 1996, data for the first nine
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
S&P 500 INDEX QUARTERLY OPERATING EARNINGS GROWTH
<S> <C>
1st Quarter 1991 through 3rd Quarter 1996
Q1 91 -8%
Q2 91 -18%
Q3 91 -17%
Q4 91 -9%
Q1 92 8%
Q2 92 15%
Q3 92 11%
Q4 92 19%
Q1 93 10%
Q2 93 9%
Q3 93 19%
Q4 93 18%
Q1 94 12%
Q2 94 19%
Q3 94 16%
Q4 94 26%
Q1 95 21%
Q2 95 22%
Q3 95 19%
Q4 95 10%
Q1 96 7%
Q2 96 11%
Q3 96 6%
Source: Merrill Lynch Quantitative Analysis
</TABLE>
1
<PAGE>
MESSAGE FROM THE CHAIRMAN (CONTINUED)
months of the year indicate deceleration is underway. As shown in the
accompanying chart, operating earnings through September 30, 1996, for the S&P
500 Index gained approximately 8 percent--a clear slowdown from the 13 to 19
percent growth of the previous four years.
In addition, we believe the 8 percent rate actually overstates growth for the
average company in the S&P 500 Index. In the third quarter, earnings for these
companies grew at approximately 6 percent, but that is measured on a
CAPITALIZATION basis. An examination of the companies on an EQUALLY WEIGHTED
basis, however, shows earnings for the average company increased only 1 percent!
In other words, most of the earnings gains in the third quarter were driven by
large-cap companies such as General Electric, which are the largest components
of the Index.
Our point is simple. Given our belief that the U.S. economy will continue in a
slow-growth, low-inflation mode through 1997, we do not think growth stocks are
overvalued. As further evidence emerges that profit growth for the average
company is becoming scarce, we believe investors will favor stable growth
companies.
Historically, growth stocks have done extremely well when S&P 500 companies'
earnings growth is decelerating. In fact, the Pasadena portfolios, the majority
of which have core holdings of growth stocks, have had some of their best years,
both on an absolute and relative basis, when the S&P 500 companies produced
negative earnings growth. We believe 1996 was just the beginning of what could
be a long period of superior performance for high quality growth stocks.
Thus, we have many reasons to be excited about 1997. We feel the U.S. economic
climate should continue to be favorable for stocks in general and for growth
stocks in particular. We have two newly launched funds, Global Growth and Small
& Mid-Cap Growth, which further round out The Pasadena Group of Mutual Funds. In
reality, neither fund is "new." They were established in 1993 and 1994
respectively, but we waited until recently to offer them to the public because
we wanted investors to have a track record to evaluate. Also, in early 1997 we
will be introducing The Pasadena Value 25 Fund, which we feel will complement
the growth funds in our existing family.
Thank you for your continued loyalty and support. We remain faithful to our
investment philosophy of being long-term investors in companies we believe can
sustain earnings growth at above average rates. During the course of last year,
the market did have moments of volatility, but the investors who came out on top
were the ones who stayed invested. This is why we feel strongly about staying on
the train and not trying to time the market. Our best wishes for a happy,
healthy and prosperous 1997!
[SIG]
Roger Engemann
Chairman of the Board and President
February 14, 1997
(1)LIPPER ANALYTICAL SERVICES, INC.
(2)THE S&P 500 STOCK INDEX IS AN
UNMANAGED INDEX WHICH ASSUMES
REINVESTMENT OF ALL DIVIDENDS AND
DISTRIBUTIONS AND IS GENERALLY
CONSIDERED REPRESENTATIVE OF THE U.S.
EQUITY MARKET FOR LARGER
CAPITALIZATION STOCKS. THE S&P 500
STOCK INDEX DOES NOT REFLECT ANY
OPERATING EXPENSES AND IS NOT
AVAILABLE FOR INVESTMENT.
2
<PAGE>
MESSAGE FROM PORTFOLIO MANAGEMENT
MANAGEMENT BACKGROUND & INVESTMENT APPROACH
Roger Engemann Management Co., Inc. (REMC), manager of The
Pasadena Group of Mutual Funds, is a subsidiary of Roger
[PHOTO]
Engemann & Associates, Inc. (REA), a leading investment firm.
REA was established in 1969 and specializes in the management of
JIM MAIR
private equity portfolios, generally with account minimums of
$100,000. REMC was established in 1985.
[PHOTO]
JIM MAIR and JOHN TILSON direct the Portfolio Management team
for the overall Engemann organization. They have been with
JOHN TILSON
REA since 1983 and have managed each of the funds since their
inception.
Jim and John are both Chartered Financial Analysts and Chartered Investment
Counselors. Together they have more than 50 years of professional investment
experience. They use a consultative team approach to managing our funds,
enabling them to bypass the risk of having all investment decisions made by one
individual as well as the potential delays involved when decisions must be made
by committee consensus. Jim and John spend a significant amount of their time in
face-to-face meetings with management of the companies they follow. As a result,
their investment conclusions are based on timely, direct information.
- ------------
The Pasadena Group of Mutual Funds has a history of investing in stable,
growing businesses. For inclusion in the funds, we favor companies that have
demonstrated the unusual ability to grow their earnings steadily in various
economic environments. We feel this characteristic is attractive to investors,
especially in a slowing economy.
Much of our analysis surrounds fundamental bottom-up scrutiny of the
underlying business. We continually evaluate the competitive and financial
strength of the companies we own and the worldwide events which are likely to
alter demand patterns for the companies' products. Our philosophy is long term
in nature, for we believe a diversified portfolio of strong businesses is likely
to outperform all other asset classes in the long run.
We are extremely pleased with the performance of the stocks in the Pasadena
fund portfolios for the year ended December 31, 1996. Please see details on each
of the funds in our following Q&A discussions.
[LOGO]
James E. Mair
[LOGO]
John S. Tilson
Managing Directors/Portfolio Management
February 14, 1997
3
<PAGE>
DISCUSSIONS WITH JIM MAIR AND JOHN TILSON, PORTFOLIO MANAGERS OF
THE PASADENA GROUP OF MUTUAL FUNDS.
THE PASADENA GROWTH FUND
INVESTMENT OBJECTIVE:
The Pasadena Growth Fund's objective is to achieve long-term capital
appreciation by investing in common stocks with rapidly growing earnings per
share. The Fund invests in stocks of various capitalization.
Q: HOW DID THE FUND PERFORM OVER THE YEAR ENDED DECEMBER 31, 1996?
A: The Growth Fund's net asset value (NAV) for Class A Shares increased 22.49
percent, slightly lower than the 22.86 percent gain by the S&P 500 Index. The
Fund compared favorably to the Lipper Growth Fund Index,(1) which advanced 17.48
percent. Complete performance figures for the Growth Fund are shown on page 6.
Q: WHAT ACCOUNTS FOR THE FUND'S SLIGHT UNDERPERFORMANCE OF THE S&P 500 IN 1996?
A: Although the S&P 500 Index had a strong year, the gains were not divided
equitably. The 20 percent of the Index which is made up of the largest companies
increased approximately 30 percent. However, the 20 percent of the Index made up
of the smallest companies gained approximately 9 percent. Because approximately
25 to 30 percent of The Growth Fund was invested in small-cap issues, its
performance was somewhat restrained.
Q: CAN YOU GIVE AN EXAMPLE OF HOW THE STRENGTH OF LARGE-CAP ISSUES AFFECTED THE
FUND?
A: In no sector was investors' preference for blue-chip stocks more pronounced
than in technology. The Nasdaq Composite Index, an index composed of all the
issues trading on Nasdaq, posted a healthy 23 percent gain in 1996. The increase
belies the fact that a significant portion of the move can be attributed to just
four of the largest components--Cisco, Intel, Microsoft and Oracle--which
account for close to 20 percent of the Index's total value.
Each of these stocks was up in excess of 48 percent during 1996. In fact,
shares of Intel, the largest stock on the NASDAQ, more than doubled during the
year. Clearly, investors favored large-cap technology stocks where the outlook
for future earnings growth seemed more readily apparent. These four stocks
represent close to 10 percent of The Growth Fund's holdings and were significant
contributors to the Fund's overall strong performance during 1996.
Q: WERE THERE ANY DISAPPOINTMENTS IN THE TECHNOLOGY SECTOR?
A: Informix Software was a disappointing performer in the Fund's portfolio. We
believe the company experienced a transition year because it had difficulty in
integrating the acquisition of a company called Illustra. The integration of
Illustra resulted in expenses growing faster than revenues, which caused a drag
on earnings growth. Despite the near-term execution challenges, we believe
Informix has leading-edge technology and is well positioned for strong growth in
the future.
Q: GIVEN THE TECHNOLOGY SECTOR'S STRONG PERFORMANCE IN 1996, WHAT DO YOU EXPECT
IN 1997?
A: Technology is one of the fastest growing sectors in the economy. Rapid growth
can quickly lead to fundamental changes in the competitive landscape. As a
result, we constantly re-assess our investment thesis on each of the companies
to assure that they are in strong strategic positions. Entering 1997, we remain
committed to the Technology sector and we believe the companies in the Growth
Fund portfolio are in compelling, competitive positions. Many of these companies
have significant product launches set for 1997.
Q: WHAT OTHER TRENDS IMPACTED THE FUND'S PORTFOLIO?
A: A number of companies in The Growth Fund portfolio were involved in merger
and acquisition activity. The combination of Gillette and Duracell is the one
which had the largest impact. At the time of
4
<PAGE>
the merger announcement, the Fund held both companies and the stocks reacted
favorably. The acquisition is expected to accelerate Gillette's growth rate.
The distribution channels for razor blades and batteries are strikingly
similar. Think about how often razor blades and batteries are displayed in close
proximity to each other at supermarkets and drug stores.
One of Gillette's main strengths is its strong foreign distribution, with 70
percent of its operating earnings from outside the United States. Duracell,
although a well-recognized name globally, receives only 34 percent of earnings
from international sales. Gillette plans to increase Duracell's international
sales by enhancing the company's global distribution. This should translate into
increased growth and cost savings.
Q: HOW DID THE GROWTH FUND'S 10 LARGEST HOLDINGS PERFORM?
A: In addition to Intel and Cisco which had strong gains, the Fund had excellent
returns from consumer staple names such as Gillette, Coca-Cola, Philip Morris
and Pfizer. Because inflation remained well contained, the Fund also saw strong
gains from financial holdings including Wells Fargo, Federal National Mortgage
Association and Federal Home Loan.
Q: WERE THERE ANY CHANGES IN THE FUND'S TOP 10 HOLDINGS DURING 1996?
A: We added Oxford Health Plans to the Fund's top 10 this summer when the share
price dropped over concerns about Health Maintenance Organization (HMO) pricing
and profitability. We believe Oxford Health is one of the leading HMOs and has
consistently demonstrated strong membership growth and earnings gains. Other new
names in the top 10 include Intel, Cisco and Philip Morris, replacing Home
Depot, Walt Disney, Pepsi and Reuters.
Q: HOW DID THE SMALL-CAP ISSUES IN THE FUND PERFORM IN 1996?
A: Small-cap stock performance was somewhat mixed. The Fund experienced good
returns from Etec Systems as they posted strong earnings gains. Etec enjoys a 75
percent market share in mask pattern generation equipment. MRV Communications
was another solid performer. On the other hand, Labor Ready and Microcom had
difficulties meeting earnings expectations and turned in disappointing results.
Q: WHAT IS YOUR OUTLOOK FOR 1997?
A: As earnings for the average company slow down, investors tend to favor high
quality growth companies that are able to reach their earning targets. With low
inflation and moderate economic growth still intact, we feel there is a very
attractive backdrop for growth stocks which should continue into 1997. In
addition, we believe small-cap issues are poised to move higher as they have
been out of favor for the past few years.
(1)THE LIPPER MUTUAL FUND INDICES
ARE EQUALLY WEIGHTED INDICES OF THE
LARGEST MUTUAL FUNDS WITHIN THEIR
RESPECTIVE INVESTMENT OBJECTIVES,
ADJUSTED FOR THE REINVESTMENT OF
CAPITAL GAINS DISTRIBUTIONS AND INCOME
DIVIDENDS. THE INDICES ARE CALCULATED
DAILY, AND ARE NOT AVAILABLE FOR
INVESTMENT.
5
<PAGE>
THE PASADENA GROWTH FUND (CONTINUED)
[CHART]
6
<PAGE>
THE PASADENA NIFTY FIFTY FUND
INVESTMENT OBJECTIVE:
The Pasadena Nifty Fifty Fund invests in approximately 50 companies management
considers to have the best prospects for appreciation potential.
Q: HOW DID THE FUND PERFORM OVER THE YEAR ENDED DECEMBER 31, 1996?
A: The Nifty Fifty Fund's net asset value (NAV) for Class A Shares increased
26.53 percent, compared to the 22.86 percent return of the S&P 500 Index and the
17.48 percent return of the Lipper Growth Index. Complete performance figures
for the Fund are shown on page 9.
Q: WHAT ACCOUNTED FOR THE FUND'S STRONG PERFORMANCE IN 1996?
A: 1996 was clearly a year to be invested in large-cap growth companies as
investors feared a slowing economy would crimp earnings growth for the average
company. We believe this provided a very favorable investment scenario for The
Nifty Fifty Fund because it invests primarily in large-cap stable growth issues.
We expect the companies in the Nifty Fifty portfolio to produce consistent
annual earnings growth in a range of 15-20 percent in 1997. In the past few
years, this growth rate has appeared somewhat ordinary compared to the strong
growth for the S&P 500 Index. In early 1996, however, we felt the extraordinary
growth of the S&P Index would decelerate and investors would turn to steady
growth companies capable of growing 2 to 3 times faster than the average company
in the S&P 500. Indeed, during 1996 we believe evidence emerged that supports
our expectations of an earnings slowdown for average companies and a rebound for
quality growth companies.
Q: WHAT WERE SOME OF THE FUND'S PORTFOLIO HIGHLIGHTS DURING THE COURSE OF 1996?
A: Technology issues boosted the Fund's overall performance, led by Intel,
Microsoft, Oracle and Cisco. These companies all posted excellent gains for the
year. Intel more than doubled. We were also very pleased with the performance of
consumer staple companies such as Gillette, Coca-Cola, Pfizer and
Colgate-Palmolive, as they continued to produce steady earnings throughout the
year.
Q: HOW DID INTEREST RATES AFFECT THE FUND'S FINANCIAL STOCK HOLDINGS?
A: We believe that financial stocks continue to be one of the most attractively
valued segments when compared to the overall market. Although historically there
has been a belief that financial companies' earnings are interest rate
sensitive, the reality is companies in this sector have been among the Fund's
most consistent performers, regardless of the interest rate environment. For
example, Federal National Mortgage Association has achieved 10 straight years of
double-digit earnings growth. Other successful stocks in this sector include
American Express, Federal Home Loan and Wells Fargo.
Q: WHAT WERE SOME OF THE FUND'S DISAPPOINTMENTS IN 1996?
A: Retail sales often move in tandem with GDP (Gross Domestic Product), which
has been slowing. Combine this with low inflation and it has become extremely
difficult for retail companies to increase prices. As a result AutoZone, Home
Depot and Wal-Mart underperformed the market. On the bright side, we are
optimistic about the merger between Office Depot and Staples--two leaders in the
retail office supplies market. The merger, which we believe is a good strategic
fit, will have the potential to create the dominant office products dealer in
the United States. We believe the integration of these two successful companies
should continue to enhance earnings growth in the future.
Q: WHAT IS YOUR VIEW ON GILLETTE'S ACQUISITION OF DURACELL?
A: We believe Gillette and Duracell are a good match. First, we believe both
companies are solid investment opportunities individually. Gillette dominates
the global market for razor blades and is on the verge of
7
<PAGE>
introducing a new shaving system which the company believes will present one of
the most dramatic improvements in shaving since the launch of the "Sensor."
Duracell, on the other hand, is one of the most recognized names in the fastest
growing market for a consumer non-durable product: batteries. When you combine
the two companies, our enthusiasm for the new entity increases because we
believe Duracell will accelerate Gillette's long-term growth rate and
vice-versa.
Q: HAS THE COMPOSITION OF THE NIFTY FIFTY FUND CHANGED FROM THE YEAR ENDED
DECEMBER 31, 1995?
A: The Fund did have some changes in its top 10 holdings over the past year. We
increased the portfolio's representation in health-care stocks, such as
Columbia/HCA, Merck and Oxford Health Plans. We added to the Fund's Philip
Morris position when litigation concerns drove the stock down. Strong gains in
Intel made it the Fund's largest holding. We decreased the Fund's exposure to
McDonald's,
PepsiCo and Wal-Mart, as these companies had difficulties meeting their earnings
estimates.
Q: WHAT IS YOUR OUTLOOK FOR THE FUND IN 1997?
A: The slowdown in corporate profits we have been expecting for some time became
a reality in 1996. The corporate profit cycle of the past few years was one of
the longest and most resilient on record, with operating profits for the S&P 500
Index growing at double-digit rates from 1991 through 1995. This is an
exceptional feat when you consider that since 1942 the long-term growth rate for
S&P 500 company earnings is approximately 6.8 percent.
The dramatic increase in the number of companies in the S&P 500 Stock Index
reporting declining sales and earnings trends is further evidence that the
average company is finding it difficult to sustain earnings growth. For the
third quarter of 1996, 107 companies reported declining sales, a 91 percent
increase from the first quarter 1995. Similarly, over the same time period, the
number of companies in the S&P 500 that reported declining earnings increased 82
percent.
The Nifty Fifty Fund has done extremely well when S&P earnings growth is
slowing. The Fund had some of its best years, both on an absolute and relative
basis, when the S&P 500 Index produced negative earnings growth. We believe slow
earnings growth will continue in 1997. This should provide an attractive setting
for stable growth stocks that will continue to meet earnings expectations. We
believe that 1996 was just the beginning of what could be a long period of
strong performance for high quality growth stocks.
8
<PAGE>
THE PASADENA NIFTY FIFTY (CONTINUED)
[CHARTS]
9
<PAGE>
THE PASADENA BALANCED RETURN FUND
INVESTMENT OBJECTIVE:
The Pasadena Balanced Return Fund seeks to maximize total investment return
consistent with reasonable risk by investing in a mix of high quality growth
stocks and U.S. government securities.
Q: HOW DID THE FUND PERFORM OVER THE YEAR ENDED DECEMBER 31, 1996?
A: The Balanced Return Fund's net asset value (NAV) for Class A Shares increased
17.78 percent, compared to 22.86 percent for the S&P 500 Stock Index, an all-
stock index. The Fund compared favorably to the Lipper Balanced Fund Index,
which advanced 13.01 percent. Complete performance figures for the Fund are
listed on page 11.
Q: HOW WAS THE FUND ABLE TO ACHIEVE SUCH STRONG PERFORMANCE IN 1996, RELATIVE TO
OTHER BALANCED RETURN FUNDS?
A: The Fund had approximately 65 percent invested in equities, 30 percent in
U.S. government securities and 5 percent in cash. A large portion of the Fund's
gain was due to its position in large-cap growth stocks which led the market
during 1996. We feel investors favored large growth stocks because of their
ability to maintain earnings gains even in an economic climate of moderate
growth.
Q: HOW DID THE FIXED-INCOME PORTION OF THE FUND PERFORM IN 1996?
A: The bond market was fairly volatile throughout most of 1996. The interest
rates on the 30-year Treasury bond started the year at 6.03 percent and by mid
year rose as high as 7.20 percent. We believe the rise in rates can be
attributed to investors' inflation concerns and their assumptions that the
economy was strengthening.
During most of this turbulent time, the Fund was defensively invested in
intermediate bonds and short-term notes. We did, however, take the opportunity
to lengthen the maturity of the portfolio's bond holding when interest rates
rose above 7 percent. We believed interest rates would start to fall as
inflation concerns subsided. Given the roller coaster year the bond market
experienced, the Fund survived relatively unscathed, with modest gains in
long-term bonds and very minor losses in short-term notes.
Q: WHAT WERE SOME OF THE FUND'S HIGHLIGHTS FOR 1996?
A: The Fund had strong gains in its technology holdings such as Intel,
Microsoft, Cisco and Oracle. Gillette rallied on the news of its acquisition of
Duracell. Despite the volatility in interest rates, financial stocks responded
well as inflation remained under control and their earnings continued to grow.
Among the strong performers were Federal Home Loan Mortgage Corporation, Wells
Fargo and United Asset Management. The stocks of consumer staple companies such
as Coca-Cola, Colgate-Palmolive, Procter & Gamble and Pfizer all performed well,
benefiting from an environment in which investors favored companies that have
produced strong, steady growth.
Q: WERE THERE ANY STOCKS THAT DIDN'T WORK OUT?
A: Informix Software had disappointing performance in 1996. We believe the
company experienced a transition year because it had difficulty integrating its
acquisition of a company called Illustra. The integration of Illustra resulted
in expenses growing faster than revenues, causing a drag on the company's
earnings growth. Despite near-term challenges, we believe Informix has
leading-edge technology and is well positioned for strong growth in the future.
Q: WHAT IS YOUR OUTLOOK FOR THE BALANCED RETURN FUND IN 1997?
A: We believe that inflation will remain in check throughout the coming year
and, as a result, interest rates will remain steady or decline. In such an
environment, we believe both the fixed-income and equity positions of the Fund's
portfolio should perform well. On the equity side, we remain confident that the
companies represented in the Fund will continue to achieve steady earnings
growth. In the past, such stocks have typically performed well in an environment
where the average company has difficulty producing earnings gains.
10
<PAGE>
THE PASADENA BALANCED RETURN FUND (CONTINUED)
[CHART]
11
<PAGE>
THE PASADENA SMALL & MID-CAP GROWTH FUND
INVESTMENT OBJECTIVE:
The Pasadena Small & Mid-Cap Growth Fund seeks to achieve long-term growth of
capital by investing primarily in a diversified portfolio of equity securities
of companies with market capitalizations below $1.5 billion.
Q: HOW DID THE FUND PERFORM OVER THE PERIOD ENDED DECEMBER 31, 1996?
A: The Pasadena Small & Mid-Cap Growth Fund had an excellent year in 1996. The
net asset value (NAV) for its Class A Shares increased 52.37 percent, compared
to 22.86 percent for the S&P 500 Stock Index and 16.49 percent for the Russell
2000 Index.(1) The Fund was ranked number 1 out of 154 mid-cap funds for 1 year
and number 1 out of 124 mid-cap funds for 2 years ended December 31, 1996,
according to Lipper Analytical Services, Inc.(2) Complete performance figures
for the Fund are listed on page 14.
Q: HOW WAS THE FUND ABLE TO OUTPERFORM BY SUCH A WIDE MARGIN?
A: We were able to make some good individual stock selections and also capture
immediate price appreciation on some new issues we purchased for the Fund's
portfolio. Good stock picking and smart trading are two ways the Fund was able
to beat the S&P 500 and Russell Growth Indices by such a wide margin. But
remember, the impact of these strategies is more pronounced when the Fund is
small. The challenge for 1997 will be to match this performance on a much larger
asset base.
Q: HOW DOES THE COMPOSITION OF THE FUND'S PORTFOLIO DIFFER FROM THE PASADENA
GROWTH FUND AND THE PASADENA NIFTY FIFTY FUND?
A: The biggest difference between the Small & Mid-Cap Growth Fund and the other
Pasadena Funds is industry weightings. For example, at any given time, the Small
& Mid-Cap Growth Fund is likely to have a much heavier weighting in technology.
Recently, technology accounted for over 30 percent of the Fund's assets,
compared to approximately 26 percent in The Pasadena Growth Fund and
approximately 15 percent in the Pasadena Nifty Fifty Fund. In addition, within
the technology category, sub-sector weightings may be different. For instance,
The Small & Mid-Cap Growth Fund recently had a 15 percent weighting in Computer
Software and Services, compared to approximately 9 percent and 4 percent,
respectively, in the Growth Fund and Nifty Fifty Fund.
Q: GIVE SOME EXAMPLES OF STOCKS THAT PERFORMED WELL IN 1996.
A: One of best performing stocks of the year was MRV Communications. MRV is
participating in the rapid growth of fiber-optic communications and computer
networking. The company is a technological leader in developing Local Area
Network switches and has doubled both its sales and profits each year since
1990.
Another Fund holding that had a good year was Regal Cinemas. Regal has been
rapidly consolidating the highly fragmented movie theater business by acquiring
other cinema companies. In addition, Regal has been developing highly successful
multi-screen theaters where the investment returns are much greater than
traditional movie houses.
(1)THE RUSSELL 2000 INDEX CONSISTS
OF THE SMALLEST 2,000 SECURITIES IN
THE RUSSELL 3000 INDEX. THIS INDEX IS
WIDELY REGARDED IN THE INDUSTRY AS THE
PREMIER MEASURE OF SMALL-CAP STOCKS.
(2)LIPPER RANKINGS ARE BASED ON
CHANGES IN NET ASSET VALUE WITH ALL
INCOME REINVESTED AND DO NOT INCLUDE
SALES CHARGES. IF THEY HAD, RESULTS
MAY HAVE BEEN LESS FAVORABLE.
12
<PAGE>
Q: HOW ABOUT FUND HOLDINGS THAT DIDN'T WORK OUT?
A: Perhaps not surprisingly, retail stocks were underperformers in 1996. The
most notable in the Small & Mid-Cap Growth Fund was Trend-Lines, a company which
operates two specialty retail chains, "Woodworker's Warehouse," and "Golf Day."
The company had difficulty meeting sales expectations, while managing expansion.
Sales are beginning to improve and we still believe both concepts have promise.
We believe the company's management has also made the necessary changes to
resume growth.
Q: DISCUSS YOUR OUTLOOK FOR SMALL AND MID-CAP STOCKS.
A: By most historical measures, small-cap stocks in general still look
inexpensive relative to large caps, particularly on a price/earnings basis. At
year end, the Small & Mid-Cap Growth Fund was selling at 25 times 1997 estimated
earnings, yet the companies in the portfolio are estimated to grow at a 35
percent rate. By contrast, the S&P 500 companies are selling at 12 times 1997
estimated earnings and expected to grow at only 6 percent.
In addition, we believe the companies in the Fund's portfolio are well
positioned to show solid earnings growth in the coming year, while larger
companies increasingly are seeing their earnings growth rates of the past few
years begin to decelerate.
13
<PAGE>
THE PASADENA SMALL & MID-CAP GROWTH FUND (CONTINUED)
[CHART]
14
<PAGE>
THE PASADENA GLOBAL GROWTH FUND
INVESTMENT OBJECTIVE:
The Pasadena Global Growth Fund's objective is to achieve long-term growth of
capital by investing in a globally diversified portfolio of equity securities,
which may be traded in securities markets in foreign countries and the United
States.
Q: HOW DID THE FUND PERFORM OVER THE YEAR ENDED DECEMBER 31, 1996?
A: The Pasadena Global Growth Fund's net asset value (NAV) for class A Shares
increased 21.77 percent, compared to the 13.1 percent return of the MSCI All
Country World Index(1). The Fund was ranked number 1 out of 89 global funds for
the three-year period ended December 31, 1996, according to Lipper Analytical
Services. Complete performance figures for the Fund are shown on page 17.
Q: WHAT ACCOUNTED FOR THE FUND'S STRONG PERFORMANCE IN 1996?
A: A key reason for the Fund's performance in 1996 was its overweighting of the
U.S. market and underweighting of Japanese markets. Among the major markets
around the world, the U.S. was one of the best performing, while the Japanese
was one of the worst. The Fund also had a relatively high weighting in certain
industries that did well, such as technology and consumer products, and several
of its largest holdings showed strong gains.
Q: GIVE SOME EXAMPLES OF STOCKS THAT PERFORMED WELL LAST YEAR.
A: Some of the Fund's best performing stocks during 1996 were large
capitalization U.S. companies such as Intel, Cisco and Gillette. Intel benefited
from rising profitability which resulted in accelerated earnings growth. Cisco
was driven by the continued strong growth of network computing, the Internet and
data traffic worldwide. Gillette's increase was due to strong product sales and
rapid earnings growth during the year.
Among the Fund's larger international holdings, Hong Kong-listed banking
group, HSBC Holdings did well, as its stock was propelled by the overall
strength of the Hong Kong market and favorable trends in the banking sector in
Asia. In May, the Fund purchased shares of Telebras, the Brazilian monopoly
telecommunications provider. Its share price benefited from a favorable outlook
for privatization of the Brazilian telecommunications industry and strong
earnings growth fueled by line expansion and the re-balancing of tariffs.
Among some of our smaller international holdings, Tecnomatix, an Israeli
software company, rose sharply on the strong growth of its computer aided
production engineering software. Datacraft Asia, a networking systems
integration provider based in Singapore, also showed a substantial gain in its
share price.
Q: TELL US ABOUT A STOCK THAT DIDN'T WORK OUT.
A: One stock that didn't live up to expectations was Korea Electric Power. The
stock was hampered in part by the overall decline in the Korean market which
suffered from a weakening economy and negative sentiment surrounding certain
political issues. The company itself was negatively impacted by the depreciation
of the Korean currency and rising crude oil prices which resulted in a setback
to the company's earnings growth. Despite the difficulties faced by the company
during the year, we continue to hold the stock in the belief the prospects for
strong earnings growth going forward remain intact.
Q: WHAT DO YOU THINK DIFFERENTIATES THIS FUND FROM OTHER GLOBAL FUNDS?
A: What differentiates The Pasadena Global Growth Fund from other global funds
is management's bottom-up stock picking style and emphasis on quality growth
companies. The Fund's asset allocation is not
(1)THE MSCI AC WORLD INDEX IS AN
UNMANAGED INDEX OF OVER 1,460
SECURITIES ON THE STOCK EXCHANGES OF
22 COUNTRIES AND IS NOT AVAILABLE FOR
DIRECT INVESTMENT.
15
<PAGE>
the result of a specific plan to invest in certain industries or countries, but
rather a reliance on searching out the best companies around the world, wherever
they might be. Of course, we consider macroeconomic factors and political and
currency risk but the emphasis is on finding high quality, rapidly growing
companies that possess a sustainable competitive advantage.
Q: HOW IS THE FUND CURRENTLY POSITIONED?
A: Given the strong run-up in the U.S. market over the last two years, we have
reduced the Fund's weighting in the U.S. and correspondingly increased our
weighting in foreign markets. Nevertheless, we believe that the U.S. market will
still perform reasonably well and thus we maintain a relatively significant
commitment to it.
With regard to foreign markets, we have increased our weighting in Hong Kong
given our belief that the hand-over to China in 1997 will be smooth and there
will be attractive prospects for Hong Kong-listed companies going forward. Other
foreign markets where the Fund holds large positions are the United Kingdom and
Sweden.
The top 10 holdings in the Fund continue to be dominated by large
multinational companies that we believe are growing rapidly and possess a strong
competitive advantage. The Fund also holds positions in several companies that
are benefiting from regional growth trends. While a majority of the Fund's
holdings are in developed markets, approximately 20 percent of the portfolio is
allocated to emerging markets.
Q: WHAT IS YOUR OUTLOOK GOING FORWARD?
A: We are very optimistic about the prospects for global investing going
forward. We believe the economic backdrop around the world remains very
favorable for stocks. With a few exceptions, economic growth remains relatively
robust in most markets, inflation remains relatively low on a worldwide basis
and the interest rate environment is generally favorable. Certainly some
markets, especially certain emerging markets, continue to face specific
challenges ahead. Nevertheless, on the whole, given the political and economic
reform occurring around the world, the prospects for global investing remain
very bright.
16
<PAGE>
THE PASADENA GLOBAL GROWTH FUND (CONTINUED)
[CHART]
17
<PAGE>
THE PASADENA GROWTH FUND
INVESTMENT IN SECURITIES AT DECEMBER 31, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
COMMON STOCKS
ADVERTISING - 0.5%
The Interpublic Group of
Companies, Inc.............. 50,000 $ 2,375
-----------
BANKING - 4.0%
Wells Fargo & Company......... 75,000 20,231
-----------
BEVERAGES - 3.5%
The Coca-Cola Company......... 250,000 13,156
PepsiCo, Inc.................. 150,000 4,388
-----------
17,544
-----------
BUSINESS SERVICES - 5.8%
American List Corporation..... 45,000 1,367
Automatic Data Processing,
Inc......................... 65,000 2,787
Electro Rent Corporation*..... 100,000 2,488
First Data Corporation........ 200,000 7,300
Labor Ready, Inc.*............ 200,000 2,700
Reuters Holdings PLC ADS B.... 120,000 9,180
VeriFone, Inc.*............... 120,000 3,540
-----------
29,362
-----------
COMMUNICATIONS EQUIPMENT - 5.7%
Cisco Systems*................ 250,000 15,906
MRV Communications, Inc.*..... 160,000 3,480
3Com Corp.*................... 125,000 9,172
-----------
28,558
-----------
COMPUTER HARDWARE - 2.9%
COMPAQ Computer*.............. 35,000 2,599
Dell Computer Corporation*.... 50,000 2,656
Hewlett-Packard............... 80,000 4,020
U.S. Robotics Corporation..... 75,000 5,400
-----------
14,675
-----------
COMPUTER SOFTWARE - 9.2%
America Online, Inc.*......... 100,000 3,325
Arbor Software Corporation*... 100,000 2,425
Aspen Technology, Inc.*....... 30,000 2,408
Indus Group, Inc.*............ 100,000 2,575
Informix Corporation*......... 225,000 4,584
Legato Systems, Inc.*......... 100,000 3,263
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
COMPUTER SOFTWARE - 9.2%
(CONTINUED)
McAfee Associates Inc.*....... 25,000 $ 1,100
Microsoft Corporation*........ 100,000 8,263
Netscape Communications
Corporation*................ 30,000 1,706
NICE Systems Ltd.*............ 60,000 1,080
Oracle Systems*............... 175,000 7,306
PeopleSoft, Inc.*............. 40,000 1,918
Scopus Technology, Inc.*...... 35,000 1,628
Summit Design, Inc.*.......... 100,000 1,025
Tecnomatix Technologies
Ltd.*....................... 80,000 2,120
Vantive Corporation*.......... 50,000 1,563
-----------
46,289
-----------
CONSUMER PRODUCTS - 4.2%
The Gillette Company.......... 250,000 19,438
Luxottica Group S.p.A......... 30,000 1,560
-----------
20,998
-----------
CONSUMER SERVICES - 0.8%
Aaron Rents, Inc., Class B.... 80,000 950
Mail Boxes Etc.*.............. 130,000 2,925
-----------
3,875
-----------
DIVERSIFIED
MANUFACTURING - 0.6%
General Electric.............. 30,000 2,966
-----------
ELECTRONICS & ELECTRICAL
EQUIPMENT - 8.4%
Advanced Lighting
Technologies, Inc.*......... 100,000 2,425
Altera Corp.*................. 35,000 2,544
ANADIGICS, Inc.*.............. 55,000 2,159
Applied Power Inc............. 50,000 1,981
Etec Systems, Inc.*........... 70,000 2,678
Intel Corporation............. 110,000 14,403
Linear Technology
Corporation................. 150,000 6,581
Maxim Integrated Products,
Inc.*....................... 85,000 3,676
Photon Dynamics, Inc.*........ 130,000 991
Xilinx, Inc.*................. 100,000 3,681
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
THE PASADENA GROWTH FUND
INVESTMENT IN SECURITIES AT DECEMBER 31, 1996 (CONTINUED)
(Dollars in thousands)
<TABLE>
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
ELECTRONICS & ELECTRICAL
EQUIPMENT - 8.4% (CONTINUED)
Xylan Corporation*............ 50,000 $ 1,413
-----------
42,532
-----------
FINANCIAL SERVICES - 10.3%
BA Merchant Services, Inc.*... 250,000 4,469
Delta Financial
Corporation*................ 90,000 1,620
Eaton Vance Corp.............. 30,000 1,429
Federal Home Loan Mortgage
Corporation................. 120,000 13,215
Federal National Mortgage
Association................. 325,000 12,106
Green Tree Financial
Corporation................. 90,000 3,476
Imperial Credit Industries,
Inc.*....................... 140,000 2,940
INVESCO PLC................... 100,000 4,437
INVESCO Funding LLC ADS*...... 20,000 875
MBNA Corporation.............. 100,000 4,150
T. Rowe Price Associates,
Inc......................... 75,000 3,263
-----------
51,980
-----------
FINANCIAL SERVICES/
BROKERAGE - 0.8%
The Charles Schwab
Corporation................. 125,000 4,000
-----------
GAMING - 1.4%
Anchor Gaming*................ 100,000 4,025
Circus Circus Enterprises,
Inc.*....................... 50,000 1,719
Sodak Gaming, Inc.*........... 100,000 1,538
-----------
7,282
-----------
HEALTHCARE SERVICES - 2.3%
Oxford Health Plans, Inc.*.... 200,000 11,712
-----------
HOSPITAL COMPANIES - 1.2%
Columbia/HCA Healthcare
Corporation................. 150,000 6,112
-----------
HOTELS - 1.2%
HFS, Incorporated*............ 100,000 5,975
-----------
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
HOUSEHOLD PRODUCTS - 1.5%
Colgate-Palmolive Company..... 50,000 $ 4,612
The Procter & Gamble
Company..................... 30,000 3,225
-----------
7,837
-----------
INDUSTRIAL/DIRECT MAIL
DISTRIBUTOR - 0.4%
MSC Industrial Direct Co.,
Inc.*....................... 50,000 1,850
-----------
LEISURE - 3.9%
Carnival Corporation.......... 200,000 6,600
The Walt Disney Company....... 100,000 6,962
Regal Cinemas, Inc.*.......... 75,000 2,306
Signature Resorts, Inc.*...... 100,000 3,525
-----------
19,393
-----------
MEDICAL EQUIPMENT &
SUPPLIES - 3.5%
Boston Scientific
Corporation*................ 100,000 6,000
Johnson & Johnson............. 80,000 3,980
Medtronic, Inc................ 110,000 7,480
-----------
17,460
-----------
PHARMACEUTICALS - 6.7%
Elan Corporation, PLC ADS*.... 100,000 3,325
Merck & Co., Inc.............. 125,000 9,906
Pfizer Inc.................... 200,000 16,575
Roche Holdings Ltd. ADR....... 50,000 3,875
-----------
33,681
-----------
RESTAURANTS - 2.3%
Brinker International,
Inc.*....................... 125,000 2,000
Einstein/Noah Bagel Corp.*.... 100,000 2,975
McDonald's Corporation........ 75,000 3,394
Planet Hollywood
International, Inc.*........ 100,000 1,975
Starbucks Corporation*........ 50,000 1,431
-----------
11,775
-----------
RETAIL - APPAREL & ACCESSORY
STORES - 0.4%
Kohl's Corporation*........... 50,000 1,962
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
THE PASADENA GROWTH FUND
INVESTMENT IN SECURITIES AT DECEMBER 31, 1996 (CONTINUED)
(Dollars in thousands)
<TABLE>
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
RETAIL - AUTO SUPPLY
STORES - 1.1%
AutoZone, Inc.*............... 200,000 $ 5,500
-----------
RETAIL - BUILDING MATERIALS &
HARDWARE - 1.5%
The Home Depot, Inc........... 150,000 7,519
-----------
RETAIL - CATALOG - 0.5%
Viking Office Products,
Inc.*....................... 100,000 2,669
-----------
RETAIL - GENERAL
MERCHANDISE - 2.3%
Consolidated Stores
Corporation*................ 62,500 2,008
Dollar General Corporation.... 120,000 3,840
Sears, Roebuck and Company.... 100,000 4,612
Wal-Mart Stores, Inc.......... 60,000 1,372
-----------
11,832
-----------
RETAIL - GROCERY STORES - 1.0%
Smart & Final Inc............. 150,000 3,244
United Natural Foods, Inc.*... 100,000 1,700
-----------
4,944
-----------
RETAIL - HOME FURNITURE,
FURNISHINGS & EQUIPMENT
STORES - 1.6%
Bed Bath & Beyond, Inc.*...... 80,000 1,940
Circuit City Stores, Inc...... 200,000 6,025
-----------
7,965
-----------
RETAIL - SPECIALTY - 1.5%
PETsMART, Inc.*............... 100,000 2,188
Staples, Inc.*................ 250,000 4,516
Trend-Lines, Inc.*............ 175,000 831
-----------
7,535
-----------
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
TELECOMMUNICATIONS
EQUIPMENT - 2.8%
Ascend Communications,
Inc.*....................... 90,000 $ 5,591
Telefonaktiebolaget LM
Ericsson ADR................ 150,000 4,528
Tellabs, Inc.*................ 100,000 3,762
-----------
13,881
-----------
TELECOMMUNICATIONS SERVICES - 1.1%
Paging Network, Inc.*......... 50,000 763
Panavision Inc.*.............. 65,000 1,349
P.T. Telekomunikasi Indonesia
(Persero) ADS............... 40,000 1,380
360 DEG. Communications
Company*.................... 100,000 2,312
-----------
5,804
-----------
TOBACCO PRODUCTS - 2.0%
Philip Morris Companies
Inc......................... 90,000 10,136
-----------
UTILITIES - 0.4%
Korea Electric Power
Corporation ADS............. 100,000 2,050
-----------
VETERINARIAN PRODUCTS - 1.1%
IDEXX Laboratories, Inc.*..... 150,000 5,400
-----------
TOTAL COMMON STOCKS - 98.4%
(COST $287,364)............. 495,659
-----------
PREFERRED STOCKS
MEDIA PUBLISHING - 0.5%
The News Corporation
Limited..................... 100,000 2,087
-----------
TOTAL PREFERRED STOCKS - 0.5%
(COST $2,156)............... 2,087
-----------
TOTAL INVESTMENT IN
SECURITIES - 98.9%
(COST $289,520)............. $ 497,746
-----------
-----------
</TABLE>
- -------------
* Non-income producing securities.
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
THE PASADENA NIFTY FIFTY FUND
INVESTMENT IN SECURITIES AT DECEMBER 31, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
COMMON STOCKS
ADVERTISING - 1.7%
The Interpublic Group of
Companies, Inc.............. 80,000 $ 3,800
-----------
BANKING - 3.7%
Wells Fargo & Company......... 30,000 8,092
-----------
BEVERAGES - 4.0%
The Coca-Cola Company......... 100,000 5,263
PepsiCo, Inc.................. 120,000 3,510
-----------
8,773
-----------
BUSINESS SERVICES - 5.2%
Automatic Data Processing,
Inc......................... 90,000 3,859
First Data Corporation........ 100,000 3,650
Reuters Holdings PLC ADS B.... 50,000 3,825
-----------
11,334
-----------
COMMUNICATIONS
EQUIPMENT - 2.0%
Cisco Systems*................ 70,000 4,454
-----------
COMPUTER HARDWARE - 2.7%
Hewlett-Packard............... 80,000 4,020
U.S. Robotics Corporation..... 25,000 1,800
-----------
5,820
-----------
COMPUTER SOFTWARE - 4.4%
Microsoft Corporation*........ 60,000 4,957
Oracle Systems*............... 112,500 4,697
-----------
9,654
-----------
CONSUMER PRODUCTS - 4.4%
The Gillette Company.......... 125,000 9,719
-----------
DIVERSIFIED
MANUFACTURING - 1.8%
General Electric.............. 40,000 3,955
-----------
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
ELECTRONICS & ELECTRICAL
EQUIPMENT - 6.3%
Intel Corporation............. 80,000 $ 10,475
Linear Technology
Corporation................. 75,000 3,291
-----------
13,766
-----------
FINANCIAL SERVICES - 11.3%
American Express.............. 75,000 4,237
Federal Home Loan Mortgage
Corporation................. 45,000 4,956
Federal National Mortgage
Association................. 112,000 4,172
Green Tree Financial
Corporation................. 100,000 3,862
MBNA Corporation.............. 100,000 4,150
T. Rowe Price Associates,
Inc......................... 75,000 3,263
-----------
24,640
-----------
FINANCIAL SERVICES/BROKERAGE - 1.5%
The Charles Schwab
Corporation................. 100,000 3,200
-----------
GAMING - 2.2%
Circus Circus Enterprises,
Inc.*....................... 75,000 2,578
Mirage Resorts,
Incorporated................ 100,000 2,163
-----------
4,741
-----------
HEALTHCARE SERVICES - 2.7%
Oxford Health Plans, Inc.*.... 100,000 5,856
-----------
HOSPITAL COMPANIES - 2.5%
Columbia/HCA Healthcare
Corporation................. 135,000 5,501
-----------
HOUSEHOLD PRODUCTS - 3.9%
Colgate-Palmolive Company..... 50,000 4,613
The Procter & Gamble
Company..................... 35,000 3,762
-----------
8,375
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
THE PASADENA NIFTY FIFTY FUND
INVESTMENT IN SECURITIES AT DECEMBER 31, 1996 (CONTINUED)
(Dollars in thousands)
<TABLE>
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
LEISURE - 3.3%
Carnival Corporation.......... 100,000 $ 3,300
The Walt Disney Company....... 55,000 3,829
-----------
7,129
-----------
MEDIA PUBLISHING - 1.4%
The News Corporation Limited
ADS......................... 150,000 3,131
-----------
MEDICAL EQUIPMENT &
SUPPLIES - 7.0%
Boston Scientific
Corporation*................ 80,000 4,800
Johnson & Johnson............. 100,000 4,975
Medtronic, Inc................ 80,000 5,440
-----------
15,215
-----------
PHARMACEUTICALS - 9.4%
Merck & Co., Inc.............. 105,000 8,321
Pfizer Inc.................... 100,000 8,288
Roche Holdings Ltd. ADR....... 50,000 3,875
-----------
20,484
-----------
RESTAURANTS - 2.0%
McDonald's Corporation........ 95,000 4,299
-----------
RETAIL - APPAREL &
ACCESSORIES - 1.4%
Kohl's Corporation*........... 80,000 3,140
-----------
RETAIL - AUTO SUPPLY
STORES - 1.6%
AutoZone, Inc.*............... 130,000 3,575
-----------
RETAIL - BUILDING MATERIALS &
HARDWARE - 1.7%
The Home Depot, Inc........... 75,000 3,759
-----------
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
RETAIL - GENERAL
MERCHANDISE - 2.6%
Wal-Mart Stores, Inc.......... 100,000 $ 2,288
Sears, Roebuck and Co......... 75,000 3,459
-----------
5,747
-----------
RETAIL - HOME FURNITURE,
FURNISHINGS &
EQUIPMENT - 1.7%
Circuit City Stores, Inc...... 125,000 3,766
-----------
RETAIL - SPECIALTY - 1.6%
Office Depot Inc.*............ 150,000 2,662
Staples, Inc.*................ 50,000 903
-----------
3,565
-----------
TOBACCO PRODUCTS - 2.6%
Philip Morris Companies
Inc......................... 50,000 5,631
-----------
UTILITIES - 0.7%
Korea Electric Power
Corporation ADS............. 75,000 1,538
-----------
TOTAL COMMON STOCKS - 97.3%
(COST $132,174)............. 212,659
-----------
TOTAL INVESTMENT IN
SECURITIES - 97.3%
(COST $132,174)............. $ 212,659
-----------
-----------
</TABLE>
- -------------
* Non-income producing securities.
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
THE PASADENA BALANCED RETURN FUND
INVESTMENT IN SECURITIES AT DECEMBER 31, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
SHARES VALUE
--------- ---------
<S> <C> <C>
COMMON STOCKS
ADVERTISING - 2.0%
The Interpublic Group of
Companies, Inc.................. 25,000 $ 1,188
---------
BANKING - 4.0%
Wells Fargo & Company............. 9,000 2,428
---------
BEVERAGES - 3.8%
The Coca-Cola Company............. 25,000 1,315
PepsiCo, Inc...................... 35,000 1,024
---------
2,339
---------
BUSINESS SERVICES - 3.7%
Automatic Data Processing, Inc.... 22,000 943
Reuters Holdings PLC ADS B........ 17,000 1,301
---------
2,244
---------
COMMUNICATIONS EQUIPMENT - 2.1%
Cisco Systems*.................... 20,000 1,272
---------
COMPUTER HARDWARE - 1.1%
Hewlett-Packard................... 14,000 704
---------
COMPUTER SOFTWARE - 4.3%
Informix Corporation*............. 25,000 509
Microsoft Corporation*............ 14,000 1,157
Oracle Systems*................... 22,500 939
---------
2,605
---------
CONSUMER PRODUCTS - 4.5%
The Gillette Company.............. 35,000 2,721
---------
ELECTRONICS & ELECTRICAL
EQUIPMENT - 4.0%
Intel Corporation................. 10,000 1,309
LSI Logic Corporation*............ 30,000 803
Linear Technology Corporation..... 7,000 307
---------
2,419
---------
<CAPTION>
SHARES VALUE
--------- ---------
<S> <C> <C>
FINANCIAL SERVICES - 6.2%
BA Merchant Services, Inc.*....... 25,000 $ 447
Federal Home Loan Mortgage
Corporation..................... 14,000 1,542
Federal National Mortgage
Association..................... 28,800 1,073
New England Investment Companies,
L.P............................. 30,000 727
---------
3,789
---------
GAMING - 1.7%
Circus Circus Enterprises,
Inc.*........................... 30,000 1,031
---------
HEALTHCARE SERVICES - 1.4%
Oxford Health Plans, Inc.*........ 15,000 878
---------
HOSPITAL COMPANIES - 2.0%
Columbia/HCA Healthcare
Corporation..................... 30,000 1,222
---------
HOUSEHOLD PRODUCTS - 4.0%
Colgate-Palmolive Company......... 15,000 1,384
The Procter & Gamble Company...... 10,000 1,075
---------
2,459
---------
INVESTMENT MANAGEMENT - 1.7%
United Asset Management
Corporation..................... 40,000 1,065
---------
LEISURE - 4.0%
Carnival Corporation.............. 30,000 990
The Walt Disney Company........... 20,000 1,393
---------
2,383
---------
MEDICAL EQUIPMENT &
SUPPLIES - 4.2%
Johnson & Johnson................. 24,000 1,194
Medtronic, Inc.................... 20,000 1,360
---------
2,554
---------
PHARMACEUTICALS - 8.3%
American Home Products
Corporation..................... 13,000 762
Merck & Co., Inc.................. 18,000 1,426
Pfizer Inc........................ 25,000 2,072
Roche Holdings Ltd. ADR........... 10,000 775
---------
5,035
---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
THE PASADENA BALANCED RETURN FUND
INVESTMENT IN SECURITIES AT DECEMBER 31, 1996 (CONTINUED)
(Dollars in thousands)
<TABLE>
<CAPTION>
SHARES VALUE
--------- ---------
<S> <C> <C>
REAL ESTATE INVESTMENT
TRUST - 1.4%
Chelsea GCA Realty................ 25,000 $ 866
---------
RESTAURANTS - 2.0%
McDonald's Corporation............ 27,000 1,223
---------
RETAIL - AUTO SUPPLY STORES - 1.3%
AutoZone, Inc.*................... 27,000 743
---------
RETAIL - BUILDING MATERIAL &
HARDWARE - 0.9%
The Home Depot, Inc............... 10,000 501
---------
TOBACCO PRODUCTS - 2.4%
Philip Morris Companies Inc....... 13,000 1,464
---------
TOTAL COMMON STOCKS - 71.0%
(COST $22,753).................. 43,133
---------
<CAPTION>
FACE
AMOUNT VALUE
--------- ---------
<S> <C> <C>
UNITED STATES TREASURY OBLIGATIONS
United States Treasury Notes,
6.0%, 02/15/2026................ $ 8,300 $ 7,554
United States Treasury Notes,
6.5%, 08/15/2005................ 8,900 8,957
---------
16,511
---------
TOTAL UNITED STATES TREASURY
OBLIGATIONS - 27.2%
(COST $16,612).................. 16,511
---------
TOTAL INVESTMENT IN
SECURITIES - 98.2%
(COST $39,365).................. $ 59,644
---------
---------
</TABLE>
- -------------
* Non-income producing securities.
SEE NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
THE PASADENA SMALL & MID-CAP GROWTH FUND
INVESTMENT IN SECURITIES AT DECEMBER 31, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
COMMON STOCKS
AUTO SPORT - 1.1%
International Speedway
Corporation*................ 5,000 $ 103
-----------
BUSINESS SERVICES - 2.6%
Electro Rent Corporation*..... 2,600 65
Labor Ready, Inc.*............ 7,500 101
VeriFone, Inc.*............... 2,600 77
-----------
243
-----------
COMMUNICATIONS
EQUIPMENT - 6.6%
Cascade Communications
Corp.*...................... 3,300 182
MRV Communications, Inc.*..... 20,000 435
-----------
617
-----------
COMPUTER SOFTWARE - 19.4%
3D Labs Inc., Ltd.*........... 5,000 115
Abacus Direct Corporation*.... 5,000 94
Arbor Software Corporation*... 3,500 85
Aspen Technology, Inc.*....... 2,500 200
CyberMedia, Inc.*............. 2,400 38
Forrester Research, Inc.*..... 5,000 129
Indus Group, Inc.*............ 2,000 51
Information Management
Resources, Inc.*............ 2,500 53
Intelligroup, Inc.*........... 6,000 66
Legato Systems, Inc.*......... 10,000 326
Mastech Corporation*.......... 6,000 114
McAfee Associates, Inc.*...... 5,000 220
NICE-Systems, Ltd.*........... 3,000 54
Scopus Technology, Inc.*...... 2,000 93
Tecnomatix Technologies
Ltd.*....................... 4,000 106
Vantive Corporation*.......... 2,500 78
-----------
1,822
-----------
CONSUMER SERVICES - 0.5%
Mail Boxes Etc.*.............. 2,000 45
-----------
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
DIVERSIFIED
MANUFACTURING - 1.0%
Ballantyne of Omaha, Inc.*.... 5,000 $ 99
-----------
ELECTRONICS & ELECTRICAL
EQUIPMENT - 9.0%
Advanced Lighting
Technologies, Inc.*......... 3,000 73
ANADIGICS, Inc.*.............. 2,000 79
Applied Power Inc............. 2,500 99
Etec Systems, Inc.*........... 4,000 153
Electromagnetic Sciences,
Inc.*....................... 1,750 34
Micrel, Inc.*................. 3,000 95
Novellus Systems, Inc.*....... 1,000 54
Photon Dynamics, Inc.*........ 3,300 25
VLSI Technology, Inc.*........ 5,000 119
Xylan Corporation*............ 4,000 113
-----------
844
-----------
FINANCIAL SERVICES - 7.4%
AAMES Financial Corporation... 3,000 108
BA Merchant Services, Inc.*... 7,500 134
Delta Financial
Corporation*................ 3,000 54
Healthcare Financial
Corporation*................ 2,500 32
Imperial Credit Industries,
Inc.*....................... 2,000 42
Metris Companies Inc.*........ 5,000 120
The Money Store............... 1,000 28
T. Rowe Price Associates,
Inc......................... 4,100 178
-----------
696
-----------
FOOD PRODUCTS - 1.7%
General Nutrition Companies,
Inc.*....................... 3,000 51
PJ America, Inc.*............. 6,000 108
-----------
159
-----------
GAMING - 5.5%
Anchor Gaming *............... 4,000 161
Primadonna Resorts, Inc.*..... 5,000 85
Silicon Gaming, Inc.*......... 5,000 81
Sodak Gaming, Inc.*........... 10,000 154
Sun International Hotels
Ltd.*....................... 1,000 36
-----------
517
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
THE PASADENA SMALL & MID-CAP GROWTH FUND
INVESTMENT IN SECURITIES AT DECEMBER 31, 1996 (CONTINUED)
(Dollars in thousands)
<TABLE>
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
HEALTHCARE SERVICES - 4.6%
Advanced Health
Corporation*................ 10,000 $ 125
Applied Analytical Industries,
Inc.*....................... 2,000 38
Curative Health Services,
Inc.*....................... 3,000 83
National Surgery Centers,
Inc.*....................... 5,000 190
-----------
436
-----------
HOTELS - 0.8%
Renaissance Hotel Group
N.V.*....................... 3,000 71
-----------
INDUSTRIAL /DIRECT MAIL
DISTRIBUTOR - 2.0%
MSC Industrial Direct Co.,
Inc.*....................... 5,000 185
-----------
LEISURE - 3.6%
Regal Cinemas, Inc.*.......... 6,000 184
Vacation Break USA, Inc.*..... 7,500 152
-----------
336
-----------
MANUFACTURING -
MISCELLANEOUS - 0.4%
Ultratech Stepper, Inc.*...... 1,500 36
-----------
MEDICAL EQUIPMENT &
SUPPLIES - 4.6%
Biosource International,
Inc.*....................... 5,000 34
Mentor Corporation............ 3,000 89
Optimal Robotics Corp.*....... 15,000 71
Qiagen N.V*................... 5,000 129
R.P. Scherer Corporation*..... 1,000 50
Ventritex, Inc.*.............. 2,500 62
-----------
435
-----------
MISCELLANEOUS SERVICES - 0.3%
CCC Information Services
Group*...................... 2,000 32
-----------
RESTAURANTS - 5.1%
Brinker International,
Inc.*....................... 10,000 160
Einstein/Noah Bagel Corp.*.... 4,000 119
Garden Fresh Restaurant
Corp.*...................... 10,000 101
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
RESTAURANTS - 5.1% (CONTINUED)
Planet Hollywood
International, Inc.*........ 5,000 $ 99
-----------
479
-----------
RETAIL - APPAREL &
ACCESSORY - 1.4%
Gadzooks, Inc.*............... 3,000 55
Kohl's Corporation*........... 2,000 78
-----------
133
-----------
RETAIL - AUTO SUPPLY
STORES - 1.0%
Discount Auto Parts, Inc.*.... 4,000 93
-----------
RETAIL - GENERAL
MERCHANDISE - 4.5%
Dollar General Corporation.... 2,000 64
Dollar Tree Stores, Inc.*..... 3,000 115
Mazel Stores, Inc.*........... 2,000 45
99 Cents Only Stores*......... 12,000 196
-----------
420
-----------
RETAIL - GROCERY STORES - 2.2%
Cost Plus, Inc.*.............. 7,500 143
Smart & Final Inc............. 1,000 22
United Natural Foods, Inc.*... 2,500 42
-----------
207
-----------
RETAIL - SPECIALTY - 1.4%
Barnes & Noble, Inc.*......... 3,000 81
Trend-Lines, Inc.*............ 10,000 48
-----------
129
-----------
TELECOMMUNICATIONS
EQUIPMENT - 0.8%
DSP Communications, Inc.*..... 4,000 77
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
THE PASADENA SMALL & MID-CAP GROWTH FUND
INVESTMENT IN SECURITIES AT DECEMBER 31, 1996 (CONTINUED)
(Dollars in thousands)
<TABLE>
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
TELECOMMUNICATIONS
SERVICES - 5.0%
360 DEG. Communications
Company*.................... 1,200 $ 28
Ascend Communications,
Inc.*....................... 2,500 155
Open Joint Stock Company
Vimpel Communications
sponsored ADR*.............. 5,000 118
Panavision Inc.*.............. 5,000 104
West TeleServices
Corporation*................ 3,000 68
-----------
473
-----------
VETERINARIAN PRODUCTS - 1.3%
IDEXX Laboratories, Inc.*..... 3,500 126
-----------
TOTAL COMMON STOCKS - 93.8%
(COST $8,444)............... 8,813
-----------
TOTAL INVESTMENT IN
SECURITIES - 93.8%
(COST $8,444)............... $ 8,813
-----------
-----------
</TABLE>
- -------------
* Non-income producing securities.
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE>
THE PASADENA GLOBAL GROWTH FUND
INVESTMENT IN SECURITIES AT DECEMBER 31, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
COMMON STOCKS
ARGENTINA - 0.6%
TELECOMMUNICATION
SERVICES - 0.6%
Telecom Argentina
STET - France Telecom S.A.
sponsored ADR............... 650 $ 26
Telefonica De Argentina
sponsored ADR............... 1,000 26
-----------
TOTAL ARGENTINA............. 52
-----------
AUSTRALIA - 2.5%
BEVERAGES - 0.7 %
Coca Cola Amatil sponsored
ADR......................... 2,900 62
-----------
MEDIA PUBLISHING - 1.8%
The News Corporation
Limited..................... 7,400 154
-----------
TOTAL AUSTRALIA............. 216
-----------
BRAZIL - 1.4%
TELECOMMUNICATION
SERVICES - 1.4%
Telecomunicacoes Brasileiras
sponsored ADR............... 1,600 122
-----------
CZECH REPUBLIC - 0.9%
MEDIA AND BROADCASTING - 0.9%
Central European Media
Enterprises Ltd.*........... 2,500 79
-----------
CHINA - 1.2%
UTILITIES - ELECTRIC - 1.2%
Huaneng Power International,
Inc. sponsored ADR*......... 4,500 101
-----------
GERMANY - 1.3%
COMPUTER SOFTWARE - 1.3%
SAP Aktiengesellschaft
sponsored ADR*.............. 2,450 114
-----------
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
HONG KONG - 13.7%
BANKING - 2.4%
HSBC Holdings plc sponsored
ADR......................... 950 $ 203
-----------
COMPUTER SOFTWARE - 2.0%
Hutchison Whampoa Limited
ADR......................... 4,500 177
-----------
CONSUMER PRODUCTS - 1.7%
Amway Asia Pacific Ltd.*...... 1,600 68
Nu Skin Asia Pacific, Inc.*... 2,500 77
-----------
145
-----------
CONGLOMERATE - 2.0%
First Pacific Company Limited
sponsored ADR............... 1,950 127
Wharf Holdings Limited
sponsored ADR............... 2,000 50
-----------
177
-----------
FINANCIAL SERVICES - 0.4%
AEON Credit Service (Asia)
Company Limited*............ 98,000 31
-----------
INFRASTRUCTURE - 0.9%
New World Infrastructure
Limited*.................... 25,000 73
-----------
INSURANCE - 0.9%
National Mutual Asia
Limited..................... 84,000 80
-----------
MEDIA AND BROADCASTING - 0.8%
Television Broadcasts
Limited..................... 17,000 68
-----------
PROPERTY DEVELOPMENT - 2.5%
Lai Sun Development Company
Limited*.................... 42,000 63
New World Development Co...... 12,000 81
Sun Hung Kai Properties
Limited..................... 6,000 73
-----------
217
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE>
THE PASADENA GLOBAL GROWTH FUND
INVESTMENT IN SECURITIES AT DECEMBER 31, 1996 (CONTINUED)
(Dollars in thousands)
<TABLE>
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
TELECOMMUNICATION
SERVICES - 0.1%
Hong Kong Telecommunications
Limited sponsored ADR....... 700 $ 11
-----------
TOTAL HONG KONG............. 1,182
-----------
INDIA - 2.9%
BANKING - 0.6%
State Bank of India GDR*...... 3,250 56
-----------
ENGINEERING AND
CONSTRUCTION - 1.0%
Larsen & Toubro Limited*
GDR......................... 6,000 87
-----------
HOTELS - 0.5%
Indian Hotels Company Limited
sponsored GDR*.............. 1,700 43
-----------
INVESTMENT COMPANIES - 0.8%
The India Fund, Inc........... 8,500 65
-----------
TOTAL INDIA................. 251
-----------
INDONESIA - 3.9%
BANKING - 1.0%
PT Bank International
Indonesia*.................. 43,000 42
PT Bank Tiara Asia*........... 43,000 46
-----------
88
-----------
TELECOMMUNICATION
SERVICES - 1.8%
Indonesian Satellite
Corporation ADR............. 550 15
Perusahaan Persero P.T.
Telekom sponsored ADR....... 4,000 138
-----------
153
-----------
TOBACCO PRODUCTS - 1.1%
PT Hanjaya Mandala
Sampoerna*.................. 18,000 96
-----------
TOTAL INDONESIA............. 337
-----------
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
IRELAND - 0.8%
PHARMACEUTICALS - 0.8%
Elan Corporation plc sponsored
ADR*........................ 2,100 $ 70
-----------
ISRAEL - 4.0%
COMPUTER SOFTWARE - 2.3%
NICE-Systems Ltd. sponsored
ADR*........................ 5,000 90
Tecnomatix Technologies
Ltd.*....................... 4,000 106
-----------
196
-----------
CONSUMER PRODUCTS - 0.7%
ZAG Industries Ltd.*.......... 3,500 58
-----------
PHARMACEUTICALS - 0.7%
Teva Pharmaceutical Industries
Limited sponsored ADR....... 1,200 60
-----------
TELECOMMUNICATION
SERVICES - 0.3%
TTI Team Telecom
International*.............. 5,000 31
-----------
TOTAL ISRAEL................ 345
-----------
ITALY - 1.6%
CONSUMER PRODUCTS - 1.1%
Luxottica Group S.p.A.
sponsored ADR............... 1,750 91
-----------
RETAIL HOME FURNITURE &
FURNISHINGS - 0.5%
Industrie Natuzzi SpA
sponsored ADR............... 1,900 44
-----------
TOTAL ITALY................. 135
-----------
JAPAN - 2.9%
CONSUMER PRODUCTS - 0.2%
Amway Japan Limited sponsored
ADR......................... 1,000 17
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE>
THE PASADENA GLOBAL GROWTH FUND
INVESTMENT IN SECURITIES AT DECEMBER 31, 1996 (CONTINUED)
(Dollars in thousands)
<TABLE>
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
ELECTRONICS AND
ELECTRICAL - 2.1%
Kyocera Corporation sponsored
ADR......................... 800 $ 98
Sony Corp. sponsored ADR...... 1,200 79
-----------
177
-----------
OFFICE EQUIPMENT - 0.6%
Canon, Inc. sponsored ADR..... 500 55
-----------
TOTAL JAPAN................. 249
-----------
KOREA - 2.0%
BANKING - 0.2%
Kookmin Bank sponsored ADR.... 1,000 19
-----------
TELECOMMUNICATION
SERVICES - 0.5%
Korea Mobile
Telecommunications Corp.
ADR......................... 3,090 40
-----------
UTILITIES - ELECTRIC - 1.3%
Korea Electric Power
Corporation sponsored ADR... 5,700 117
-----------
TOTAL KOREA................. 176
-----------
MEXICO - 2.5%
BEVERAGES - 1.2%
Coca-Cola Femsa, S.A. de C.V.
sponsored ADR............... 3,500 101
-----------
RETAIL - GENERAL
MERCHANDISE - 1.3%
Cifra, S.A. de C.V............ 92,300 113
-----------
TOTAL MEXICO................ 214
-----------
NETHERLANDS - 3.2%
BEVERAGES - 0.7%
Heineken N.V. ADR............. 350 62
-----------
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
COMPUTER SOFTWARE - 0.6%
Baan Company N.V.*............ 1,500 $ 52
-----------
HOTELS - 1.3%
Renaissance Hotel Group,
N.V.*....................... 4,600 108
-----------
MEDICAL EQUIPMENT AND SUPPLIES
0.6%
Qiagen N.V.*.................. 2,000 52
-----------
TOTAL NETHERLANDS........... 274
-----------
PERU - 1.0%
TELECOMMUNICATION SERVICES
1.0%
Telefonica del Peru sponsored
ADR......................... 4,500 85
-----------
PHILIPPINES - 3.3%
CONGLOMERATE - 0.9%
Ayala Corp, Inc.*............. 75,000 81
-----------
ELECTRIC UTILITIES - 0.6%
Manila Electric Company*...... 6,000 50
-----------
INFRASTRUCTURE - 0.6%
International Container
Terminal Services, Inc.*.... 91,500 48
-----------
PROPERTY DEVELOPMENT - 0.4%
Fil-Estate Land, Inc.*........ 40,000 35
-----------
TELECOMMUNICATION
SERVICES - 0.8%
Philippine Long Distance
Telephone Company sponsored
ADR......................... 1,350 69
-----------
TOTAL PHILIPPINES........... 283
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PAGE>
THE PASADENA GLOBAL GROWTH FUND
INVESTMENT IN SECURITIES AT DECEMBER 31, 1996 (CONTINUED)
(Dollars in thousands)
<TABLE>
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
RUSSIA - 0.5%
TELECOMMUNICATION
SERVICES - 0.5%
Open Joint Stock Company
Vimpel Communications
sponsored ADR*.............. 2,000 $ 47
-----------
SINGAPORE - 0.9%
COMMUNICATION EQUIPMENT - 0.9%
Datacraft Asia*............... 45,000 75
-----------
SPAIN - 1.4%
TELECOMMUNICATION
SERVICES - 1.4%
Telefonica de Espana, S.A.
sponsored ADR............... 1,800 125
-----------
SWEDEN - 4.7%
CAPITAL GOODS EQUIPMENT - 0.7%
ABB AB - Sponsored ADR........ 550 61
-----------
PHARMACEUTICALS - 1.8%
Astra AB sponsored ADR........ 3,100 152
-----------
TELECOMMUNICATION
EQUIPMENT - 2.2%
Telefonaktiebolaget LM
Ericsson - Sponsored ADR... 6,500 196
-----------
TOTAL SWEDEN................ 409
-----------
SWITZERLAND - 2.8%
CAPITAL GOODS EQUIPMENT - 0.4%
ABB AG - Sponsored ADR........ 300 37
-----------
PHARMACEUTICALS - 2.4%
Roche Holding Ltd. ADR........ 2,600 202
-----------
TOTAL SWITZERLAND........... 239
-----------
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
THAILAND - 1.5%
INFRASTRUCTURE - 0.8%
Italian-Thai Development
Public Company Limited*..... 10,500 $ 68
-----------
TELECOMMUNICATION
EQUIPMENT - 0.2%
Jasmine International Public
Co. Ltd.*................... 15,000 23
-----------
RESTAURANTS - 0.5%
The Pizza Public Company
Limited*.................... 7,000 41
-----------
TOTAL THAILAND.............. 132
-----------
UNITED KINGDOM - 5.5%
COMPUTER SOFTWARE - 1.3%
3D Labs Inc., Ltd.*........... 5,000 115
-----------
INVESTMENT MANAGEMENT - 1.5%
INVESCO PLC sponsored ADR..... 2,500 111
INVESCO Funding LLC ADS*...... 400 17
-----------
128
-----------
BUSINESS SERVICES - 1.7%
Reuters Holdings PLC ADS B.... 1,900 145
-----------
TELECOMMUNICATION
SERVICES - 1.0%
Vodafone Group Plc sponsored
ADR......................... 2,050 85
-----------
TOTAL UNITED KINGDOM........ 473
-----------
UNITED STATES - 30.4%
ADVERTISING - 0.6%
The Interpublic Group of
Companies, Inc.............. 1,150 55
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE>
THE PASADENA GLOBAL GROWTH FUND
INVESTMENT IN SECURITIES AT DECEMBER 31, 1996 (CONTINUED)
(Dollars in thousands)
<TABLE>
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
BANKING - 2.7%
American Express Company...... 700 $ 39
Citicorp...................... 600 62
Wells Fargo & Company......... 500 135
-----------
236
-----------
BEVERAGES - 0.4%
The Coca-Cola Company......... 700 37
-----------
BUSINESS SERVICES - 0.8%
First Data Corporation........ 1,000 36
VeriFone, Inc.*............... 1,000 30
-----------
66
-----------
COMMUNICATION EQUIPMENT - 3.1%
Cisco Systems*................ 3,050 194
MRV Communications, Inc.*..... 3,500 76
-----------
270
-----------
COMPUTER HARDWARE - 0.4%
Hewlett-Packard............... 700 35
-----------
COMPUTER SOFTWARE - 3.7%
Informix Corp.*............... 3,800 77
Legato Systems, Inc.*......... 1,500 49
Microsoft Corporation*........ 1,350 111
Oracle Systems*............... 2,000 84
-----------
321
-----------
CONSUMER PRODUCTS - 2.3%
The Gillette Company.......... 2,550 198
-----------
CONSUMER STAPLES - 0.9%
Colgate-Palmolive Company..... 800 74
-----------
DIVERSIFIED
MANUFACTURING - 0.3%
General Electric.............. 250 25
-----------
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
ELECTRONICS AND ELECTRICAL
EQUIPMENT - 2.8%
Intel Corporation............. 1,500 $ 196
Linear Technology
Corporation................. 1,000 44
-----------
240
-----------
FINANCIAL SERVICES - 0.4%
Green Tree Financial
Corporation................. 1,000 39
-----------
FOOD PRODUCTS - 0.4%
CPC International Inc......... 400 31
-----------
GAMING - 0.4%
Circus Circus Enterprises,
Inc.*....................... 1,000 34
-----------
HEALTHCARE SERVICES - 0.5%
Oxford Health Plans, Inc.*.... 700 41
-----------
HOUSEHOLD PRODUCTS - 0.5%
The Procter & Gamble
Company..................... 400 43
-----------
INFORMATION TECHNOLOGY - 1.3%
Mastech Corporation*.......... 6,000 114
-----------
INSURANCE - 0.6%
American International Group,
Inc......................... 500 54
-----------
LEISURE AND
ENTERTAINMENT - 0.3%
The Walt Disney Company....... 400 28
-----------
MANUFACTURING - TOYS - 0.4%
Mattel, Inc................... 1,250 35
-----------
MEDICAL EQUIPMENT AND
SUPPLIES - 1.7%
Boston Scientific
Corporation*................ 850 51
Johnson & Johnson............. 950 47
Medtronic, Inc................ 750 51
-----------
149
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE>
THE PASADENA GLOBAL GROWTH FUND
INVESTMENT IN SECURITIES AT DECEMBER 31, 1996 (CONTINUED)
(Dollars in thousands)
<TABLE>
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
PHARMACEUTICALS - 1.9%
Merck & Co., Inc.............. 400 $ 32
Pfizer Inc.................... 1,200 99
RP Scherer Corp.*............. 650 33
-----------
164
-----------
RESTAURANTS - 0.5%
McDonald's Corporation........ 900 41
-----------
RETAIL - AUTO SUPPLY
STORES - 0.7%
AutoZone, Inc.*............... 2,100 58
-----------
RETAIL - BUILDING MATERIALS
AND HARDWARE - 0.5%
The Home Depot, Inc........... 900 45
-----------
RETAIL - CATALOG - 0.4%
Viking Office Products,
Inc.*....................... 1,200 32
-----------
RETAIL - SPECIALITY - 0.4%
Staples, Inc.*................ 2,000 36
-----------
<CAPTION>
SHARES VALUE
----------- -----------
<S> <C> <C>
TOBACCO PRODUCTS - 0.9%
Philip Morris Companies
Inc......................... 700 $ 79
-----------
VETERINARIAN PRODUCTS - 0.6%
IDEXX Laboratories, Inc.*..... 1,300 47
-----------
TOTAL UNITED STATES......... 2,627
-----------
TOTAL COMMON STOCKS - 97.4%
(COST $8,350)............... 8,412
-----------
TOTAL INVESTMENT IN
SECURITIES - 97.4%
(COST $8,350)............... $ 8,412
-----------
-----------
</TABLE>
- -------------
* Non-income producing securities
SEE NOTES TO FINANCIAL STATEMENTS.
33
<PAGE>
THE PASADENA GROWTH, NIFTY FIFTY, BALANCED RETURN,
SMALL & MID-CAP GROWTH AND GLOBAL GROWTH FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RELATED CALCULATIONS)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
THE THE
THE THE THE PASADENA PASADENA
PASADENA PASADENA PASADENA SMALL & GLOBAL
GROWTH NIFTY FIFTY BALANCED MID-CAP GROWTH
FUND FUND RETURN FUND GROWTH FUND FUND
<S> <C> <C> <C> <C> <C>
----------- ----------- ----------- ----------- -----------
ASSETS:
Investment in securities, at value (Cost
$289,520, $132,174, $39,365, $8,444
and $8,350)
See accompanying schedules............ $ 497,746 $ 212,659 $ 59,644 $ 8,813 $ 8,412
Cash.................................... 6,544 5,656 784 1,387 2,213
Receivable for investments sold......... -- -- -- 298 417
Receivable for Fund shares sold......... 490 817 45 278 21
Dividends and interest receivable....... 343 254 465 8 9
----------- ----------- ----------- ----------- -----------
Total assets........................ 505,123 219,386 60,938 10,784 11,072
----------- ----------- ----------- ----------- -----------
LIABILITIES:
Payable for investments purchased....... -- -- -- 875 419
Payable for Fund shares repurchased..... 352 109 32 500 2,002
Accrued administration fees............. 285 115 30 4 4
Accrued investment management fees...... 273 129 45 7 8
Accrued service fees.................... 603 197 75 4 4
Accrued distribution fees............... 142 132 17 1 1
----------- ----------- ----------- ----------- -----------
Total liabilities................... 1,655 682 199 1,391 2,438
----------- ----------- ----------- ----------- -----------
NET ASSETS AT DECEMBER 31, 1996......... $ 503,468 $ 218,704 $ 60,739 $ 9,393 $ 8,634
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
NET ASSETS CONSIST OF:
Capital paid-in......................... $ 296,021 $ 138,093 $ 40,407 $ 8,974 $ 7,827
Accumulated undistributed income:
Net investment income................. -- -- 21 -- --
Net realized gain (loss) on
investments......................... (779 ) 126 32 50 745
Net unrealized appreciation in value of
investments........................... 208,226 80,485 20,279 369 62
----------- ----------- ----------- ----------- -----------
$ 503,468 $ 218,704 $ 60,739 $ 9,393 $ 8,634
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
PER SHARE VALUES:
CLASS A
Net asset value and redemption price
($426,784,892 DIVIDED BY 19,451,423,
$145,468,929 DIVIDED BY 5,489,907,
$51,947,000 DIVIDED BY 1,850,224,
$7,859,247 DIVIDED BY 427,452 and
$7,653,897 DIVIDED BY 401,595)....... $ 21.94 $ 26.50 $ 28.08 $ 18.39 $ 19.06
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Maximum offering price [NAV per share
DIVIDED BY
(1 - maximum sales load)]............. $ 23.22 $ 28.04 $ 29.71 $ 19.46 $ 20.17
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
CLASS B
Net asset value and offering price
($49,443,730 DIVIDED BY 2,310,474,
$47,143,294 DIVIDED BY 1,821,939,
$4,608,937 DIVIDED BY 165,485,
$1,479,806 DIVIDED BY 80,658 and
$873,539 DIVIDED BY 45,890).......... $ 21.40 $ 25.88 $ 27.85 $ 18.35 $ 19.04
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
CLASS C
Net asset value, offering price and
redemption price ($27,239,209
DIVIDED BY 1,272,853, $26,091,723
DIVIDED BY 1,008,360, $4,182,877
DIVIDED BY 150,026, $53,784
DIVIDED BY 2,931 and $106,435
DIVIDED BY 5,593).................... $ 21.40 $ 25.88 $ 27.88 $ 18.35 $ 19.03
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
34
<PAGE>
THE PASADENA GROWTH, NIFTY FIFTY, BALANCED RETURN,
SMALL & MID-CAP GROWTH AND GLOBAL GROWTH FUNDS
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
THE THE
THE THE THE PASADENA PASADENA
PASADENA PASADENA PASADENA SMALL & GLOBAL
GROWTH NIFTY FIFTY BALANCED MID-CAP GROWTH
FUND FUND RETURN FUND GROWTH FUND FUND
<S> <C> <C> <C> <C> <C>
----------- ----------- ----------- ----------- -----------
INVESTMENT INCOME:
Dividends............................. $ 4,117 $ 2,163 $ 646 $ 3 $ 46
Interest.............................. 504 181 1,158 9 --
----------- ----------- ----------- ----------- -----------
Total investment income............. 4,621 2,344 1,804 12 46
----------- ----------- ----------- ----------- -----------
EXPENSES:
Administration fees................... 3,453 1,485 557 19 40
Investment management fees............ 3,202 1,391 528 25 50
Service fees.......................... 1,229 471 146 6 12
Distribution fees - Class B........... 320 269 26 1 1
Distribution fees - Class C........... 182 142 25 -- --
----------- ----------- ----------- ----------- -----------
Total expenses before Manager's
waivers........................... 8,386 3,758 1,282 51 103
Manager's expense waivers........... (30 ) (70 ) (55 ) (18 ) (62 )
----------- ----------- ----------- ----------- -----------
Total expenses - net................ 8,356 3,688 1,227 33 41
----------- ----------- ----------- ----------- -----------
Net investment income (loss)........ (3,735 ) (1,344 ) 577 (21 ) 5
----------- ----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments...... 35,738 14,376 3,223 469 1,243
Net increase (decrease) in unrealized
appreciation........................ 67,038 30,983 5,744 279 (268 )
----------- ----------- ----------- ----------- -----------
Net gain on investments............. 102,776 45,359 8,967 748 975
----------- ----------- ----------- ----------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM
OPERATIONS............................ $ 99,041 $ 44,015 $ 9,544 $ 727 $ 980
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
35
<PAGE>
THE PASADENA GROWTH, NIFTY FIFTY, BALANCED RETURN,
SMALL & MID-CAP GROWTH AND GLOBAL GROWTH FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THE PASADENA THE PASADENA
GROWTH FUND NIFTY FIFTY FUND
------------------------------ ------------------------------
For the Year Ended December 31,
--------------------------------------------------------------
1996 1995 1996 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
THE PASADENA THE PASADENA
THE PASADENA SMALL & MID-CAP GLOBAL GROWTH
BALANCED RETURN FUND GROWTH FUND FUND
------------------------------ ------------------------------ --------------
For the Year Ended December 31,
------------------------------------------------------------------------------
1996 1995 1996 1995 1996
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss).......... $ 577 $ 621 $ (21) $ 9 $ 5
Net realized gain (loss) on
investments......................... 3,223 3,083 469 22 1,243
Net increase (decrease) in unrealized
appreciation in value of
investments......................... 5,744 9,811 279 91 (268)
-------------- -------------- -------------- -------------- --------------
Net increase in net assets resulting
from operations..................... 9,544 13,515 727 122 980
-------------- -------------- -------------- -------------- --------------
Dividends and distributions to
shareholders:
Net investment income................. (564 ) (612 ) (25 ) (9 ) (12)
Capital gains......................... (3,123 ) (971 ) (398 ) (21 ) (455)
-------------- -------------- -------------- -------------- --------------
Decrease in net assets resulting from
dividends and distributions to
shareholders........................ (3,687 ) (1,583 ) (423 ) (30 ) (467)
-------------- -------------- -------------- -------------- --------------
Capital share transactions:
Net increase (decrease) in net assets
resulting from capital share
transactions........................ (2,676 ) (10,093 ) 7,347 1,530 4,918
-------------- -------------- -------------- -------------- --------------
Total increase in net assets.......... 3,181 1,839 7,651 1,622 5,431
NET ASSETS:
Beginning of year....................... 57,558 55,719 1,742 120 3,203
-------------- -------------- -------------- -------------- --------------
End of year............................. $ 60,739 $ 57,558 $ 9,393 $ 1,742 $ 8,634
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
<CAPTION>
1995
--------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss).......... $ 26
Net realized gain (loss) on
investments......................... (40)
Net increase (decrease) in unrealized
appreciation in value of
investments......................... 327
--------------
Net increase in net assets resulting
from operations..................... 313
--------------
Dividends and distributions to
shareholders:
Net investment income................. (26 )
Capital gains......................... --
--------------
Decrease in net assets resulting from
dividends and distributions to
shareholders........................ (26 )
--------------
Capital share transactions:
Net increase (decrease) in net assets
resulting from capital share
transactions........................ 2,776
--------------
Total increase in net assets.......... 3,063
NET ASSETS:
Beginning of year....................... 140
--------------
End of year............................. $ 3,203
--------------
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
36
<PAGE>
THE PASADENA GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------------------------------------------------------
1996 1995
---------------------------------------- ----------------------------------------
Class A Class B Class C Class A Class B Class C
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year...... $ 19.28 $ 18.99 $ 18.99 $ 15.40 $ 15.28 $ 15.28
------------ ------------ ------------ ------------ ------------ ------------
GAIN (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss(1)................ (.14 )(2) (.31 )(2) (.31 )(2) (.06 ) (.20 ) (.20 )
Net realized and unrealized gain
(loss) on investments............... 4.47 4.39 4.39 4.24 4.21 4.21
------------ ------------ ------------ ------------ ------------ ------------
Total gain (loss) from investment
operations.......................... 4.33 4.08 4.08 4.18 4.01 4.01
------------ ------------ ------------ ------------ ------------ ------------
LESS DISTRIBUTIONS:
Capital gains......................... (1.67 ) (1.67 ) (1.67 ) (.30 ) (.30 ) (.30 )
------------ ------------ ------------ ------------ ------------ ------------
Total distributions................... (1.67 ) (1.67 ) (1.67 ) (.30 ) (.30 ) (.30 )
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, end of year............ $ 21.94 $ 21.40 $ 21.40 $ 19.28 $ 18.99 $ 18.99
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
TOTAL RETURN(3)......................... 22.49%(2) 21.52%(2) 21.52%(2) 27.16% 26.26% 26.26%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).......................... $ 426,785 $ 49,444 $ 27,239 $ 415,416 $ 34,786 $ 20,497
Ratio of expenses to average net
assets.............................. 1.6%(2) 2.3%(2) 2.3%(2) 1.6% 2.4% 2.4%
Ratio of net investment loss to
average net assets.................. (0.6)%(2) (1.5)%(2) (1.5)%(2) (0.3)% (1.1)% (1.1)%
Portfolio turnover rate............... 70.1% 70.1% 70.1% 65.9% 65.9% 65.9%
Average commission rate paid per
share(4)............................ $ 0.0578 $ 0.0578 $ 0.0578
</TABLE>
- -------------
The table above provides condensed information concerning income and
capital changes for one share of The Pasadena Growth Fund. Such information
is based on the Fund's audited financial statements for the years
presented.
1 This information was prepared using the average number of shares
outstanding during each year.
2 These amounts reflect the impact of a waiver of administration fees of
$30,000. Absent the waiver, net investment loss per share, total
return and the ratios of expenses and net investment loss to average
net assets for Class A, Class B and Class C shares would have been
$(.14), $(.31) and $(.31), respectively, 22.49%, 21.52% and 21.52%,
respectively, 1.6%, 2.4% and 2.4%, respectively, and (0.7)%, (1.5)%
and (1.5)%, respectively.
3 Total return measures the change in the value of an investment during
each of the years indicated. It does not include the impact of paying
any applicable front-end or contingent deferred sales charge.
4 This disclosure, effective for the first time in 1996, has not been
applied retroactively.
SEE NOTES TO FINANCIAL STATEMENTS.
38
<PAGE>
THE PASADENA GROWTH FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------------------------------
1994 1993 1992
---------------------------------------- ------------ ------------
Class A Class B Class C Class A Class A
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year...... $ 16.00 $ 15.89 $ 15.89 $ 17.00 $ 16.80
------------ ------------ ------------ ------------ ------------
GAIN (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss(1)................ (.03 ) (.14 ) (.14 ) (.02 ) (.05 )
Net realized and unrealized gain
(loss) on investments............... (.57 ) (.47 ) (.47 ) (.98 ) .43
------------ ------------ ------------ ------------ ------------
Total gain (loss) from investment
operations.......................... (.60 ) (.61 ) (.61 ) (1.00 ) .38
------------ ------------ ------------ ------------ ------------
LESS DISTRIBUTIONS:
Capital gains......................... -- -- -- -- (.18 )
------------ ------------ ------------ ------------ ------------
Total distributions................... -- -- -- -- (.18 )
------------ ------------ ------------ ------------ ------------
Net asset value, end of year............ $ 15.40 $ 15.28 $ 15.28 $ 16.00 $ 17.00
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
TOTAL RETURN(3)......................... (3.75)% (3.84)% (3.84)% (5.87)% 2.24%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).......................... $ 391,831 $ 11,349 $ 6,136 $ 532,208 $ 625,624
Ratio of expenses to average net
assets.............................. 1.6% 2.3% 2.3% 1.6% 1.6%
Ratio of net investment loss to
average net assets.................. (0.2)% (1.0)% (1.0)% --% (0.3)%
Portfolio turnover rate............... 53.8% 53.8% 53.8% 22.9% 24.5%
Average commission rate paid per
share4
</TABLE>
- -------------
The table above provides condensed information concerning income and
capital changes for one share of The Pasadena Growth Fund. Such information
is based on the Fund's audited financial statements for the years
presented.
1 This information was prepared using the average number of shares
outstanding during each year.
2 These amounts reflect the impact of a waiver of administration fees of
$30,000. Absent the waiver, net investment loss per share, total
return and the ratios of expenses and net investment loss to average
net assets for Class A, Class B and Class C shares would have been
$(.14), $(.31) and $(.31), respectively, 22.49%, 21.52% and 21.52%,
respectively, 1.6%, 2.4% and 2.4%, respectively, and (0.7)%, (1.5)%
and (1.5)%, respectively.
3 Total return measures the change in the value of an investment during
each of the years indicated. It does not include the impact of paying
any applicable front-end or contingent deferred sales charge.
4 This disclosure, effective for the first time in 1996, has not been
applied retroactively.
SEE NOTES TO FINANCIAL STATEMENTS.
39
<PAGE>
THE PASADENA NIFTY FIFTY FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------------------------------------------------------
1996 1995
---------------------------------------- ----------------------------------------
Class A Class B Class C Class A Class B Class C
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year...... $ 22.18 $ 21.85 $ 21.85 $ 17.30 $ 17.17 $ 17.17
------------ ------------ ------------ ------------ ------------ ------------
GAIN (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss(1)................ (.12 )(2) (.30 )(2) (.30 )(2) (.05 ) (.21 ) (.21 )
Net realized and unrealized gain
(loss) on investments............... 6.00 5.89 5.89 4.93 4.89 4.89
------------ ------------ ------------ ------------ ------------ ------------
Total gain (loss) from investment
operations.......................... 5.88 5.59 5.59 4.88 4.68 4.68
------------ ------------ ------------ ------------ ------------ ------------
LESS DISTRIBUTIONS:
Capital gains......................... (1.56 ) (1.56 ) (1.56 ) -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Total distributions................... (1.56 ) (1.56 ) (1.56 ) -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, end of year............ $ 26.50 $ 25.88 $ 25.88 $ 22.18 $ 21.85 $ 21.85
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
TOTAL RETURN(3)......................... 26.53%(2) 25.60%(2) 25.60%(2) 28.21% 27.26% 27.26%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).......................... $ 145,469 $ 47,143 $ 26,092 $ 122,322 $ 27,462 $ 15,105
Ratio of expenses to average net
assets.............................. 1.7%(2) 2.5%(2) 2.5%(2) 1.9% 2.6% 2.6%
Ratio of net investment loss to
average net assets.................. (0.4 )%2 (1.2 )%2 (1.2 )%2 (.3 )% (1.0 )% (1.0 )%
Portfolio turnover rate............... 41.9% 41.9% 41.9% 26.5% 26.5% 26.5%
Average commission rate paid per
share(4)............................ $ 0.0585 $ 0.0585 $ 0.0585
</TABLE>
- -------------
The table above provides condensed information concerning income and
capital changes for one share of The Pasadena Nifty Fifty Fund. Such
information is based on the Fund's audited financial statements for the
years presented.
1 This information was prepared using the average number of shares
outstanding during each year.
2 These amounts reflect the impact of a waiver of administration fees of
$70,000. Absent the waiver, net investment loss per share, total
return and the ratios of expenses and net investment loss to average
net assets for Class A, Class B and Class C shares would have been
$(.13), $(.31) and $(.31), respectively, 26.48%, 25.55% and 25.55%,
respectively, 1.8%, 2.5% and 2.5%, respectively, and (0.5)%, (1.3)%
and (1.3)%, respectively.
3 Total return measures the change in the value of an investment during
each of the years indicated. It does not include the impact of paying
any applicable front-end or contingent deferred sales charge.
4 This disclosure, effective for the first time in 1996, has not been
applied retroactively.
SEE NOTES TO FINANCIAL STATEMENTS.
40
<PAGE>
THE PASADENA NIFTY FIFTY FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------------------------------
1994 1993 1992
---------------------------------------- ------------ ------------
Class A Class B Class C Class A Class A
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year...... $ 17.12 $ 17.02 $ 17.02 $ 17.21 $ 16.60
------------ ------------ ------------ ------------ ------------
GAIN (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss(1)................ (.03 ) (.14 ) (.15 ) (.06 ) (.05 )
Net realized and unrealized gain
(loss) on investments............... .21 .29 .30 (.03 ) .66
------------ ------------ ------------ ------------ ------------
Total gain (loss) from investment
operations.......................... .18 .15 .15 (.09 ) .61
------------ ------------ ------------ ------------ ------------
LESS DISTRIBUTIONS:
Capital gains......................... -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Total distributions................... -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net asset value, end of year............ $ 17.30 $ 17.17 $ 17.17 $ 17.12 $ 17.21
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
TOTAL RETURN(3)......................... 1.05% 0.88% 0.88% (0.52 )% 3.67%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in
thousands).......................... $ 100,596 $ 6,722 $ 4,283 $ 134,284 $ 195,067
Ratio of expenses to average net
assets.............................. 1.9% 2.6% 2.6% 1.8% 1.9%
Ratio of net investment loss to
average net assets.................. (0.2 )% (0.9 )% (0.9 )% -- (0.3 )%
Portfolio turnover rate............... 23.2% 23.2% 23.2% 2.2% 12.9%
Average commission rate paid per
share(4)
</TABLE>
- -------------
The table above provides condensed information concerning income and
capital changes for one share of The Pasadena Nifty Fifty Fund. Such
information is based on the Fund's audited financial statements for the
years presented.
1 This information was prepared using the average number of shares
outstanding during each year.
2 These amounts reflect the impact of a waiver of administration fees of
$70,000. Absent the waiver, net investment loss per share, total
return and the ratios of expenses and net investment loss to average
net assets for Class A, Class B and Class C shares would have been
$(.13), $(.31) and $(.31), respectively, 26.48%, 25.55% and 25.55%,
respectively, 1.8%, 2.5% and 2.5%, respectively, and (0.5)%, (1.3)%
and (1.3)%, respectively.
3 Total return measures the change in the value of an investment during
each of the years indicated. It does not include the impact of paying
any applicable front-end or contingent deferred sales charge.
4 This disclosure, effective for the first time in 1996, has not been
applied retroactively.
SEE NOTES TO FINANCIAL STATEMENTS.
41
<PAGE>
THE PASADENA BALANCED RETURN FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------------------------------------------------------
1996 1995
---------------------------------------- ----------------------------------------
Class A Class B Class C Class A Class B Class C
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year...... $ 25.39 $ 25.26 $ 25.28 $ 20.54 $ 20.49 $ 20.48
------------ ------------ ------------ ------------ ------------ ------------
GAIN (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income(1).............. .29(2) .09(2) .09(2) .27 .08 .07
Net realized and unrealized gain
(loss) on investments............... 4.23 4.16 4.16 5.31 5.29 5.30
------------ ------------ ------------ ------------ ------------ ------------
Total gain (loss) from investment
operations.......................... 4.52 4.25 4.25 5.58 5.37 5.37
------------ ------------ ------------ ------------ ------------ ------------
LESS DIVIDENDS AND DISTRIBUTIONS:
Net investment income................. (.30 ) (.13 ) (.12 ) (.29 ) (.16 ) (.13 )
Capital gains......................... (1.53 ) (1.53 ) (1.53 ) (.44 ) (.44 ) (.44 )
------------ ------------ ------------ ------------ ------------ ------------
Total dividends and distributions..... (1.83 ) (1.66 ) (1.65 ) (.73 ) (.60 ) (.57 )
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, end of year............ $ 28.08 $ 27.85 $ 27.88 $ 25.39 $ 25.26 $ 25.28
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
TOTAL RETURN(3)......................... 17.78%(2) 16.82%(2) 16.79%(2) 27.18% 26.20% 26.23%
RATIOS/SUPPLEMENTAL DATA:
Net assets end of year (in
thousands).......................... $ 51,947 $ 4,609 $ 4,183 $ 52,028 $ 2,721 $ 2,809
Ratio of expenses to average net
assets.............................. 2.0%(2) 2.7%(2) 2.7%(2) 2.1% 2.9% 2.9%
Ratio of net investment income to
average net assets.................. 1.1%(2) 0.3%(2) 0.3%(2) 1.2% 0.3% 0.3%
Portfolio turnover rate............... 35.1%(2) 35.1%(2) 35.1%(2) 51.1% 51.1% 51.1%
Average commission rate paid per
share(4)............................ $ 0.0597 $ 0.0597 $ 0.0597
</TABLE>
- -------------
The table above provides condensed information concerning income and
capital changes for one share of The Pasadena Balanced Return Fund. Such
information is based on the Fund's audited financial statements for the
years presented.
1 This information was prepared using the average number of shares
outstanding during each year.
2 These amounts reflect the impact of a waiver of administration fees of
$55,000. Absent the waiver, net investment income per share, total
return and the ratios of expenses and investment income to average
net assets for Class A, Class B and Class C shares would have been
$.27, $.06 and $.06, respectively, 17.66%, 16.74% and 16.71%,
respectively, 2.1%, 2.8% and 2.8%, respectively, and 1.0%, 0.2% and
0.2%, respectively.
3 Total return measures the change in the value of an investment during
each of the years indicated. It does not include the impact of paying
any applicable front-end or contingent deferred sales charge.
4 This disclosure, effective for the first time in 1996, has not been
applied retroactively.
SEE NOTES TO FINANCIAL STATEMENTS.
42
<PAGE>
THE PASADENA BALANCED RETURN FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------------------------------
1994 1993 1992
---------------------------------------- ------------ ------------
Class A Class B Class C Class A Class A
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year...... $ 21.97 $ 21.89 $ 21.89 $ 21.76 $ 20.95
------------ ------------ ------------ ------------ ------------
GAIN (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income1................ .39 .26 .25 .32 .25
Net realized and unrealized gain
(loss) on investments............... (1.36 ) (1.32 ) (1.31 ) .21 .69
------------ ------------ ------------ ------------ ------------
Total gain (loss) from investment
operations.......................... (.97 ) (1.06 ) (1.06 ) .53 .94
------------ ------------ ------------ ------------ ------------
LESS DIVIDENDS AND DISTRIBUTIONS:
Net investment income................. (.46 ) (.34 ) (.35 ) (.32 ) (.13 )
Capital gains......................... -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Total dividends and distributions..... (.46 ) (.34 ) (.35 ) (.32 ) (.13 )
------------ ------------ ------------ ------------ ------------
Net asset value, end of year............ $ 20.54 $ 20.49 $ 20.48 $ 21.97 $ 21.76
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
TOTAL RETURN3........................... (4.43% (4.85% (4.85% 2.44% 4.49%
RATIOS/SUPPLEMENTAL DATA:
Net assets end of year (in
thousands).......................... $ 53,047 $ 1,223 $ 1,449 $ 84,591 $ 75,143
Ratio of expenses to average net
assets.............................. 2.1% 2.9% 2.9% 2.1% 2.3%
Ratio of net investment income to
average net assets.................. 1.8% 1.3% 1.3% 1.5% 1.2%
Portfolio turnover rate............... 28.2% 28.2% 28.2% 4.8% 6.3%
Average commission rate paid per
share4
</TABLE>
- -------------
The table above provides condensed information concerning income and
capital changes for one share of The Pasadena Balanced Return Fund. Such
information is based on the Fund's audited financial statements for the
years presented.
1 This information was prepared using the average number of shares
outstanding during each year.
2 These amounts reflect the impact of a waiver of administration fees of
$55,000. Absent the waiver, net investment income per share, total
return and the ratios of expenses and investment income to average
net assets for Class A, Class B and Class C shares would have been
$.27, $.06 and $.06, respectively, 17.66%, 16.74% and 16.71%,
respectively, 2.1%, 2.8% and 2.8%, respectively, and 1.0%, 0.2% and
0.2%, respectively.
3 Total return measures the change in the value of an investment during
each of the years indicated. It does not include the impact of paying
any applicable front-end or contingent deferred sales charge.
4 This disclosure, effective for the first time in 1996, has not been
applied retroactively.
SEE NOTES TO FINANCIAL STATEMENTS.
43
<PAGE>
THE PASADENA SMALL & MID-CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Inception
(October 10,
For the Year Ended December 31, 1994)
------------------------------------------------------ through
December 31,
1996 1995 1994
---------------------------------------- ------------ ------------
Class A Class B(5) Class C(5) Class A Class A
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period............................ $ 14.90 $ 16.44 $ 17.99 $ 12.07 $ 10.00
------------ ------------ ------------ ------------ ------------
GAIN FROM INVESTMENT OPERATIONS:
Net investment income (loss)(1)... (.12 (2) (.32 ) (.29 ) .22 (2) .07 (2)
Net realized and unrealized gain
on investments.................. 7.45 2.43 .85 2.87 2.00
------------ ------------ ------------ ------------ ------------
Total gain from investment
operations...................... 7.33 2.11 .56 3.09 2.07
------------ ------------ ------------ ------------ ------------
LESS DIVIDENDS AND DISTRIBUTIONS:
Net investment income............. (.28 ) -- -- (.08 ) --
Capital gains..................... (3.56 ) (.20 ) (.20 ) (.18 ) --
------------ ------------ ------------ ------------ ------------
Total dividends and
distributions................... (3.84 ) (.20 ) (.20 ) (.26 ) --
------------ ------------ ------------ ------------ ------------
Net asset value, end of period...... $ 18.39 $ 18.35 $ 18.35 $ 14.90 $ 12.07
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
TOTAL RETURN(3)..................... 52.37%(2) 12.84% 3.12% 25.68%(2) 20.70%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands).................. $ 7,859 $ 1,480 $ 54 $ 1,742 $ 121
Ratio of expenses to average net
assets.......................... 1.1%(2) 2.6%(4) 2.6%(4) 0.0%(2) 0.0%(2,4)
Ratio of net investment income
(loss) to average net assets.... (0.7)%(2) (2.2)%(4) (2.2)%(4) 1.5%(2) 2.6%(2,4)
Portfolio turnover rate........... 297.1% 297.1% 297.1% 121.4% 157.9%
Average commission rate paid per
share(6)........................ $ 0.0547 $ 0.0547 $ 0.0547
</TABLE>
- -------------
The table above provides condensed information concerning income and
capital changes for one share of The Pasadena Small & Mid-Cap Growth Fund.
Such information is based on the Fund's audited financial statements for
the periods presented.
1 This information was prepared using the average number of shares
outstanding during each period.
2 These amounts reflect the impact of a waiver of Manager fees of
$18,499, $13,443 and $585 for the periods ended December 31, 1996,
1995 and 1994, respectively, and the Manager's reimbursement for
income taxes of $6,654 during 1994. Had the waivers and reimbursement
not been made, net investment income (loss) per share, total return
(not annualized for the period ended December 31, 1994) and the ratios
of expenses and net investment income (loss) to average net assets
(annualized for the period ended December 31, 1994) would have been
$(.25), 51.35%, 1.9% and (1.4)%, respectively, $(.11), 23.40%, 2.3%
and (0.8)%, respectively, and $(.01), 15.10%, 22.1% (2.3% if only
normal and recurring expenses are taken into account) and (0.4)%,
respectively, for the periods ended December 31, 1996, 1995 and 1994,
respectively.
3 Total return measures the change in the value of an investment during
the period indicated and does not include the impact of paying any
applicable front-end or contingent deferred sales charge. Total return
for the periods ended December 31, 1996 (Class B and Class C shares
only) and December 31, 1995 have not been annualized.
4 Annualized.
5 The beginning net asset value per share of Class B and Class C shares
equals the net asset value per share of the Class A shares as of the
first day Class B and Class C shares were sold, September 18, 1996 and
October 8, 1996, respectively.
6 This disclosure, effective for the first time in 1996, has not been
applied retroactively.
SEE NOTES TO FINANCIAL STATEMENTS.
44
<PAGE>
THE PASADENA GLOBAL GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Inception
(November 1,
For the Year Ended December 31, 1993)
------------------------------------------------------------- through
December 31,
1996 1995 1994 1993
---------------------------------- ------------ ----------- ------------
Class A Class B(5) Class C(5) Class A Class A Class A
---------- ---------- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period............................ $ 17.27 $ 17.44 $ 17.88 $ 14.06 $ 11.18 $ 10.00
---------- ---------- ---------- ------------ ----------- ------------
GAIN FROM INVESTMENT OPERATIONS:
Net investment income (loss)(1)... .03(2 ) (.08 ) (.04 ) .24(2 ) .10(2 ) .01(2 )
Net realized and unrealized gain
on investments.................. 3.55 1.82 1.34 3.11 2.78 1.17
---------- ---------- ---------- ------------ ----------- ------------
Total gain from investment
operations...................... 3.58 1.74 1.30 3.35 2.88 1.18
---------- ---------- ---------- ------------ ----------- ------------
LESS DIVIDENDS AND DISTRIBUTIONS:
Net investment income............. (.04 ) -- (.01 ) -- -- --
Capital gains..................... (1.75 ) (.14 ) (.14 ) (.14 ) -- --
---------- ---------- ---------- ------------ ----------- ------------
Total dividends and
distributions................... (1.79 ) (.14 ) (.15 ) (.14 ) -- --
---------- ---------- ---------- ------------ ----------- ------------
Net asset value, end of period...... $ 19.06 $ 19.04 $ 19.03 $ 17.27 $ 14.06 $ 11.18
---------- ---------- ---------- ------------ ----------- ------------
---------- ---------- ---------- ------------ ----------- ------------
TOTAL RETURN(3)..................... 21.77%(2) 9.98% 7.28% 23.84%(2) 25.76%(2) 11.80%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands).................. $ 7,654 $ 874 $ 106 $ 3,203 $ 141 $ 112
Ratio of expenses to average net
assets.......................... 0.8%(2) 2.7%(4) 2.7%(4) 0.0%(2) 0.0%(2) 0.0%(2,4)
Ratio of net investment income
(loss) to average net assets.... 0.1%(2) (1.9%(4) (1.6%(4) 1.4%(2) 0.8%(2) 0.8%(2,4)
Portfolio turnover rate........... 220.3% 220.3% 220.3% 29.0% 479.3% 215.8%
Average commission rate paid per
share(6)........................ $ 0.0301 $ 0.0301 $ 0.0301
</TABLE>
- -------------
The table above provides condensed information concerning income and
capital changes for one share of The Pasadena Global Growth Fund. Such
information is based on the Fund's audited financial statements for the
periods presented.
1 This information was prepared using the average number of shares
outstanding during each period.
2 These amounts reflect the impact of a waiver of Manager fees of
$62,438, $42,545, $2,784 and $410 for the periods ended December 31,
1996, 1995, 1994 and 1993, respectively, and the Manager's
reimbursement for income taxes of $13,109 during 1994. Absent waivers
and reimbursement, net investment income (loss) per share, total
return (not annualized for the period ended December 31, 1993) and
ratios of expenses and net investment income (loss) to average net
assets (annualized for the period ended December 31, 1993) would have
been $(.21), 21.71%, 2.0% and (1.2)%, respectively, $(.15), 22.88%,
2.3%, and (0.9)%, respectively, $(.21), 14.40%, 10.4% (2.3% if only
normal and recurring expenses are taken into account) and (1.7)%,
respectively, and $(.03), 11.40%, 2.3% and (1.5)%, respectively, for
the periods ended December 31, 1996, 1995, 1994, and 1993,
respectively.
3 Total return measures the change in the value of an investment during
the period indicated and does not include the impact of paying any
sales charge. Total return for the period ended December 31, 1996 for
Class B and Class C shares and from inception (November 1, 1993)
through December 31, 1993, has not been annualized.
4 Annualized.
5 The beginning net asset value per share of Class B and Class C shares
equals the net asset value per share of the Class A shares as of the
first day Class B and Class C shares were sold, September 18, 1996 and
October 21, 1996, respectively.
6 This disclosure effective for the first time in 1996, has not been
applied retroactively.
SEE NOTES TO FINANCIAL STATEMENTS.
45
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES: The Pasadena Growth Fund, The Pasadena Nifty
Fifty Fund, The Pasadena Balanced Return Fund, The Pasadena Small & Mid-Cap
Growth Fund and The Pasadena Global Growth Fund, collectively referred to as the
"Funds," are series of the Pasadena Investment Trust (the "Trust"), a
Massachusetts business trust registered under the Investment Company Act of 1940
as a diversified, open-end management investment company. Each Fund offers three
Classes (Class A, Class B and Class C) of no par value shares (an unlimited
number of which have been authorized). Class A shares are sold with a maximum
front-end sales charge of 5.5% of the offering price. Class B and Class C shares
are sold at their respective net asset values. Class B shares redeemed during
the first four years of ownership may be subject to a contingent deferred sales
charge ("CDSC") of up to 5%. Class C shares of The Pasadena Small & Mid-Cap
Growth Fund and The Pasadena Global Growth Fund redeemed in the first year of
ownership may be subject to a CDSC of 1%. At the beginning of the seventh year
after purchase, Class B shares automatically convert into Class A shares based
upon the relative net asset values of the two Classes, without imposition of any
sales charges. The significant accounting policies of the Funds are as follows:
A. SECURITIES VALUATION. Securities traded on a securities exchange (foreign or
domestic) or on Nasdaq are stated at the last sale price determined as of
4:00 p.m. Eastern Time on the day of valuation; securities for which no sale
was reported on that date are stated 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 are valued at the current or last
quoted bid price. If no bid price is quoted that day, and in the case of
U.S. Government securities if no bid prices of comparable issues exist, the
security is valued by such method as the Trust's Board of Trustees shall
determine in good faith reflects the security's fair value.
B. INCOME AND EXPENSE ALLOCATION. All items of income and expense not directly
related to a specific Class of shares are allocated among the three Classes
based upon the relative aggregate value of the outstanding shares of each
Class.
C. FEDERAL INCOME TAXES. It is the Funds' policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of their taxable income to their
shareholders. Accordingly, no federal income tax provisions are required.
Distributions of income and capital gains are determined in accordance with
income tax regulations which differ in certain respects from generally
accepted accounting principles. Accordingly, the Funds have reclassified to
capital paid-in the effects of permanent differences included in
undistributed net investment income.
D. FOREIGN CURRENCY TRANSACTIONS. The books and records of the Funds are
maintained in U.S. dollars. Assets and liabilities denominated in foreign
currencies are converted into U.S. dollars at the exchange rates at the end
of the period being reported upon. Purchases and sales of investment
securities, dividend and interest income, and expenses are translated at the
rates of exchange prevailing on the respective dates of such transactions.
Net realized foreign exchange gains and losses arise from the differences
between asset and liability amounts initially stated in foreign currencies
and the U.S. dollar value of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the
unrealized value of assets and liabilities at the end of the reporting
period resulting from changes in the exchange rates. The Funds do not
isolate that portion of their results of operations resulting from changes
in foreign exchange rates on investments from fluctuations arising from
changes in the market prices of securities held. The Funds did not have any
material exchange gains or losses during the periods covered by these
financial statements.
E. OTHER. The Funds recognize security transactions on the trade date. Realized
gains and losses on sales of investments are determined on the identified
cost basis. Dividend income less foreign taxes withheld (if any) and
distributions to shareholders are recorded on the ex-dividend date. Interest
income is recorded on an accrual basis.
2. FEES AND OTHER TRANSACTIONS WITH AFFILIATES: Under an investment management
agreement with the Funds, Roger Engemann Management Co., Inc. (the "Manager")
furnishes advice and recommendations with respect to the Funds' securities
portfolios, supervises the Funds' investments, provides Fund accounting and
pricing, and provides the Trust's Board of Trustees with periodic and special
reports on investment securities,
46
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
2. FEES AND OTHER TRANSACTIONS WITH AFFILIATES (continued):
economic conditions and other pertinent subjects. The Manager also performs
various administrative and shareholder services to the Funds under an
administration agreement. All normal operating expenses of the Funds, except for
fees and expenses associated with investment management services, service fees
and distribution fees, are paid by the Manager pursuant to the administration
agreement.
For the services provided and expenses assumed under the management and
administration agreements, the Manager receives separate fees computed and
prorated on a daily basis as follows:
<TABLE>
<CAPTION>
NET ASSETS LEVEL MANAGEMENT FEE ADMINISTRATION FEE
---------------- ------------------- ---------------------
<S> <C> <C> <C>
The Pasadena Growth, First $30,000 1.00% 1.05%
Balanced Return and Next $70,000 0.80% 0.85%
Nifty Fifty Funds Next $400,000 0.60% 0.65%
Over $500,000 0.40% 0.60%
The Pasadena Small & Mid- First $50,000 1.00% 0.60%
Cap Growth Fund Next $450,000 0.90% 0.50%
Over $500,000 0.80% 0.40%
The Pasadena Global First $50,000 1.10% 0.60%
Growth Fund Next $450,000 1.00% 0.50%
Over $500,000 0.90% 0.40%
</TABLE>
Broker/dealers and other service providers, including the Manager and the Funds'
distributor, Pasadena Fund Services, Inc. (the "Distributor"), receive service
fees at an annualized 0.25% of each Fund's average daily net asset value for
services to shareholders.
Pursuant to the distribution plans (the "Plans") adopted by the Funds, each Fund
pays distribution fees to the Distributor at an annualized rate of 0.75% of its
average daily net assets attributable to Class B and Class C shares. The fees
reimburse the Distributor for distribution costs (principally payments to
broker/dealers) incurred on behalf of the Funds with respect to Class B and
Class C shares. Under the Plans, Class B and Class C shares are not obligated to
pay any distribution costs in excess of the distribution fee paid or accrued
even if the Plans are terminated or otherwise discontinued.
Roger Engemann & Associates, Inc., a wholly-owned subsidiary of Pasadena Capital
Corporation (PCC), owns 93.5% of the Manager's capital stock. The Distributor is
also a wholly-owned subsidiary of PCC. Roger Engemann, the controlling
shareholder of PCC, is the Chairman of the Board and President of the Trust.
47
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
2. FEES AND OTHER TRANSACTIONS WITH AFFILIATES (continued):
During 1996 the Manager elected to waive the above fees as follows:
<TABLE>
<CAPTION>
EXPENSE WAIVED TIME PERIOD AMOUNT
--------------------- ----------------------- -----------
<S> <C> <C> <C>
The Pasadena Growth Fund Administration fees October 1, 1996 - $ 30
December 31, 1996
The Pasadena Nifty Fifty Fund Administration fees October 1, 1996 - $ 70
December 31, 1996
The Pasadena Balanced Return Fund Administration fees October 1, 1996 - $ 55
December 31, 1996
The Pasadena Small & Mid-Cap Growth Fund Management fees January 1, 1996 - $ 8
August 31, 1996
Administration fees January 1, 1996 - $ 8
August 31, 1996
Service fees January 1, 1996 - $ 2
August 31, 1996
The Pasadena Global Growth Fund Management fees January 1, 1996 - $ 27
August 31, 1996
Administration fees January 1, 1996 - $ 28
August 31, 1996
Service fees January 1, 1996 - $ 7
August 31, 1996
</TABLE>
3. INVESTMENT TRANSACTIONS: For the year ended December 31, 1996, purchases and
sales of securities, other than short-term securities, aggregated $341,561 and
$409,253, respectively, for The Pasadena Growth Fund, $85,103 and $77,426
respectively, for The Pasadena Nifty Fifty Fund, $20,029 (which includes $12,127
in U.S. government obligations) and $25,916, respectively, for The Pasadena
Balanced Return Fund, $14,456 and $7,771, respectively, for The Pasadena Small &
Mid-Cap Growth Fund and $14,560 and $9,953, respectively, for The Pasadena
Global Growth Fund.
At December 31, 1996, the aggregate cost of securities for federal income tax
purposes for The Pasadena Growth Fund, The Pasadena Nifty Fifty Fund, The
Pasadena Balanced Return Fund, The Pasadena Small & Mid-Cap Growth Fund, and The
Pasadena Global Growth Fund was $290,658, $132,174, $39,365, $8,557 and $8,358,
respectively. Net unrealized appreciation for federal income tax purposes
aggregated $207,088, $80,485 and $20,279, $256 and $54 respectively, of which
$218,383, $82,626, $20,699, $845 and $402, respectively, related to appreciated
securities and $11,295, $2,141, $420, $589 and $348, respectively, related to
depreciated securities.
48
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
4. CAPITAL SHARE TRANSACTIONS: The Funds' capital share transactions were as
follows:
<TABLE>
<CAPTION>
Net Assets Shares
------------------------ ------------------------
For the Year Ended December 31
--------------------------------------------------
The Pasadena Growth Fund 1996 1995 1996 1995
- ------------------------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CLASS A
Shares sold................... $ 19,445 $ 25,923 914 1,467
Shares issued in reinvestment
of distributions............ 27,035 5,625 1,236 294
Shares repurchased............ (90,882 ) (100,949 ) (4,242 ) (5,667 )
----------- ----------- ----------- -----------
Net decrease.................. (44,402 ) (69,401 ) (2,092 ) (3,906 )
----------- ----------- ----------- -----------
CLASS B
Shares sold................... 13,137 20,183 625 1,162
Shares issued in reinvestment
of distributions............ 3,299 502 154 27
Shares repurchased............ (6,393 ) (1,815 ) (300 ) (100 )
----------- ----------- ----------- -----------
Net increase.................. 10,043 18,870 479 1,089
----------- ----------- ----------- -----------
CLASS C
Shares sold................... 7,457 14,314 356 823
Shares issued in reinvestment
of distributions............ 1,798 287 84 15
Shares repurchased............ (5,173 ) (2,895 ) (247 ) (160 )
----------- ----------- ----------- -----------
Net increase.................. 4,082 11,706 193 678
----------- ----------- ----------- -----------
Net decrease resulting from
capital share
transactions................ $ (30,277 ) $ (38,825 ) (1,420 ) (2,139 )
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
The Pasadena Nifty Fifty Fund
- ------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold................... $ 19,958 $ 17,467 803 907
Shares issued in reinvestment
of distributions............ 7,236 -- 273 --
Shares repurchased............ (27,395) (24,108) (1,101) (1,206)
----------- ----------- ----------- -----------
Net decrease.................. (201 ) (6,641 ) (25 ) (299 )
----------- ----------- ----------- -----------
CLASS B
Shares sold................... 16,788 18,638 680 945
Shares issued in reinvestment
of distributions............ 2,450 -- 95 --
Shares repurchased............ (5,120 ) (1,688 ) (210 ) (80 )
----------- ----------- ----------- -----------
Net increase.................. 14,118 16,950 565 865
----------- ----------- ----------- -----------
CLASS C
Shares sold................... 12,251 11,993 493 611
Shares issued in reinvestment
of distributions............ 1,358 -- 52 --
Shares repurchased............ (5,522 ) (3,455 ) (228 ) (169 )
----------- ----------- ----------- -----------
Net increase.................. 8,087 8,538 317 442
----------- ----------- ----------- -----------
Net increase resulting from
capital share
transactions................ $ 22,004 $ 18,847 857 1,008
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
49
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Net Assets Shares
------------------------ ------------------------
For the Year Ended December 31,
The Pasadena Balanced Return --------------------------------------------------
Fund 1996 1995 1996 1995
- ------------------------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CLASS A
Shares sold................... $ 1,671 $ 2,304 61 97
Shares issued in reinvestment
of distributions............ 2,918 1,331 104 53
Shares repurchased............ (9,904 ) (15,800 ) (363 ) (683 )
----------- ----------- ----------- -----------
Net decrease.................. (5,315 ) (12,165 ) (198 ) (533 )
----------- ----------- ----------- -----------
CLASS B
Shares sold................... 1,909 1,527 70 65
Shares issued in reinvestment
of distributions............ 224 52 8 2
Shares repurchased............ (562 ) (430 ) (20 ) (19 )
----------- ----------- ----------- -----------
Net increase.................. 1,571 1,149 58 48
----------- ----------- ----------- -----------
CLASS C
Shares sold................... 2,078 2,728 77 115
Shares issued in reinvestment
of distributions............ 217 55 8 2
Shares repurchased............ (1,227 ) (1,860 ) (46 ) (77 )
----------- ----------- ----------- -----------
Net increase.................. 1,068 923 39 40
----------- ----------- ----------- -----------
Net decrease resulting from
capital share
transactions................ $ (2,676 ) $ (10,093 ) (101 ) (445 )
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
The Pasadena Small & Mid-Cap Growth Fund
- -------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold................... $ 7,102 $ 1,500 391 105
Shares issued in reinvestment
of distributions............ 405 30 24 2
Shares repurchased............ (1,683) -- (105) --
----------- ----------- ----------- -----------
Net increase.................. 5,824 1,530 310 107
----------- ----------- ----------- -----------
CLASS B
Shares sold................... 1,491 -- 82 --
Shares issued in reinvestment
of distributions............ 12 -- 1 --
Shares repurchased............ (34 ) -- (2 ) --
----------- ----------- ----------- -----------
Net increase.................. 1,469 -- 81 --
----------- ----------- ----------- -----------
CLASS C
Shares sold................... 75 -- 4 --
Shares issued in reinvestment
of distributions............ 1 -- -- --
Shares repurchased............ (22 ) -- (1 ) --
----------- ----------- ----------- -----------
Net increase.................. 54 -- 3 --
----------- ----------- ----------- -----------
Net increase resulting from
capital share
transactions................ $ 7,347 $ 1,530 394 107
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
50
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Net Assets Shares
------------------------ ------------------------
For the Year Ended December 31,
The Pasadena Global Growth --------------------------------------------------
Fund 1996 1995 1996 1995
- ------------------------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CLASS A
Shares sold................... $ 5,512 $ 2,750 295 174
Shares issued in reinvestment
of distributions............ 459 26 26 2
Shares repurchased............ (2,005 ) -- (105 ) --
----------- ----------- ----------- -----------
Net increase.................. 3,966 2,776 216 176
----------- ----------- ----------- -----------
CLASS B
Shares sold................... 842 -- 46 --
Shares issued in reinvestment
of distributions............ 6 -- -- --
Shares repurchased............ -- -- -- --
----------- ----------- ----------- -----------
Net increase.................. 848 -- 46 --
----------- ----------- ----------- -----------
CLASS C
Shares sold................... 103 -- 6 --
Shares issued in reinvestment
of distributions............ 1 -- -- --
Shares repurchased............ -- -- -- --
----------- ----------- ----------- -----------
Net increase.................. 104 -- 6 --
----------- ----------- ----------- -----------
Net increase resulting from
capital share
transactions................ $ 4,918 $ 2,776 268 176
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
5. DIVIDENDS AND DISTRIBUTIONS: Dividends and distributions to shareholders were
as follows:
<TABLE>
<CAPTION>
The
Pasadena
The Pasadena Global
The Pasadena The Pasadena The Pasadena Small & Mid-Cap Growth Growth
Growth Fund Nifty Fifty Fund Balanced Return Fund Fund Fund
---------------------- ---------------------- ---------------------- ---------------------- ----------
For the Year Ended December 31,
----------------------------------------------------------------------------------------------------------
1996 1995 1996 1995 1996 1995 1996 1995 1996
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net investment
income:
Class A......... $ -- $ -- $ -- $ -- $ 526 $ 582 $ 25 $ 9 $ 12
Class B......... -- -- -- -- 21 16 -- -- --
Class C......... -- -- -- -- 17 14 -- -- --
Net realized gains
on investments:
Class A......... 30,458 6,381 8,069 -- 2,670 878 385 21 449
Class B......... 3,565 536 2,685 -- 238 46 12 -- 5
Class C......... 1,972 315 1,450 -- 215 47 1 -- 1
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total............. $ 35,995 $ 7,232 $ 12,204 $ -- $ 3,687 $ 1,583 $ 423 $ 30 $ 467
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<CAPTION>
<S> <C>
1995
----------
Net investment
income:
Class A......... $ 26
Class B......... --
Class C......... --
Net realized gains
on investments:
Class A......... --
Class B......... --
Class C......... --
----------
Total............. $ 26
----------
----------
</TABLE>
51
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Pasadena Investment Trust:
We have audited the accompanying statements of assets and liabilities of The
Pasadena Growth Fund, The Pasadena Nifty Fifty Fund, The Pasadena Balanced
Return Fund, The Pasadena Small & Mid-Cap Growth Fund and The Pasadena Global
Growth Fund, collectively referred to as the "Funds," which Funds are series of
the Pasadena Investment Trust, including the schedules of investment in
securities as of December 31, 1996, and the related statements of operations for
the year then ended, the statements of changes in net assets for the two years
then ended, and the financial highlights for each of the periods presented.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Pasadena Growth Fund, The Pasadena Nifty Fifty Fund, The Pasadena Balanced
Return Fund, The Pasadena Small & Mid-Cap Growth Fund and The Pasadena Global
Growth Fund as of December 31, 1996, the results of their operations for the
year then ended, the changes in their net assets for each of the two years then
ended, and the financial highlights for each of the periods presented in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Los Angeles, California
February 14, 1997
52
<PAGE>
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