===============================================================================
THE COMPASS CAPITAL
GROUP OF FUNDS
INTERNATIONAL FIXED
INCOME FUND
ANNUAL REPORT TO SHAREHOLDERS
JANUARY 31, 1996
===============================================================================
<PAGE>
THE COMPASS CAPITAL GROUP OF FUNDS
INTERNATIONAL FIXED INCOME FUND
Dear Shareholder,
The International Fixed Income Fund invests principally in top quality,
fixed income securities denominated in foreign currencies. The investment
adviser has the discretion to hedge foreign currency exposure back to the dollar
to protect the fund against adverse currency moves.
For the eleven months ended January 31, 1996, the International Fixed
Income Fund provided a total return of 16.79%. This return exceeded the Salomon
Brothers Non-U.S. Hedged World Government Bond Index, which had a return of
16.50% over the same period.
The exceptionally strong returns posted by the global bond markets in 1995
were a result of weaker than expected growth and inflation figures. As in 1995,
the direction of the U.S. bond market is expected to set the tone for the global
bond markets in 1996. We believe that the European bond markets will continue to
outperform other markets in the first quarter of the year, continuing their
strong performance from the final months of 1995, and that the Japanese market
will continue to underperform due to an increase in economic activity stemming
from government spending packages. We remain optimistic for further positive
performance of the aggregate international bond markets in 1996 as benign
inflationary forecasts for the major world economies suggest a continued low
interest rate environment.
As a result of these views the portfolio is overweight European bonds
relative to the Salomon non-U.S. bond index. Our belief in a further easing of
monetary policy by the Bundesbank has led us to a substantially overweight
position in Germany and the closely correlated Danish bond market. We also have
overweight positions in all three of the high yielding European markets, Italy,
Spain and Sweden as we foresee improvements in inflation and the political
situation in all three of these countries. Our relatively cautious view on Japan
is apparent in our modest exposure to that market compared to Europe. Our only
exposure in the dollar bloc is a small position in the Canadian market. All bond
positions have been hedged back into the U.S. dollar, so that the portfolio has
minimized foreign currency exposure.
Comparison of Change in Value of $10,000 Investment in the International Fixed
Income Fund and the Salomon Brothers Non-U.S.Hedged World
Government Bond Index Fund
(CHART)
[GRAPHICOMITTED]
PLOT POINTS:
Compass Salomon
7/1/91 $9,600 $10,000
2/29/92 10,157 10,750
2/28/93 11,131 11,750
2/28/94 12,303 12,730
2/28/95 12,497 12,855
1/31/96 14,559 14,976
- ----------------------------
AVERAGE ANNUAL TOTAL RETURN
One Year 19.29%
From Inception 9.50%
============================
Past performance is not predictive of future results.
<PAGE>
THE COMPASS CAPITAL GROUP OF FUNDS
INTERNATIONAL FIXED INCOME FUND
SCHEDULE OF INVESTMENTS
JANUARY 31, 1996
- -------------------------------------------------------------------------------
PAR
MATURITY (000)** VALUE
-------- ---------- -----------
FOREIGN BONDS -- 99.5%
CANADA -- 3.6%
Province of British Columbia
9.00% 06/21/04 900 $ 728,646
Province of Ontario Global Bond
7.75% 12/08/03 800 600,801
-----------
1,329,447
-----------
DENMARK -- 11.1%
Kingdom of Denmark
9.00% 11/15/00 7,400 1,443,019
7.00% 12/15/04 7,500 1,308,954
8.00% 03/15/06 7,000 1,291,168
-----------
4,043,141
-----------
FRANCE -- 4.6%
Government of France
5.50% 04/25/04 9,000 1,683,419
-----------
GERMANY -- 31.2%
African Development Bank
7.25% 10/21/99 2,000 1,456,963
Bayerische Hypotheken Bank
6.00% 09/13/00 2,500 1,748,734
7.25% 10/21/02 1,600 1,183,832
Deutsche Ausgleichsbank
6.50% 09/25/00 2,000 1,426,155
Federal National
Mortgage Association
Global Bond
6.00% 08/23/00 2,000 1,399,221
KFW International Finance
7.25% 12/03/97 2,000 1,432,792
Norddeutsche
Landesbank Finance
6.00% 01/05/04 2,500 1,668,457
Westdeutsche Landbank
6.25% 09/15/03 1,500 1,022,224
-----------
11,338,378
-----------
ITALY -- 16.0%
Buoni Poliennali del Tes
10.50% 11/01/98 2,000,000 1,296,248
10.50% 09/01/05 1,700,000 1,111,229
European Investment Bank
12.75% 02/15/00 2,250,000 1,579,390
Nordisca Investment Bank
11.30% 03/04/02 2,700,000 1,823,027
-----------
5,809,894
-----------
PAR
MATURITY (000)** VALUE
-------- ---------- -----------
JAPAN -- 14.9%
Austria Republic
6.25% 10/16/03 135,000 $ 1,540,692
Interamerican
Development Bank
6.00% 10/30/01 135,000 1,491,756
Japan Development Bank
6.50% 09/20/01 145,000 1,637,015
World Bank Global Bond
4.50% 03/20/03 75,000 775,257
-----------
5,444,720
-----------
SPAIN -- 8.9%
Bonos y Obligacion del Estado
10.10% 02/28/01 170,000 1,406,672
Junta de Andalucia
10.50% 12/14/00 220,000 1,841,888
-----------
3,248,560
-----------
SWEDEN -- 4.4%
Sweden Government Bond
13.00% 06/15/01 9,000 1,585,282
-----------
UNITED KINGDOM -- 4.8%
Abbey National Treasury PLC
8.00% 04/02/03 600 919,346
National Power PLC
10.625% 03/26/01 500 853,396
-----------
1,772,742
-----------
TOTAL FOREIGN BONDS
(Total Cost $35,628,385) 36,255,583
-----------
See accompanying notes to financial statements.
2
<PAGE>
THE COMPASS CAPITAL GROUP OF FUNDS
INTERNATIONAL FIXED INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
JANUARY 31, 1996
- -------------------------------------------------------------------------------
LOCAL
MATURITY CURRENCY VALUE
-------- ----------- ----------
INVESTMENTS IN CURRENCY -- 0.5%
Canadian Dollar 89,685 $ 65,273
Danish Krone 1,576 273
Italian Lira 124,029,981 78,083
Japanese Yen 547 5
New Zealand Dollars 34,853 23,446
United Kingdom Pound Sterling 50 6
-----------
TOTAL INVESTMENTS IN CURRENCY
(Total Cost $167,655) 167,156
-----------
TOTAL INVESTMENTS IN SECURITIES
(Total Cost $35,796,040*)
100.0% $36,422,739
====== ===========
*Also cost for Federal income tax purposes. The gross
unrealized appreciation (depreciation) on a tax basis
is as follows:
Gross unrealized appreciation $1,558,232
Gross unrealized depreciation (931,533)
----------
$ 626,699
==========
**In local currency.
See accompanying notes to financial statements.
3
<PAGE>
THE COMPASS CAPITAL GROUP OF FUNDS
INTERNATIONAL FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1996
<TABLE>
<S> <C>
ASSETS
Investments at value (Cost $35,796,040) ............................................................. $36,422,739
Interest receivable ................................................................................. 1,172,423
Receivable for investments sold ..................................................................... 1,974,721
Net unrealized appreciation on forward foreign currency contracts ................................... 1,260,865
-----------
TOTAL ASSETS ...................................................................................... $40,799,863
-----------
LIABILITIES
Fund share redemption payable ....................................................................... 2,945,068
Net unrealized depreciation on forward foreign currency contracts ................................... 197,596
Accrued expenses payable ............................................................................ 61,303
-----------
TOTAL LIABILITIES ................................................................................. 3,173,082
-----------
NET ASSETS (Applicable to 3,301,814 shares outstanding) ................................................ $37,626,781
===========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE $ 11.40
===========
MAXIMUM PUBLIC OFFERING PRICE PER SHARE ($11.40/.96) $ 11.88
===========
At January 31, 1996, Net Assets consisted of:
Capital paid-in ..................................................................................... $33,214,248
Undistributed net investment income ................................................................. 105,320
Accumulated net realized gain on investments and foreign
currency transactions ............................................................................. 2,651,481
Net unrealized appreciation on investments and foreign
currency transactions ............................................................................. 1,655,732
-----------
Net Assets ........................................................................................ $37,626,781
===========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
THE COMPASS CAPITAL GROUP OF FUNDS
INTERNATIONAL FIXED INCOME FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD MARCH 1, 1995 THROUGH JANUARY 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME (less foreign taxes withheld of $28,923) ............................................. $2,890,562
----------
EXPENSES
Investment advisory fee ............................................................................. 330,008
Administration fee .................................................................................. 81,222
Custodian fee ....................................................................................... 53,484
Transfer agent fees ................................................................................. 27,237
Legal and Audit ..................................................................................... 16,294
Printing ............................................................................................ 2,634
Registration fees and expenses ...................................................................... 1,734
Trustees' fees and officer's salary ................................................................. 1,945
Other ............................................................................................... 6,131
----------
520,689
Less fees voluntarily waived by administrator .......................................................... (1,157)
----------
TOTAL EXPENSES .................................................................................... 519,532
----------
NET INVESTMENT INCOME .................................................................................. 2,371,030
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain from:
Investment transactions ........................................................................... 1,833,513
Foreign currency transactions and forward foreign
currency contracts ............................................................................. 2,104,030
Change in unrealized appreciation (depreciation) from:
Investment transactions ........................................................................... (782,301)
Foreign currency transactions and forward foreign
currency contracts ............................................................................. 1,646,033
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY RELATED TRANSACTIONS ........................................................... 4,801,275
----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ..................................................................................... $7,172,305
==========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
THE COMPASS CAPITAL GROUP OF FUNDS
INTERNATIONAL FIXED INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
PERIOD FOR THE
3/1/95 YEAR
THROUGH ENDED
1/31/96 2/28/95
------------ ------------
<S> <C> <C>
Increase (decrease) in net assets:
Investment Operations
Net investment income ............................................................ $ 2,371,030 $ 2,695,000
Net gain (loss) on investments and foreign currency
related transactions .......................................................... 4,801,275 (2,000,000)
----------- -----------
Net increase in net assets resulting from operations ............................. 7,172,305 695,000
----------- -----------
Distributions to shareholders from
Net investment income: ............................................................. (3,221,772) (570,000)
Net realized gains: ................................................................ -- (1,055,000)
----------- -----------
Total distributions to shareholders ........................................... (3,221,772) (1,625,000)
----------- -----------
Capital share transactions ............................................................ (11,980,752) (301,000)
----------- -----------
Total decrease in net assets .................................................. (8,030,219) (1,231,000)
----------- -----------
Net assets
Beginning of period ................................................................ 45,657,000 46,888,000
----------- -----------
End of period ...................................................................... $37,626,781 $45,657,000
=========== ===========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
THE COMPASS CAPITAL GROUP OF FUNDS
INTERNATIONAL FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD PERIOD
3/1/95 YEAR YEAR YEAR 7/1/91 1
THROUGH ENDED ENDED ENDED THROUGH
1/31/96 2/28/95 2/28/94 2/28/93 2/29/92
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period .................... $ 10.52 $ 10.75 $ 10.76 $ 10.21 $ 10.00
------- ------- ------- ------- -------
Income from investment operations
Net investment income .................................. 0.62 0.62 0.65 0.52 0.31
Net realized gain (loss) on investments and
foreign currency related transactions ................ 1.13 (0.48) 0.46 0.47 0.26
------- ------- ------- ------- -------
Total from investment operations ..................... 1.75 0.14 1.11 0.99 0.57
------- ------- ------- ------- -------
Less distribution
Distributions from net investment income ............... (0.88) (0.13) (0.90) (0.30) --
Distributions from net realized capital gains .......... -- (0.24) (0.22) (0.14) (0.36)
------- ------- ------- ------- -------
Total distributions .................................. (0.88) (0.37) (1.12) (0.44) (0.36)
------- ------- ------- ------- -------
Net asset value at end of period .......................... $ 11.39 $ 10.52 $ 10.75 $ 10.76 $ 10.21
======= ======= ======= ======= =======
Total return .............................................. 16.79%3 1.50% 10.24% 9.55% 5.84%3
Ratios/Supplemental data
Net assets at end of period (in thousands) ............. $37,627 $45,657 $46,888 $38,257 $27,774
Ratios of expenses to average net assets
After advisory/administration fee waivers ............ 1.23%2 1.24% 1.38% 1.30% 1.33%2
Before advisory/administration fee waivers ........... 1.23%2 1.24% 1.38% 1.30% 1.37%2
Ratios of net investment income to average
net assets
After advisory/administration fee waivers ............ 5.62%2 5.96% 6.00% 6.31% 6.79%2
Before advisory/administration fee waivers ........... 5.62%2 5.96% 6.00% 6.31% 6.75%2
Portfolio turnover rate ................................... 158.73% 130.64% 128.14% 115.25% 110.13%
<FN>
- --------------
1 Commencement of operations.
2 Annualized.
3 Not annualized.
</FN>
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
THE COMPASS CAPITAL GROUP OF FUNDS
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996
1. ORGANIZATION:
The Compass Capital Group (the "Group") was organized on October 1, 1987,
and is registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company established as a
Massachusetts business trust.
The Group is authorized to issue an unlimited number of shares which are
units of beneficial interest without par value. This report relates solely to
the International Fixed Income Fund (the "Fund").
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires the use of management estimates.
SECURITIES VALUATION -- Foreign securities are valued based upon quotations
from the primary market in which they are traded. Restricted and illiquid
securities for which quotations are not readily available are valued at fair
value using methods determined in good faith as approved by the Board of
Trustees.
SECURITY TRANSACTIONS AND RELATED INCOME -- Security transactions are
accounted on the date the security is purchased or sold (trade date). Interest
income is recognized on the accrual basis. Gains or losses realized on sales of
securities are determined by comparing the identified cost of the security lot
sold with the net sales proceeds.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
are declared and paid twice annually. Any net realized capital gains are
declared and distributed to shareholders at least annually.
Differences between undistributed net investment income or accumulated net
capital gains for financial reporting and tax purposes, if permanent, are
required to be reclassified to/from paid in capital.
FEDERAL INCOME TAXES -- It is the intention of the Fund to continue to
qualify as a regulated investment company for Federal income tax purposes and
distribute all of its taxable income and net capital gains. Accordingly, no
provision for Federal income taxes is required.
FOREIGN CURRENCY TRANSLATION -- The books and records of the Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into
U.S. dollars on the following basis:
(I) market value of investment securities, assets and liabilities at the
current rate of exchange; and
(II) purchases and sales of investment securities, income and expenses at
the relevant rates of exchange prevailing on the respective dates of
such transactions.
The Fund does not isolate that portion of gains and losses on investment
securities which is due to changes in the foreign exchange rates from that which
is due to changes in market prices of such securities.
The Fund reports certain foreign currency related transactions as
components of realized and unrealized gains for financial reporting purposes,
whereas such components are treated as ordinary income for Federal income tax
purposes.
8
<PAGE>
THE COMPASS CAPITAL GROUP OF FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1996
FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund enters into forward foreign
currency contracts as a hedge against either specific transactions or portfolio
positions. These contracts are adjusted by the daily exchange rate of the
underlying currency and any gains or losses are recorded as unrealized until the
contract settlement date. Such contracts, which protect the value of the Fund's
investment securities against a decline in the value of currency, do not
eliminate fluctuations in the underlying prices of the securities. They simply
establish an exchange rate at a future date. Also, although such contracts tend
to minimize the risk of loss due to a decline in the value of a hedged currency,
at the same time they tend to limit any potential gain that might be realized
should the value of such foreign currency increase. Risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar.
The aggregate principal amounts of the contracts are not recorded as the
Fund intends to settle the contracts prior to delivery. Under the terms of
foreign currency contracts open at January 31, 1996, the Fund is obligated to
deliver or receive currency in exchange for U.S. dollars as indicated below:
<TABLE>
<CAPTION>
UNREALIZED
VALUE AT FOREIGN
SETTLEMENT CURRENCY CONTRACT JANUARY 31, EXCHANGE
DATE BOUGHT AMOUNT 1996 GAIN/(LOSS)
---------- ------------------------------------------ ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
2/28/96 Spanish Peseta 268,000,000 $ 2,136,042 $ 2,132,093 $ (3,949)
2/29/96 Danish Kroner 9,800,000 1,750,870 1,703,368 (47,502)
2/29/96 Italian Lira 900,000,000 560,636 560,636 0
4/12/96 Canadian Dollar 1,800,000 1,313,600 1,310,044 (3,556)
4/16/96 Japanese Yen 238,000,000 2,270,962 2,246,654 (24,308)
4/19/96 French Franc 12,300,000 2,498,984 2,411,588 (87,396)
4/19/96 Swedish Krona 2,600,000 370,909 370,909 0
----------- ----------- ---------
$10,902,003 $10,735,292 $(166,711)
=========== =========== =========
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED
VALUE AT FOREIGN
SETTLEMENT CURRENCY CONTRACT JANUARY 31, EXCHANGE
DATE SOLD AMOUNT 1996 GAIN/(LOSS)
---------- ------------------------------------------ ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
2/28/96 Spanish Peseta 625,000,000 $ 5,077,133 $ 4,973,128 $ 104,005
2/29/96 Danish Kroner 26,000,000 4,758,419 4,519,617 238,802
2/29/96 Italian Lira 4,500,000,000 2,793,955 2,820,733 (26,778)
4/9/96 Italian Lira 3,100,000,000 1,940,046 1,934,103 5,943
4/12/96 Canadian Dollar 3,650,000 2,678,309 2,656,477 21,832
4/16/96 Japanese Yen 826,000,000 7,949,952 7,800,842 149,110
4/17/96 Danish Kroner 7,800,000 1,401,743 1,357,899 43,844
4/19/96 German Mark 16,900,000 11,775,967 11,400,224 375,743
4/19/96 French Franc 21,400,000 4,369,130 4,195,772 173,358
4/19/96 British Pound Sterling 1,160,000 1,798,000 1,748,676 49,324
4/19/96 Swedish Krona 14,000,000 2,104,472 2,005,568 98,904
4/26/96 Italian Lira 2,280,000,000 1,415,534 1,419,641 (4,107)
----------- ----------- ----------
$48,062,660 $46,832,680 $1,229,980
=========== =========== ==========
</TABLE>
9
<PAGE>
THE COMPASS CAPITAL GROUP OF FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1996
3. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities (excluding short-term and U.S. Government
securities) for the period March 1, 1995 through January 31, 1996, were
$64,791,748 and $67,474,687, respectively.
4. RELATED PARTY TRANSACTIONS:
PFPC Inc. and Compass Distributors, Inc. (the "Administrators") serve the
Fund as Administrators. Under the terms of the administration agreement between
the Group and the Administrators, the Administrators earn an annual fee of .18%
of the daily net assets of the Fund. SEI Financial Services Company (the
"Distributor") serves the Fund as Distributor pursuant to a distribution
agreement between the Group and the Distributor. The Distributor receives no fee
for its services. Prior to January 13, 1996, SEI served as Administrator to the
Fund at an annual fee of .18% of the daily net assets of the Fund.
Investment advisory services are provided to the Fund by PNC Asset
Management Group, Inc. ("PAMG"). Under the terms of the investment advisory
agreement, PAMG is entitled to receive advisory fees at the annual rate of .80%
of the Fund's average daily net assets. Prior to January 13, 1996, Midlantic
Corporation served as Investment Adviser to the Fund at the same annual rate.
Morgan Grenfell Investment Services Limited serves as subadviser for the
Fund, pursuant to a subadvisory agreement with PAMG.
5. CAPITAL SHARES
Transactions in capital shares for each period were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE YEAR ENDED
3/1/95 THROUGH 1/31/96 2/28/95
------------------------------ -------------------------
SHARES VALUE SHARES VALUE
---------- ------------ -------- -----------
<S> <C> <C> <C> <C>
Shares sold: 315,538 $ 3,593,223 717,000 $ 7,437,000
Shares issued in reinvestment
of dividends: 140,790 1,586,753 122,000 1,240,000
Shares redeemed: (1,495,630) (17,160,728) (861,000) (8,979,000)
---------- ------------ -------- -----------
Net decrease (1,039,302) $(11,980,752) (22,000) $ (301,000)
========== ============ ======== ===========
</TABLE>
10
<PAGE>
THE COMPASS CAPITAL GROUP OF FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 1996
6. RECENT AND SUBSEQUENT EVENTS:
On July 10, 1995, Midlantic Corporation, the parent corporation of the
former investment adviser of the Group, entered into a merger agreement with PNC
Bank Corp. As a result, the Trustees of the Group called a special meeting of
the shareholders to vote on an asset purchase agreement which provided for (A)
the transfer of all of the assets and liabilities of the Fund to a corresponding
portfolio of Compass Capital Funds (formerly, "The PNC Fund") (the "Compass
Transaction") and (B) the approval of interim investment advisory and
sub-advisory agreements for the Fund if the merger of Midlantic Corporation and
PNC Bank Corp. occurred before the closing of the Compass Transaction. At a
special meeting of shareholders held on December 11, 1995, the shareholders of
the Fund voted to approve this proposal. Pursuant to the asset purchase
agreement, on February 13, 1996 all of the assets and liabilities of the Fund
were transferred to the International Bond Portfolio (the "Portfolio") of
Compass Capital Funds in exchange for Service Shares of the Portfolio, and the
Portfolio assumed the prior operating history of the Fund. Compass Distributors,
Inc. is the new distributor of the Fund as of February 13, 1996.
11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF THE COMPASS CAPITAL GROUP OF FUNDS:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments of The International Fixed Income Fund of The
Compass Capital Group of Funds, as of January 31, 1996, and the related
statement of operations for the period from March 1, 1995 to January 31, 1996,
the statements of changes in net assets for the period from March 1, 1995 to
January 31, 1996 and for the year ended February 28, 1995, and the financial
highlights for each of the periods presented. These financial statements and
financial highlights are the responsibility of the Fund's 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 audit 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 investments held by the
custodian as of January 31, 1996. 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
International Fixed Income Fund of The Compass Capital Group of Funds, as of
January 31, 1996 and the results of their operations for the period from March
1, 1995 to January 31, 1996, the changes in their net assets for the period from
March 1, 1995 to January 31, 1996 and for the year ended February 28, 1995, and
the financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 15, 1996
12
<PAGE>
=================================================
COMPASS FUNDS(REGISTRATION MARK)
Investment Adviser
PNC Asset Management Group
Philadelphia, PA
Sub-Adviser
Morgan Grenfell Investment Services Ltd.
London
United Kingdom
Administrators
PFPC Inc.
Wilmington, DE 19809
Compass Distributors, Inc.
Radnor, PA 19087
Distributor
SEI Financial Services Company
Wayne, Pennsylvania 19087
Legal Counsel
Morgan, Lewis & Bockius
Philadelphia, Pennsylvania 19103
Auditors
Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania 19103
This material must be preceded or accompanied
by a current prospectus.
=================================================