<PAGE> 1
The Compass Capital Group(R)
680 East Swedesford Road
Wayne, PA 19087
(800) 451-8371
November 8, 1995
Dear Compass Shareholder,
The Board of Trustees of The Compass Capital Group ("Compass" or the
"Fund") is pleased to call a special shareholders meeting concerning matters
that are important to you.
As you may be aware, PNC Bank Corp. recently announced a definitive plan to
acquire Midlantic Corporation, the parent company of the investment adviser to
The Compass Capital Group. In anticipation of the consummation of this merger,
which is expected to close by year-end, PNC Bank Corp. is taking steps to
consolidate the mutual fund investment advisory activities of Midlantic
Corporation with those of other PNC affiliates, in order to create one
consolidated family of mutual funds to offer shareholders more investment
options in an efficient manner. Subject to necessary shareholder approval, the
consolidated family will be under the advisory supervision of PNC Asset
Management Group. The Compass Board of Trustees believes that these actions are
in the best interests of the Fund's shareholders.
The Compass Board of Trustees has carefully reviewed the proposal to
combine all portfolios of The Compass Capital Group with PNC and BlackRock Funds
with similar investment objectives and policies (the "Transaction"), and has
considered the effects of this Transaction on shareholder value with respect to
investment performance, expense levels and shareholder services. The Board of
Trustees has also considered the interim advisory and sub-advisory agreements
for the Fund that are described in the attached materials if the merger of PNC
Bank Corp. and Midlantic occurs before the Fund's consolidation. In light of
their consideration, the Board of Trustees unanimously recommends the approval
of the Transaction. As you evaluate the proposal, please note the following
points:
- The absolute dollar value of your investment in Compass before the
Transaction will NOT change, and will be the same immediately after the
Transaction although the fund(s) you are an investor in, as well as the
number of shares and the net asset value of each share, may be different.
- The Transaction will be tax-free and will not involve any sales loads,
commissions or transaction charges.
- The investment objective and policies of your new portfolio will be
substantially similar to your portfolio's current objective and policies,
except as stated in the enclosures.
- PNC's service providers have agreed to waive fees and reimburse expenses
to ensure that for the fiscal year ending September 30, 1996 the
operating expenses of the PNC portfolios they manage are limited to the
ratios stated in the Combined Proxy Statement/Prospectus.
THE BOARD RECOMMENDS THE APPROVAL OF THIS TRANSACTION IN LIGHT OF THE
FOLLOWING SHAREHOLDER BENEFITS:
- Broader array of investment options available to shareholders;
- Ability to add to your existing holdings at no sales charge;
- Maintenance of existing purchase and redemption features plus additional
benefits including 24-hour account service for accounts held directly
with the PNC portfolios; and
- Potential economies in portfolio management resulting from larger asset
size.
Enclosed is a proxy card for the meeting. IT IS IMPORTANT THAT YOU
COMPLETE, SIGN AND RETURN YOUR PROXY IN THE ENVELOPE PROVIDED AS SOON AS
POSSIBLE. This will ensure that your shares will be represented at the
shareholders meeting to be held on November 30, 1995.
<PAGE> 2
Please read the attached materials carefully. If you have any questions,
please feel free to call our Compass representatives at 800-451-8371. Thank you
for your cooperation.
Sincerely,
[SIG]
David G. Lee
President
Enclosures:
- - Proxy Card and Return Envelope
- - Combined Proxy Statement/Prospectus
- - PNC Prospectus(es)
- - PNC Annual Report(s)
- - Compass Prospectus(es)
- - Statement of Additional Information
<PAGE> 3
THE COMPASS CAPITAL GROUP(R)
680 EAST SWEDESFORD ROAD
WAYNE, PA 19087
NOTICE OF SPECIAL SHAREHOLDERS MEETING
TO BE HELD ON NOVEMBER 30, 1995
To Compass Shareholders:
NOTICE IS GIVEN THAT a Special Meeting of Shareholders of The Compass
Capital Group(R)("Compass") will be held at the offices of SEI Financial
Management Corporation, 680 East Swedesford Road, Wayne, PA 19087 on November
30, 1995 at 11:00 A.M. Eastern Time for the following purposes:
ITEM 1. To approve an Asset Purchase Agreement (the "Compass Agreement")
providing for (a) the transfer of the assets and liabilities of the
following Compass portfolios to corresponding portfolios of The PNC(R) Fund
(the "Compass Transaction") and (b) the approval of interim investment
advisory and (for some portfolios) sub-advisory agreements for the
following Compass Portfolios if the merger of Midlantic Corporation and PNC
Bank Corp. occurs before the closing of the Compass Transaction:
<TABLE>
<S> <C>
Municipal Money Fund Equity Income Fund
New Jersey Municipal Money Fund Growth Fund
Pennsylvania Municipal Money Fund Small Company Fund
Cash Reserve Fund International Equity Fund
U.S. Treasury Fund Balanced Fund
Municipal Bond Fund Short/Intermediate Fund
New Jersey Municipal Bond Fund Fixed Income Fund
Pennsylvania Municipal Bond Fund International Fixed Income Fund
</TABLE>
ITEM 2. To transact such other business as may properly come before the
Special Meeting or any adjournment.
Compass shareholders of record as of the close of business on October 20,
1995 are entitled to notice of, and to vote at, this Special Meeting or any
adjournment.
THE COMPASS BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR
OF THE COMPASS AGREEMENT.
The Compass Agreement and related matters are described in the attached
Combined Proxy Statement/Prospectus.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE THE ACCOMPANYING PROXY CARD WHICH IS BEING SOLICITED BY THE COMPASS
BOARD OF TRUSTEES. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE MEETING. PROXIES
MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY SUBMITTING TO COMPASS A
WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR BY ATTENDING
THE SPECIAL MEETING AND VOTING IN PERSON.
Richard W. Grant
Secretary
November 8, 1995
<PAGE> 4
The BFM Institutional Trust Inc.
345 Park Avenue, 30th Floor
New York, NY 10154
(800)227-7236
November 8, 1995
Dear BFM Institutional Trust (BIT) Shareholder,
The Board of Directors of The BFM Institutional Trust Inc. ("BIT" or the
"Trust") is pleased to call a special shareholders meeting concerning matters
that are important to you.
In order to create one consolidated family of mutual funds to offer
shareholders more investment options in an efficient manner, BlackRock Financial
Management, together with its parent, PNC Bank, N.A., are taking steps to
consolidate the mutual fund investment advisory activities of the BIT portfolios
with those of other PNC affiliates, including The Compass Capital Group which is
anticipated to be acquired following the consummation of PNC's acquisition of
Midlantic Corporation (expected to close by year-end). Subject to necessary
shareholder approval, the consolidated entity will be a new mutual fund company
under the advisory supervision of PNC Asset Management Group. The Board of
Directors of BIT believes that these actions are in the best interests of the
Trust's shareholders.
The Trust's Board of Directors has carefully reviewed the proposal to
combine the BIT portfolios with PNC and Compass Funds with similar investment
objectives and policies (the "Transaction") and has considered the effects of
this Transaction on shareholder value with respect to investment performance,
expense levels and shareholder services. In light of such consideration, the
Board of Directors unanimously recommends the proposed Asset Purchase Agreement.
As you evaluate the proposal, please note the following points:
- The absolute dollar value of your investment before the Transaction will
NOT change, and will be the same immediately after the Transaction
although the number of shares and the net asset value of each share may
be different.
- The Transaction will be tax-free and will not involve any sales loads,
commissions or transaction charges.
- The investment objectives and policies of your portfolio will be
substantially similar to your portfolio's current objectives and
policies.
- PNC's service providers have agreed to waive fees and reimburse expenses
to ensure that the operating expenses of the portfolios are limited to
the ratios stated in the Combined Proxy Statement/Prospectus through
fiscal year-end September 30, 1996.
The Board recommends the approval of this Transaction in light of the
following shareholder benefits, which are expected to result:
- Broader array of investment options available to shareholders;
- Maintenance of all existing investor features plus additional benefits
including 24-hour account service for accounts held directly with the PNC
portfolios; and
- Potential economies in portfolio management resulting from larger asset
size.
Enclosed is a proxy card for the meeting. IT IS IMPORTANT THAT YOU
COMPLETE, SIGN AND RETURN YOUR PROXY IN THE ENVELOPE PROVIDED AS SOON AS
POSSIBLE. This will ensure that your shares will be represented at the
shareholders meeting held on December 20, 1995.
<PAGE> 5
Please read the attached materials carefully. If you have any questions,
please feel free to call our BlackRock representatives at 800-227-7236 or Sarah
Brown at (212)754-5550. Thank you for your cooperation.
Sincerely,
[Signature]
Frank J. Fabozzi
Enclosures
- - Proxy Card and Return Envelope
- - Combined Proxy Statement/Prospectus
- - PNC Prospectus
- - PNC Annual Report
<PAGE> 6
THE BFM INSTITUTIONAL TRUST INC.
345 PARK AVENUE
NEW YORK, NEW YORK 10154
NOTICE OF SPECIAL SHAREHOLDERS MEETING
TO BE HELD ON DECEMBER 20, 1995
To Shareholders of The BFM Institutional Trust Inc.:
NOTICE IS GIVEN THAT a Special Meeting of Shareholders of The BFM
Institutional Trust Inc. ("BIT") will be held at the offices of BlackRock
Financial Management, Inc., 345 Park Avenue, New York, New York 10154, on
December 20, 1995 at 11:00 A.M. Eastern Time for the following purposes:
ITEM 1. To approve an Asset Purchase Agreement (the "BIT Agreement")
providing for the transfer of the assets and liabilities of BIT's Short
Duration Portfolio, Core Fixed Income Portfolio and Multi-Sector Mortgage
Securities Portfolio III to corresponding portfolios of The PNC(R) Fund.
ITEM 2. To transact such other business as may properly come before the
Special Meeting or any adjournment.
BIT shareholders of record as of the close of business on October 20, 1995
are entitled to notice of, and to vote at, this Special Meeting or any
adjournment.
THE BIT BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF
THE BIT AGREEMENT.
The BIT Agreement and related matters are described in the attached
Combined Proxy Statement/Prospectus.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE THE ACCOMPANYING PROXY CARD WHICH IS BEING SOLICITED BY THE BIT BOARD
OF DIRECTORS. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE MEETING. PROXIES MAY
BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY SUBMITTING TO BIT A WRITTEN
NOTICE OF REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR BY ATTENDING THE
SPECIAL MEETING AND VOTING IN PERSON.
James Grosfeld
Director and President
November 8, 1995
<PAGE> 7
COMBINED PROXY STATEMENT/PROSPECTUS
DATED NOVEMBER 3, 1995
THE PNC(R) FUND
400 BELLEVUE PARKWAY
WILMINGTON, DE 19809
800-422-6538
THE COMPASS CAPITAL GROUP(R)
680 EAST SWEDESFORD ROAD
WAYNE, PA 19087
800-451-8371
THE BFM INSTITUTIONAL TRUST INC.
345 PARK AVENUE
NEW YORK, NEW YORK 10154
800-227-7236
This Combined Proxy Statement/Prospectus is furnished in connection with
the solicitation of proxies by the Board of Trustees of The Compass Capital
Group ("Compass") for a Special Meeting of Compass Shareholders to be held at
11:00 A.M. Eastern Time on November 30, 1995 at the offices of SEI Financial
Management Corporation, 680 East Swedesford Road, Wayne, PA 19087. At the
meeting, Compass shareholders will be asked to approve a proposed Asset Purchase
Agreement dated October 30, 1995 (the "Compass Agreement"), between Compass and
The PNC(R) Fund ("PNC") and the matters contemplated therein. A copy of the
Compass Agreement is attached as Appendix I.
This Combined Proxy Statement/Prospectus is also furnished in connection
with the solicitation of proxies by the Board of Directors of The BFM
Institutional Trust Inc. ("BIT") for a Special Meeting of BIT Shareholders to be
held at 11:00 A.M. Eastern Time on December 20, 1995 at the offices of BlackRock
Financial Management, Inc., 345 Park Avenue, New York, New York 10154. At the
meeting, BIT shareholders will be asked to approve a proposed Asset Purchase
Agreement dated October 30, 1995 (the "BIT Agreement"), between BIT and PNC and
the matters contemplated in that agreement. A copy of the BIT Agreement is
attached as Appendix II.
Compass and PNC are open-end management investment companies (mutual funds)
that offer a series of money market, tax-exempt, fixed income and equity
investment portfolios. The Compass Agreement provides for the transfer of the
assets and liabilities of the sixteen Compass portfolios listed in Item 1 of the
Compass Notice of Meeting and under "Information Relating to the Proposed
Transactions" below (the "Compass Portfolios") to corresponding investment
portfolios of PNC (the "PNC Portfolios") in exchange for an aggregate amount of
shares of the PNC Portfolios of equal value (the "Compass Transaction"). After
the consummation of the Compass Transaction, shareholders of the Compass
Portfolios will be shareholders of the PNC Portfolios, and Compass will be
deregistered as an investment company and terminated under state law.
BIT is also an open-end management investment company. The BIT Agreement
provides for the transfer of the assets and liabilities of the three fixed
income portfolios listed in Item 1 of the BIT Notice of Meeting and under
"Information Relating to the Proposed Transactions" below (the "BIT Portfolios")
to corresponding PNC Portfolios in exchange for an aggregate amount of shares of
the PNC Portfolios of equal value (the "BIT Transaction"). After the
consummation of the BIT Transaction, shareholders of the BIT Portfolios will be
shareholders of their corresponding PNC Portfolios, and BIT will also be
deregistered as an investment company and terminated under state law.
This Combined Proxy Statement/Prospectus sets forth concisely the
information that shareholders of Compass and BIT should know before voting, and
should be retained for future reference. This Combined Proxy
Statement/Prospectus is accompanied by the following documents as appropriate,
each as supple-
<PAGE> 8
mented through the date hereof: (1) for each PNC Portfolio except the Municipal
Money Market Portfolio, New Jersey Municipal Money Market Portfolio,
Pennsylvania Municipal Money Market Portfolio, Money Market Portfolio,
Government Money Market Portfolio, New Jersey Tax-Free Income Portfolio, Core
Fixed Income Portfolio, International Fixed Income Portfolio and Multi-Sector
Mortgage Securities Portfolio III -- 1994 Annual Shareholder Reports; (2) for
each PNC Portfolio except the New Jersey Tax-Free Income Portfolio, Core Fixed
Income Portfolio and Multi-Sector Mortgage Securities Portfolio III --
prospectuses dated July 24, 1995 for the PNC Municipal Money Market Portfolio,
New Jersey Municipal Money Market Portfolio, Money Market Portfolio and
Government Money Market Portfolio and prospectuses dated January 30, 1995 for
the other PNC Portfolios; and (3) for each Compass Portfolio -- Prospectuses
dated July 1, 1995. Additional information is set forth in the statement of
additional information relating to this Combined Proxy Statement/Prospectus,
dated November 3, 1995 and in the prospectuses dated October 31, 1995 for the
BIT Portfolios (each as supplemented through the date hereof). Each of these
documents is on file with the Securities and Exchange Commission (the "SEC"),
and is available without charge upon oral or written request by calling or
writing PNC, Compass or BIT at the respective telephone numbers or addresses
stated on the first page of this Combined Proxy Statement/Prospectus. The
information contained in these prospectuses and statement of additional
information is incorporated herein by reference.
This Combined Proxy Statement/Prospectus is the proxy statement of Compass
and BIT, respectively, for the special meetings of their shareholders, and the
prospectus of PNC for the shares of the PNC Portfolios that have been registered
with the SEC and are to be issued in connection with the Compass and BIT
Transactions.
The Combined Proxy Statement/Prospectus is expected to first be sent to
shareholders on or about November 8, 1995.
SHARES OF THE PNC PORTFOLIOS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS COMBINED PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROXY
STATEMENT/PROSPECTUS AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY
REFERENCE AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY PNC, COMPASS, BIT OR THEIR
RESPECTIVE SPONSORS AND DISTRIBUTORS.
AN INVESTMENT IN A PNC MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THE PNC MONEY
MARKET PORTFOLIOS WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE.
SHARES OF PNC, COMPASS AND BIT ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, PNC, MIDLANTIC OR ANY OTHER BANK, AND ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL. THE DISTRIBUTOR AND SPONSOR OF COMPASS IS SEI
FINANCIAL SERVICES COMPANY. THE DISTRIBUTOR AND SPONSOR OF PNC AND BIT IS
PROVIDENT DISTRIBUTORS, INC.
2
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY............................................................................... 4
Proposed Compass Transaction..................................................... 4
Proposed BIT Transaction......................................................... 4
Board Considerations............................................................. 5
Federal Income Tax Consequences.................................................. 5
Overview of PNC, Compass and BIT................................................. 5
Voting Information............................................................... 8
Risk Factors..................................................................... 8
INFORMATION RELATING TO THE PROPOSED TRANSACTIONS..................................... 9
Description of the Compass and BIT Agreements.................................... 10
Compass Board Considerations..................................................... 12
BIT Board Considerations......................................................... 12
PNC Board Considerations......................................................... 12
Capitalization................................................................... 13
Federal Income Tax Consequences.................................................. 15
Interim Compass Advisory and Sub-Advisory Agreements............................. 15
EXPENSE SUMMARIES OF PNC, COMPASS AND BIT............................................. 15
COMPARISON OF PNC, COMPASS AND BIT.................................................... 54
Investment Objectives and Policies............................................... 54
Investment Advisers and Other Service Providers.................................. 54
Share Structure............................................................. 54
Purchase, Redemption and Dividend Policies....................................... 55
INTERIM COMPASS ADVISORY AND SUB-ADVISORY AGREEMENTS.................................. 56
INFORMATION RELATING TO VOTING MATTERS................................................ 61
General Information.............................................................. 61
Compass Shareholder and Board Approvals.......................................... 61
BIT Shareholder and Board Approvals.............................................. 62
Quorum........................................................................... 62
Annual Meetings.................................................................. 62
Other Shareholder Information.................................................... 62
ADDITIONAL INFORMATION ABOUT PNC...................................................... 77
ADDITIONAL INFORMATION ABOUT COMPASS.................................................. 79
ADDITIONAL INFORMATION ABOUT BIT...................................................... 79
ADDITIONAL INFORMATION ABOUT INVESTMENT ADVISERS, DISTRIBUTORS
AND ADMINISTRATORS............................................................... 79
PAMG, PIMC, PCM, PEAC, BlackRock and Morgan Grenfell............................. 79
Other Investment Companies Advised by PIMC, PEAC, PCM, BlackRock and
Morgan Grenfell............................................................. 81
Information About Distributors And Administrators................................ 87
FINANCIAL STATEMENTS AND EXPERTS...................................................... 87
OTHER BUSINESS........................................................................ 87
SHAREHOLDER INQUIRIES................................................................. 88
APPENDICES I-COMPASS ASSET PURCHASE AGREEMENT....................................... I-1
II-BIT ASSET PURCHASE AGREEMENT..................................... II-1
III- INVESTMENT OBJECTIVES AND FUNDAMENTAL
LIMITATIONS................................................ III-1
IV-SHAREHOLDER TRANSACTIONS AND SERVICES............................. IV-1
V- INTERIM COMPASS ADVISORY AND SUB-ADVISORY
AGREEMENTS.................................................. V-1
VI-PNC PORTFOLIO SIX-MONTH FINANCIAL HIGHLIGHTS...................... VI-1
</TABLE>
3
<PAGE> 10
SUMMARY
The following is a summary of certain information relating to the proposed
Compass and BIT Transactions and related matters, and is qualified by reference
to the more complete information contained elsewhere in this Combined Proxy
Statement/Prospectus, the prospectuses and statements of additional information
of PNC, Compass and BIT, respectively, and the Appendices attached hereto.
PROPOSED COMPASS TRANSACTION. Based upon their evaluations of the relevant
information presented to them, and in light of their fiduciary duties under
Federal and state law, the Boards of Trustees of Compass and PNC, including all
of the non-interested members of each Board, have determined that the proposed
Compass Transaction is in the best interests of the shareholders of Compass and
PNC, respectively, and that the interests of the shareholders of the respective
companies will not be diluted as a result of the Compass Transaction. THE BOARD
OF TRUSTEES OF COMPASS RECOMMENDS THAT COMPASS SHAREHOLDERS APPROVE THE COMPASS
AGREEMENT AND THE MATTERS CONTEMPLATED THEREIN.
Subject to shareholder approval, the Compass Agreement provides for: (a)
the acquisition by PNC of all of the assets and liabilities of each of the
Compass Portfolios in exchange for Service Shares of the PNC Portfolios that
correspond to the Compass Portfolios; (b) the distribution of these PNC Service
Shares to the shareholders of the Compass Portfolios in liquidation of the
Compass Portfolios; and (c) the deregistration of Compass as an investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its dissolution under state law.
As a result of the proposed Compass Transaction, each shareholder of a
Compass Portfolio will become a shareholder of a corresponding PNC Portfolio and
will hold, immediately after the time the Compass Transaction becomes effective
(the "Effective Time of the Compass Transaction"), Service Shares of the
corresponding PNC Portfolio having an aggregate net asset value equal to the
aggregate net asset value of the shares of the Compass Portfolio the shareholder
held immediately before the Effective Time of the Compass Transaction.
In addition, the Compass Agreement provides that if the merger of Midlantic
Corporation and PNC Bank Corp. (the "Midlantic/PNC Bank Merger") occurs before
the Compass Transaction, the Compass Portfolios will enter into interim
investment advisory agreements with affiliates of PNC Bank Corp. and (for some
portfolios) sub-advisory agreements that will be effective for the period
between the date of such merger and the Effective Time of the Compass
Transaction. The provisions of the interim agreements, including the advisory
and sub-advisory fee rates, will be substantially the same as those in the
existing investment advisory and sub-advisory agreements for the Compass
Portfolios. The interim agreements will differ, however, with respect to dates
and contracting parties.
PNC has entered into separate agreements with Compass and BIT as described
in this Combined Proxy Statement/Prospectus, and consummation of the Compass
Transaction is in no way subject to consummation of the BIT Transaction
described below. IF THE COMPASS AGREEMENT IS APPROVED BY COMPASS SHAREHOLDERS AT
THE COMPASS MEETING, IT IS EXPECTED THAT THE COMPASS TRANSACTION WILL BE
COMPLETED WHETHER OR NOT THE BIT TRANSACTION IS COMPLETED.
For further information, see "Information Relating to the Proposed
Transactions" and "Interim Compass Investment Advisory and Sub-Advisory
Agreements."
PROPOSED BIT TRANSACTION. Based upon their evaluations of the relevant
information presented to them, and in light of their fiduciary duties under
Federal and state law, the governing Boards of BIT and PNC, including all of the
non-interested members of each Board, have determined that the proposed BIT
Transaction is in the best interests of the shareholders of BIT and PNC,
respectively, and that the interests of shareholders of the respective companies
will not be diluted as a result of the BIT Transaction. THE BOARD OF DIRECTORS
OF BIT RECOMMENDS THAT BIT SHAREHOLDERS APPROVE THE BIT AGREEMENT AND THE
MATTERS CONTEMPLATED THEREIN.
Subject to shareholder approval, the BIT Agreement provides for: (a) the
acquisition by PNC of all of the assets and liabilities of each of the BIT
Portfolios in exchange for Institutional Shares of the PNC
4
<PAGE> 11
Portfolios that correspond to the BIT Portfolios; (b) the distribution of these
PNC Institutional Shares to the shareholders of the BIT Portfolios in
liquidation of the BIT Portfolios; and (c) the deregistration of BIT as an
investment company under the 1940 Act and its dissolution under state law.
As a result of the proposed BIT Transaction, each shareholder of a BIT
Portfolio will become a shareholder of a corresponding PNC Portfolio and will
hold, immediately after the time the BIT Transaction becomes effective (the
"Effective Time of the BIT Transaction"), Institutional Shares of the
corresponding PNC Portfolio having an aggregate net asset value equal to the
aggregate net asset value of the shares of the BIT Portfolio the shareholder
holds immediately before the Effective Time of the BIT Transaction.
PNC has entered into separate agreements with Compass and BIT as described
in this Combined Proxy Statement/Prospectus, and consummation of the BIT
Transaction is in no way subject to consummation of the Compass Transaction. IF
THE BIT AGREEMENT IS APPROVED BY BIT SHAREHOLDERS, IT IS EXPECTED THAT THE BIT
TRANSACTION WILL BE COMPLETED WHETHER OR NOT THE COMPASS TRANSACTION IS
COMPLETED.
For further information, see "Information Relating to the Proposed
Transactions."
BOARD CONSIDERATIONS. In reviewing the proposed Compass Transaction, the
Compass and PNC Boards considered the pending merger of Midlantic Corporation,
the parent corporation of Midlantic Bank, N.A., ("Midlantic"), which serves as
investment adviser to the Compass Portfolios, and PNC Bank Corp., the parent
corporation of the companies that provide investment advisory and other services
to the PNC Portfolios. This pending merger presents the opportunity to combine
the separate Compass and PNC mutual fund families into a single, larger
consolidated group. In considering Midlantic's recommendation in favor of the
Compass Transaction, the Compass Board considered the potential impact of the
Compass Transaction on shareholders, including (a) the terms and conditions of
the Compass Agreement and the provisions intended to avoid the dilution of
shareholder interests; (b) the capabilities of the organizations that will
provide investment advisory and other services to the PNC Portfolios, and the
terms on which these services are provided; (c) the investment objectives and
policies of the PNC Portfolios and the shareholder services offered by them; (d)
the historical investment performance of the PNC Portfolios; and (e) the
historical and projected investment advisory fee rates and operating expenses of
the PNC Portfolios.
In reviewing the proposed BIT Transaction, the BIT and PNC Boards noted
that both BIT and PNC currently receive investment advisory (or sub-advisory),
administration, distribution, custody and transfer agency services from the same
companies. The Boards also noted that the total assets of all of PNC's
investment portfolios approximated $7,089 million, whereas the total assets of
all of BIT's investment portfolios approximated $195 million. The Boards
believed that portfolio and other efficiencies might be achieved by combining
the BIT Portfolios with the PNC mutual fund family.
For further information, see "Information Relating to the Proposed
Transactions -- Compass Board Considerations" and "BIT Board Considerations."
FEDERAL INCOME TAX CONSEQUENCES. Drinker Biddle & Reath will issue an
opinion (based on certain assumptions) as of the Effective Time of each
Transaction to the effect that the respective Compass and BIT Transactions will
not give rise to the recognition of income, gain or loss for Federal income tax
purposes to the Compass Portfolios, the PNC Portfolios, the BIT Portfolios and
their respective shareholders. See "Information Relating to the Proposed
Transactions -- Federal Income Tax Consequences."
OVERVIEW OF PNC, COMPASS AND BIT. The investment objectives and policies
of the Compass Portfolios and BIT Portfolios are generally similar to those of
their corresponding PNC Portfolios. There are, however, differences. For
example, the PNC Money Market Portfolio, unlike the Compass Cash Reserve Fund,
(a) normally invests at least 25% of its assets in bank obligations or
instruments secured by bank obligations; and (b) may invest in securities rated
in either the highest or second highest rating category. The PNC Government
Money Market Portfolio, unlike the Compass U.S. Treasury Fund, may currently
invest in obligations issued by U.S. Government agencies and instrumentalities.
The PNC Government Money Market Portfolio will, however, change its name and
investment policies before the Effective Time of the Compass Transaction to
provide that it will invest only in U.S. Treasury securities and related
repurchase agreements. The PNC Municipal Money Market, New Jersey Municipal
Money Market and Pennsylvania Municipal
5
<PAGE> 12
Money Market Portfolios, unlike the corresponding Compass Portfolios, may invest
in securities rated in either the highest or second highest rating category, and
the PNC Municipal Money Market Portfolio must normally invest at least 80% of
its assets in municipal securities that are exempt from Federal alternative
minimum tax as well as regular Federal income tax. The PNC Tax-Free Income
Portfolio, New Jersey Tax-Free Income Portfolio and Pennsylvania Tax-Free Income
Portfolio, unlike their corresponding Compass Portfolios, (a) may invest in
investment grade securities rated in the four (rather than three) highest rating
categories and (b) must normally invest at least 80% of their assets in
municipal securities that are exempt from Federal alternative minimum tax as
well as regular Federal income tax. The PNC International Fixed Income
Portfolio, unlike the Compass International Fixed Income Fund, may invest its
assets in securities rated below the highest three rating categories. The PNC
Growth Equity Portfolio emphasizes companies in the middle and higher
capitalization ranges (over $1 billion) while the Compass Growth Fund invests in
companies with market capitalizations in excess of $200 million. The PNC Value
Equity Portfolio's investment objective is to seek long-term capital
appreciation; the investment objective of the Compass Equity Income Fund is to
seek a combination of current income and capital appreciation.
In connection with the Compass Transaction and BIT Transaction described in
this Combined Proxy Statement/Prospectus, the PNC Core Fixed Income Portfolio
and PNC Short-Term Bond Portfolio will adopt investment objectives and policies
that are substantially the same as the investment objectives and policies of the
BIT Core Fixed Income Portfolio and BIT Short Duration Portfolio. The BIT Core
Fixed Income Portfolio and BIT Short Duration Portfolio have historically
invested a significant percentage of their assets in mortgage-related and
asset-backed securities. In addition, these two portfolios have actively engaged
in reverse repurchase agreements and dollar mortgage rolls to increase income.
Both the PNC and the BIT Core Fixed Income Portfolios may invest in securities
in the four highest rating categories, whereas the Compass Fixed Income Fund may
only invest in securities in the three highest rating categories. The PNC
Short-Term Bond Portfolio, like the BIT Short Duration Portfolio, intends to
limit its investments after the Effective Times of the respective Transactions
to U.S. Government securities and "triple-A" corporate obligations. The
permitted dollar-weighted average portfolio maturities of the BIT and PNC
Portfolios discussed in this paragraph also differ from their corresponding
Compass Portfolios. In addition, these BIT Portfolios (and, after the Effective
Times of the respective Transactions, these two PNC Portfolios), unlike their
corresponding Compass Portfolios, may engage in interest rate swap, cap and
floor transactions; short sales "against the box"; and transactions in inverse
floating rate instruments as discussed in Appendix III.
The investment objectives and policies of the BIT Multi-Sector Mortgage
Securities Portfolio III and PNC Multi-Sector Mortgage Securities Portfolio III
are the same.
Additional information concerning portfolio investment objectives and
policies, and the related risks, is provided below under "Summary -- Risk
Factors," "Comparison of PNC, Compass and BIT -- Investment Objectives and
Policies" and in Appendix III attached to this Combined Proxy
Statement/Prospectus, which sets forth the investment objectives, fundamental
investment limitations and other differences in the investment policies of the
Compass Portfolios, BIT Portfolios and their corresponding PNC Portfolios.
PNC Institutional Management Corporation ("PIMC") currently serves as the
investment adviser of each PNC Portfolio. It is expected that contemporaneously
with the consummation of the Compass Transaction and BIT Transaction, PNC Asset
Management Group, Inc. ("PAMG"), PIMC's parent corporation, will become the
investment adviser of each PNC Portfolio (except the PNC Multi-Sector Mortgage
Securities Portfolio III), on substantially the same terms as those stated in
the prospectuses of the PNC Portfolios. It is further expected that after the
Effective Times of the respective Transactions the companies listed below will
provide sub-advisory services to the PNC Portfolios:
6
<PAGE> 13
<TABLE>
<CAPTION>
NAME OF SUB-ADVISER PNC PORTFOLIOS
- ---------------------------------------- ---------------------------------------------------
<S> <C>
BlackRock Financial Management, Inc. PNC Tax-Free Income Portfolio
("BlackRock") PNC New Jersey Tax-Free Income Portfolio
PNC Pennsylvania Tax-Free Income Portfolio
PNC Short-Term Bond Portfolio
PNC Core Fixed Income Portfolio
PNC Balanced Portfolio (fixed income portion)
PNC Equity Advisers Company ("PEAC") PNC Growth Equity Portfolio
PNC Small Cap Growth Equity Portfolio
Provident Capital Management, Inc. PNC Value Equity Portfolio
("PCM") PNC International Equity Portfolio
PNC Balanced Portfolio (equity portion)
PNC Institutional Management Corporation PNC Municipal Money Market Portfolio
("PIMC") PNC New Jersey Municipal Money Market Portfolio
PNC Pennsylvania Municipal Money Market Portfolio
PNC Money Market Portfolio
PNC Government Money Market Portfolio
Morgan Grenfell Investment Services PNC International Fixed Income Portfolio
Limited ("Morgan Grenfell")
</TABLE>
PNC intends to call a special meeting of the shareholders of the PNC
Portfolios (except the PNC New Jersey Tax-Free Income Portfolio, PNC Core Fixed
Income Portfolio, PNC New Jersey Municipal Money Market Portfolio, PNC
International Fixed Income Portfolio and PNC Multi-Sector Mortgage Securities
Portfolio III) to approve PAMG as investment adviser and the others listed above
as sub-advisers. If these arrangements are not approved by shareholders of these
PNC Portfolios, then the existing advisory and sub-advisory arrangements
described in the enclosed prospectuses of the PNC Portfolios will remain in
effect after the Effective Times of the respective Transactions.
The Compass Portfolios and PNC Portfolios have different administrators,
distributors, custodians, transfer agents and Board members, but the same
independent accountants. The BIT Portfolios and PNC Portfolios have the same
administrators, distributors, custodians and transfer agents, but different
independent accountants and Board members. For further information, see
"Comparison of PNC, Compass and BIT -- Investment Advisers and Other Service
Providers" and the tables showing the fees and expenses for each of the PNC
Portfolios, Compass Portfolios and BIT Portfolios under "Expense Summaries of
PNC, Compass and BIT" below.
As discussed under "Comparison of PNC, Compass and BIT -- Share Structure,"
each of the PNC Portfolios (except PNC Multi-Sector Mortgage Securities
Portfolio III) offers multiple classes of shares called Service Shares,
Institutional Shares and Investor Shares. Service Shares and Institutional
Shares are sold without a sales load to institutional and other qualified
investors. Series A Investor Shares of the PNC Portfolios (other than the money
market funds) are sold with a front-end sales load, and Series B Investor Shares
are sold with a contingent deferred sales load. Investor Shares are sold to the
general public, as well as to customers of PNC Bank, National Association and
other institutions. Each of the Compass Portfolios and BIT Portfolios offer one
share class to all investors.
The purchase and redemption policies applicable to the BIT Portfolios and
Institutional Shares of the PNC Portfolios are generally similar as described in
Appendix IV to this Combined Proxy Statement/Prospectus. In addition, PNC and
its service providers will establish purchase and redemption policies for
Compass shareholders who receive Service Shares in the Compass Transaction that
are substantially similar to those currently offered by Compass. After the
Effective Time of the Compass Transaction, each former Compass shareholder will
also be permitted to purchase, without a sales charge, additional Service Shares
of the same PNC Portfolio in which the shareholder receives shares in the
Compass Transaction, but (unless otherwise qualified to purchase Service Shares)
will not be permitted to purchase Service Shares of other PNC Portfolios. Share
exchange privileges and certain other shareholder services will not be available
with respect to PNC Service Shares received by Compass shareholders. To
accommodate those shareholders
7
<PAGE> 14
who wish to have these privileges and programs, after the Effective Time of the
Compass Transaction, former Compass shareholders will be able to switch, if they
choose, their PNC Service Shares for PNC Investor Shares, which offer share
exchange privileges and additional shareholder programs but have higher
operating expense ratios and are sold with a sales load.
As set forth under the section entitled "Expense Summaries of PNC, Compass
and BIT," the annualized per share ordinary operating expense ratios (that is, a
portfolio's ordinary operating expenses expressed as a percentage of its average
daily net assets) of PNC Service Shares during the current fiscal year are
expected to be the same as, or lower than, the current ordinary operating
expense ratios of the Compass Portfolios, except for the Compass Equity Income
Fund, Compass Growth Fund and Compass International Fixed Income Fund. The
frequency of dividend declarations and distributions differ for certain Compass
and BIT Portfolios and their corresponding PNC Portfolios as set forth in
Appendix IV.
Additional information on the purchase, redemption, dividend and other
policies of the Compass Portfolios, BIT Portfolios and PNC Portfolios is
provided under "Comparison of PNC, Compass and BIT -- Purchase, Redemption and
Dividend Policies" and in Appendix IV to this Combined Proxy
Statement/Prospectus.
VOTING INFORMATION. This Combined Proxy Statement/Prospectus is being
furnished in connection with the solicitation of proxies by the Compass Board of
Trustees for a Special Meeting of Shareholders to be held at the offices of SEI
Financial Management Corporation, 680 East Swedesford Road, Wayne, PA 19087 on
November 30, 1995 at 11:00 A.M. Eastern Time. (This meeting and any adjournment
thereof is referred to as the "Compass Meeting.") Only Compass shareholders of
record at the close of business on October 20, 1995 will be entitled to vote at
the Compass Meeting.
This Combined Proxy Statement/Prospectus is also being furnished in
connection with the solicitation of proxies by the BIT Board of Directors for a
Special Meeting of Shareholders to be held at the offices of BlackRock Financial
Management, Inc., 345 Park Avenue, New York, New York 10154, on December 20,
1995 at 11:00 A.M. Eastern Time. (This meeting and any adjournment thereof is
referred to as the "BIT Meeting.") Only BIT shareholders of record at the close
of business on October 20, 1995 will be entitled to vote at the BIT Meeting.
Each whole or fractional Compass or BIT share is entitled to a whole or
fractional vote. Shares represented by a properly executed proxy will be voted
in accordance with the instructions thereon or, if no specification is made, the
persons named as proxies will vote in favor of the proposal set forth in the
respective Notices of Meeting. Proxies may be revoked at any time before they
are exercised by submitting a written notice of revocation or a subsequently
executed proxy or by attending the particular Meeting and voting in person. For
additional information, including a description of the shareholder votes
required for approval of each proposal, see "Information Relating to Voting
Matters."
RISK FACTORS. Because of the similarities of the investment objectives and
policies of the Compass Portfolios, the BIT Portfolios and their corresponding
PNC Portfolios, management believes that an investment in a PNC Portfolio
involves risks that are similar to those of the corresponding Compass Portfolio
or BIT Portfolio. These investment risks include those typically associated with
investing in a portfolio of high quality, short-term money market instruments in
the case of the money market portfolios; government or investment grade bonds in
the case of the taxable and tax-exempt bond portfolios; common stocks in the
case of the stock portfolios; and foreign securities in the case of the
international portfolios.
There are differences, however, between the Compass Portfolios, BIT
Portfolios and PNC Portfolios as noted above under "Summary -- Overview of PNC,
Compass and BIT." These differences can result in different risks. For example,
the PNC money market funds and the PNC Core Fixed Income Portfolio may invest in
securities with lower credit ratings than their corresponding Compass
Portfolios, and certain PNC and BIT Portfolios, unlike the Compass Portfolios,
may engage in dollar roll transactions and certain leveraging techniques, as
well as interest rate swap, cap and floor transactions and other transactions as
discussed above under "Summary -- Overview of PNC, Compass and BIT" and in
Appendix III. In addition, the PNC International Fixed Income Portfolio, unlike
the Compass International Fixed Income Fund, may
8
<PAGE> 15
invest an unlimited amount of its assets in securities rated in the lowest
investment grade rating category (and unrated securities deemed to be of
comparable quality), and may invest up to 5% of its assets in securities rated
below investment grade. Because the investment objectives and policies of the
BIT Multi-Sector Mortgage Securities Portfolio III and PNC Multi-Sector Mortgage
Securities Portfolio III are the same, the investment risks of those two
portfolios are believed to be the same. Both the BIT Multi-Sector Mortgage
Securities Portfolio III and the PNC Multi-Sector Mortgage Portfolio III may
invest up to 25% of their respective assets in non-investment grade securities.
Although the money market portfolios offered by Compass and PNC seek to
maintain a stable net asset value of $1.00 per share, there is no assurance they
will be able to do so. The per share price of the other portfolios will
fluctuate with changes in value of the investments held by each portfolio.
Certain portfolios may seek to achieve their investment objectives through
investments in securities of foreign issuers that involve risks not typically
associated with U.S. issuers; stocks of small capitalization companies that have
limited product lines, markets and financial resources; debt instruments with
the lowest or below investment grade rating which are speculative;
mortgage-backed and asset-backed securities and other derivative instruments;
illiquid instruments; interest rate swaps, floors and caps; and certain options,
futures and foreign currency strategies. For further discussion of the risk
factors involved in foreign investments, see the sections entitled
"International Equity Portfolio -- Special Risk Considerations" and
"International Fixed Income Portfolio -- Special Risk Considerations,"
respectively, in the PNC International Equity Portfolio and PNC International
Fixed Income Portfolio prospectuses. Some of the PNC and BIT fixed-income
portfolios have historically had higher turnover rates, resulting in higher
portfolio costs, and may engage in leveraging techniques (including, but not
limited to, the use of reverse repurchase agreements) that can cause their net
asset values to rise or fall faster than they otherwise would. Reverse
repurchase agreements involve the risk that the market value of the securities
sold by a portfolio may decline below the price of the securities the portfolio
is obligated to purchase. The policy of the Compass and PNC state tax-free
portfolios to invest primarily in municipal obligations of a particular state,
and the non-diversified status of each Compass and PNC state tax-free portfolio,
and the BIT Multi-Sector Mortgage Securities Portfolio III (and its
corresponding PNC Portfolio), present additional risks as stated in their
current prospectuses. Generally, the market value of debt securities will vary
inversely to changes in prevailing interest rates. There is no assurance that
any portfolio will achieve its investment objective.
INFORMATION RELATING TO THE PROPOSED TRANSACTIONS
The terms and conditions of the Compass Transaction are set forth in the
Compass Agreement. The terms and conditions of the BIT Transaction are set forth
in the BIT Agreement. Significant provisions of these Agreements are summarized
below; however, this summary is qualified in its entirety by reference to the
Compass Agreement and BIT Agreement, copies of which are attached as Appendices
I and II, respectively, to this Combined Proxy Statement/Prospectus.
9
<PAGE> 16
DESCRIPTION OF THE COMPASS AND BIT AGREEMENTS. The Compass Agreement
provides that at the Effective Time of the Compass Transaction, the assets and
liabilities of the Compass Portfolios will be transferred to corresponding PNC
Portfolios in exchange for full and fractional Service Shares of the PNC
Portfolios as shown in the following table.
<TABLE>
<CAPTION>
COMPASS PORTFOLIO CORRESPONDING PNC PORTFOLIO
- -------------------------------------------------------------------------------------
<S> <C>
Municipal Money Fund Municipal Money Market Portfolio
New Jersey Municipal Money Fund New Jersey Municipal Money Market Portfolio
Pennsylvania Municipal Money Fund Pennsylvania Municipal Money Market
Portfolio
Cash Reserve Fund Money Market Portfolio
U.S. Treasury Fund Government Money Market Portfolio
Municipal Bond Fund Tax-Free Income Portfolio
New Jersey Municipal Bond Fund New Jersey Tax-Free Income Portfolio
Pennsylvania Municipal Bond Fund Pennsylvania Tax-Free Income Portfolio
Equity Income Fund Value Equity Portfolio
Growth Fund Growth Equity Portfolio
Small Company Fund Small Cap Growth Equity Portfolio
International Equity Fund International Equity Portfolio
Balanced Fund Balanced Portfolio
Short/Intermediate Fund Short-Term Bond Portfolio
Fixed Income Fund Core Fixed Income Portfolio
International Fixed Income Fund International Fixed Income Portfolio
</TABLE>
The BIT Agreement provides that at the Effective Time of the BIT
Transaction the assets and liabilities of the BIT Portfolios will be transferred
to corresponding PNC Portfolios in exchange for full and fractional
Institutional Shares of the PNC Portfolio as shown in the following table.
<TABLE>
<CAPTION>
BIT PORTFOLIO CORRESPONDING PNC PORTFOLIO
- -------------------------------------------------------------------------------------
<S> <C>
Short Duration Portfolio Short-Term Bond Portfolio
Core Fixed Income Portfolio Core Fixed Income Portfolio
Multi-Sector Mortgage Securities Multi-Sector Mortgage Securities Portfolio
Portfolio III III
</TABLE>
The shares issued by PNC in the Compass Transaction will have an aggregate
net asset value equal to the aggregate net asset value of the shares of the
respective Compass Portfolios that are outstanding immediately before the
Effective Time of the Compass Transaction. Similarly, the shares issued by PNC
in the BIT Transaction will have an aggregate net asset value equal to the
aggregate net asset value of the shares of the respective BIT Portfolios that
are outstanding immediately before the Effective Time of the BIT Transaction.
After the transfer of their assets and liabilities in exchange for PNC
Portfolio shares, the respective Compass Portfolios and BIT Portfolios will
distribute the shares of PNC Portfolios to their shareholders in liquidation of
Compass and BIT and the Compass and BIT Portfolios. Each shareholder owning
shares of a particular Compass Portfolio or BIT Portfolio at the Effective Time
of the respective Transactions will receive an aggregate amount of shares of the
PNC Portfolio designated in the foregoing table of equal value, plus the right
to receive any unpaid dividends or distributions that were declared on the
Compass Portfolio or BIT Portfolio shares owned by the shareholder before the
Effective Time of the particular Transaction, provided such shareholder is also
the shareholder of record for purposes of such dividend or distribution. PNC
will establish an account for each former shareholder of the Compass Portfolios
and BIT Portfolios reflecting the appropriate number of PNC Portfolio shares
distributed to the shareholder. These accounts will be identical to the accounts
currently maintained by Compass and BIT for their shareholders. For economy and
convenience, shareholders will not receive share certificates for shares of the
PNC Portfolios unless requested.
10
<PAGE> 17
Upon completion of the respective Transactions, all outstanding shares of
the Compass Portfolios and BIT Portfolios will be cancelled, and Compass and BIT
will each be deregistered as an investment company under the 1940 Act and will
be dissolved under state law. The stock transfer books of Compass and BIT will
be closed as of the close of business immediately preceding the Effective Times
of the respective Transactions. Redemption requests received thereafter will be
deemed to be redemption requests for shares of the PNC Portfolios distributed to
the shareholders of the Compass Portfolios and BIT Portfolios. If any shares of
the Compass Portfolios or BIT Portfolios are represented by a share certificate,
the certificate must be surrendered to PNC's transfer agent for cancellation
before the PNC Portfolio shares issued to a shareholder in the Transactions may
be redeemed.
Both the Compass Transaction and the BIT Transaction are subject to a
number of conditions including, in the case of the Compass Transaction, approval
of the Compass Agreement and the interim advisory and sub-advisory agreements
described in this Combined Proxy Statement/Prospectus by Compass shareholders
and, in the case of the BIT Transaction, approval of the BIT Agreement by BIT
shareholders; the receipt of certain legal opinions described in Sections 9 and
10 of the Compass and BIT Agreements (which include an opinion of counsel that
PNC shares issued in the respective Transactions will be validly issued, fully
paid and non-assessable); the receipt of certain certificates from the parties
concerning the continuing accuracy of the representations and warranties in the
Agreements and other matters; the parties' performance in all material respects
of their respective agreements and undertakings in the Agreements; and, in the
case of the Compass Transaction, the consummation of the Midlantic/PNC Bank
Merger.
Assuming satisfaction of the conditions in the Compass Agreement, the
Effective Time of the Compass Transaction as to each Compass Portfolio will be
January 15, 1996 or such other date or dates as are agreed to by PNC and
Compass. The Compass Agreement provides, however, that if the difference between
the per share net asset values of a Compass Portfolio that is a money market
fund and its corresponding PNC Portfolio equals or exceeds $.0025 at the close
of business on the day preceding the time at which the Compass Transaction is to
be effective, as computed by using the market values of such portfolios' assets,
the Board of Trustees of either Compass or PNC may postpone the Effective Time
of the Compass Transaction with respect to such portfolios until such time as
the per share difference is less than $.0025. Assuming satisfaction of the
conditions in the BIT Agreement, the Effective Time of the BIT Transaction as to
each BIT Portfolio will be on January 15, 1996 or such other date or dates as
are agreed to by the parties to that agreement.
The Compass Agreement provides that, to the extent not borne by their
respective investment advisers, Compass and PNC will each pay or otherwise
provide for the payment of its own expenses incurred in connection with the
Compass Transaction. Compass and PNC estimate that their expenses (which include
the fees and disbursements of attorneys and auditors, proxy printing and
solicitation expenses and any Federal or state stock transfer taxes) will be
approximately $700,000. Similarly, the BIT Agreement provides that BIT and PNC
will each pay or otherwise provide for the payment of its own expenses incurred
in connection with the BIT Transaction. BIT and PNC estimate that their expenses
(which include the fees and disbursements of attorneys and auditors, proxy
printing and solicitation expenses and any Federal or state stock transfer
taxes) will be approximately $75,000. PNC will also bear all share registration
expenses arising in connection with each Transaction.
Each Transaction may be abandoned at any time prior to its Effective Time
upon the concurring votes of a majority of the entire governing Boards of the
parties to that Transaction. The Compass Agreement and BIT Agreement each
provide further that at any time before or (to the fullest extent permitted by
law) after approval of the Compass Agreement or BIT Agreement by the
shareholders of Compass or BIT, respectively, (a) the parties may, by written
agreement authorized by their respective governing Boards and with or without
the approval of their shareholders, amend any of the provisions of the Compass
Agreement or BIT Agreement, respectively, and (b) either party may waive any
breach by the other party or the failure to satisfy any of the conditions to its
obligations (the waiver to be in writing and authorized by the governing Board
of the waiving party with or without the approval of the party's shareholders).
11
<PAGE> 18
COMPASS BOARD CONSIDERATIONS. In connection with its approval of the
Compass Agreement, the Board of Trustees of Compass considered the pending
merger between Midlantic Corporation and PNC Bank Corp. Consummation of the
Midlantic/PNC Bank Merger will result in the automatic termination of the
existing investment advisory agreement between Compass and Midlantic and the
existing sub-advisory agreements between Midlantic and the sub-advisers of the
Compass Portfolios pursuant to the provisions of those agreements. Midlantic has
recommended that the assets of the Compass Portfolios be sold to the PNC
Portfolios as described in this Combined Proxy Statement/Prospectus, and that
Compass enter into interim advisory and sub-advisory agreements pending such
sale as described below under "Interim Compass Advisory and Sub-Advisory
Agreements."
The Compass Board of Trustees has considered the recommendation of
Midlantic, and the potential effect of the Midlantic/PNC Bank Merger on the
operations of Compass. During its deliberations, the Compass Board of Trustees
(with the advice and assistance of its counsel) considered, among other things:
(1) the investment objectives, policies and limitations of the PNC Portfolios,
including their relative compatibility with the Compass Portfolios; (2) the
additional risks of investing in certain of the PNC Portfolios, and the means by
which these risks would be disclosed to Compass shareholders; (3) the
capabilities and investment practices of PNC's investment adviser, sub-advisers
and other service contractors; (4) the management fees paid by the PNC
Portfolios and their historical and projected expense ratios as compared to the
Compass Portfolios; (5) the portfolio and other efficiencies that may result
from the Compass Transaction; (6) the investment performance of the Compass
Portfolios and the existing PNC Portfolios both on an aggregate and individual
basis; (7) the terms and conditions of the Compass Transaction, including
provisions intended to avoid dilution of the interests of Compass and PNC
shareholders; (8) the costs of the Compass Transaction, including the portion of
such costs to be borne by the Compass shareholders; (9) the anticipated tax
consequences of the Compass Transaction; (10) the structure of PNC's share
classes; (11) the shareholder services offered by PNC in connection with its
Service Shares; (12) the qualifications and duties of PNC Bank, National
Association ("PNC Bank"), as the custodian of the PNC Portfolios; and (13) the
appointment of Morgan Grenfell as sub-adviser to the PNC International Fixed
Income Portfolio. In connection with the Compass Transaction, PNC National Bank
has agreed to indemnify Compass and its trustees against damages relating to or
arising out of potential claims by Compass's administrator, SEI Financial
Management Corporation, with respect to the Management and Administration
Agreement between Compass and SEI Financial Management Corporation.
Based on the considerations described above, the Compass Board of Trustees
unanimously approved the Compass Agreement, as well as the interim investment
advisory and sub-advisory agreements described under "Interim Compass Advisory
and Sub-Advisory Agreements," at a meeting held on October 3, 1995.
BIT BOARD CONSIDERATIONS. In connection with its approval of the BIT
Agreement, the Board of Directors of BIT noted that both BIT and PNC currently
receive investment advisory (or sub-advisory), administration, distribution,
custody and transfer agency services from the same companies. The Board also
noted that the total assets of PNC's investment portfolios were significantly
greater than the total assets of BIT's investment portfolios. The Board believed
that portfolio and other efficiencies might be achieved by combining BIT with
PNC.
During its deliberations, the BIT Board of Directors (with the advice and
assistance of its counsel) also considered, among other things: (1) the
investment objectives, policies and limitations of the PNC Portfolios, including
their relative compatibility with the BIT Portfolios; (2) the management fees
paid by the PNC Portfolios and their historical and projected expense ratios as
compared to the BIT Portfolios; (3) the terms and conditions of the BIT
Transaction, including provisions intended to avoid dilution of the interests of
BIT and PNC shareholders; (4) the anticipated tax consequences of the BIT
Transaction; and (5) the structure of PNC's share classes.
Based on the considerations described above, the BIT Board of Directors
approved the BIT Agreement at a meeting held on September 28, 1995.
PNC BOARD CONSIDERATIONS. The PNC Board of Trustees unanimously approved
the Compass Agreement and BIT Agreement at a meeting held on September 29, 1995.
In approving the Agreements, the
12
<PAGE> 19
PNC Board of Trustees considered, in particular, the pending Midlantic/PNC Bank
Merger, the potential portfolio and other efficiencies that can result from
greater asset size, the terms of the respective Agreements, the provisions
intended to avoid the dilution of shareholder interests and the anticipated tax
consequences of the respective Transactions.
CAPITALIZATION. Thirteen of the Compass Portfolios are similar to PNC
Portfolios and/or BIT Portfolios that have commenced investment operations. In
addition, two of the BIT Portfolios are similar to currently operating PNC
Portfolios and/or Compass Portfolios. The following table sets forth as of
September 29, 1995, (i) the capitalization of each of these thirteen Compass
Portfolios; (ii) the capitalization of each of the two BIT Portfolios; (iii) the
capitalization of each of the corresponding PNC Portfolios; and (iv) the pro
forma capitalization of each PNC Portfolio as adjusted to give effect to the
respective Compass and BIT Transactions. If consummated, the capitalization of
each portfolio is likely to be different at the Effective Times of the
respective Transactions as a result of daily share purchase and redemption
activity in the portfolios as well as the effects of the portfolios' operations.
Because the Compass New Jersey Municipal Money, New Jersey Municipal Bond and
International Fixed Income Funds and the BIT Multi-Sector Mortgage Securities
Portfolio III are to be acquired by PNC Portfolios that currently have nominal
assets and liabilities, information on the capitalization of these four
portfolios is not presented.
PRO FORMA CAPITALIZATION TABLE
<TABLE>
<CAPTION>
NET ASSET
TOTAL SHARES VALUE PER
NET ASSETS* OUTSTANDING* SHARE*
-------------- ------------ ----------
<S> <C> <C> <C> <C>
MONEY MARKET PORTFOLIOS
A. PNC Money Market Portfolio..................... $1,194,015,051 1,194,038,553 $ 1.00
Compass Cash Reserve Fund...................... $ 535,684,644 535,794,389 $ 1.00
Pro Forma Combined............................. $1,729,699,695 1,729,832,942 $ 1.00
B. PNC Government Money Market Portfolio.......... $ 550,958,502 550,949,434 $ 1.00
Compass U.S. Treasury Fund..................... $ 529,798,012 529,792,661 $ 1.00
Pro Forma Combined............................. $1,080,756,514 1,080,742,095 $ 1.00
C. PNC Municipal Money Market Portfolio........... $ 265,629,380 265,659,375 $ 1.00
Compass Municipal Money Fund................... $ 32,973,046 32,998,204 $ 1.00
Pro Forma Combined............................. $ 298,602,426 298,657,579 $ 1.00
D. PNC Pennsylvania Municipal Money Market
Portfolio...................................... $ 147,739,396 147,740,008 $ 1.00
Compass Pennsylvania Municipal Money Fund...... $ 42,374,999 42,375,414 $ 1.00
Pro Forma Combined............................. $ 190,114,395 190,115,422 $ 1.00
BOND FUNDS
E. PNC Tax-Free Income Portfolio.................. $ 4,712,677 444,256 $ 10.61
Compass Municipal Bond Fund.................... $ 28,788,349 2,721,976 $ 10.58
Pro Forma Combined............................. $ 33,501,026 3,157,578 $ 10.61
F. PNC Pennsylvania Tax-Free Income Portfolio..... $ 13,374,359 1,295,217 $ 10.33
Compass Pennsylvania Municipal Bond Fund....... $ 17,237,893 1,741,406 $ 9.90
Pro Forma Combined............................. $ 30,612,252 2,963,938 $ 10.33
</TABLE>
13
<PAGE> 20
<TABLE>
<CAPTION>
NET ASSET
TOTAL SHARES VALUE PER
NET ASSETS* OUTSTANDING* SHARE*
-------------- ------------ ----------
<S> <C> <C> <C> <C>
G. PNC Short-Term Bond Portfolio.................. $ 6,579,129 677,806 $ 9.71
Compass Short/Intermediate Fund................ $ 192,085,466 18,656,236 $ 10.30
Pro Forma PNC Short-Term Bond Portfolio and
Compass Short/Intermediate Fund Only........... $ 198,664,595 20,460,037 $ 9.71
PNC Short-Term Bond Portfolio
(Institutional)................................ $ 8,561,095 882,003 $ 9.71
BIT Short Duration Portfolio................... $ 44,108,945 4,478,177 $ 9.85
Pro Forma PNC Short-Term Bond (Institutional)
and BIT Short Duration Portfolio Only.......... $ 52,670,040 5,347,324 $ 9.85+
Pro Forma Combined -- All Portfolios (Service
and Institutional)............................. $ 251,334,635 25,516,318 $9.85/9.85+
H. PNC Core Fixed Income Portfolio................ $ 0 0 $ 0
Compass Fixed Income Fund...................... $ 250,228,116 23,709,190 $ 10.55
BIT Core Fixed Income Portfolio................ $ 37,065,353 3,749,768 $ 9.88
PNC Core Fixed Income Portfolio and Compass
Fixed Income Fund Only......................... $ 250,228,116 25,326,732 $ 9.88
PNC Core Fixed Income Portfolio (Institutional)
and BIT Core Fixed Income Portfolio Only....... $ 37,065,353 3,749,768 $ 9.88**
Pro Forma Combined -- All Portfolios (Service
and Institutional)............................. $ 287,293,469 29,076,500 $9.88/9.88***
EQUITY FUNDS
I. PNC Value Equity Portfolio..................... $ 170,776,782 12,268,712 $ 13.92
Compass Equity Income Fund..................... $ 346,839,053 24,448,284 $ 14.19
Pro Forma Combined............................. $ 517,615,835 37,185,311 $ 13.92
J. PNC Growth Equity Portfolio.................... $ 76,959,735 5,912,548 $ 13.02
Compass Growth Fund............................ $ 163,044,388 12,385,019 $ 13.16
Pro Forma Combined............................. $ 240,004,123 18,435,158 $ 13.02
K. PNC Small Cap Growth Equity Portfolio.......... $ 62,618,323 4,167,776 $ 15.02
Compass Small Company Fund..................... $ 27,804,714 2,165,765 $ 12.84
Pro Forma Combined............................. $ 90,423,037 6,018,955 $ 15.02
L. PNC International Equity Portfolio............. $ 106,084,639 8,011,213 $ 13.24
Compass International Equity Fund.............. $ 46,703,366 3,457,183 $ 13.51
Pro Forma Combined............................. $ 152,788,005 11,538,658 $ 13.24
BALANCED FUND
M. PNC Balanced Portfolio......................... $ 85,706,926 6,245,535 $ 13.72
Compass Balanced Fund.......................... $ 33,066,469 2,928,819 $ 11.29
Pro Forma Combined............................. $ 118,773,395 8,655,628 $ 13.72
</TABLE>
- ---------------
+ Net asset value per BIT Share.
* Except as noted, the figures for the PNC Portfolios are for the Service
Share Class.
** Net asset value per PNC Institutional Share.
*** Net asset value per PNC Service Share and Institutional Share, respectively.
14
<PAGE> 21
FEDERAL INCOME TAX CONSEQUENCES. Consummation of the Compass Transaction
and BIT Transaction is subject to the condition that the respective parties
receive an opinion from Drinker Biddle & Reath to the effect that for federal
income tax purposes: (i) the transfer of all of the assets and liabilities of
each Compass Portfolio and BIT Portfolio (referred to below as a "Liquidating
Portfolio") to its corresponding PNC Portfolio in exchange for shares of the PNC
Portfolio and the distribution of these PNC shares to shareholders of the
Liquidating Portfolio, as described in the Compass Agreement and BIT Agreement,
will constitute a tax-free transaction under Section 368(a)(1)(C), Section
368(a)(1)(D) or Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as
amended; (ii) no gain or loss will be recognized by the Liquidating Portfolios
as a result of these transactions; (iii) no gain or loss will be recognized by
the PNC Portfolios as a result of the transactions; (iv) no gain or loss will be
recognized by the shareholders of each Liquidating Portfolio on the distribution
to them of shares of the corresponding PNC Portfolios in exchange for their
shares of the Liquidating Portfolios; (v) the aggregate basis of PNC Portfolio
shares received by a shareholder of a Liquidating Portfolio will be the same as
the aggregate basis of the shareholder's Liquidating Portfolio shares
immediately before the Compass Transaction or BIT Transaction, as applicable;
(vi) the basis to each PNC Portfolio of the assets of the corresponding
Liquidating Portfolio received pursuant to these transactions will be the same
as the basis of the assets in the hands of the Liquidating Portfolio immediately
before the transactions; (vii) a shareholder's holding period for PNC Portfolio
shares will be determined by including the period for which the shareholder held
the Liquidating Portfolio shares exchanged therefor, provided the shareholder
held the Liquidating Portfolio shares as a capital asset; and (vii) each PNC
Portfolio's holding period with respect to the assets received in the Compass
Transaction and BIT Transaction will include the period for which the assets
were held by the corresponding Liquidating Portfolio.
PNC, Compass and BIT have not sought a tax ruling from the Internal Revenue
Service ("IRS"). The opinion of counsel is not binding on the IRS and does not
preclude the IRS from adopting a contrary position. Shareholders should consult
their own advisers concerning the potential tax consequences to them, including
state and local income tax consequences.
INTERIM COMPASS ADVISORY AND SUB-ADVISORY AGREEMENTS. The Compass
Agreement provides that the Compass Transaction will occur contemporaneously
with, or after, the consummation of the Midlantic/PNC Bank Merger. Because the
Midlantic/PNC Bank Merger will result in a change in control of Midlantic, each
of the existing investment advisory and sub-advisory agreements for the Compass
Portfolios will, by its terms, automatically terminate on the date the
Midlantic/PNC Bank Merger occurs. The Compass Agreement provides, therefore,
that if the Midlantic/PNC Bank Merger and the Compass Transaction do not occur
contemporaneously, subject to approval of the Compass Agreement by its
shareholders, each Compass Portfolio will enter into an interim investment
advisory agreement with affiliates of PNC Bank Corp. and (for certain Compass
Portfolios) a sub-advisory agreement for the period between the date of the
Midlantic/PNC Bank Merger and the Effective Time of the Compass Transaction. The
investment advisory and sub-advisory fee rates stated in the interim agreements
will be the same, and the other provisions of the interim agreements will be
substantially the same, as those in the existing investment advisory and
sub-advisory agreements for the Compass Portfolios. See "Interim Compass
Advisory and Sub-Advisory Agreements" below.
EXPENSE SUMMARIES OF PNC, COMPASS AND BIT
The following tables (a) compare the fees and expenses of the respective
Compass Portfolios, BIT Portfolios and corresponding PNC Portfolios for their
most recent fiscal years (restated in the case of the Compass Portfolios to show
estimated expenses for the current year) and (b) show estimated fees and
expenses on a pro forma basis giving effect to the respective Compass and BIT
Transactions. The purpose of these tables is to assist shareholders in
understanding the various costs and expenses that investors in the Portfolios
bear as shareholders. These expenses include investment advisory fees and other
operating expenses such as, in the case of the PNC Portfolios, administration
fees payable to PFPC Inc. ("PFPC"), Provident Distributors, Inc. ("PDI") and
Compass Capital Group, Inc. ("CCGI"). The tables do not reflect any charges that
may be imposed by Midlantic Bank, N.A., PNC Bank, National Association or their
affiliates or other institutions directly on their customer accounts in
connection with investments in the Portfolios.
15
<PAGE> 22
COMPASS MUNICIPAL MONEY FUND
PNC MUNICIPAL MONEY MARKET PORTFOLIO -- SERVICE SHARES
<TABLE>
<CAPTION>
PNC
COMPASS MUNICIPAL
MUNICIPAL MONEY MARKET POST-CLOSING
MONEY FUND PORTFOLIO PRO-FORMA
---------- ------------ ------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load on Imposed Purchases
(as a percentage of offering price)................. None None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................. None None None
Deferred Sales Load
(as a percentage of redemption proceeds)............ None None None
Redemption Fees....................................... None(1) None None
Exchange Fees......................................... None None None
ANNUAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(2):
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fees(3)...................................... 0.40% 0.06% 0.06%
Other Operating Expenses(4)........................... 0.29% 0.52% 0.52%
---- ---- ----
TOTAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(5)................................... 0.69% 0.58% 0.58%
==== ==== ====
</TABLE>
- ---------------
(1) The Compass Municipal Money Fund imposes a $7 charge for wiring redemption
proceeds.
(2) The investment adviser and other service providers for the PNC Municipal
Money Market Portfolio are under no contractual obligation, after the
closing on the Compass Transaction, to waive fees or reimburse expenses, but
have informed the Portfolio that they expect to waive fees and reimburse
expenses during the fiscal year ending September 30, 1996 as necessary to
maintain the Portfolio's total operating expenses at the pro forma level
stated in the table.
(3) Advisory fees (before waivers) are .40% for the Compass Municipal Money
Fund. The PNC Municipal Money Market Portfolio and pro forma advisory fees
(before waivers) are .45% of the first $1 billion of the average daily net
assets of the Portfolio, plus .40% of the next $1 billion of the Portfolio's
average daily net assets, plus .375% of the next $1 billion of the
Portfolio's average daily net assets, plus .35% of the Portfolio's average
daily net assets in excess of $3 billion. PAMG as the investment adviser of
the PNC Municipal Money Market Portfolio will be entitled to retain a
portion of this fee equal to the annual rate of .05% of the Portfolio's
average daily net assets, and the Portfolio's sub-adviser will be entitled
to the remainder of the fee. The sub-advisory fee is paid by PAMG and has no
effect on the advisory fees paid by the Portfolio.
(4) Other expenses (before waivers and reimbursements) would be .29%, .56% and
.59%, respectively. Other pro forma expenses include an administration fee
payable to PFPC and PDI at an annual rate of .15% of the first $500 million
of the Portfolio's average daily net assets, .13% of the next $500 million
of the Portfolio's average daily net assets, .11% of the next $1 billion of
the Portfolio's average daily net assets and .10% of the Portfolio's average
daily net assets in excess of $2 billion, and a separate co-administration
fee payable to CCGI at an annual rate of .03% of the Portfolio's average
daily net assets. Other pro forma expenses also include (a) custodial fees
paid to PNC Bank based upon the PNC Portfolio's average gross assets, with a
minimum fee of $1,000, plus out-of-pocket expenses and certain transaction
charges, (b) transfer agency fees payable at the annual rate of .03% of the
average net asset value of the Portfolio's outstanding Service Shares, and
(c) shareholder servicing fees as described under "Comparison of PNC,
Compass and BIT -- Share Structure."
16
<PAGE> 23
(5) Total Fund Operating Expenses (before waivers and reimbursements) would be
0.69%, 1.01% and 1.04%, respectively.
EXAMPLE:(O)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
PNC
COMPASS MUNICIPAL
MUNICIPAL MONEY MARKET POST-CLOSING
MONEY FUND PORTFOLIO PRO-FORMA
---------- ------------ ------------
<S> <C> <C> <C>
1 year................................................ $ 7 $ 6 $ 6
3 years............................................... 22 19 19
5 years............................................... 38 32 32
10 years.............................................. 86 73 73
</TABLE>
- ---------------
(O) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
17
<PAGE> 24
COMPASS NEW JERSEY MUNICIPAL MONEY FUND
PNC NEW JERSEY MUNICIPAL MONEY MARKET PORTFOLIO -- SERVICE SHARES
<TABLE>
<CAPTION>
PNC
COMPASS NEW JERSEY
NEW JERSEY MUNICIPAL
MUNICIPAL MONEY MARKET POST-CLOSING
MONEY FUND PORTFOLIO* PRO-FORMA
---------- ------------ ------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................. None None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................. None None None
Deferred Sales Load
(as a percentage of redemption proceeds)............ None None None
Redemption Fees....................................... None(1) None None
Exchange Fees......................................... None None None
ANNUAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(2):
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fees(3)...................................... 0.40% 0.06% 0.06%
Other Operating Expenses(4)........................... 0.29% 0.52% 0.52%
---- ---- ----
TOTAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(5)................................... 0.69% 0.58% 0.58%
==== ==== ====
</TABLE>
- ---------------
* The PNC New Jersey Municipal Money Market Portfolio is a new investment
portfolio that has nominal assets and liabilities and is expected to
commence investment operations upon completion of the Compass Transaction.
(1) The Compass New Jersey Municipal Money Fund imposes a $7 charge for wiring
redemption proceeds.
(2) The investment adviser and other service providers for the PNC New Jersey
Municipal Money Market Portfolio are under no contractual obligation, after
the closing on the Compass Transaction, to waive fees or reimburse expenses,
but have informed the Portfolio that they expect to waive fees and reimburse
expenses during the fiscal year ending September 30, 1996 as necessary to
maintain the Portfolio's total operating expenses at the pro forma level
stated in the table.
(3) Advisory fees (before waivers) are .40% for the Compass New Jersey Municipal
Money Fund. The PNC New Jersey Municipal Money Market Portfolio and pro
forma advisory fees (before waivers) are .45% of the first $1 billion of the
average daily net assets of the Portfolio, plus .40% of the next $1 billion
of the Portfolio's average daily net assets, plus .375% of the next $1
billion of the Portfolio's average daily net assets, plus .35% of the
Portfolio's average daily net assets in excess of $3 billion. PAMG as the
investment adviser of the PNC New Jersey Municipal Money Market Portfolio
will be entitled to retain a portion of this fee equal to the annual rate of
.05% of the Portfolio's average daily net assets, and the Portfolio's
sub-adviser will be entitled to the remainder of the fee. The sub-advisory
fee is paid by PAMG and has no effect on the advisory fees paid by the
Portfolio.
(4) Other expenses (before waivers and reimbursements) would be .29%, .59% and
.59%, respectively. Other pro forma expenses include an administration fee
payable to PFPC and PDI at an annual rate of .15% of the first $500 million
of the Portfolio's average daily net assets, .13% of the next $500 million
of the Portfolio's average daily net assets, .11% of the next $1 billion of
the Portfolio's average daily net assets and .10% of the Portfolio's average
daily net assets in excess of $2 billion, and a separate co-administration
fee payable to CCGI at an annual rate of .03% of the Portfolio's average
daily net assets. Other pro forma expenses also include (a) custodial fees
paid to PNC Bank based upon the PNC Portfolio's average gross assets, with a
minimum fee of $1,000, plus out-of-pocket expenses and certain
18
<PAGE> 25
transaction charges, (b) transfer agency fees payable at the annual rate of
.03% of the average net asset value of the Portfolio's outstanding Service
Shares, and (c) shareholder servicing fees as described under "Comparison of
PNC, Compass and BIT -- Share Structure."
(5) Total Fund Operating Expenses (before waivers and reimbursements) would be
0.69%, 1.04% and 1.04%, respectively.
EXAMPLE:(O)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
PNC
COMPASS NEW JERSEY
NEW JERSEY MUNICIPAL
MUNICIPAL MONEY MARKET POST-CLOSING
MONEY FUND PORTFOLIO* PRO-FORMA
---------- ------------ ------------
<S> <C> <C> <C>
1 year................................................ $ 7 $ 6 $ 6
3 years............................................... 22 19 19
5 years............................................... 38 32 32
10 years.............................................. 86 73 73
</TABLE>
- ---------------
(O) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE MORE OR LESS THAN THE ASSUMED AMOUNT.
* See first footnote above.
19
<PAGE> 26
COMPASS PENNSYLVANIA MUNICIPAL MONEY FUND
PNC PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO -- SERVICE SHARES
<TABLE>
<CAPTION>
PNC
COMPASS PENNSYLVANIA
PENNSYLVANIA MUNICIPAL
MUNICIPAL MONEY MARKET POST-CLOSING
MONEY FUND PORTFOLIO PRO-FORMA
------------ ------------ ------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................. None None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................. None None None
Deferred Sales Load
(as a percentage of redemption proceeds)............ None None None
Redemption Fees....................................... None(1) None None
Exchange Fees......................................... None None None
ANNUAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(2):
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fees(3)...................................... 0.40% 0.06% 0.06%
Other Operating Expenses(4)........................... 0.29% 0.52% 0.52%
---- ---- ----
TOTAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(5)................................... 0.69% 0.58% 0.58%
==== ==== ====
</TABLE>
- ---------------
(1) The Compass Pennsylvania Municipal Money Fund imposes a $7 charge for wiring
redemption proceeds.
(2) The investment adviser and other service providers for the PNC Pennsylvania
Municipal Money Market Portfolio are under no contractual obligation, after
the closing on the Compass Transaction, to waive fees or reimburse expenses,
but have informed the Portfolio that they expect to waive fees and reimburse
expenses during the fiscal year ending September 30, 1996 as necessary to
maintain the Portfolio's total operating expenses at the pro forma level
stated in the table.
(3) Advisory fees (before waivers) are .40% for the Compass Pennsylvania
Municipal Money Fund. The PNC Pennsylvania Municipal Money Market Portfolio
and pro forma advisory fees (before waivers) are .45% of the first $1
billion of the average daily net assets of the Portfolio, plus .40% of the
next $1 billion of the Portfolio's average daily net assets, plus .375% of
the next $1 billion of the Portfolio's average daily net assets, plus .35%
of the Portfolio's average daily net assets in excess of $3 billion. PAMG as
the investment adviser of the PNC Pennsylvania Municipal Money Market
Portfolio will be entitled to retain a portion of this fee equal to the
annual rate of .05% of the Portfolio's average daily net assets, and the
Portfolio's sub-adviser will be entitled to the remainder of the fee. The
sub-advisory fee is paid by PAMG and has no effect on the advisory fees paid
by the Portfolio.
(4) Other expenses (before waivers and reimbursements) would be .29%, .55% and
.59%, respectively. Other pro forma expenses include an administration fee
payable to PFPC and PDI at an annual rate of .15% of the first $500 million
of the Portfolio's average daily net assets, .13% of the next $500 million
of the Portfolio's average daily net assets, .11% of the next $1 billion of
the Portfolio's average daily net assets and .10% of the Portfolio's average
daily net assets in excess of $2 billion, and a separate co-administration
fee payable to CCGI at an annual rate of .03% of the Portfolio's average
daily net assets. Other pro forma expenses also include (a) custodial fees
paid to PNC Bank based upon the PNC Portfolio's average gross assets, with a
minimum fee of $1,000, plus out-of-pocket expenses and certain transaction
charges, (b) transfer agency fees payable at the annual rate of .03% of the
average net asset value of the Portfolio's outstanding Service Shares, and
(c) shareholder servicing fees as described under "Comparison of PNC,
Compass and BIT -- Share Structure."
(5) Total Fund Operating Expenses (before waivers and reimbursements) would be
0.69%, 1.00% and 1.04%, respectively.
20
<PAGE> 27
EXAMPLE:(O)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
PNC
COMPASS PENNSYLVANIA
PENNSYLVANIA MUNICIPAL
MUNICIPAL MONEY MARKET POST-CLOSING
MONEY FUND PORTFOLIO PRO-FORMA
------------ ------------ ------------
<S> <C> <C> <C>
1 year................................................ $ 7 $ 6 $ 6
3 years............................................... 22 19 19
5 years............................................... 38 32 32
10 years.............................................. 86 73 73
</TABLE>
- ---------------
(O) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
21
<PAGE> 28
COMPASS CASH RESERVE FUND
PNC MONEY MARKET PORTFOLIO -- SERVICE SHARES
<TABLE>
<CAPTION>
COMPASS PNC
CASH RESERVE MONEY MARKET POST-CLOSING
FUND PORTFOLIO PRO-FORMA
------------ ------------ ------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................ None None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................ None None None
Deferred Sales Load
(as a percentage of redemption proceeds)........... None None None
Redemption Fees...................................... None(1) None None
Exchange Fees........................................ None None None
ANNUAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(2):
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fees(3)..................................... 0.35% 0.06% 0.06%
Other Operating Expenses(4).......................... 0.24% 0.52% 0.52%
---- ---- ----
TOTAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(5).................................. 0.59% 0.58% 0.58%
==== ==== ====
</TABLE>
- ---------------
(1) The Compass Cash Reserve Fund imposes a $7 charge for wiring redemption
proceeds.
(2) The investment adviser and other service providers for the PNC Money Market
Portfolio are under no contractual obligation, after the closing on the
Compass Transaction, to waive fees or reimburse expenses, but have informed
the Portfolio that they expect to waive fees and reimburse expenses during
the fiscal year ending September 30, 1996 as necessary to maintain the
Portfolio's total operating expenses at the pro forma level stated in the
table.
(3) Advisory fees (before waivers) are .35% for the Compass Cash Reserve Fund.
The PNC Money Market Portfolio and pro forma advisory fees (before waivers)
are .45% of the first $1 billion of the average daily net assets of the
Portfolio, plus .40% of the next $1 billion of the Portfolio's average daily
net assets, plus .375% of the next $1 billion of the Portfolio's average
daily net assets, plus .35% of the Portfolio's average daily net assets in
excess of $3 billion. PAMG as the investment adviser of the PNC Money Market
Portfolio will be entitled to retain a portion of this fee equal to the
annual rate of .05% of the Portfolio's average daily net assets, and the
Portfolio's sub-adviser will be entitled to the remainder of the fee. The
sub-advisory fee is paid by PAMG and has no effect on the advisory fees paid
by the Portfolio.
(4) Other expenses (before waivers and reimbursements) would be .24%, .53% and
.56%, respectively. Other pro forma expenses include an administration fee
payable to PFPC and PDI at an annual rate of .15% of the first $500 million
of the Portfolio's average daily net assets, .13% of the next $500 million
of the Portfolio's average daily net assets, .11% of the next $1 billion of
the Portfolio's average daily net assets and .10% of the Portfolio's average
daily net assets in excess of $2 billion, and a separate co-administration
fee payable to CCGI at an annual rate of .03% of the Portfolio's average
daily net assets. Other pro forma expenses also include (a) custodial fees
paid to PNC Bank based upon the PNC Portfolio's average gross assets, with a
minimum fee of $1,000, plus out-of-pocket expenses and certain transaction
charges, (b) transfer agency fees payable at the annual rate of .03% of the
average net asset value of the Portfolio's outstanding Service Shares, and
(c) shareholder servicing fees as described under "Comparison of PNC,
Compass and BIT -- Share Structure."
(5) Total Fund Operating Expenses (before waivers and reimbursements) would be
0.59%, 0.97% and 1.00%, respectively.
22
<PAGE> 29
EXAMPLE:(O)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
COMPASS PNC
CASH RESERVE MONEY MARKET POST-CLOSING
FUND PORTFOLIO PRO-FORMA
------------ ------------ ------------
<S> <C> <C> <C>
1 year............................................... $ 6 $ 6 $ 6
3 years.............................................. 19 19 19
5 years.............................................. 33 32 32
10 years............................................. 74 73 73
</TABLE>
- ---------------
(O) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
23
<PAGE> 30
COMPASS U.S. TREASURY FUND
PNC GOVERNMENT MONEY MARKET PORTFOLIO -- SERVICE SHARES
<TABLE>
<CAPTION>
PNC
COMPASS GOVERNMENT
U.S. TREASURY MONEY MARKET POST-CLOSING
FUND PORTFOLIO PRO-FORMA
------------- ------------ ------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................ None None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................ None None None
Deferred Sales Load
(as a percentage of redemption proceeds)........... None None None
Redemption Fees...................................... None(1) None None
Exchange Fees........................................ None None None
ANNUAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(2):
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fees(3)..................................... 0.35% 0.06% 0.06%
Other Operating Expenses(4).......................... 0.24% 0.52% 0.52%
---- ---- ----
TOTAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(5).................................. 0.59% 0.58% 0.58%
==== ==== ====
</TABLE>
- ---------------
(1) The Compass U.S. Treasury Fund imposes a $7 charge for wiring redemption
proceeds.
(2) The investment adviser and other service providers for the PNC Government
Money Market Portfolio are under no contractual obligation, after the
closing on the Compass Transaction, to waive fees or reimburse expenses, but
have informed the Portfolio that they expect to waive fees and reimburse
expenses during the fiscal year ending September 30, 1996 as necessary to
maintain the Portfolio's total operating expenses at the pro forma level
stated in the table.
(3) Advisory fees (before waivers) are .35% for the Compass U.S. Treasury Fund.
The PNC Government Money Market Portfolio and pro forma advisory fees
(before waivers) are .45% of the first $1 billion of the average daily net
assets of the Portfolio, plus .40% of the next $1 billion of the Portfolio's
average daily net assets, plus .375% of the next $1 billion of the
Portfolio's average daily net assets, plus .35% of the Portfolio's average
daily net assets in excess of $3 billion. PAMG as the investment adviser of
the PNC Government Money Market Portfolio will be entitled to retain a
portion of this fee equal to the annual rate of .05% of the Portfolio's
average daily net assets, and the Portfolio's sub-adviser will be entitled
to the remainder of the fee. The sub-advisory fee is paid by PAMG and has no
effect on the advisory fees paid by the Portfolio.
(4) Other expenses (before waivers and reimbursements) would be .24%, .55% and
.58%, respectively. Other pro forma expenses include an administration fee
payable to PFPC and PDI at an annual rate of .15% of the first $500 million
of the Portfolio's average daily net assets, .13% of the next $500 million
of the Portfolio's average daily net assets, .11% of the next $1 billion of
the Portfolio's average daily net assets and .10% of the Portfolio's average
daily net assets in excess of $2 billion, and a separate co-administration
fee payable to CCGI at an annual rate of .03% of the Portfolio's average
daily net assets. Other pro forma expenses also include (a) custodial fees
paid to PNC Bank based upon the PNC Portfolio's average gross assets, with a
minimum fee of $1,000, plus out-of-pocket expenses and certain transaction
charges, (b) transfer agency fees payable at the annual rate of .03% of the
average net asset value of the Portfolio's outstanding Service Shares, and
(c) shareholder servicing fees as described under "Comparison of PNC,
Compass and BIT -- Share Structure."
(5) Total Fund Operating Expenses (before waivers and reimbursements) would be
0.59%, 1.00% and 1.03%, respectively.
24
<PAGE> 31
EXAMPLE:(O)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
PNC
COMPASS GOVERNMENT
U.S. TREASURY MONEY MARKET POST-CLOSING
FUND PORTFOLIO PRO-FORMA
------------- ------------ ------------
<S> <C> <C> <C>
1 year............................................... $ 6 $ 6 $ 6
3 years.............................................. 19 19 19
5 years.............................................. 33 32 32
10 years............................................. 74 73 73
</TABLE>
- ---------------
(O) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
25
<PAGE> 32
COMPASS MUNICIPAL BOND FUND
PNC TAX-FREE INCOME PORTFOLIO -- SERVICE SHARES
<TABLE>
<CAPTION>
COMPASS PNC
MUNICIPAL TAX-FREE POST-CLOSING
BOND FUND INCOME PORTFOLIO PRO-FORMA
--------- ---------------- ------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................ 4.00%(1) None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................ None None None
Deferred Sales Load
(as a percentage of redemption proceeds)........... None None None
Redemption Fees...................................... None(2) None None
Exchange Fees........................................ None None None
ANNUAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(3):
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fees(4)..................................... 0.60% 0.00% 0.30%
Other Operating Expenses(5).......................... 0.33% 0.83% 0.55%
---- ---- ----
TOTAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(6).................................. 0.93% 0.83% 0.85%
==== ==== ====
</TABLE>
- ---------------
(1) There is no sales charge on certain purchases of the Compass Municipal Bond
Fund.
(2) The Compass Municipal Bond Fund imposes a $7 charge for wiring redemption
proceeds.
(3) The investment adviser and other service providers for the PNC Tax-Free
Income Portfolio are under no contractual obligation, after the closing on
the Compass Transaction, to waive fees or reimburse expenses, but have
informed the Portfolio that they expect to waive fees and reimburse expenses
during the fiscal year ending September 30, 1996 as necessary to maintain
the Portfolio's total operating expenses at the pro forma level stated in
the table.
(4) Advisory fees (before waivers) are .60% for the Compass Municipal Bond Fund.
The PNC Tax-Free Income Portfolio and pro forma advisory fees (before
waivers) are .50% of the first $1 billion of the average daily net assets of
the Portfolio, plus .45% of the next $1 billion of the Portfolio's average
daily net assets, plus .425% of the next $1 billion of the Portfolio's
average daily net assets, plus .40% of the Portfolio's average daily net
assets in excess of $3 billion. For its sub-advisory services, the
sub-adviser for this PNC Portfolio is entitled to receive a fee at the
annual rate of .35% of the Portfolio's first $1 billion of average daily net
assets, .30% of its next $1 billion of average daily net assets, .275% of
its next $1 billion of average daily net assets, and .25% of its average
daily net assets in excess of $3 billion. This sub-advisory fee is paid by
the PNC Portfolio's investment adviser and has no effect on the advisory
fees paid by the Portfolio.
(5) Other expenses (before waivers and reimbursements) would be 0.33%, 1.03% and
0.69%, respectively. Other pro forma expenses include an administration fee
payable to PFPC and PDI at an annual rate of .20% of the first $500 million
of the Portfolio's average daily net assets, .18% of the next $500 million
of the Portfolio's average daily net assets, .16% of the next $1 billion of
the Portfolio's average daily net assets and .15% of the Portfolio's average
daily net assets in excess of $2 billion, and a separate co-administration
fee payable to CCGI at an annual rate of .03% of the Portfolio's average
daily net assets. Other pro forma expenses also include (a) custodial fees
paid to PNC Bank based upon the PNC Portfolio's average gross assets, with a
minimum fee of $1,000, plus out-of-pocket expenses and certain transaction
charges, (b) transfer agency fees payable at the annual rate of .03% of the
average net asset value of the Portfolio's outstanding Service Shares, and
(c) shareholder servicing fees as described under "Comparison of PNC,
Compass and BIT -- Share Structure."
26
<PAGE> 33
(6) Total Fund Operating Expenses (before waivers and reimbursements) would be
0.93%, 1.53% and 1.19%, respectively.
EXAMPLE:(O)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
COMPASS PNC
MUNICIPAL TAX-FREE POST-CLOSING
BOND FUND INCOME PORTFOLIO PRO-FORMA
--------- ---------------- ------------
<S> <C> <C> <C>
1 year............................................... $ 49 $ 8 $ 9
3 years.............................................. 68 26 27
5 years.............................................. 89 46 47
10 years............................................. 150 103 105
</TABLE>
- ---------------
(O) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
27
<PAGE> 34
COMPASS NEW JERSEY MUNICIPAL BOND FUND
PNC NEW JERSEY TAX-FREE INCOME PORTFOLIO -- SERVICE SHARES
<TABLE>
<CAPTION>
COMPASS PNC
NEW JERSEY NEW JERSEY
MUNICIPAL TAX-FREE INCOME POST-CLOSING
BOND FUND PORTFOLIO* PRO-FORMA
---------- --------------- ------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................ 4.00%(1) None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................ None None None
Deferred Sales Load
(as a percentage of redemption proceeds)........... None None None
Redemption Fees...................................... None(2) None None
Exchange Fees........................................ None None None
ANNUAL FUND OPERATING EXPENSE AFTER WAIVERS AND
REIMBURSEMENTS(3):
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fees(4)..................................... 0.60% 0.30% 0.30%
Other Operating Expenses(5).......................... 0.28% 0.55% 0.55%
---- ---- ----
TOTAL FUND OPERATING EXPENSES AFTER WAIVERS AND
REIMBURSEMENTS(6).................................. 0.88% 0.85% 0.85%
==== ==== ====
</TABLE>
- ---------------
* The PNC New Jersey Tax-Free Income Portfolio is a new investment portfolio
with nominal assets and liabilities that is expected to commence investment
operations upon completion of the Compass Transaction.
(1) There is no sales charge on certain purchases of the Compass New Jersey
Municipal Bond Fund.
(2) The Compass New Jersey Municipal Bond Fund imposes a $7 charge for wiring
redemption proceeds.
(3) The investment adviser and service providers for the PNC New Jersey Tax-Free
Income Portfolio are under no contractual obligation, after the closing on
the Compass Transaction, to waive fees or reimburse expenses, but have
informed the Portfolio that they expect to waive fees and reimburse expenses
during the fiscal year ending September 30, 1996 as necessary to maintain
the Portfolio's total operating expenses at the pro forma level stated in
the table.
(4) Advisory fees (before waivers) are .60% for the Compass New Jersey Municipal
Bond Fund. The PNC New Jersey Tax-Free Income Portfolio and pro forma
advisory fees (before waivers) are .50% of the first $1 billion of the
average daily net assets of the Portfolio, plus .45% of the next $1 billion
of the Portfolio's average daily net assets, plus .425% of the next $1
billion of the Portfolio's average daily net assets, plus .40% of the
Portfolio's average daily net assets in excess of $3 billion. For its
sub-advisory services, the sub-adviser for this PNC Portfolio is entitled to
receive a fee at the annual rate of .35% of the Portfolio's first $1 billion
of average daily net assets, .30% of its next $1 billion of average daily
net assets, .275% of its next $1 billion of average daily net assets, and
.25% of its average daily net assets in excess of $3 billion. The
sub-advisory fee is paid by PNC's investment adviser and has no effect on
the advisory fees paid by the Portfolio.
(5) Other expenses (before waivers and reimbursements) would be .28%, .55% and
.55%, respectively. Other pro forma expenses include an administration fee
payable to PFPC and PDI at an annual rate of .20% of the first $500 million
of the Portfolio's average daily net assets, .18% of the next $500 million
of the Portfolio's average daily net assets, .16% of the next $1 billion of
the Portfolio's average daily net assets and .15% of the Portfolio's average
daily net assets in excess of $2 billion, and a separate co-administration
fee payable to CCGI at an annual rate of .03% of the Portfolio's average
daily net assets. Other pro forma expenses also include (a) custodial fees
paid to PNC Bank based upon the PNC
28
<PAGE> 35
Portfolio's average gross assets, with a minimum fee of $1,000, plus
out-of-pocket expenses and certain transaction charges, (b) transfer agency
fees payable at the annual rate of .03% of the average net asset value of
the Portfolio's outstanding Service Shares, and (c) shareholder servicing
fees as described under "Comparison of PNC, Compass and BIT -- Share
Structure."
(6) Total Fund Operating Expenses (before waivers) would be 0.88%, 1.05% and
1.05%, respectively.
EXAMPLE:(O)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
COMPASS PNC
NEW JERSEY NEW JERSEY
MUNICIPAL TAX-FREE INCOME POST-CLOSING
BOND FUND PORTFOLIO* PRO-FORMA
---------- --------------- ------------
<S> <C> <C> <C>
1 year............................................... $ 49 $ 9 $ 9
3 years.............................................. 67 27 27
5 years.............................................. 87 47 47
10 years............................................. 144 105 105
</TABLE>
- ---------------
(O) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
* See first footnote above.
29
<PAGE> 36
COMPASS PENNSYLVANIA MUNICIPAL BOND FUND
PNC PENNSYLVANIA TAX-FREE INCOME PORTFOLIO -- SERVICE SHARES
<TABLE>
<CAPTION>
COMPASS PNC
PENNSYLVANIA PENNSYLVANIA
MUNICIPAL TAX-FREE INCOME POST-CLOSING
BOND FUND PORTFOLIO PRO-FORMA
------------ --------------- ------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load on Purchases
(as a percentage of offering price)............... 4.00%(1) None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)............... None None None
Deferred Sales Load
(as a percentage of redemption proceeds).......... None None None
Redemption Fees..................................... None(2) None None
Exchange Fees....................................... None None None
ANNUAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(3):
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fees(4).................................... 0.60% 0.28% 0.30%
Other Operating Expenses(5)......................... 0.41% 0.55% 0.55%
---- ---- ----
TOTAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(6)................................. 1.01% 0.83% 0.85%
==== ==== ====
</TABLE>
- ---------------
(1) There is no sales charge on certain purchases of the Compass Pennsylvania
Municipal Bond Fund.
(2) The Compass Pennsylvania Municipal Bond Fund imposes a $7 charge for wiring
redemption proceeds.
(3) The investment adviser and service providers for the PNC Pennsylvania
Tax-Free Income Portfolio are under no contractual obligation, after the
closing on the Compass Transaction, to waive fees or reimburse expenses, but
have informed the Portfolio that they expect to waive fees and reimburse
expenses during the fiscal year ending September 30, 1996 as necessary to
maintain the Portfolio's total operating expenses at the pro forma level
stated in the table.
(4) Advisory fees (before waivers) are .60% for the Compass Pennsylvania
Municipal Bond Fund. The PNC Pennsylvania Tax-Free Income Portfolio and pro
forma advisory fees (before waivers) are .50% of the first $1 billion of the
average daily net assets of the Portfolio, plus .45% of the next $1 billion
of the Portfolio's average daily net assets, plus .425% of the next $1
billion of the Portfolio's average daily net assets, plus .40% of the
Portfolio's average daily net assets in excess of $3 billion. For its
sub-advisory services, the sub-adviser for this PNC Portfolio is entitled to
receive a fee at the annual rate of .35% of the Portfolio's first $1 billion
of average daily net assets, .30% of its next $1 billion of average daily
net assets, .275% of its next $1 billion of average daily net assets, and
.25% of its average daily net assets in excess of $3 billion. This
sub-advisory fee is paid by the PNC Portfolio's investment adviser and has
no effect on the advisory fees paid by the Portfolio.
(5) Other expenses (before waivers and reimbursements) would be .41%, .66% and
.65%, respectively. Other pro forma expenses include an administration fee
payable to PFPC and PDI at an annual rate of .20% of the first $500 million
of the Portfolio's average daily net assets, .18% of the next $500 million
of the Portfolio's average daily net assets, .16% of the next $1 billion of
the Portfolio's average daily net assets and .15% of the Portfolio's average
daily net assets in excess of $2 billion, and a separate co-administration
fee payable to CCGI at an annual rate of .03% of the Portfolio's average
daily net assets. Other pro forma expenses also include (a) custodial fees
paid to PNC Bank based upon the PNC Portfolio's average gross assets, with a
minimum fee of $1,000, plus out-of-pocket expenses and certain transaction
charges, (b) transfer agency fees payable at the annual rate of .03% of the
average net asset
30
<PAGE> 37
value of the Portfolio's outstanding Service Shares, and (c) shareholder
servicing fees as described under "Comparison of PNC, Compass and
BIT -- Share Structure."
(6) Total Fund Operating Expenses (before waivers and reimbursements) would be
1.01%, 1.16% and 1.15%, respectively.
EXAMPLE:(O)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
COMPASS PNC
PENNSYLVANIA PENNSYLVANIA
MUNICIPAL TAX-FREE INCOME POST-CLOSING
BOND FUND PORTFOLIO PRO-FORMA
------------ --------------- ------------
<S> <C> <C> <C>
1 year.............................................. $ 50 $ 8 $ 9
3 years............................................. 71 26 27
5 years............................................. 94 46 47
10 years............................................ 159 103 105
</TABLE>
- ---------------
(O) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
31
<PAGE> 38
COMPASS EQUITY INCOME FUND
PNC VALUE EQUITY PORTFOLIO -- SERVICE SHARES
<TABLE>
<CAPTION>
COMPASS PNC
EQUITY VALUE EQUITY POST-CLOSING
INCOME FUND PORTFOLIO PRO-FORMA
----------- ------------ ------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).................. 4.50%(1) None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price).................. None None None
Deferred Sales Load
(as a percentage of redemption proceeds)............. None None None
Redemption Fees........................................ None(2) None None
Exchange Fees.......................................... None None None
ANNUAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(3):
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fees(4)....................................... 0.70% 0.43% 0.50%
Other Operating Expenses(5)............................ 0.25% 0.55% 0.55%
---- ---- ----
TOTAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(6).................................... 0.95% 0.98% 1.05%
==== ==== ====
</TABLE>
- ---------------
(1) There is no sales charge on certain purchases of the Compass Equity Income
Fund.
(2) The Compass Equity Income Fund imposes a $7 charge for wiring redemption
proceeds.
(3) The investment adviser and service providers for the PNC Value Equity
Portfolio are under no contractual obligation, after the closing on the
Compass Transaction, to waive fees or reimburse expenses, but have informed
the Portfolio that they expect to waive fees and reimburse expenses during
the fiscal year ending September 30, 1996 as necessary to maintain the
Portfolio's total operating expenses at the pro forma level stated in the
table.
(4) Advisory fees (before waivers and reimbursements) are .70% for the Compass
Equity Income Fund. The PNC Value Equity Portfolio and pro forma advisory
fees (before waivers) are .55% of the first $1 billion of the average daily
net assets of the Portfolio, plus .50% of the next $1 billion of the
Portfolio's average daily net assets, plus .475% of the next $1 billion of
the Portfolio's average daily net assets, plus .45% of the Portfolio's
average daily net assets in excess of $3 billion. For its sub-advisory
services, the sub-adviser for this PNC Portfolio is entitled to receive a
fee at the annual rate of .40% of the Portfolio's first $1 billion of
average daily net assets, .35% of its next $1 billion of average daily net
assets, .325% of its next $1 billion of average daily net assets and .30% of
its average daily net assets in excess of $3 billion. This sub-advisory fee
is paid by the PNC Portfolio's investment adviser and has no effect on the
advisory fees paid by the Portfolio.
(5) Other expenses (before waivers) would be .25%, .56% and .55%, respectively.
Other pro forma expenses include an administration fee payable to PFPC and
PDI at an annual rate of .20% of the first $500 million of the Portfolio's
average daily net assets, .18% of the next $500 million of the Portfolio's
average daily net assets, .16% of the next $1 billion of the Portfolio's
average daily net assets and .15% of the Portfolio's average daily net
assets in excess of $2 billion, and a separate co-administration fee payable
to CCGI at an annual rate of .03% of the Portfolio's average daily net
assets. Other pro forma expenses also include (a) custodial fees paid to PNC
Bank based upon the PNC Portfolio's average gross assets, with a minimum fee
of $1,000, plus out-of-pocket expenses and certain transaction charges, (b)
transfer agency fees payable at the annual rate of .03% of the average net
asset value of the Portfolio's outstanding Service Shares, and (c)
shareholder servicing fees as described under "Comparison of PNC, Compass
and BIT -- Share Structure."
32
<PAGE> 39
(6) Total Fund Operating Expenses (before waivers and reimbursements) would be
0.95%, 1.11% and 1.10%, respectively.
EXAMPLE:(O)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
COMPASS PNC
EQUITY VALUE EQUITY POST-CLOSING
INCOME FUND PORTFOLIO PRO-FORMA
----------- ------------ ------------
<S> <C> <C> <C>
1 year................................................. $ 54 $ 10 $ 11
3 years................................................ 74 31 33
5 years................................................ 95 54 58
10 years............................................... 156 120 128
</TABLE>
- ---------------
(O) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
33
<PAGE> 40
COMPASS GROWTH FUND
PNC GROWTH EQUITY PORTFOLIO -- SERVICE SHARES
<TABLE>
<CAPTION>
PNC
COMPASS GROWTH EQUITY POST-CLOSING
GROWTH FUND PORTFOLIO PRO-FORMA
----------- ------------- ------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load on Purchases
(as a percentage of offering price)................. 4.50%(1) None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................. None None None
Deferred Sales Load
(as a percentage of redemption proceeds)............ None None None
Redemption Fees....................................... None(2) None None
Exchange Fees......................................... None None None
ANNUAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(3):
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fees(4)...................................... 0.70% 0.43% 0.50%
Other Operating Expenses(5)........................... 0.26% 0.55% 0.55%
----------- ------ ------
TOTAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(6)................................... 0.96% 0.98% 1.05%
========= ========== =========
</TABLE>
- ---------------
(1) There is no sales charge on certain purchases of the Compass Growth Fund.
(2) The Compass Growth Fund imposes a $7 charge for wiring redemption proceeds.
(3) The investment adviser and service providers for the PNC Growth Equity
Portfolio are under no contractual obligation, after the closing on the
Compass Transaction, to waive fees or reimburse expenses, but have informed
the Portfolio that they expect to waive fees and reimburse expenses during
the fiscal year ending September 30, 1996 as necessary to maintain the
Portfolio's total operating expenses at the pro forma level stated in the
table.
(4) Advisory fees (before waivers) are .70% for the Compass Growth Fund. The PNC
Growth Equity Portfolio and pro forma advisory fees (before waivers) are
.55% of the first $1 billion of the average daily net assets of the
Portfolio, plus .50% of the next $1 billion of the Portfolio's average daily
net assets, plus .475% of the next $1 billion of the Portfolio's average
daily net assets, plus .45% of the Portfolio's average daily net assets in
excess of $3 billion. For its sub-advisory services, the sub-adviser for
this PNC Portfolio is entitled to receive a fee at the annual rate of .40%
of the Portfolio's first $1 billion of average daily net assets, .35% of its
next $1 billion of average daily net assets, .325% of its next $1 billion of
average daily net assets and .30% of its average daily net assets in excess
of $3 billion. This sub-advisory fee is paid by the PNC Portfolio's
investment adviser and has no effect on the advisory fees paid by the
Portfolio.
(5) Other expenses (before waivers and reimbursements) would be .26%, .59% and
.62%, respectively. Other pro forma expenses include an administration fee
payable to PFPC and PDI at an annual rate of .20% of the first $500 million
of the Portfolio's average daily net assets, .18% of the next $500 million
of the Portfolio's average daily net assets, .16% of the next $1 billion of
the Portfolio's average daily net assets and .15% of the Portfolio's average
daily net assets in excess of $2 billion, and a separate co-administration
fee payable to CCGI at an annual rate of .03% of the Portfolio's average
daily net assets. Other pro forma expenses also include (a) custodial fees
paid to PNC Bank based upon the PNC Portfolio's average gross assets, with a
minimum fee of $1,000, plus out-of-pocket expenses and certain transaction
charges, (b) transfer agency fees payable at the annual rate of .03% of the
average net asset value of the Portfolio's outstanding Service Shares, and
(c) shareholder servicing fees as described under "Comparison of PNC,
Compass and BIT -- Share Structure."
34
<PAGE> 41
(6) Total Fund Operating Expenses (before waivers and reimbursements) would be
0.96%, 1.14% and 1.17%, respectively.
EXAMPLE:(O)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
PNC
COMPASS GROWTH EQUITY POST-CLOSING
GROWTH FUND PORTFOLIO PRO-FORMA
----------- ------------- ------------
<S> <C> <C> <C>
1 year................................................ $ 54 $ 10 $ 11
3 years............................................... 74 31 33
5 years............................................... 96 54 58
10 years.............................................. 158 120 128
</TABLE>
- ---------------
(O) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
35
<PAGE> 42
COMPASS SMALL COMPANY FUND
PNC SMALL CAP GROWTH EQUITY PORTFOLIO -- SERVICE SHARES
<TABLE>
<CAPTION>
PNC
COMPASS SMALL CAP
SMALL COMPANY GROWTH EQUITY POST-CLOSING
FUND PORTFOLIO PRO-FORMA
------------- ------------- ------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load on Purchases
(as a percentage of offering price)............... 4.50%(1) None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)............... None None None
Deferred Sales Load
(as a percentage of redemption proceeds).......... None None None
Redemption Fees..................................... None(2) None None
Exchange Fees....................................... None None None
ANNUAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(3):
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fees(4).................................... 0.90% 0.48% 0.53%
Other Operating Expenses(5)......................... 0.40% 0.58% 0.63%
---- ---- ----
TOTAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(6)................................. 1.30% 1.06% 1.16%
==== ==== ====
</TABLE>
- ---------------
(1) There is no sales charge on certain purchases of the Compass Small Company
Fund.
(2) The Compass Small Company Fund imposes a $7 charge for wiring redemption
proceeds.
(3) The investment adviser and service providers for the PNC Small Cap Growth
Equity Portfolio are under no contractual obligation, after the closing on
the Compass Transaction, to waive fees or reimburse expenses, but have
informed the Portfolio that they expect to waive fees and reimburse expenses
during the fiscal year ending September 30, 1996 as necessary to maintain
the Portfolio's total operating expenses at the pro forma level stated in
the table.
(4) Advisory fees (before waivers) are .90% for the Compass Small Company Fund.
The PNC Small Cap Growth Equity Portfolio and pro forma advisory fees
(before waivers) are .55% of the first $1 billion of the average daily net
assets of the Portfolio, plus .50% of the next $1 billion of the Portfolio's
average daily net assets, plus .475% of the next $1 billion of the
Portfolio's average daily net assets, plus .45% of the Portfolio's average
daily net assets in excess of $3 billion. For its sub-advisory services, the
sub-adviser for this PNC Portfolio is entitled to receive a fee at the
annual rate of .40% of the Portfolio's first $1 billion of average daily net
assets, .35% of its next $1 billion of average daily net assets, .325% of
its next $1 billion of average daily net assets and .30% of its average
daily net assets in excess of $3 billion. This sub-advisory fee is paid by
the PNC Portfolio's and has no effect on the advisory fees paid by the
Portfolio.
(5) Other expenses (before waivers and reimbursements) would be .40%, .58% and
.63%, respectively. Other pro forma expenses include an administration fee
payable to PFPC and PDI at an annual rate of .20% of the first $500 million
of the Portfolio's average daily net assets, .18% of the next $500 million
of the Portfolio's average daily net assets, .16% of the next $1 billion of
the Portfolio's average daily net assets and .15% of the Portfolio's average
daily net assets in excess of $2 billion, and a separate co-administration
fee payable to CCGI at an annual rate of .03% of the Portfolio's average
daily net assets. Other pro forma expenses also include (a) custodial fees
paid to PNC Bank based upon the PNC Portfolio's average gross assets, with a
minimum fee of $1,000, plus out-of-pocket expenses and certain transaction
charges, (b) transfer agency fees payable at the annual rate of .03% of the
average net asset value of the Portfolio's outstanding Service Shares, and
(c) shareholder servicing fees as described under "Comparison of PNC,
Compass and BIT -- Share Structure."
36
<PAGE> 43
(6) Total Fund Operating Expenses (before waivers and reimbursements) would be
1.30%, 1.14% and 1.18%, respectively.
EXAMPLE:(O)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
PNC
COMPASS SMALL CAP
SMALL COMPANY GROWTH EQUITY POST-CLOSING
FUND PORTFOLIO PRO-FORMA
------------- ------------- ------------
<S> <C> <C> <C>
1 year.............................................. $ 58 $ 11 $ 12
3 years............................................. 84 34 37
5 years............................................. 113 57 64
10 years............................................ 195 129 141
</TABLE>
- ---------------
(O) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
37
<PAGE> 44
COMPASS INTERNATIONAL EQUITY FUND
PNC INTERNATIONAL EQUITY PORTFOLIO -- SERVICE SHARES
<TABLE>
<CAPTION>
PNC
COMPASS INTERNATIONAL
INTERNATIONAL EQUITY POST-CLOSING
EQUITY FUND PORTFOLIO PRO-FORMA
------------- ------------- ------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load on Purchases
(as a percentage of offering price).................. 4.50%(1) None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price).................. None None None
Deferred Sales Load
(as a percentage of redemption proceeds)............. None None None
Redemption Fees........................................ None(2) None None
Exchange Fees.......................................... None None None
ANNUAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
DISBURSEMENTS(3):
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fees(4)....................................... 0.90% 0.63% 0.70%
Other Operating Expenses(5)............................ 0.56% 0.65% 0.66%
---- ---- ----
TOTAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
DISBURSEMENTS(6)..................................... 1.46% 1.28% 1.36%
==== ==== ====
</TABLE>
- ---------------
(1) There is no sales charge on certain purchases of the Compass International
Equity Fund.
(2) The Compass International Equity Fund imposes a $7 charge for wiring
redemption proceeds.
(3) The investment adviser and service providers for the PNC International
Equity Portfolio are under no contractual obligation, after the closing on
the Compass Transaction, to waive fees or reimburse expenses, but have
informed the Portfolio that they expect to waive fees and reimburse expenses
during the fiscal year ending September 30, 1996 as necessary to maintain
the Portfolio's total operating expenses at the pro forma level stated in
the table.
(4) Advisory fees (before waivers) are .90% for the Compass International Equity
Fund. The PNC International Equity Portfolio pro forma advisory fees (before
waivers) are .75% of the first $1 billion of the average daily net assets of
the Portfolio, plus .70% of the next $1 billion of the Portfolio's average
daily net assets, plus .675% of the next $1 billion of the Portfolio's
average daily net assets, plus .65% of the Portfolio's average daily net
assets in excess of $3 billion. For its sub-advisory fees, the sub-adviser
for this PNC Portfolio is entitled to receive a fee at the annual rate of
.60% of the Portfolio's first $1 billion of average daily net assets, .55%
of its next $1 billion of average daily net assets, .525% of its next $1
billion of average daily net assets and .50% of its average daily net assets
in excess of $3 billion. This sub-advisory fee is paid by the PNC
Portfolio's investment adviser and has no effect on the advisory fees paid
by the Portfolio.
(5) Other expenses (before waivers or reimbursements) would be .56%, .67% and
.73%, respectively. Other pro forma expenses include an administration fee
payable to PFPC and PDI at an annual rate of .20% of the first $500 million
of the Portfolio's average daily net assets, .18% of the next $500 million
of the Portfolio's average daily net assets, .16% of the next $1 billion of
the Portfolio's average daily net assets and .15% of the Portfolio's average
daily net assets in excess of $2 billion, and a separate co-administration
fee payable to CCGI at an annual rate of .03% of the Portfolio's average
daily net assets. Other pro forma expenses also include (a) custodial fees
paid to PNC Bank based upon the PNC Portfolio's average gross assets, with a
minimum fee of $1,000, plus out-of-pocket expenses and certain transaction
charges, (b) transfer agency fees payable at the annual rate of .03% of the
average net asset
38
<PAGE> 45
value of the Portfolio's outstanding Service Shares, and (c) shareholder
servicing fees as described under "Comparison of PNC, Compass and
BIT -- Share Structure."
(6) Total Fund Operating Expenses (before waivers or reimbursements) would be
1.46%, 1.42% and 1.48%, respectively.
EXAMPLE:(O)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
PNC
COMPASS INTERNATIONAL
INTERNATIONAL EQUITY POST-CLOSING
EQUITY FUND PORTFOLIO PRO-FORMA
------------- ------------- ------------
<S> <C> <C> <C>
1 year................................................. $ 59 $ 13 $ 13
3 years................................................ 89 41 40
5 years................................................ 121 70 69
10 years............................................... 212 155 152
</TABLE>
- ---------------
(O) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
39
<PAGE> 46
COMPASS BALANCED FUND
PNC BALANCED PORTFOLIO -- SERVICE SHARES
<TABLE>
<CAPTION>
COMPASS PNC
BALANCED BALANCED POST-CLOSING
FUND PORTFOLIO PRO-FORMA
-------- -------- ------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load on Purchases
(as a percentage of offering price)....................... 4.50%(1) None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)....................... None None None
Deferred Sales Load
(as a percentage of redemption proceeds).................. None None None
Redemption Fees............................................. None(2) None None
Exchange Fees............................................... None None None
ANNUAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(3):
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fees(4)............................................ 0.70% 0.43% 0.50%
Other Operating Expenses(5)................................. 0.40% 0.55% 0.60%
---- ---- ----
TOTAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(6)......................................... 1.10% 0.98% 1.10%
==== ==== ====
</TABLE>
- ---------------
(1) There is no sales charge on certain purchases of the Compass Balanced Fund.
(2) The Compass Balanced Fund imposes a $7 charge for wiring redemption
proceeds.
(3) The investment adviser and service providers for the PNC Balanced Portfolio
are under no contractual obligation, after the closing on the Compass
Transaction, to waive fees or reimburse expenses, but have informed the
Portfolio that they expect to waive fees and reimburse expenses during the
fiscal year ending September 30, 1996 as necessary to maintain the
Portfolio's total operating expenses at the pro forma level stated in the
table.
(4) Advisory fees (before waivers) are .70% for the Compass Balanced Fund. The
PNC Balanced Portfolio and pro forma advisory fees (before waivers) are .55%
of the first $1 billion of the average daily net assets of the Portfolio,
plus .50% of the next $1 billion of the Portfolio's average daily net
assets, plus .475% of the next $1 billion of the Portfolio's average daily
net assets, plus .45% of the Portfolio's average daily net assets in excess
of $3 billion. For its sub-advisory services, the sub-adviser for this PNC
Portfolio is entitled to receive a fee at the annual rate of .40% of the
Portfolio's first $1 billion of average daily net assets, .35% of its next
$1 billion of average daily net assets, .325% of its next $1 billion of
average daily net assets and .30% of its average daily net assets in excess
of $3 billion. This sub-advisory fee is paid by the PNC Portfolio's
investment adviser and has no effect on the advisory fees paid by the
Portfolio.
(5) Other expenses (before waivers or reimbursements) would be .40%, .64% and
.65%, respectively. Other pro forma expenses include an administration fee
payable to PFPC and PDI at an annual rate of .20% of the first $500 million
of the Portfolio's average daily net assets, .18% of the next $500 million
of the Portfolio's average daily net assets, .16% of the next $1 billion of
the Portfolio's average daily net assets and .15% of the Portfolio's average
daily net assets in excess of $2 billion, and a separate co-administration
fee payable to CCGI at an annual rate of .03% of the Portfolio's average
daily net assets. Other pro forma expenses also include (a) custodial fees
paid to PNC Bank based upon the PNC Portfolio's average gross assets, with a
minimum fee of $1,000, plus out-of-pocket expenses and certain transaction
charges, (b) transfer agency fees payable at the annual rate of .03% of the
average net asset value of the Portfolio's outstanding Service Shares, and
(c) shareholder servicing fees as described under "Comparison of PNC,
Compass and BIT -- Share Structure."
40
<PAGE> 47
(6) Total Fund Operating Expenses (before waivers or reimbursements) would be
1.10%, 1.19% and 1.20%, respectively.
EXAMPLE:(O)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
COMPASS PNC
BALANCED BALANCED POST-CLOSING
FUND PORTFOLIO PRO-FORMA
-------- -------- ------------
<S> <C> <C> <C>
1 year...................................................... $ 56 $ 10 $ 11
3 year...................................................... 78 31 35
5 years..................................................... 103 54 61
10 years.................................................... 173 120 134
</TABLE>
- ---------------
(O) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
41
<PAGE> 48
COMPASS SHORT/INTERMEDIATE FUND
PNC SHORT-TERM BOND PORTFOLIO -- SERVICE SHARES
<TABLE>
<CAPTION>
PNC
COMPASS SHORT-TERM
SHORT/INTERMEDIATE BOND POST-CLOSING
FUND PORTFOLIO PRO-FORMA
------------------ ---------- ------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............... 4.00%(1) None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)............... None None None
Deferred Sales Load
(as a percentage of redemption proceeds).......... None None None
Redemption Fees..................................... None(2) None None
Exchange Fees....................................... None None None
ANNUAL FUND OPERATING EXPENSES AFTER
FEE WAIVERS AND REIMBURSEMENTS(3):
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fees(4).................................... 0.60% 0.23% 0.30%
Other Operating Expenses(5)......................... 0.25% 0.50% 0.55%
------ ---------- ------
TOTAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(6)................................. 0.85% 0.73% 0.85%
============== ======== =========
</TABLE>
- ---------------
(1) There is no sales charge on certain purchases of the Compass
Short/Intermediate Fund.
(2) The Compass Short/Intermediate Fund imposes a $7 charge for wiring
redemption proceeds.
(3) The investment adviser and service providers for the PNC Short-Term Bond
Portfolio are under no contractual obligation, after the closing on the
Compass Transaction, to waive fees or reimburse expenses, but have informed
the Portfolio that they expect to waive fees and reimburse expenses during
the fiscal year ending September 30, 1996 as necessary to maintain the
Portfolio's total operating expenses at the pro forma level stated in the
table.
(4) Advisory fees (before waivers) are .60% for the Compass Short/Intermediate
Fund. The PNC Short-Term Bond Portfolio and pro forma advisory fees (before
waivers) are .50% of the first $1 billion of the average daily net assets of
the Portfolio, plus .45% of the next $1 billion of the Portfolio's average
daily net assets, plus .425% of the next $1 billion of the Portfolio's
average daily net assets, plus .40% of the Portfolio's average daily net
assets in excess of $3 billion. For its sub-advisory services, the
sub-adviser for this PNC Portfolio is entitled to receive a fee at the
annual rate of .35% of the Portfolio's first $1 billion of average daily net
assets, .30% of its next $1 billion of average daily net assets, .275% of
its next $1 billion of average daily net assets, and .25% of its average
daily net assets in excess of $3 billion. This sub-advisory fee is paid by
the PNC Portfolio's investment adviser and has no effect on the advisory
fees paid by the Portfolio.
(5) Other expenses (before waivers and reimbursements) would be .25%, .61% and
.61%, respectively. Other pro forma expenses include an administration fee
payable to PFPC and PDI at an annual rate of .20% of the first $500 million
of the Portfolio's average daily net assets, .18% of the next $500 million
of the Portfolio's average daily net assets, .16% of the next $1 billion of
the Portfolio's average daily net assets and .15% of the Portfolio's average
daily net assets in excess of $2 billion, and a separate co-administration
fee payable to CCGI at an annual rate of .03% of the Portfolio's average
daily net assets. Other pro forma expenses also include (a) custodial fees
paid to PNC Bank based upon the PNC Portfolio's average gross assets, with a
minimum fee of $1,000, plus out-of-pocket expenses and certain transaction
charges, (b) transfer agency fees payable at the annual rate of .03% of the
average net asset
42
<PAGE> 49
value of the Portfolio's outstanding Service Shares, and (c) shareholder
servicing fees as described under "Comparison of PNC, Compass and
BIT -- Share Structure."
(6) Total Fund Operating Expenses (before waivers and reimbursements) would be
0.85%, 1.11% and 1.11%, respectively.
EXAMPLE:(O)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
PNC
COMPASS SHORT-TERM
SHORT/INTERMEDIATE BOND POST-CLOSING
FUND PORTFOLIO PRO-FORMA
------------------ ---------- ------------
<S> <C> <C> <C>
1 year.............................................. $ 48 $ 7 $ 9
3 years............................................. 66 23 27
5 years............................................. 85 41 47
10 years............................................ 141 91 105
</TABLE>
- ---------------
(O) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
43
<PAGE> 50
COMPASS FIXED INCOME FUND
PNC CORE FIXED INCOME PORTFOLIO -- SERVICE SHARES
<TABLE>
<CAPTION>
COMPASS PNC CORE
FIXED INCOME FIXED INCOME POST-CLOSING
FUND PORTFOLIO* PRO-FORMA
------------ ------------ ------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load on Purchases
(as a percentage of offering price)................. 4.00%(1) None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................. None None None
Deferred Sales Load
(as a percentage of redemption proceeds)............ None None None
Redemption Fees....................................... None(2) None None
Exchange Fees......................................... None None None
ANNUAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(3):
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fees(4)...................................... 0.60% 0.30% 0.30%
Other Operating Expenses(5)........................... 0.25% 0.55% 0.55%
----
TOTAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(6)................................... 0.85% 0.85% 0.85%
====
</TABLE>
- ---------------
* The PNC Core Fixed Income Portfolio is a new investment portfolio with
nominal assets and liabilities that is expected to commence investment
operations in connection with the Compass and BIT Transactions.
(1) There is no sales charge on certain purchases of the Compass Fixed Income
Fund.
(2) The Compass Fixed Income Fund imposes a $7 charge for wiring redemption
proceeds.
(3) The investment adviser and service providers for the PNC Core Fixed Income
Portfolio are under no contractual obligation, after the closing on the
Compass Transaction, to waive fees or reimburse expenses, but have informed
the Portfolio that they expect to waive fees and reimburse expenses during
the fiscal year ending September 30, 1996 as necessary to maintain the
Portfolio's total operating expenses at the pro forma level stated in the
table.
(4) Advisory fees (before waivers) are .60% for the Compass Fixed Income Fund.
The PNC Core Fixed Income Portfolio and pro forma advisory fees (before
waivers) are .50% of the first $1 billion of the average daily net assets of
the Portfolio, plus .45% of the next $1 billion of the Portfolio's average
daily net assets, plus .425% of the next $1 billion of the Portfolio's
average daily net assets, plus .40% of the Portfolio's average daily net
assets in excess of $3 billion. For its sub-advisory services, the
sub-adviser for this PNC Portfolio is entitled to receive a fee at the
annual rate of .35% of the Portfolio's first $1 billion of average daily net
assets, .30% of its next $1 billion of average daily net assets, .275% of
its next $1 billion of average daily net assets, and .25% of its average
daily net assets in excess of $3 billion. This sub-advisory fee is paid by
the PNC Portfolio's investment adviser and has no effect on the advisory
fees paid by the Portfolio.
(5) Other expenses (before waivers and reimbursements) would be .25%, .60% and
.60%, respectively. Other PRO forma expenses include an administration fee
payable to PFPC and PDI at an annual rate of .20% of the first $500 million
of the Portfolio's average daily net assets, .18% of the next $500 million
of the Portfolio's average daily net assets, .16% of the next $1 billion of
the Portfolio's average daily net assets and .15% of the Portfolio's average
daily net assets in excess of $2 billion, and a separate co-administration
fee payable to CCGI at an annual rate of .03% of the Portfolio's average
daily net assets. Other pro forma expenses also include (a) custodial fees
paid to PNC Bank based upon the PNC Portfolio's average gross assets, with a
minimum fee of $1,000, plus out-of-pocket expenses and certain
44
<PAGE> 51
transaction charges, (b) transfer agency fees payable at the annual rate of
.03% of the average net asset value of the Portfolio's outstanding Service
Shares, and (c) shareholder servicing fees as described under "Comparison of
PNC, Compass and BIT -- Share Structure."
(6) Total Fund Operating Expenses (before waivers and reimbursements) would be
0.85%, 1.10% and 1.10%, respectively.
EXAMPLE:(O)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
COMPASS PNC CORE
FIXED INCOME FIXED INCOME POST-CLOSING
FUND PORTFOLIO* PRO-FORMA
------------ ------------ ------------
<S> <C> <C> <C>
1 year................................................ $ 48 $ 9 $ 9
3 years............................................... 66 27 27
5 years............................................... 85 47 47
10 years.............................................. 141 105 105
</TABLE>
- ---------------
(O) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
* See first footnote above.
45
<PAGE> 52
COMPASS INTERNATIONAL FIXED INCOME FUND
PNC INTERNATIONAL FIXED INCOME PORTFOLIO -- SERVICE SHARES
<TABLE>
<CAPTION>
COMPASS PNC
INTERNATIONAL INTERNATIONAL
FIXED INCOME FIXED INCOME POST-CLOSING
FUND PORTFOLIO* PRO-FORMA
------------ ------------ ------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load on Purchases
(as a percentage of offering price)................. 4.00%(1) None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................. None None None
Deferred Sales Load
(as a percentage of redemption proceeds)............ None None None
Redemption Fees....................................... None(2) None None
Exchange Fees......................................... None None None
ANNUAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(3):
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fees(4)...................................... 0.80% 0.43% 0.55%
Other Operating Expenses(5)........................... 0.44% 0.65% 0.73%
---- ----
TOTAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(6)................................... 1.24% 1.08% 1.28%
==== ====
</TABLE>
- ---------------
* The PNC International Fixed Income Portfolio currently has nominal assets
and liabilities and is expected to commence investment operations in
connection with the Compass Transaction.
(1) There is no sales charge on certain purchases of the Compass International
Fixed Income Portfolio.
(2) The Compass International Fixed Income Fund imposes a $7 charge for wiring
redemption proceeds.
(3) The investment adviser and service providers for the PNC International Fixed
Income Portfolio are under no contractual obligation, after the closing on
the Compass Transaction, to waive fees or reimburse expenses, but have
informed the Portfolio that they expect to waive fees and reimburse expenses
during the fiscal year ending September 30, 1996 as necessary to maintain
the Portfolio's total operating expenses at the pro forma level stated in
the table.
(4) Advisory fees (before waivers) are .80% for the Compass International Fixed
Income Fund. The PNC International Fixed Income Portfolio and pro forma
advisory fees (before waivers) are .55% of the first $1 billion of the
average daily net assets of the Portfolio, plus .50% of the next $1 billion
of the Portfolio's average daily net assets, plus .475% of the next $1
billion of the Portfolio's average daily net assets, plus .45% of the
Portfolio's average daily net assets in excess of $3 billion. For its
sub-advisory services, the sub-adviser for this PNC Portfolio is entitled to
receive a fee at the annual rate of .40% of the Portfolio's first $1 billion
of average daily net assets, .35% of its next $1 billion of average daily
net assets, .325% of its next $1 billion of average daily net assets, and
.30% of its average daily net assets in excess of $3 billion. This
sub-advisory fee is paid by the PNC Portfolio's investment adviser and has
no effect on the advisory fees paid by the Portfolio.
(5) Other expenses (before waivers and reimbursements) would be .44%, .75% and
.78%, respectively. Other pro forma expenses include an administration fee
payable to PFPC and PDI at an annual rate of .20% of the first $500 million
of the Portfolio's average daily net assets, .18% of the next $500 million
of the Portfolio's average daily net assets, .16% of the next $1 billion of
the Portfolio's average daily net assets and .15% of the Portfolio's average
daily net assets in excess of $2 billion, and a separate co-administration
fee payable to CCGI at an annual rate of .03% of the Portfolio's average
daily net assets. Other pro forma expenses also include (a) custodial fees
paid to PNC Bank based upon the PNC Portfolio's average gross assets, with a
minimum fee of $1,000, plus out-of-pocket expenses and certain
46
<PAGE> 53
transaction charges, (b) transfer agency fees payable at the annual rate of
.03% of the average net asset value of the Portfolio's outstanding Service
Shares, and (c) shareholder servicing fees as described under "Comparison of
PNC, Compass and BIT -- Share Structure."
(6) Total Fund Operating Expenses (before waivers and reimbursements) would be
1.24%, 1.30% and 1.33%, respectively.
EXAMPLE:(O)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
COMPASS PNC
INTERNATIONAL INTERNATIONAL
FIXED INCOME FIXED INCOME POST-CLOSING
FUND PORTFOLIO* PRO-FORMA
------------ ------------ ------------
<S> <C> <C> <C>
1 year................................................ $ 52 $ 11 $ 13
3 years............................................... 78 34 41
5 years............................................... 105 60 70
10 years.............................................. 184 132 155
</TABLE>
- ---------------
(O) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
* See first footnote above.
47
<PAGE> 54
BIT SHORT DURATION PORTFOLIO
PNC SHORT-TERM BOND PORTFOLIO -- INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
PNC
BIT SHORT-TERM
SHORT DURATION BOND POST-CLOSING
PORTFOLIO PORTFOLIO PRO-FORMA
-------------- ---------- ------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load on Purchases
(as a percentage of offering price)................. None None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................. None None None
Deferred Sales Load
(as a percentage of redemption proceeds)............ None None None
Redemption Fees....................................... None None None
Exchange Fees......................................... None None None
ANNUAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(1):
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fees(2)...................................... 0.30% 0.23% 0.30%
Other Operating Expenses(3)........................... 0.27% 0.20% 0.25%
------ ---------- ------
TOTAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(4)................................... 0.57% 0.43% 0.55%
=========== ======== =========
</TABLE>
- ---------------
(1) The investment adviser and service providers for the PNC Short-Term Bond
Portfolio are under no contractual obligation, after the closing on the BIT
Transaction, to waive fees or reimburse expenses, but have informed the
Portfolio that they expect to waive fees and reimburse expenses during the
fiscal year ending September 30, 1996 as necessary to maintain the
Portfolio's total operating expenses at the pro forma level stated in the
table.
(2) Advisory fees (before waivers) are .30% for the BIT Short Duration
Portfolio. The PNC Short-Term Bond Portfolio and pro forma advisory fees
(before waivers) are .50% of the first $1 billion of the average daily net
assets of the Portfolio, plus .45% of the next $1 billion of the Portfolio's
average daily net assets, plus .425% of the next $1 billion of the
Portfolio's average daily net assets, plus .40% of the Portfolio's average
daily net assets in excess of $3 billion. For its sub-advisory services, the
sub-adviser for this PNC Portfolio is entitled to receive a fee at the
annual rate of .35% of the Portfolio's first $1 billion of average daily net
assets, .30% of its next $1 billion of average daily net assets, .275% of
its next $1 billion of average daily net assets, and .25% of its average
daily net assets in excess of $3 billion. This sub-advisory fee is paid by
the PNC Portfolio's investment adviser and has no effect on the advisory
fees paid by the Portfolio.
(3) Other expenses (before waivers and reimbursements) would be .27%, .31% and
.31%, respectively. Other pro forma expenses include an administration fee
payable to PFPC and PDI at an annual rate of .20% of the first $500 million
of the Portfolio's average daily net assets, .18% of the next $500 million
of the Portfolio's average daily net assets, .16% of the next $1 billion of
the Portfolio's average daily net assets and .15% of the Portfolio's average
daily net assets in excess of $2 billion, and a separate co-administration
fee payable to CCGI at an annual rate of .03% of the Portfolio's average
daily net assets. Other pro forma expenses also include (a) custodial fees
paid to PNC Bank based upon the PNC Portfolio's average gross assets, with a
minimum fee of $1,000, plus out-of-pocket expenses and certain transaction
charges and (b) transfer agency fees payable at the annual rate of .03% of
the average net asset value of the Portfolio's outstanding Institutional
Shares.
(4) Total Fund Operating Expenses (before waivers and reimbursements) would be
.57%, .81% and .81%, respectively.
48
<PAGE> 55
EXAMPLE:(O)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
PNC
BIT SHORT-TERM
SHORT DURATION BOND POST-CLOSING
PORTFOLIO PORTFOLIO PRO-FORMA
-------------- ---------- ------------
<S> <C> <C> <C>
1 year................................................ $ 6 $ 4 $ 6
3 years............................................... 18 14 18
5 years............................................... 32 24 31
10 years.............................................. 72 54 69
</TABLE>
- ---------------
(O) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
49
<PAGE> 56
BIT CORE FIXED INCOME PORTFOLIO
PNC CORE FIXED INCOME PORTFOLIO -- INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
BIT CORE PNC CORE
FIXED INCOME FIXED INCOME POST-CLOSING
PORTFOLIO PORTFOLIO* PRO-FORMA
------------ ------------ ------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load on Purchases
(as a percentage of offering price)................. None None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................. None None None
Deferred Sales Load
(as a percentage of redemption proceeds)............ None None None
Redemption Fees....................................... None None None
Exchange Fees......................................... None None None
ANNUAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(1):
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fees(2)...................................... 0.30% 0.30% 0.30%
Other Operating Expenses(3)........................... 0.25% 0.25% 0.25%
---- ---- ----
TOTAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(4)................................... 0.55% 0.55% 0.55%
==== ==== ====
</TABLE>
- ---------------
* The PNC Core Fixed Income Portfolio is a new investment portfolio with
nominal assets and liabilities that is expected to commence investment
operations in connection with the Compass and BIT Transactions.
(1) The investment adviser and service providers for the PNC Core Fixed Income
Portfolio are under no contractual obligation, after the closing on the BIT
Transaction, to waive fees or reimburse expenses, but have informed the
Portfolio that they expect to waive fees and reimburse expenses during the
fiscal year ending September 30, 1996 as necessary to maintain the
Portfolio's total operating expenses at the pro forma level stated in the
table.
(2) Advisory fees (before waivers) are .35% for the BIT Core Fixed Income
Portfolio. The PNC Core Fixed Income Portfolio and pro forma advisory fees
(before waivers) are .50% of the first $1 billion of the average daily net
assets of the Portfolio, plus .45% of the next $1 billion of the Portfolio's
average daily net assets, plus .425% of the next $1 billion of the
Portfolio's average daily net assets, plus .40% of the Portfolio's average
daily net assets in excess of $3 billion. For its sub-advisory services, the
sub-adviser for this PNC Portfolio is entitled to receive a fee at the
annual rate of .35% of the Portfolio's first $1 billion of average daily net
assets, .30% of its next $1 billion of average daily net assets, .275% of
its next $1 billion of average daily net assets, and .25% of its average
daily net assets in excess of $3 billion. This sub-advisory fee is paid by
the PNC Portfolio's investment adviser and has no effect on the advisory
fees paid by the Portfolio.
(3) Other expenses (before waivers and reimbursements) would be .20%, .35% and
.35%, respectively. Other pro forma expenses include an administration fee
payable to PFPC and PDI at an annual rate of .20% of the first $500 million
of the Portfolio's average daily net assets, .18% of the next $500 million
of the Portfolio's average daily net assets, .16% of the next $1 billion of
the Portfolio's average daily net assets and .15% of the Portfolio's average
daily net assets in excess of $2 billion, and a separate co-administration
fee payable to CCGI at an annual rate of .03% of the Portfolio's average
daily net assets. Other pro forma expenses also include (a) custodial fees
paid to PNC Bank based upon the PNC Portfolio's average gross assets, with a
minimum fee of $1,000, plus out-of-pocket expenses and certain transaction
charges and (b) transfer agency fees payable at the annual rate of .03% of
the average net asset value of the Portfolio's outstanding Institutional
Shares.
50
<PAGE> 57
(4) Total Fund Operating Expenses (before waivers and reimbursements) would be
.55%, .85% and .85%, respectively.
EXAMPLE:(O)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
BIT CORE PNC CORE
FIXED INCOME FIXED INCOME POST-CLOSING
PORTFOLIO PORTFOLIO* PRO-FORMA
------------ ------------ ------------
<S> <C> <C> <C>
1 year................................................ $ 6 $ 6 $ 6
3 years............................................... 18 18 18
5 years............................................... 31 31 31
10 years.............................................. 69 69 69
</TABLE>
- ---------------
(O) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
* See first footnote above.
51
<PAGE> 58
BIT MULTI-SECTOR MORTGAGE SECURITIES PORTFOLIO III
PNC MULTI-SECTOR MORTGAGE SECURITIES PORTFOLIO III -- INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
BIT
MULTI-SECTOR PNC
MORTGAGE MULTI-SECTOR
SECURITIES MORTGAGE
PORTFOLIO SECURITIES POST-CLOSING
III PORTFOLIO III* PRO-FORMA
------------ -------------- ------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load on Purchases
(as a percentage of offering price).................. None None None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price).................. None None None
Deferred Sales Load
(as a percentage of redemption proceeds)............. None None None
Redemption Fees........................................ None None None
Exchange Fees.......................................... None None None
ANNUAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(1):
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Advisory Fees(2)....................................... 0.25% 0.25% 0.25%
Other Operating Expenses(3)............................ 0.12% 0.12% 0.12%
------ ------ ------
TOTAL FUND OPERATING EXPENSES AFTER FEE WAIVERS AND
REIMBURSEMENTS(4).................................... 0.37% 0.37% 0.37%
========= ========== =========
</TABLE>
- ---------------
* The PNC Multi-Sector Mortgage Securities Portfolio III is a new investment
portfolio with nominal assets and liabilities that is expected to commence
investment operations in connection with the BIT Transaction.
(1) The investment adviser and service providers for the PNC Multi-Sector
Mortgage Securities Portfolio III are under no contractual obligation, after
the closing on the BIT Transaction, to waive fees or reimburse expenses, but
have informed the Portfolio that they expect to waive fees and reimburse
expenses during the current fiscal year ending September 30, 1996 as
necessary to maintain the Portfolio's total operating expenses at the pro
forma level stated in the table.
(2) The BIT Multi-Sector Mortgage Securities Portfolio III, PNC Multi-Sector
Mortgage Securities Portfolio III and pro forma advisory fees (before
waivers) are .25%.
(3) Other expenses (before waivers and reimbursements) would be .29%, .29% and
.29%, respectively. Other pro forma expenses include an administration fee
payable to PFPC and PDI at an annual rate of .20% of the first $500 million
of the Portfolio's average daily net assets, .18% of the next $500 million
of the Portfolio's average daily net assets, .16% of the next $1 billion of
the Portfolio's average daily net assets and .15% of the Portfolio's average
daily net assets in excess of $2 billion, and a separate co-administration
fee payable to CCGI at an annual rate of .03% of the Portfolio's average
daily net assets. Other pro forma expenses also include (a) custodial fees
paid to PNC Bank based upon the PNC Portfolio's average gross assets, with a
minimum fee of $1,000, plus out-of-pocket expenses and certain transaction
charges and (b) transfer agency fees payable at the annual rate of .03% of
the average net asset value of the Portfolio's outstanding Shares.
(4) Total Fund Operating Expenses (before waivers and reimbursements) would be
.54%, .54% and .54%, respectively.
52
<PAGE> 59
EXAMPLE:(O)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
BIT
MULTI-SECTOR PNC
MORTGAGE MULTI-SECTOR
SECURITIES MORTGAGE
PORTFOLIO SECURITIES POST-CLOSING
III PORTFOLIO III* PRO-FORMA
------------ -------------- ------------
<S> <C> <C> <C>
1 year................................................. $ 6 $ 6 $ 6
3 years................................................ 19 19 19
5 years................................................ 33 33 33
10 years............................................... 75 75 75
</TABLE>
- ---------------
(O) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS
HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
ANNUAL RETURN; ACTUAL RETURN MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
* See first footnote above.
53
<PAGE> 60
COMPARISON OF PNC, COMPASS AND BIT
INVESTMENT OBJECTIVES AND POLICIES. The investment objectives and policies
of the PNC Portfolios are generally similar to those of the corresponding
Compass Portfolios and BIT Portfolios. There are, however, differences as
discussed above under "Summary -- Overview of PNC, Compass and BIT." Other
differences in the investment objectives, investment policies and those
investment limitations that are fundamental (that is, limitations that may be
changed only by shareholder vote) are discussed in Appendix III to this Combined
Proxy Statement/Prospectus. Each PNC Portfolio's investment objective (except
the investment objective of PNC Multi-Sector Mortgage Securities Portfolio III)
may be changed by the PNC Board of Trustees without a shareholder vote. In
contrast, the Compass and BIT Portfolios may not change their investment
objectives without a vote of the holders of a majority of the outstanding shares
of the Portfolio involved.
INVESTMENT ADVISERS AND OTHER SERVICE PROVIDERS. After the consummation of
the Compass and BIT Transactions, affiliates of PNC Bank Corp. will serve as
investment adviser and sub-advisers to the respective PNC Portfolios, except
that Morgan Grenfell will serve as sub-adviser to the PNC International Fixed
Income Portfolio as stated under "Summary -- Overview of PNC, Compass and BIT."
Currently, Midlantic provides investment advisory services to the Compass
Portfolios. Wellington Management Company ("Wellington") serves as sub-adviser
to the Compass Equity Income and Growth Funds; Seligman Henderson Co.
("Seligman") serves as sub-adviser to the Compass International Equity Fund;
Wall Street Associates ("WSA") serves as sub-adviser to the Compass Small
Company Fund; and Morgan Grenfell serves as sub-adviser to the International
Fixed Income Fund. BlackRock is the investment adviser for each of the BIT
Portfolios.
The other service providers for the Compass Portfolios, BIT Portfolios and
the PNC Portfolios are set forth in the following table.
OTHER SERVICE PROVIDERS FOR COMPASS PORTFOLIOS, BIT PORTFOLIOS AND PNC
PORTFOLIOS
<TABLE>
<CAPTION>
COMPASS PORTFOLIOS BIT PORTFOLIOS PNC PORTFOLIOS
------------------------- ------------------------- -------------------------
<S> <C> <C> <C>
Distributor SEI Financial Services Provident Distributors, Provident Distributors,
Company Inc. Inc.
Administrator SEI Financial Management PFPC Inc. PFPC Inc., Compass
Corporation Capital Group, Inc. and
Provident Distributors,
Inc.
Transfer Agent State Street Bank & Trust PFPC Inc. PFPC Inc.
Co.
Custodian Citibank, N.A. PNC Bank, National PNC Bank, National
Association Association
Independent Coopers & Lybrand, L.L.P. Deloitte & Touche LLP Coopers & Lybrand, L.L.P.
Accountants
</TABLE>
The trustees, directors and officers of PNC, Compass and BIT are different
as set forth in their respective prospectuses and statements of additional
information. As of the date of this Combined Proxy Statement/Prospectus, PNC's
management expects that one current Compass Trustee will be nominated to the PNC
Board of Trustees, subject to election by the PNC shareholders before the
Effective Time of the Compass Transaction.
Additional information on the fees and expenses of the PNC Portfolios,
Compass Portfolios and BIT Portfolio (including the investment advisory,
sub-advisory, administration, transfer agency and custodial fees payable by the
PNC Portfolios to PAMG and its affiliates) is included above under "Expense
Summaries of PNC, Compass and BIT."
SHARE STRUCTURE. PNC, Compass and BIT are each registered as open-end
management investment companies under the 1940 Act. After the Compass and BIT
Transactions, PNC expects to offer twenty-nine separate investment portfolios.
Currently, Compass offers sixteen portfolios, and BIT has three portfolios that
54
<PAGE> 61
have commenced investment operations. After the respective Transactions, Compass
and BIT each expect to file a Form N-8F with the Securities and Exchange
Commission in order to deregister as an open-end management investment company
and to be terminated under state law.
Compass and PNC are each organized as a Massachusetts business trust, and
each is subject to the provisions of its Declaration of Trust originally dated
October 1, 1987 and December 22, 1988, respectively. BIT is organized as a
Maryland corporation under Articles of Incorporation originally dated November
27, 1991. Shares of the Compass Portfolios have a par value of $.00001 per
share, shares of the BIT Portfolios have a par value of $.0001 per share, and
shares of the PNC Portfolios have a par value of $.001 per share. Compass and
PNC are authorized to issue an unlimited number of shares in each of their
portfolios; BIT is authorized to issue 100 million shares in each of the BIT
Portfolios. Shares of the Compass Portfolios, BIT Portfolios and PNC Portfolios
are entitled to one vote for each full share held and fractional votes for
fractional shares held, and will vote in the aggregate and not by portfolio or
class except as otherwise required by law or when portfolio or class voting is
permitted by the governing Board. Shares of the Compass Portfolios, BIT
Portfolios and PNC Portfolios do not have preemptive or cumulative voting
rights, and only such conversion and exchange rights as the governing Board of
Compass, BIT or PNC, respectively, may grant in its discretion. When issued for
payment as described in their respective prospectuses, shares of the Compass
Portfolios, BIT Portfolios and PNC Portfolios are fully paid and non-assessable
by such entities, except as required under Massachusetts law in the case of the
Compass and PNC Portfolios.
The governing Boards of Compass and BIT have authorized the issuance of one
class of shares in each of the respective Compass and BIT Portfolios. Each of
the PNC Portfolios offers four classes of shares ("Service," "Institutional,"
"Series A Investor" and "Series B Investor"), except the PNC Municipal Money
Market Portfolio, New Jersey Municipal Money Market Portfolio, Pennsylvania
Municipal Money Market Portfolio and Government Money Market Portfolio, which
each offer three classes of shares ("Service," "Institutional" and "Series A
Investor"), and the PNC Multi-Sector Mortgage Securities Portfolio III, which
offers one class of shares ("Institutional").
The shares of each class in a PNC Portfolio represent equal pro rata
interests in the Portfolio, except that they bear different expenses which
reflect differences in their service and distribution arrangements. Service
Shares bear the expense of fees at an annual rate not to exceed .15% of the
average daily net asset value of each PNC Portfolio's outstanding Service
Shares. These fees are paid to institutions (including PNC Bank) that render
support services to the beneficial owners of Service Shares. These services may
include processing purchase and redemption requests for Service Shares and
placing orders with PNC's transfer agent or distributor; processing dividend
payments; providing sub-accounting with respect to Service Shares or the
information necessary for sub-accounting; and other similar services. Service
Shares also bear the expense of a separate service fee at an annual rate not to
exceed .15% of the average daily net asset value of each Portfolio's outstanding
Service Shares for other shareholder support activities provided by institutions
such as responding to inquiries from investors relating to their investments in
Service Shares; providing information periodically to investors showing their
positions in Service Shares; and other similar shareholder liaison services.
Institutional Shares do not bear these shareholder servicing fees, and Investor
Shares bear separate charges in connection with their shareholder servicing and
distribution arrangements. In addition, the respective share classes bear
different transfer agency fees. As a result of these different expenses, the
performance on the Institutional Shares of a PNC Portfolio will generally be
higher than that of the Portfolio's Service Shares, and the performance on the
Portfolio's Service Shares will generally be higher than that of the Portfolio's
Investor Shares. Subject to certain exemptions, Series A Investor Shares of the
PNC Portfolios (other than the money market funds) are sold with a front-end
sales load and Series B Investor Shares are sold with a contingent deferred
sales load. Service Shares and Institutional Shares of all PNC Portfolios are
sold without a sales load. For further information regarding PNC's share
classes, contact PNC at 1-800-422-6538 or your service representative.
PURCHASE, REDEMPTION AND DIVIDEND POLICIES. The purchase, redemption and
dividend policies of the Compass Portfolios, BIT Portfolios and PNC Portfolios
are discussed above under "Summary -- Overview of PNC, Compass and BIT" and
below in Appendix IV to this Combined Proxy Statement/Prospectus.
55
<PAGE> 62
INTERIM COMPASS ADVISORY AND SUB-ADVISORY AGREEMENTS
The Compass Agreement provides that the Effective Time of the Compass
Transaction will occur contemporaneously with, or after, the consummation of the
Midlantic/PNC Bank Merger. As stated above, because the Midlantic/PNC Bank
Merger will result in a change in control of Midlantic, each of the existing
investment advisory and sub-advisory agreements for the Compass Portfolios with
Midlantic and any sub-adviser will, by their terms, automatically terminate on
the date the Midlantic/PNC Bank Merger occurs. The Compass Agreement provides,
therefore, that if the Midlantic/PNC Bank Merger and the Compass Transaction do
not occur contemporaneously, subject to approval of the Compass Agreement by its
shareholders, each Compass Portfolio will enter into interim investment advisory
and (for certain Compass Portfolios) sub-advisory agreements (the "Interim
Agreements") for the period between the date of the Midlantic/PNC Bank Merger
and the Effective Time of the Compass Transaction (the "Interim Period").
In particular, it is contemplated that the firms that provide investment
advisory and sub-advisory services for the PNC Portfolios will provide similar
services to the Compass Portfolios during the Interim Period under the Interim
Agreements as follows:
<TABLE>
<CAPTION>
NAME OF INVESTMENT ADVISER/
NAME OF COMPASS PORTFOLIO SUB-ADVISER FOR INTERIM PERIOD
- ----------------------------------- ---------------------------------------------------------
<S> <C>
Municipal Money Fund PIMC
New Jersey Municipal Money Fund PIMC
Pennsylvania Municipal Money Fund PIMC
Cash Reserve Fund PIMC
U.S. Treasury Fund PIMC
Municipal Bond Fund BlackRock
New Jersey Municipal Bond Fund BlackRock
Pennsylvania Municipal Bond Fund BlackRock
Equity Income Fund PAMG(adviser)/PCM(sub-adviser)
Growth Fund PAMG(adviser)/PEAC(sub-adviser)
Small Company Fund PAMG(adviser)/PEAC(sub-adviser)
International Equity Fund PAMG(adviser)/PCM(sub-adviser)
Balanced Fund PCM and BlackRock (co-advisers)
Short/Intermediate Fund BlackRock
Fixed Income Fund BlackRock
International Fixed Income Fund PAMG(adviser)/Morgan Grenfell (sub-adviser)
</TABLE>
The investment advisory and sub-advisory fee rates stated in the Interim
Agreements will be the same, and the other provisions of the Interim Agreements
will be substantially the same, as those in the current investment and
sub-advisory agreements for the Compass Portfolios. The only material difference
between the current and Interim Agreements will be the contracting parties.
Copies of the proposed Interim Agreements are attached as Appendix V. In
the Interim Agreements, each investment adviser agrees, subject to the
supervision of the Compass Board of Trustees, to provide a continuous investment
program for the Compass Portfolio involved and to determine from time to time
what securities and other investments will be purchased, retained or sold in
accordance with that Portfolio's investment objectives, policies and
restrictions. An investment adviser's responsibilities include, but are not
limited to, placing purchase and sale orders for portfolio transactions;
maintaining books and records with respect to a Portfolio's securities
transactions; and furnishing periodic and special reports to the Compass Board
of Trustees as requested. The Interim Agreements further provide that a
Portfolio's investment adviser will pay all expenses incurred by it in
connection with its advisory activities, other than the cost of securities
(including brokerage commissions, if any) purchased for a Portfolio.
With respect to certain Compass Portfolios, some of an investment adviser's
responsibilities under the Interim Agreements will be performed by sub-advisers
as indicated in the above table. In particular, PCM
56
<PAGE> 63
will, subject to supervision by PAMG and the Compass Board of Trustees, manage
the investment operations of the Compass Equity Income Fund and International
Equity Fund during the Interim Period and determine the composition of each of
these Portfolios, including the purchase, retention and disposition of
securities in accordance with each Portfolio's investment objective, policies
and restrictions. Similarly, PEAC, with respect to the Compass Growth Fund and
Small Company Fund, and Morgan Grenfell, with respect to the Compass
International Fixed Income, will, subject to supervision by PAMG and the Compass
Board of Trustees, furnish an investment program in respect of, and make
decisions for, all assets of these portfolios, and place all orders for the
purchase and sale of securities on behalf of the portfolios.
Under the Interim Agreements, in placing orders with brokers and dealers,
the investment advisers and sub-advisers are to attempt to obtain prompt
execution of orders at the most favorable price. Consistent with this
obligation, when the execution and price offered by two or more brokers or
dealers are comparable, an investment adviser or sub-adviser may, in its
discretion, purchase and sell portfolio securities to and from brokers and
dealers that provide research advice and other services. These brokerage and
research services might consist of reports and statistics on specific companies
of industries, general summaries of groups of stocks or bonds and their
comparative earnings and yields, or broad overviews of the securities markets
and the economy.
Supplementary research information so received is in addition to, and not
in lieu of, services required to be performed by an investment adviser or
sub-adviser, and does not reduce the advisory fees payable by the Compass
Portfolios. It is possible that certain of the supplementary research or other
services received will primarily benefit one or more other investment companies
or other accounts for which an investment adviser or sub-adviser exercises
investment discretion. Conversely, the Compass Portfolios may be the primary
beneficiary of the research or services received as a result of portfolio
transactions effected for such other account or investment company.
Investment decisions for the Compass Portfolios and for other investment
accounts managed by the investment advisers and sub-advisers during the Interim
Period will be made independently of each other in light of differing
conditions. However, the same investment decision may be made for two or more of
such accounts. In such cases, simultaneous transactions are inevitable.
Purchases or sales are then allocated in a manner believed by the investment
adviser or sub-adviser to be equitable to each such account. While in some cases
this practice could have a detrimental effect on the price or value of the
security as far as a Compass Portfolio is concerned, in other cases it may be
beneficial to the portfolio. To the extent permitted by law, an investment
adviser or sub-adviser may aggregate the securities to be sold or purchased for
the Compass Portfolios with those to be sold or purchased for other investment
companies or accounts in executing transactions. Portfolio securities will not
be purchased from or sold to the investment advisers, sub-advisers, or any
affiliated person (as defined in the 1940 Act) during the Interim Period.
If in any fiscal year the aggregate expenses of any Compass Portfolio
exceeds the expense limitation of any state having jurisdiction over Compass,
the Interim Agreements provide that the Portfolio's investment adviser will
reimburse the Portfolio for a portion of such excess expenses equal to such
excess times the ratio of the fees otherwise payable by the Portfolio to the
investment adviser to the aggregate fees otherwise payable by the Portfolio to
the investment adviser and to the Portfolio's administrator under its
administration agreement. The obligation of the investment adviser to reimburse
a Portfolio is limited in any fiscal year to the amount of its fee for such
fiscal year, provided that an investment adviser will reimburse a Portfolio for
such proportion of such excess expenses regardless of the amount of fees paid to
it during such fiscal year to the extent that the securities regulations of any
state having jurisdiction over Compass so require. As of the date hereof, the
most restrictive expense limitation applicable to a Compass Portfolio limits its
aggregate annual expenses (as defined by applicable regulations) to 2 1/2% of
the first $30 million of its average net assets, 2% of the next $70 million of
its average net assets, and 1 1/2% of its remaining net assets.
An investment adviser or sub-adviser will not be liable for any error of
judgment or mistake of law or for any loss suffered by a Compass Portfolio in
connection with the performance of its agreements, except a loss arising from a
breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from wilful misfeasance, bad faith or gross
negligence on the part of the investment adviser or sub-
57
<PAGE> 64
adviser in the performance of its duties or from reckless disregard by it of its
obligations and duties under the agreements.
Unless sooner terminated, the Interim Agreement for a Compass Portfolio
will continue in effect until the Effective Time of the Compass Transaction for
that Portfolio or, if sooner, July 31, 1996. If the Effective Time of the
Compass Transaction has not occurred, the Interim Agreements may thereafter be
renewed for successive periods with respect to a Compass Portfolio if
specifically approved at least annually (a) by the vote of a majority of those
members of the Compass Board of Trustees who are not parties to the agreements
or interested persons of any party to the agreements, cast in person at a
meeting called for the purpose of voting on such approval, and (b) by the vote
of a majority of the Compass Board of Trustees or by the vote of a majority of
all votes attributable to the outstanding shares of the Portfolio.
The Interim Agreements will terminate upon their assignment (as defined in
the 1940 Act). In addition, the Interim Agreements may be terminated with
respect to any Compass Portfolio by the Compass Board of Trustees, by vote of a
majority of the outstanding shares of that Portfolio, by the investment adviser
or, in the case of an Interim Sub-Advisory Agreement, by either the investment
adviser or sub-adviser upon notice as stated in the particular agreement.
The following table shows (i) the current investment adviser/sub-adviser of
each of the Compass Portfolios, (ii) the current contractual fee rates for these
Portfolios, which will be the same throughout the Interim Period until the
Effective Time of the Compass Transaction, (iii) the advisory/sub-advisory fees
actually paid by the Compass Portfolios for their last fiscal year net of
waivers, and (iv) the effective rate of advisory fees for the Portfolios for
their last fiscal year net of waivers. All fee rates are annualized, and are
computed daily and payable monthly based on a Portfolio's average daily net
assets.
58
<PAGE> 65
COMPASS INVESTMENT ADVISORY FEE INFORMATION
<TABLE>
<CAPTION>
ADVISORY/ EFFECTIVE RATE
CURRENT SUB-ADVISORY OF ADVISORY/
CURRENT CONTRACTUAL FEES FOR SUB-ADVISORY FEES
INVESTMENT ADVISORY/ FISCAL YEAR FOR FISCAL YEAR
NAME OF COMPASS ADVISER/ SUB-ADVISORY ENDED 2/28/95 ENDED 2/28/95
PORTFOLIO SUB-ADVISER FEE RATE* (NET OF WAIVERS)* (NET OF WAIVERS)*
- --------------------- ------------- ------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Cash Reserve Fund.... Mid(1) .35% $1,494,954 .35%
Municipal Money
Fund............... Mid(1) .40% $179,677 .40%
New Jersey Municipal
Money Fund......... Mid(1) .40% $158,240 .40%
Pennsylvania
Municipal Money
Fund............... Mid(1) .40% $109,047 .28%
U.S. Treasury Fund... Mid(1) .35% $1,259,186 .35%
Municipal Bond
Fund............... Mid(1) .60% $166,647 .51%
New Jersey Municipal
Bond Fund.......... Mid(1) .60% $607,485 .60%
Pennsylvania
Municipal Bond
Fund............... Mid(1) .60% $67,344 .36%
Short/Intermediate
Fund............... Mid(1) .60% $1,360,255 .60%
Fixed Income Fund.... Mid(1) .60% $1,510,610 .60%
International Fixed
Income Fund........ Mid(1)/MGIS(2) .80%/.40%(6) $361,620/$180,759 .80%/.40%
Equity Income Fund... Mid(1)/WMC(3) .70%/.40%(6) $1,980,970/$784,044 .70%/.28%
Growth Fund.......... Mid(1)/WMC(3) .70%/.325%(6) $939,431/$355,351 .70%/.25%
Small Company Fund... Mid(1)/WSA(4) .90%/.50%(6) $217,501/$120,819 .90%/.50%
International Equity
Fund............... Mid(1)/SH(5) .90%/.45%(6) $311,314/$155,647 .90%/.45%
Balanced Fund........ Mid(1) .70% $37,962 .37%
</TABLE>
- ---------------
* Sub-advisory fees are paid by Midlantic and have no effect on the advisory
fees paid by each Compass Portfolio.
(1) Midlantic Bank, N.A.
(2) Morgan Grenfell Investment Services Limited ("Morgan Grenfell").
(3) Wellington Management Company ("Wellington").
(4) Wall Street Associates ("WSA"). (Note that sub-advisory fees listed on this
line were paid to a former sub-adviser to the Small Company Fund, formerly
the Small Cap Value Fund.)
(5) Seligman Henderson Co. ("Seligman").
(6) This percentage represents the maximum sub-advisory fee rate. The full
sub-advisory fee rate schedules are as follows: International Fixed Income
Fund -- .40% of average daily net assets up to $75 million and .35% of the
remainder; Equity Income Fund -- .40% of average daily net assets up to
$100 million, .30% of the next $100 million and .25% of average daily net
assets over $200 million; Growth Fund -- .325% of average daily net assets
up to $50 million, .225% of the next $100 million, .20% of the next $350
million and .15% of average daily net assets over $500 million; Small
Company Fund -- .50% of all average daily net assets; and International
Equity Fund -- .45% of average daily net assets up to $100 million and .40%
of the remainder.
During the fiscal year ended February 28, 1995 the Compass Portfolios
purchased portfolio securities for a total of $1,000,000 and sold portfolio
securities for a total of $1,000,000 to an affiliate of PNC Bank Corp. acting as
dealer. During the seven-month period ended September 30, 1995, the Compass
Portfolios purchased portfolio securities for a total of $7,730,035 from, and
sold portfolio securities for a total of
59
<PAGE> 66
$2,607,200 to, that dealer. In addition, during its last fiscal year, the
Compass Cash Reserve Fund held obligations issued by affiliates of PNC Bank
Corp. with an aggregate principal amount of $30,000,000. As of October 18, 1995,
the Compass Balanced Fund held 7,000 common shares of PNC Bank Corp., and the
Compass Municipal Money Market Fund and Pennsylvania Municipal Money Market Fund
held certain municipal obligations guaranteed by an affiliate of PNC Bank Corp.
with an aggregate principal amount of $1,200,000 and $2,970,000, respectively.
It is expected that after the consummation of the Midlantic/PNC Bank Merger,
affiliates of PNC Bank Corp. will no longer act as dealer in portfolio
securities transactions with Compass, and the Compass Portfolios will not hold
securities issued or guaranteed by PNC Bank Corp. or its affiliates.
Except as stated above, the Compass Portfolios did not make any payments to
Midlantic, PAMG or their affiliates during the Portfolios' fiscal year ended
February 28, 1995.
Midlantic's current investment advisory agreement for the Compass
Portfolios dated March 1, 1989 (the "Midlantic Agreement") was approved last by
Compass shareholders on June 26, 1992 except that the sole shareholder of
Compass Balanced Fund approved the Midlantic Agreement on July 1, 1994. The
continuance of the Midlantic Agreement was most recently approved by the Compass
Board of Trustees on May 24, 1995.
Wellington serves as sub-adviser to the Compass Growth Fund and Compass
Equity Income Fund pursuant to sub-advisory agreements dated June 22, 1993 (the
"Wellington Agreements"). The Wellington Agreements were last approved by
shareholders of the Growth Fund and Equity Income Fund on June 21, 1993. The
continuance of the Wellington Agreements was most recently approved by the
Compass Board of Trustees on May 24, 1995.
Morgan Grenfell serves as sub-adviser to the Compass International Fixed
Income Fund pursuant to a sub-advisory agreement dated June 19, 1991 (the
"Morgan Agreement"). The Morgan Agreement was last approved by shareholders of
the International Fixed Income Fund on June 26, 1992. The continuance of the
Morgan Agreement was most recently approved by the Compass Board of Trustees on
May 24, 1995.
WSA serves as sub-adviser to the Compass Small Company Fund pursuant to a
sub-advisory agreement dated July 1, 1995 (the "WSA Agreement"). The WSA
Agreement was approved by the Compass Board of Trustees on May 24, 1995 and by
shareholders of the Small Company Fund on June 28, 1995.
Seligman serves as sub-adviser to the Compass International Equity Fund
pursuant to a sub-advisory agreement dated July 1, 1993 (the "Seligman
Agreement"). The Seligman Agreement was approved by shareholders of the
International Equity Fund on June 21, 1993. The continuance of the Seligman
Agreement was most recently approved by the Compass Board of Trustees on May 24,
1995.
At the time of these Board approvals (and the approvals of the Compass
Agreement and the Interim Agreements), and as of the date hereof, Robert A.
Nesher and Raymond J. Clark were "interested" members of the Compass Board of
Trustees (which is comprised of six members) because Mr. Nesher is a shareholder
and a former officer of the parent corporation of the distributor of Compass,
and Mr. Clark's son is an employee of Midlantic.
As stated above, the Midlantic, Wellington, Morgan, WSA and Seligman
Agreements will automatically terminate upon the consummation of the
Midlantic/PNC Bank Merger. If this merger is not consummated, the Compass
Transaction will not occur, and each of the foregoing agreements will continue
in effect with respect to the Compass Portfolios in accordance with their terms.
If the Midlantic/PNC Bank Merger occurs but the Compass Agreement and the
transactions contemplated therein are not approved with respect to a particular
Compass Portfolio, the existing advisory (and any sub-advisory) agreement for
that Portfolio will nevertheless automatically terminate, the Interim Agreements
will not be effective with respect to that Portfolio, and the Compass Board of
Trustees will reconsider the proposed investment advisory and sub-advisory
agreements for that Portfolio.
60
<PAGE> 67
INFORMATION RELATING TO VOTING MATTERS
GENERAL INFORMATION. This Combined Proxy Statement/Prospectus is being
furnished (a) in connection with the solicitation of proxies for the Compass
Meeting by the Compass Board of Trustees and (b) in connection with the
solicitation of proxies for the BIT Meeting by the BIT Board of Directors. It is
expected that the solicitation of proxies will be primarily by mail. Officers
and service providers of PNC, Compass and BIT may also solicit proxies by
telephone, telegraph or personal interview. Any Compass shareholder giving a
proxy may revoke it at any time before it is exercised by submitting to Compass
a written notice of revocation or a subsequently executed proxy or by attending
the Compass Meeting and voting in person. Similarly, any BIT shareholder giving
a proxy may revoke it at any time before it is exercised by submitting to BIT a
written notice of revocation or a subsequently executed proxy or by attending
the BIT Meeting and voting in person.
Only Compass shareholders of record at the close of business on October 20,
1995 will be entitled to vote at the Compass Meeting. On that date, the
following Compass shares were outstanding and entitled to be voted:
<TABLE>
<CAPTION>
NAME OF COMPASS PORTFOLIO SHARES ENTITLED TO VOTE
- ------------------------------------------------------------------------ -----------------------
<S> <C>
Municipal Money Fund.................................................... 32,097,786
New Jersey Municipal Money Fund......................................... 45,897,325
Pennsylvania Municipal Money Fund....................................... 44,528,639
Cash Reserve Fund....................................................... 608,858,908
U.S. Treasury Fund...................................................... 423,124,985
Municipal Bond Fund..................................................... 2,714,118
New Jersey Municipal Bond Fund.......................................... 8,651,067
Pennsylvania Municipal Bond Fund........................................ 1,728,728
Equity Income Fund...................................................... 24,324,706
Growth Fund............................................................. 12,216,373
Small Company Fund...................................................... 2,174,104
International Equity Fund............................................... 3,507,327
Balanced Fund........................................................... 3,039,623
Short/Intermediate Fund................................................. 18,524,461
Fixed Income Fund....................................................... 23,653,942
International Fixed Income Fund......................................... 3,877,322
</TABLE>
Only BIT shareholders of record at the close of business on October 20,
1995 will be entitled to vote at the BIT Meeting. On that date, the following
BIT shares were outstanding and entitled to be voted:
<TABLE>
<CAPTION>
NAME OF BIT PORTFOLIO SHARES ENTITLED TO VOTE
- ------------------------------------------------------------------------ -----------------------
<S> <C>
Short Duration Portfolio................................................ 4,705,281
Core Fixed Income Portfolio............................................. 4,374,609
Multi-Sector Mortgage Securities Portfolio III.......................... 107,713
</TABLE>
Each whole and fractional share is entitled to a whole or fractional vote
at the Compass Meeting or BIT Meeting, as applicable. If the accompanying proxy
is executed and returned in time for the Meeting to which it pertains, the
shares covered thereby will be voted in accordance with the proxy on all matters
that may properly come before that Meeting.
The vote of the shareholders of the PNC Portfolios is not being solicited
in connection with the Compass Transaction or the BIT Transaction, since their
approval or consent is unnecessary to complete either of these Transactions.
COMPASS SHAREHOLDER AND BOARD APPROVALS. The Compass Agreement, including
the implementation of the Interim Agreements and other matters contemplated
therein, is being submitted for approval at the Compass Meeting by the holders
of a majority of the shares of each Compass Portfolio, voting separately on a
61
<PAGE> 68
portfolio-by-portfolio basis, pursuant to the provisions of the Declaration of
Trust of Compass and the requirements of the 1940 Act. As used in this
paragraph, the term "majority of the outstanding shares" of a particular Compass
Portfolio means the lesser of (a) 67% of the shares of the particular Portfolio
present at the Compass Meeting, if the holders of more than 50% of the
outstanding shares of such Portfolio are present or (b) more than 50% of the
outstanding shares of the particular Portfolio. The Compass Agreement provides
that in the event the Compass Agreement is approved with respect to some but not
all of the Compass Portfolios, the Board of Trustees of PNC may, in the exercise
of its sole discretion, determine to either abandon the Compass Agreement with
respect to all of the Compass Portfolios or direct that the Compass Transaction
be consummated to the extent it deems advisable.
The approval of the Compass Agreement by the governing Boards of Compass
and PNC is discussed above under "Information Relating to the Proposed
Transactions."
BIT SHAREHOLDER AND BOARD APPROVALS. The BIT Agreement is being submitted
for approval at the BIT Meeting by the holders of a majority (more than 50%) of
the outstanding shares of each BIT Portfolio, voting separately on a
portfolio-by-portfolio basis, pursuant to provisions of BIT's charter and the
requirements of the 1940 Act. The BIT Agreement provides that in the event the
BIT Agreement is approved with respect to some but not all of the BIT
Portfolios, the Board of Trustees of PNC may, in the exercise of its sole
discretion, determine to either abandon the BIT Agreement with respect to all of
the BIT Portfolios or direct that the BIT Transaction be consummated to the
extent it deems advisable and to the degree the Transaction may be lawfully
effected in accordance with the Maryland Corporation Law and BIT's charter.
The approval of the BIT Agreement by the governing Boards of BIT and PNC is
discussed above under "Information Relating to the Proposed Transactions."
QUORUM. In the event that a quorum is not present at either the Compass
Meeting or the BIT Meeting, or in the event that a quorum is present at either
Meeting but sufficient votes to approve any matter presented at that Meeting are
not received, the persons named as proxies may propose one or more adjournments
of the Meeting to permit the further solicitation of proxies. Any such
adjournment will require the affirmative vote of a majority of those shares
affected by the adjournment that are represented at the particular Meeting in
person or by proxy. If a quorum is present, the persons named as proxies will
vote those proxies which they are entitled to vote FOR the Compass Agreement or
BIT Agreement, as applicable, in favor of such adjournments, and will vote those
proxies required to be voted AGAINST such proposal against any adjournment. A
shareholder vote may be taken with respect to one or more Compass Portfolios or
BIT Portfolios (but not the other Portfolios) on some or all matters before any
such adjournment if sufficient votes have been received for approval. A quorum
is constituted with respect to a Compass Portfolio or BIT Portfolio by the
presence in person or by proxy of the holders of more than 50% of the
outstanding shares of the Portfolio entitled to vote at the particular Meeting.
For purposes of determining the presence of a quorum for transacting business at
each Meeting, abstentions, but not broker "non-votes" (that is, proxies from
brokers or nominees indicating that such persons have not received instructions
from the beneficial owners or other persons entitled to vote shares on a
particular matter with respect to which the brokers or nominees do not have
discretionary power), will be treated as shares that are present at the Meeting
but which have not been voted. Abstentions and broker "non-votes" will have the
effect of a "no" vote for purposes of obtaining the requisite approval of each
proposal.
ANNUAL MEETINGS. Neither PNC, Compass nor BIT presently intends to hold
annual meetings of shareholders for the election of Board members and other
business unless and until such time as less than a majority of the trustees or
directors holding office have been elected by the shareholders, at which time
the Board will call a shareholders meeting for the election of Board members.
Under certain circumstances, however, shareholders have the right to call a
meeting of shareholders to consider the removal of one or more Board members and
such meetings will be called when requested by the holders of record of 10% or
more of the outstanding shares of PNC, Compass or BIT, respectively. To the
extent required by law, PNC, Compass and BIT will assist in shareholder
communications in such matters.
OTHER SHAREHOLDER INFORMATION. At the record date for the Compass Meeting,
affiliates of PNC Bank Corp. or their nominees held of record substantially all
of the outstanding shares of the PNC Portfolios as
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<PAGE> 69
agent or custodian for their customers. The name, address and share ownership of
each person who may have possessed sole or shared voting or investment power
with respect to more than 5% of the outstanding shares of PNC's respective share
classes at that date are listed in the following table. The table also shows the
percentage of PNC's respective share classes that would be owned by these
persons upon the consummation of the Compass and BIT Transactions based on their
holdings at that date.
<TABLE>
<CAPTION>
PERCENTAGE
OF
PERCENTAGE PORTFOLIO PERCENTAGE
CLASS AND OF CLASS SHARES OF CLASS
AMOUNT OF OWNED ON OWNED ON OWNED ON
PORTFOLIO NAME AND ADDRESS SHARES OWNED RECORD DATE RECORD DATE CONSUMMATION
- ------------------------- ------------------------------ ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Managed Income Saxon & Company Service 99.9% 20.43% 99.9%
PNC Bank Shares
Attn: Income Collections 11,311,236
200 Stevens Drive
Suite 260
Lester, PA 19113
BHC Securities Series A 62.8% 1.28% 62.8%
Attn: Mutual Funds Department Investor
100 N. 20th Street Shares
Philadelphia, PA 19103 708,868
Saxon & Company Institutional 92.8% 71.97% 92.8%
PNC Bank Shares
Attn: Income Collections 39,850,606
200 Stevens Drive,
Suite 260
Lester, PA 19113
Tax-Free Income Saxon & Company Service 100% 41.11% 14.3%
PNC Bank Shares
Attn: Income Collections 450,743
200 Stevens Drive,
Suite 260
Lester, PA 19113
BHC Securities Series A 27.6% 15.63% 27.6%
Attn: Mutual Funds Department Investor
100 N. 20th Street Shares
Philadelphia, PA 19103 171,330
Saxon & Company Institutional 35.1% .82% 35.1%
PNC Bank Shares
Attn: Income Collections 8,959
200 Stevens Drive,
Suite 260
Lester, PA 19113
First Charter National Bank Institutional 64.9% 1.51% 64.9%
Attn: Trust Operations Shares
P.O. Box 228 16,574
Concord, NC 28026
Pennsylvania Tax-Free Saxon & Company Service 100% 22.65% 45.5%
Income PNC Bank Shares
Attn: Income Collections 1,385,466
200 Stevens Drive, Suite 260
Lester, PA 19113
BHC Securities Series A 67.3% 45.61% 67.3%
Attn: Mutual Funds Investor
Department Shares
100 N. 20th Street 2,789,579
Philadelphia, PA 19103
Saxon & Company Institutional 100% 3.29% 100%
PNC Bank Shares
Attn: Income Collections 202,949
200 Stevens Drive,
Suite 260
Lester, PA 19113
</TABLE>
63
<PAGE> 70
<TABLE>
<CAPTION>
PERCENTAGE
OF
PERCENTAGE PORTFOLIO PERCENTAGE
CLASS AND OF CLASS SHARES OF CLASS
AMOUNT OF OWNED ON OWNED ON OWNED ON
PORTFOLIO NAME AND ADDRESS SHARES OWNED RECORD DATE RECORD DATE CONSUMMATION
- ------------------------- ------------------------------ ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
BHC Securities Series B 5.4% .34% 5.4%
Attn: Mutual Funds Investor
Department Shares
100 N. 20th Street 20,695
Philadelphia, PA 19103
Short-Term Bond Saxon & Company Service 100% 41.72% 3.3%
PNC Bank Shares
Attn: Income Collections 675,613
200 Stevens Drive,
Suite 260
Lester, PA 19113
BHC Securities Series A 62.5% 1.25% 62.5%
Attn: Mutual Funds Investor
Department Shares
100 N. 20th Street 20,256
Philadelphia, PA 19103
MMC&P Inc. Series A 5.4% .11% 5.4%
Recordkeeper for Ohio Investor
Feather Co., Inc. Shares
Profit Sharing Plan 1,745
One Gateway Center,
11th Floor
Pittsburgh, PA 15222
Rafiou Barry & Raye Barry Series A 8.5% .17% 8.5%
JTWROS Investor
C/O Halco Mining Inc. Shares
900 Two Allegheny Center 2,765
Pittsburgh, PA 15212
Saxon & Company Institutional 74.9% 42.16% 12.0%
PNC Bank Shares
Attn: Income Collections 682,763
200 Stevens Drive, Suite 260
Lester, PA 19113
Medical Practice Account Institutional 25.1% 14.12% 4.0%
Thomas Jefferson University Shares
Attn: Treasurer's Office 228,736
1020 Walnut Street
Philadelphia, PA 19107
John L. Silk Rollover IRA Series A 12.3% .25% 12.3%
613 Radcon Street Investor
Johnstown, PA 15904 Shares
3,985
Money Market BHC Securities, Series B 100% .001% 100%
Attn: Mutual Funds Dept. Investor
2005 Market St. Shares
Phila., PA 19103 26,947
PNC Bank Service 76.5% 46.88% 51.3%
Attn: Income Collections Shares
200 Stevens Dr., Suite 260 949,865,314
Lester, PA 19113
PNC Bank Ohio Service 6.9% 4.22% 4.6%
Attn: Corporate Services Shares
201 E. Fifth St. 85,409,523
Cincinnati, OH 45202
PNC Bank Institutional 100% 36.86% 100%
Attn: Income Collections Shares
Airport Business Center 46,750,724
Int'l Court 2
200 Stevens Dr.
Lester, PA 19113
</TABLE>
64
<PAGE> 71
<TABLE>
<CAPTION>
PERCENTAGE
OF
PERCENTAGE PORTFOLIO PERCENTAGE
CLASS AND OF CLASS SHARES OF CLASS
AMOUNT OF OWNED ON OWNED ON OWNED ON
PORTFOLIO NAME AND ADDRESS SHARES OWNED RECORD DATE RECORD DATE CONSUMMATION
- ------------------------- ------------------------------ ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Cash Balance Sweeps Service 9.5% 5.84% 6.4%
BHC Securities Inc. Shares
Attn: Cash Sweeps Dept. 118,233,367
2005 Market Street
One Commerce Square
11th Floor
Philadelphia, PA 19103
BHC Securities Inc. Series A 76.8% 1.45% 76.8%
FAO Cash Balance Sweeps Investor
Attn: Sweeps Dept. Shares
2005 Market Street 29,321,266
Philadelphia, PA 19103
Government Money Market PNC Bank Institutional 99.8% 17.31% 99.8%
Attn: Income Collections Shares
Airport Business Center 122,996,824
Int'l Court 2
200 Stevens Drive
Lester, PA 19113
PNC Bank Ohio Service 5.3% 4.36% 3.1%
Attn: Corporate Services Shares
201 East Fifth Street, 9th 31,011,937
Floor
Cincinnati, OH 45202
PNC Bank Service 71.6% 58.96% 41.6%
Attn: Income Collections Shares
Airport Business Center 418,937,765
Int'l Court 2
200 Stevens Drive
Lester, PA 19113
BHC Securities Inc. Series A 5.5% .02% 5.5%
FAO Cash Balance Sweeps Investor
Attn: Cash Sweeps Dept. Shares
2005 Market Street 133,260
One Commerce Square
11th Floor
Philadelphia, PA 19103
MMC&P Inc. Recordkeeper, Series A 9.6% .03% 9.6%
Alex C. Ferguson Inc. Investor
Tax Favored Plan Shares
One Gateway Center 234,025
11th Floor
Pittsburgh, PA 15222-1416
MMC&P Inc. Recordkeeper, Series A 5.8% .02% 5.8%
Stalex/Robeson/Ryan Investor
St. Lawrence Inc. Shares
401K Plan 141,477
One Gateway Center
11th Floor
Pittsburgh, PA 15222-1416
MMC&P Inc. Recordkeeper, Series A 32.9% .11% 32.9%
Provident Distributors, Inc. Investor
One Gateway Center Shares
11th Floor 801,907
Pittsburgh, PA 15222-1416
Archibald Douglas III Series A 9.1% .03% 9.1%
4370 Province Line Road Investor
Princeton, NJ 08540 Shares
222,280
</TABLE>
65
<PAGE> 72
<TABLE>
<CAPTION>
PERCENTAGE
OF
PERCENTAGE PORTFOLIO PERCENTAGE
CLASS AND OF CLASS SHARES OF CLASS
AMOUNT OF OWNED ON OWNED ON OWNED ON
PORTFOLIO NAME AND ADDRESS SHARES OWNED RECORD DATE RECORD DATE CONSUMMATION
- ------------------------- ------------------------------ ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Municipal Money Market PNC Bank Pittsburgh Service 15.9% 13.45% 14.1%
Attn: Fund Services Shares
2d Floor 41,124,344
960 Ft. Duquesne Blvd.
Pittsburgh, PA 15222
PNC Bank Ohio Service 8.3% 7.01% 7.4%
201 E. Fifth St. Shares
Cincinnati, OH 45202 21,425,239
PNC Bank Institutional 95.3% 14.56% 95.3%
Attn: Income Collections Shares
200 Stevens Dr. 44,507,555
Suite 260
Lester, PA 19113
PNC Bank Service 68.3% 57.85% 60.8%
Attn: Income Collections Shares
Airport Business Center 176,840,143
Int'l Court 2
200 Stevens Drive
Lester, PA 19113
Thomas O. Lloyd Series A 16.1% .001% 16.1%
4363 S. Licking Pike Investor
Alexandria, KY 41001 Shares
3,198
Regina M. Henning Series A 15.9% .001% 15.9%
1529 So. 28th Street Investor
Philadelphia, PA 19146 Shares
3,145
Harry J. Chmelynski and Series A 53.8% .003% 53.8%
John D. Chmelynski and Investor
Joseph M. Chmelynski and Shares
Harry J. Chmelynski 10,664
JT TEN WROS
224 Dodd Avenue
Rehoboth, DE 19971
Michael C. Steinhilber and Series A 8.4% .001% 8.4%
Ginger L. Steinhilber Investor
JT TEN WROS Shares
228 Mimosa Ln. 1,656
Hatboro, PA 19040
Ohio Municipal Money BHC Securities Series A 86.8% .29% 86.8%
Market FAO Cash Balance Sweeps Investor
Attn: Cash Sweep Dept. Shares
2005 Market St. 205,062
Phila., PA 19103
PNC Bank Service 60.9% 43.05% 60.9%
Attn: Income Collections Shares
200 Stevens Dr. 30,335,952
Airport Business Center
Int'l Court 2
Lester, PA 19113
Wayco & Co. Institutional 20.6% 5.97% 20.6%
Wayne County Shares
National Bank 4,204,674
Stephen E. Kitchen
Senior To
P.O. Box 550
Wooster, OH 44691
</TABLE>
66
<PAGE> 73
<TABLE>
<CAPTION>
PERCENTAGE
OF
PERCENTAGE PORTFOLIO PERCENTAGE
CLASS AND OF CLASS SHARES OF CLASS
AMOUNT OF OWNED ON OWNED ON OWNED ON
PORTFOLIO NAME AND ADDRESS SHARES OWNED RECORD DATE RECORD DATE CONSUMMATION
- ------------------------- ------------------------------ ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Canat & Co. Institutional 9.6% 2.77% 9.6%
United National Bank Shares
& Trust Co. 1,951,300
P.O. Box 24190
Canton, OH 44701
PNC Bank Institutional 68.4% 19.82% 68.4%
Attn: Income Collections Shares
Airport Business Center 13,968,110
Int'l Court 2
200 Stevens Drive
Lester, PA 19113
Cash Balance Sweeps Service 39.1% 27.64% 39.1%
BHC Securities Inc. Shares
Attn: Cash Sweeps Dept. 19,475,431
2005 Market Street
Philadelphia, PA 19103
Janney Montgomery Scott Series A 10.4% .03% 10.4%
Omnibus Account Investor
1801 Market Street Shares
9th Floor 24,482
Philadelphia, PA 19103
North Carolina Bond Dept. Service 11.8% .38% 11.8%
Municipal Money Centura Bank Shares
Market Attn: Pat Langston 284,800
P.O. Box 1220
Rocky Mount, NC 27802
WACCO Institutional 25.2% 24.42% 25.2%
United Carolina Bank Shares
Whiteville 18,520,401
P.O. Drawer 632
Whiteville, NC 28472
First Charter National Bank Institutional 10.8% 10.50% 10.8%
P.O. Box 228 Shares
Concord, NC 28926 7,961,875
McWood & Co. Institutional 15.7% 15.14% 15.7%
First Citizens Bank Shares
Attn: Penny Eason 11,488,129
Trust Dept.
P.O. Box 29522
Raleigh, NC 27626
North Carolina Trust Co. Institutional 16.8% 16.30% 16.8%
Dana Petroff Shares
Trust Acctg. Dept. 12,363,100
301 North Elm St.
Greensboro, NC 27402
PNC Bank Service 23.3% .74% 23.3%
Attn: Income Collections Shares
Airport Business Center 561,331
Int'l Court 2
200 Stevens Drive
Lester, PA 19113
Mutual Partners Corporate Service 64.9% 2.07% 64.9%
First Charter National Bank Shares
Cash Sweep 1,567,393
P.O. Box 228
Concord, NC 28026
</TABLE>
67
<PAGE> 74
<TABLE>
<CAPTION>
PERCENTAGE
OF
PERCENTAGE PORTFOLIO PERCENTAGE
CLASS AND OF CLASS SHARES OF CLASS
AMOUNT OF OWNED ON OWNED ON OWNED ON
PORTFOLIO NAME AND ADDRESS SHARES OWNED RECORD DATE RECORD DATE CONSUMMATION
- ------------------------- ------------------------------ ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Willbranch & Company Institutional 5.5% 5.36% 5.5%
Branch Banking & Shares
Trust Company 4,063,263
Attn: Terry Wall/Trust Dept.
P.O. Box 1847
Wilson, NC 27893
Centura Bank Institutional 14.0% 13.57% 14.0%
Attn: Barbara Landis Shares
P.O. Box 1220 10,294,668
Rocky Mount, NC 27802
Central Carolina Bank & Institutional 5.6% 5.38% 5.6%
Trust Co. Shares
Attn: Trust Operations 4,083,448
P.O. Box 30010
Durham, NC 27702
Robert E. Morris Series A 39.2% .03% 39.2%
113 Foothills Dr. Investor
Horse Shoe, NC 28742 Shares
20,715
Lucia Milano and Series A 60.8% .04% 60.8%
Joseph De Muro and Investor
Mary De Muro JT TEN Shares
136 Sanair Ct. 32,100
Apex, NC 27502
Pennsylvania Cash Balance Sweeps Service 22.9% 8.67% 17.8%
Municipal Money BHC Securities Inc. Shares
Market Attn: Cash Sweeps Dept. 35,402,521
2005 Market Street
One Commerce Square
11th Floor
Phila., PA 19103
PNC Bank Service 70.9% 26.87% 55.1%
Attn: Income Collections Shares
Airport Business Center 109,776,066
Int'l Court 2
200 Stevens Drive
Lester, PA 19113
PNC Bank Institutional 88.2% 51.50% 88.2%
Attn: Income Collections Shares
Airport Business Center 210,418,894
Int'l Court 2
200 Stevens Drive
Lester, PA 19113
Janney Montgomery Scott Series A 91.5% 3.35% 91.5%
Omnibus Account Investor
1801 Market Street Shares
9th Floor 13,705,259
Philadelphia, PA 19103
BHC Securities Inc. Series A 7.9% .29% 7.9%
FAO Cash Balance Sweeps Investor
Attn: Cash Sweeps Dept. Shares
2005 Market Street 1,178,069
One Commerce Square
11th Floor
Philadelphia, PA 19103
Virginia Municipal Oldom & Co. Institutional 68.8% 66.87% 68.8%
Money Market First Virginia Bank Inc. Shares
Trust Investment Dept. 18,373,738
Attn: Rose M. Gazes
6400 Arlington Blvd.
Falls Church, VA 22042
</TABLE>
68
<PAGE> 75
<TABLE>
<CAPTION>
PERCENTAGE
OF
PERCENTAGE PORTFOLIO PERCENTAGE
CLASS AND OF CLASS SHARES OF CLASS
AMOUNT OF OWNED ON OWNED ON OWNED ON
PORTFOLIO NAME AND ADDRESS SHARES OWNED RECORD DATE RECORD DATE CONSUMMATION
- ------------------------- ------------------------------ ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Warrtrust & Co. Institutional 5.6% 5.45% 5.6%
F&M Bank -- Peoples Shares
Attn: Debbie Wharton 1,496,683
P.O. Box 93
Warrenton, VA 22186
Piedmont Company Institutional 22.2% 21.53% 22.2%
Piedmont Trust Bank Shares
Attn: Lynn Calaman 5,914,932
P.O. Box 4751
Martinsville, VA 24115
Saxon & Company Service 100% 2.85% 100%
PNC Bank Shares
Attn: Income Collections 783,877
Airport Business Center
Int'l Court 2
200 Stevens Drive
Lester, PA 19113
Ohio Tax-Free Income Saxon & Co. Service 100% 58.74% 100%
PNC Bank Shares
Attn: Income Collections 505,303
200 Stevens Drive
Suite 260
Lester, PA 19113
Saxon & Co. Institutional 90.9% 1.76% 90.9%
PNC Bank Shares
Attn: Income Collections 15,108
200 Stevens Drive
Suite 260
Lester, PA 19113
Garlow & Co. Institutional 9.1% .18% 9.1%
Citizens National Bank Shares
Attn: Jackie Giggs 1,507
12 E. Main Street
P.O. Box 69
Norwalk, OH 44857
BHC Securities Series A 82.1% 31.29% 82.1%
Attn: Mutual Funds Dept. Investor
100 N. 20th Street Shares
Philadelphia, PA 19103 269,145
BHC Securities Inc. Series B 9.9% .12% 9.9%
Attn: Mutual Funds Dept. Investor
One Commerce Square Shares
2005 Market Street 1,044
Suite 1200
Philadelphia, PA 19103
BHC Securities Inc. Series B 51.5% .63% 51.5%
Attn: Mutual Funds Dept. Investor
One Commerce Square Shares
2005 Market Street 5,449
Suite 1200
Philadelphia, PA 19103
BHC Securities Inc. Series B 14.6% .18% 14.6%
Attn: Mutual Funds Dept. Investor
One Commerce Square Shares
2005 Market Street 1,544
Suite 1200
Philadelphia, PA 19103
</TABLE>
69
<PAGE> 76
<TABLE>
<CAPTION>
PERCENTAGE
OF
PERCENTAGE PORTFOLIO PERCENTAGE
CLASS AND OF CLASS SHARES OF CLASS
AMOUNT OF OWNED ON OWNED ON OWNED ON
PORTFOLIO NAME AND ADDRESS SHARES OWNED RECORD DATE RECORD DATE CONSUMMATION
- ------------------------- ------------------------------ ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
BHC Securities Inc. Series B 19.4% .24% 19.4%
Attn: Mutual Funds Dept. Investor
One Commerce Square Shares
2005 Market Street 2,049
Suite 1200
Philadelphia, PA 19103
Intermediate-Term Bond Saxon & Co. Institutional 93.6% 75.63% 93.6%
PNC Bank Shares
Attn: Income Collections 16,241,643
200 Stevens Drive
Suite 260
Lester, PA 19113
Saxon & Co. Service 100% 18.84% 100%
PNC Bank Shares
Attn: Income Collections 4,046,722
200 Stevens Drive
Suite 260
Lester, PA 19113
BHC Securities Series A 40.7% .14% 40.7%
Attn: Mutual Funds Dept. Investor
100 N. 20th Street Shares
Philadelphia, PA 19103 30,216
MMC&P Inc. Recordkeeper, Series A 15.3% .05% 15.3%
Dairy Farms Profit Investor
Sharing Plan Shares
One Gateway Center 11,325
11th Floor
Pittsburgh, PA 15222-1416
MMC&P Inc. Recordkeeper, Series A 25.9% .09% 25.9%
Wolfers Service Station Investor
Money Purchase Pension Plan Shares
One Gateway Center 19,243
11th Floor
Pittsburgh, PA 15222-1416
MMC&P Recordkeeper for Series A 8.6% .03% 8.6%
Central Cambria Investor
Drilling Co. Shares
401K Profit Sharing Plan 6,357
One Gateway Center
11th Floor
Pittsburgh, PA 15222-1416
Government Income BHC Securities Series A 91.1% 21.78% 91.1%
100 N. 20th St. Investor
Phila., PA 19103 Shares
275,902
Intermediate Saxon & Co. Institutional 94.4% 65.23% 94.4%
Government PNC Bank Shares
Attn: Income Collections 12,498,625
200 Stevens Drive, Suite 260
Lester, PA 19113
Saxon & Co. Service 100% 25.88% 100%
PNC Bank Shares
Attn: Income Collections 4,958,812
200 Stevens Drive, Suite 260
Lester, PA 19113
BHC Securities Series A 78.2% 3.95% 78.2%
Attn: Mutual Funds Dept. Investor
100 N. 20th Street Shares
Philadelphia, PA 19103 756,115
</TABLE>
70
<PAGE> 77
<TABLE>
<CAPTION>
PERCENTAGE
OF
PERCENTAGE PORTFOLIO PERCENTAGE
CLASS AND OF CLASS SHARES OF CLASS
AMOUNT OF OWNED ON OWNED ON OWNED ON
PORTFOLIO NAME AND ADDRESS SHARES OWNED RECORD DATE RECORD DATE CONSUMMATION
- ------------------------- ------------------------------ ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
International BHC Securities Series A 88.2% 4.46% 88.2%
Emerging Markets Attn: Mutual Funds Dept. Investor
100 N. 20th Street Shares
Philadelphia, PA 19103 273,497
First Charter Institutional 8.3% 5.32% 8.3%
National Bank Shares
Attn: Trust Operations 326,244
P.O. Box 228
Concord, NC 28026
Saxon & Co. Service 99.4% 30.64% 99.4%
PNC Bank Shares
Attn: Income Collections 1,878,985
200 Stevens Drive, Suite 260
Lester, PA 19113
Saxon & Co. Institutional 91.7% 58.77% 91.7%
PNC Bank Shares
Attn: Income Collections 3,603,483
200 Stevens Drive, Suite 260
Lester, PA 19113
Growth Equity Saxon & Co. Institutional 99.8% 72.65% 99.8%
PNC Bank Shares
Attn: Income Collections 18,049,875
200 Stevens Drive, Suite 260
Lester, PA 19113
Saxon & Co. Service 99.9% 24.09% 32.8%
PNC Bank Shares
Attn: Income Collections 5,985,272
200 Stevens Drive, Suite 260
Lester, PA 19113
BHC Securities Series A 42.5% 1.31% 42.5%
Attn: Mutual Funds Dept. Investor
100 N. 20th Street Shares
Philadelphia, PA 19103 324,254
MMC&P Inc. Recordkeeper Series A 5.2% .16% 5.2%
Less Tool & Die 401K Plan Investor
One Gateway Center Shares
11th Floor 39,717
Pittsburgh, PA 15222-1416
Index Equity Saxon & Co. Institutional 92.7% 56.39% 92.7%
PNC Bank Shares
200 Stevens Drive, Suite 260 7,457,590
Lester, PA 19113
Saxon & Co. Service 100% 35.45% 100%
PNC Bank Shares
Attn: Income Collections 4,689.056
200 Stevens Drive, Suite 260
Lester, PA 19113
BHC Securities Series A 55.4% 2.07% 55.4%
Attn: Mutual Funds Dept. Investor
100 N. 20th Street Shares
Philadelphia, PA 19103 273,894
MMC&P Inc. Recordkeeper Series A 6.3% .23% 6.3%
Optimum Group Investor
401K Profit Sharing Plan Shares
One Gateway Center 31,007
11th Floor
Pittsburgh, PA 15222-1416
</TABLE>
71
<PAGE> 78
<TABLE>
<CAPTION>
PERCENTAGE
OF
PERCENTAGE PORTFOLIO PERCENTAGE
CLASS AND OF CLASS SHARES OF CLASS
AMOUNT OF OWNED ON OWNED ON OWNED ON
PORTFOLIO NAME AND ADDRESS SHARES OWNED RECORD DATE RECORD DATE CONSUMMATION
- ------------------------- ------------------------------ ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Small Cap Value Equity BHC Securities Series A 58.3% 4.98% 58.3%
Attn: Mutual Fund Dept. Investor
100 N. 20th St. Shares
Phila., PA 19103 825,073
Saxon & Co. Service 100% 24.69% 100%
PNC Bank Shares
200 Stevens Drive 4,088,974
Suite 260
Lester, PA 19113
Saxon & Co. Institutional 85.8% 56.78% 85.8%
PNC Bank Shares
Attn: Income Collections 9,404,922
200 Stevens Drive
Suite 260
Lester, PA 19113
Alex Brown & Sons Series A 7.3% .62% 7.3%
P.O. Box 1346 Investor
Baltimore, MD 21203 Shares
102,589
BHC Securities Inc. Series B 6.0% .04% 6.0%
Attn: Mutual Funds Investor
One Commerce Square Shares
2005 Market Street 6,090
Suite 1200
Philadelphia, PA 19102
International Equity Saxon & Co. Institutional 94.4% 67.65% 94.4%
PNC Bank Shares
Attn: Income Collections 22,537,472
200 Stevens Drive
Suite 260
Lester, PA 19113
Saxon & Co. Service 99.9% 24.13% 70.6%
PNC Bank Shares
Attn: Income Collections 8,040,068
200 Stevens Drive
Suite 260
Lester, PA 19113
BHC Securities Series A 59.7% 2.35% 59.7%
Attn: Mutual Funds Dept. Investor
100 N. 20th Street Shares
Philadelphia, PA 19103 781,878
Balanced BHC Securities Series A 66.4% 24.52% 66.4%
Attn: Mutual Fund Dept. Investor
100 N. 20th St. Shares
Phila., PA 19103 3,245,497
Saxon & Co. Institutional 97.8% 13.15% 97.8%
PNC Bank Shares
Attn: Income Collections 1,740,056
200 Stevens Drive, Suite 260
Lester, PA 19113
Saxon & Co. Service 100% 47.84% 71.8%
PNC Bank Shares
Attn: Income Collections 6,331,285
200 Stevens Drive, Suite 260
Lester, PA 19113
</TABLE>
72
<PAGE> 79
<TABLE>
<CAPTION>
PERCENTAGE
OF
PERCENTAGE PORTFOLIO PERCENTAGE
CLASS AND OF CLASS SHARES OF CLASS
AMOUNT OF OWNED ON OWNED ON OWNED ON
PORTFOLIO NAME AND ADDRESS SHARES OWNED RECORD DATE RECORD DATE CONSUMMATION
- ------------------------- ------------------------------ ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
BHC Securities Inc. Series B 5.9% .10% 5.9%
Attn: Mutual Funds Dept. Investor
One Commerce Square Shares
2005 Market Street 13,842
Suite 1200
Philadelphia, PA 19103
Value Equity Saxon & Co. Service 100% 24.73% 33.9%
PNC Bank Shares
Attn: Income Collections 12,305,006
200 Stevens Drive, Suite 260
Lester, PA 19113
Saxon & Co. Institutional 91.1% 66.30% 91.1%
PNC Bank Shares
Attn: Income Collections 32,989,984
200 Stevens Drive, Suite 260
Lester, PA 19113
BHC Securities Series A 61.8% 1.53% 61.8%
Attn: Mutual Funds Dept. Investor
100 N. 20th Street Shares
Philadelphia, PA 19103 763,172
Small Cap Growth Equity Saxon & Co. Institutional 91.2% 62.30% 91.2%
PNC Bank Shares
Attn: Income Collections 9,400,946
200 Stevens Drive, Suite 260
Lester, PA 19113
Saxon & Co. Service 100% 28.60% 70.3%
PNC Bank Shares
Attn: Income Collections 4,316,027
200 Stevens Drive, Suite 260
Lester, PA 19113
BHC Securities Series A 76.0% 2.60% 76.0%
Attn: Mutual Funds Dept. Investor
100 N. 20th Street Shares
Philadelphia, PA 19103 393,012
Core Equity Saxon & Co. Institutional 99.1% 72.10% 99.1%
PNC Bank Shares
Attn: Income Collections 19,835,645
200 Stevens Drive
Suite 260
Lester, PA 19113
Saxon & Co. Service 99.9% 25.99% 99.9%
PNC Bank Shares
Attn: Income Collections 7,150,417
200 Stevens Drive, Suite 260
Lester, PA 19113
BHC Securities Series A 54.2% .66% 54.2%
Attn: Mutual Funds Dept. Investor
100 N. 20th Street Shares
Philadelphia, PA 19103 180,589
MMC&P Inc. Recordkeeper, Series A 8.0% .10% 8.0%
Dairy Farms Profit Investor
Sharing Plan Shares
One Gateway Center 26,687
11th Floor
Pittsburgh, PA 15222-1416
MMC&P Inc. Recordkeeper Series A 9.1% .11% 9.1%
Caldwells Windoware Investor
401K Profit Sharing Plan Shares
One Gateway Center, 11th Floor 30,426
Pittsburgh, PA 15222-1416
</TABLE>
73
<PAGE> 80
<TABLE>
<CAPTION>
PERCENTAGE
OF
PERCENTAGE PORTFOLIO PERCENTAGE
CLASS AND OF CLASS SHARES OF CLASS
AMOUNT OF OWNED ON OWNED ON OWNED ON
PORTFOLIO NAME AND ADDRESS SHARES OWNED RECORD DATE RECORD DATE CONSUMMATION
- ------------------------- ------------------------------ ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
MMC&P Inc. Recordkeeper Series A 9.1% .11% 9.1%
Wolfe Shuman Profit Investor
Sharing Plan Shares
One Gateway Center 30,366
11th Floor
Pittsburgh, PA 15222-1416
MMC&P Inc. Recordkeeper Series A 6.4% .08% 6.4%
Baumfolder Corporation Investor
401K Plan Shares
One Gateway Center 21,151
11th Floor
Pittsburgh, PA 15222-1416
</TABLE>
At the record date for the Compass Meeting, Midlantic held of record 89.5%,
89.9%, 48.5%, 83.5%, 86.7%, 91.3%, 92.0%, 92.3% and 93.5% of the outstanding
shares of the Compass New Jersey Municipal Money Market Fund, Municipal Bond
Fund, New Jersey Municipal Bond Fund, Pennsylvania Municipal Bond Fund, Equity
Income Fund, Small Company Fund, Short/Intermediate Fund, Fixed Income Fund and
International Equity Fund, respectively, and substantially all of the
outstanding shares of the other Compass Portfolios. In addition, at that date
Midlantic held investment and/or voting power with respect to a majority of the
outstanding shares of each Compass Portfolio. The table below shows the name,
address and share ownership of each other person who may have possessed at that
date sole or shared voting or investment power with respect to more than 5% of
the outstanding shares of the Compass Portfolios. The table also shows the
percentage of Service Shares of the corresponding PNC Portfolios that would be
owned by these persons upon the consummation of the Compass and BIT Transactions
based on their holdings at the record date.
<TABLE>
<CAPTION>
PERCENTAGE OF
COMPASS PORTFOLIO PERCENTAGE OF PNC
AMOUNT OF SHARES OWNED ON SERVICE SHARES
PORTFOLIO NAME AND ADDRESS SHARES OWNED RECORD DATE UPON CONSUMMATION
- ------------------------------- --------------------------- ------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Municipal Money Market Martha Megerle Special 2,352,180 7.3% 0.81%
4 Headquarters Plaza North
Morristown, NJ 07960
New Jersey Municipal Money Wilson Kaplen 3,761,767 8.2% 8.20%
100 Hugenot Avenue
Englewood, NJ 07631
Lillian Lewis 3,073,590 6.7% 6.70%
1350 Hudson Road
Teaneck, NJ 07666
Pennsylvania Municipal Healthcare Services Group 11,623,596 26.1% 5.83%
Money Market 2643 Huntingdon Pike
Huntingdon Valley, PA 19006
Harold Honickman 9,306,212 20.9% 4.67%
8275 US Rt. 130
Pennsauken, NJ 08110
Cash Reserve Carrier -- 55,257,675 9.1% 2.99%
ILA Container Royalty
One Evertrust Plaza 3rd Pl.
Jersey City, NJ 07302
Princeton Insurance Company 50,388,542 8.3% 2.72%
746 Alexander Road
Princeton, NJ 08543
Pennsylvania Municipal Bond Helen Annette Segnere 113,853 6.6% 3.59%
600 Rosedale Drive
Pottstown, PA 19464
</TABLE>
74
<PAGE> 81
<TABLE>
<CAPTION>
PERCENTAGE OF
COMPASS PORTFOLIO PERCENTAGE OF PNC
AMOUNT OF SHARES OWNED ON SERVICE SHARES
PORTFOLIO NAME AND ADDRESS SHARES OWNED RECORD DATE UPON CONSUMMATION
- ------------------------------- --------------------------- ------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Donald Z. Wade Trust 91,033 5.3% 2.87%
710 Delaware Drive
P.O. Box 145
Matamoras, PA 18336
Equity Income Midlantic Retirement Plan 4,179,657 17.2% 11.37%
Midlantic Bank, N.A.
P.O. Box 600
Edison, NJ 08818
Growth Midlantic Retirement Plan 4,396,068 36.0% 25.65%
Midlantic Bank, N.A.
P.O. Box 600
Edison, NJ 08818
Midlantic Savings & 645,873 5.3% 3.77%
Investment Plan
P.O. Box 600
Edison, NJ 08818
Small Company Midlantic Retirement Plan 1,140,039 52.4% 15.45%
Midlantic Bank, N.A.
P.O. Box 600
Edison, NJ 08818
Hatfield Quality Meats 199,646 9.2% 2.71%
2700 Funks Road
P.O. Box 902
Hatfield, PA 19440
International Equity Midlantic Retirement Plan 1,189,744 33.9% 10.43%
Midlantic Bank, N.A.
P.O. Box 600
Edison, NJ 08818
Huls Salaried Retirement 282,713 8.1% 2.48%
Huls America, Inc.
220 Davidson Road
Somerset, NJ 08875
U.S. Treasury Market Transition 37,461,926 8.9% 3.72%
Facility of NJ
293 Eisenhower Parkway
Livingston, NJ 07039
Balanced Midlantic Retirement Plan 1,106,900 36.4% 10.29%
Midlantic Bank, N.A.
P.O. Box 600
Edison, NJ 08818
Market Source 401K 231,632 7.6% 2.51%
10 Abeel Road
Cranbury, NJ 08512
Wood Press 225,395 7.4% 2.10%
Profit Sharing Plan
515 East 41st Street
Paterson, NJ 07509
Short/Intermediate Midlantic Retirement Plan 2,608,101 14.1% 13.62%
Midlantic Bank, N.A.
P.O. Box 600
Edison, NJ 08818
Fixed Income Midlantic Retirement Plan 6,532,018 27.6% 27.6%
Midlantic Bank, N.A.
P.O. Box 600
Edison, NJ 08818
</TABLE>
75
<PAGE> 82
<TABLE>
<CAPTION>
PERCENTAGE OF
COMPASS PORTFOLIO PERCENTAGE OF PNC
AMOUNT OF SHARES OWNED ON SERVICE SHARES
PORTFOLIO NAME AND ADDRESS SHARES OWNED RECORD DATE UPON CONSUMMATION
- ------------------------------- --------------------------- ------------ ----------------- -----------------
<S> <C> <C> <C> <C>
International Fixed Income Midlantic Retirement Plan 1,699,188 43.8% 43.8%
Midlantic Bank, N.A.
P.O. Box 600
Edison, NJ 08818
Huls Salaried Retirement 324,977 8.4% 8.4%
Huls America, Inc.
220 Davidson Road
Somerset, NJ 08875
Verona Construction Company 230,925 6.0% 6.0%
1201 N. Market Street
Suite 1705
Wilmington, DE 19801
</TABLE>
The table below shows the name, address and share ownership of each person
who may have owned of record, or held sole or shared voting or investment power
with respect to, more than 5% of the outstanding shares of the BIT Portfolios at
the record date for the BIT Meeting. The table also shows the percentage of
Institutional Shares of the corresponding PNC Portfolios that would be owned by
these persons upon consummation of the Compass and BIT Transactions based on
their holdings at the record date.
<TABLE>
<CAPTION>
PERCENTAGE OF BIT PERCENTAGE OF PNC
PORTFOLIO SHARES INSTITUTIONAL
AMOUNT OF OWNED ON SHARES
PORTFOLIO NAME AND ADDRESS SHARES OWNED RECORD DATE UPON CONSUMMATION
- ------------------------------- --------------------------- ------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Short Duration Saxon & Co. 565,463 12.02% 10.10%
FBO HA Inc.
P.O. Box 7780-1888
Philadelphia, PA 19182
Saxon & Co. 921,384 19.58% 16.45%
FBO HC Insurance
P.O. Box 7780-1888
Philadelphia, PA 19182
First National Bank 364,089 7.74% 6.50%
Maryland
Custodian for Mercersberg
Academy
Securities Processing
101-610
P.O. Box 1596
Baltimore, MD 21203
Saxon & Co. 1,873,087 39.81% 33.45%
FBO 33 Hunielity/Mary
Venture
A/C 10-01-001-0595447
P.O. Box 7780-1888
Philadelphia, PA 19182
Core Fixed Income Union of American Hebrew 586,755 13.41% 13.41%
Congregation Endowment Fund
Attn: Paul Rockfeld
838 Fifth Avenue
New York, NY 10021
Mellon Bank, N.A. 336,268 7.69% 7.69%
MAC & Co. 502-502
P.O. Box 215
Pittsburgh, PA 15230
Edward Lowe Charitable 519,820 11.88% 11.88%
Remainder Unitrust 1992
P.O. Box 385
Cassopolk, MI 49031
Charles Schwab & Co. Inc. 912,313 20.85% 20.85%
101 Montgomery St.
San Francisco, CA 94104
</TABLE>
76
<PAGE> 83
<TABLE>
<CAPTION>
PERCENTAGE OF BIT PERCENTAGE OF PNC
PORTFOLIO SHARES INSTITUTIONAL
AMOUNT OF OWNED ON SHARES
PORTFOLIO NAME AND ADDRESS SHARES OWNED RECORD DATE UPON CONSUMMATION
- ------------------------------- --------------------------- ------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Saxon & Co. 507,775 11.61% 11.61%
FBO Landmarks
Financial Corp.
P.O. Box 7780-1888
Philadelphia, PA 19182
Multi-Sector Mortgage Harris Trust & Savings Bank 107,686 99.98 100%
Securities Portfolio III Trustee for Ameritech
Pension Trust
Attn: Patricia Melton
111 West Monroe SW
Chicago, IL 60603
</TABLE>
For purposes of the 1940 Act, any person who owns directly or through one
or more controlled companies more than 25% of the voting securities of a company
is presumed to "control" such company. Under this definition, PNC Bank Corp. and
its affiliates may be deemed to be controlling persons of PNC and Midlantic may
be deemed to be a controlling person of Compass. At November 1, 1995, the
trustees and officers of PNC, Compass and BIT as a group owned beneficially less
than 1% of the outstanding shares of each of the investment portfolios of PNC,
Compass and BIT, respectively.
PNC and Compass have been advised by Midlantic that for Midlantic Trust
Department accounts the voting process shall be as follows: (i) for those
accounts, other than the accounts established for Midlantic's own employee
benefit plans and for which Midlantic is Trustee, where there is a designated
individual to receive prospectuses, annual, and semi-annual reports, proxies,
and other disclosure documents, such designated individuals shall be entitled to
vote the shares belonging to such accounts; (ii) with respect to the accounts
established for Midlantic's own employee benefit plans, Midlantic shall vote
such shares in the same proportion as shares owned by other fiduciary accounts
maintained by the Midlantic Trust Department, except if Midlantic concludes that
the best interest of the plans and their participants requires that said shares
be voted directly by it or another, independent fiduciary, and (iii) for those
accounts where there is no designated individual to vote or such designated
individual fails to vote, Midlantic will cast votes for such shares reflexively.
Midlantic Corporation has agreed with PNC Bank Corp. to cause Midlantic to
seek to obtain the approval of the trustees and shareholders of Compass of the
Interim Agreements and the Compass Agreement.
ADDITIONAL INFORMATION ABOUT PNC
The business and affairs of PNC are managed under the direction of its
Board of Trustees. Currently, PIMC is the investment adviser for each PNC
Portfolio. As stated above, it is expected that after the consummation of the
Compass Transaction and BIT Transaction, PAMG will be the investment adviser for
each PNC Portfolio except the PNC Multi-Sector Mortgage Securities Portfolio
III. BlackRock will serve as the investment adviser for that PNC Portfolio. The
adviser for a PNC Portfolio is responsible for the overall management of that
Portfolio. The sub-adviser for a PNC Portfolio is responsible for the day-to-day
management of the particular Portfolio, and generally makes all purchase and
sale decisions regarding the investments made by the Portfolio. The sub-adviser
also provides research and credit analysis as well as certain other services.
Brokerage transactions for the PNC Portfolios may be directed through
broker/dealers that have entered into selling agreements with PNC's distributor,
subject to the requirements of best execution. As adviser for the PNC
Multi-Sector Mortgage Securities Portfolio III, BlackRock provides all of the
advisory and sub-advisory services described above for that Portfolio. After the
Effective Times of the respective Transactions, it is contemplated that Kevin
Klingert will be primarily responsible for the management of the PNC New Jersey
Tax-Free Income Portfolio and that Messrs. Keith Anderson and Robert S. Kapito
will be primarily responsible for the management of the PNC Core Fixed Income
Portfolio and PNC Multi-Sector Mortgage Securities Portfolio III. Mr. Klingert
has been with BlackRock since 1991 and is a Principal,
77
<PAGE> 84
Portfolio Manager and member of BlackRock's Investment Strategy Committee.
Previously, Mr. Klingert was an Assistant Vice President at Merrill, Lynch,
Pierce, Fenner & Smith. Mr. Anderson serves as a Managing Director of BlackRock
and co-head of its Portfolio Management Group. Mr. Kapito serves as Vice
Chairman of BlackRock and co-head of BlackRock's Portfolio Management Group.
Information about the portfolio managers of the other PNC Portfolios is
contained in their prospectuses.
It is expected that after the Effective Time of the respective
Transactions, Compass Capital Group, Inc. ("CCGI"), PFPC Inc. ("PFPC"), indirect
wholly-owned subsidiaries of PNC Bank Corp., and Provident Distributors, Inc.
("PDI"), will serve as PNC's co-administrators. CCGI and PFPC are affiliates of
PAMG. A majority of the outstanding stock of PDI is owned by its officers and
the remaining outstanding stock is owned by Pennsylvania Merchant Group Ltd. As
co-administrators, CCGI, PFPC and PDI will generally assist PNC in all aspects
of its administration and operation, including matters relating to the
maintenance of financial records and fund accounting.
Expenses are deducted from the total income of each PNC Portfolio before
dividends and distributions are paid. These expenses include, but are not
limited to, investment advisory, administration, custodial and transfer agency
fees; fees and expenses of officers and trustees who are not affiliated with
PNC's investment adviser or distributor or any of their affiliates; taxes;
interest; professional fees; servicing fees; fees and expenses for registering
and qualifying PNC and its shares for distribution under Federal and state
securities laws; expenses of preparing prospectuses and statements of additional
information and of printing and distributing them to existing shareholders;
expenses related to shareholder reports, meetings and proxy solicitations;
fidelity bond and trustees and officers liability insurance premiums; expenses
of independent pricing services; and other expenses which are not expressly
assumed by PNC's service providers.
Purchases and redemptions of Service Shares and Institutional Shares of the
PNC Portfolios are effected at the net asset value per share next determined
after an order is received by PNC's transfer agent. PNC's taxable and tax-exempt
money market portfolios calculate their per share net asset value as of 12:00
noon (Eastern Time) and 4:00 p.m. (Eastern Time) on each weekday that both the
New York Stock Exchange and the Federal Reserve Bank of Philadelphia are open
("Business Day"), and the other PNC Portfolios calculate their per share net
asset value as of the close of trading on the New York Stock Exchange (currently
4:00 p.m. Eastern Time) on each Business Day. Net asset value is determined by
adding the market value or fair value (if market quotations are not readily
available) of the securities, cash and other assets allocated to a particular
class of shares, subtracting the liabilities allocated to that class, and
dividing by the total number of the shares of that class that are outstanding.
Amortized cost valuation, rather than market valuation, is used by PNC for its
taxable and tax-exempt money market funds and for debt obligations with 60 days
or less remaining to maturity.
Each PNC Portfolio intends to be taxed as a regulated investment company
under the Internal Revenue Code of 1986, as amended. So long as a Portfolio
qualifies for this tax treatment, it generally will be relieved of Federal
income tax on amounts distributed to the shareholders, but shareholders, unless
otherwise exempt, will pay income or capital gains taxes on amounts so
distributed (except distributions that are "exempt interest dividends" or are
treated as a return of capital). PNC will inform shareholders at least annually
of the amount and nature of the distributions of income and gains made to them.
Information about the PNC Portfolios is included herein and in the PNC
prospectuses accompanying this Combined Proxy Statement/Prospectus, which are
incorporated by reference herein. Additional information about the PNC
Portfolios is included in the statement of additional information related to
this Combined Proxy Statement/Prospectus and in PNC's statement of additional
information dated July 24, 1995 (as supplemented to the date hereof), which have
been filed with the SEC. A copy of these statements of additional information
may be obtained without charge by calling 1-800-821-7432. PNC is subject to the
informational requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, as applicable, and, in accordance with such
requirements, files proxy materials, reports and other information with the SEC.
These materials can be inspected and copied at the Public Reference Facilities
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the offices of PDI at 259 Radnor-Chester Road, Suite 120, Radnor, Pennsylvania
19087. In addition, these materials can be inspected and copied at the
78
<PAGE> 85
SEC's Regional Offices at 7 World Trade Center, Suite 1300, New York, New York
10048, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of these materials can also be obtained from the
Public Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20549, at prescribed rates.
Financial highlights for certain PNC Portfolios for the six-month period
ended March 31, 1995 are attached to this Combined Proxy Statement/Prospectus as
Appendix VI.
Information in this Combined Proxy Statement/Prospectus and the other
documents mentioned above concerning PNC was provided by PNC.
ADDITIONAL INFORMATION ABOUT COMPASS
Information about the Compass Portfolios is included in its prospectuses
and statement of additional information dated July 1, 1995 (as supplemented to
the date hereof), copies of which may be obtained without charge by writing or
calling Compass at the address and telephone number shown on the cover page of
this Combined Proxy Statement/Prospectus. Reports and other information filed by
Compass can be inspected and copied at the Public Reference Facilities
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the SEC's Regional Offices at 77 Park Place, New York, New York 10007, and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60621-2511. Copies of these materials can also be obtained from the
Public Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20549, at prescribed rates.
Information in this Combined Proxy Statement/Prospectus and the other
documents mentioned above concerning Compass was provided by Compass.
ADDITIONAL INFORMATION ABOUT BIT
Information about the BIT Portfolios is included in its prospectuses and
statement of additional information dated October 31, 1995 (as supplemented to
the date hereof), copies of which may be obtained without charge by writing or
calling BIT at the address and telephone number shown on the cover page of this
Combined Proxy Statement/Prospectus. Reports and other information filed by BIT
can be inspected and copied at the Public Reference Facilities maintained by the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's Regional
Offices at 77 Park Place, New York, New York 10007, and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60621-2511.
Copies of these materials can also be obtained from the Public Reference Branch,
Office of Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington, D.C. 20549, at prescribed rates.
Information in this Combined Proxy Statement/Prospectus and the other
documents mentioned above concerning BIT was provided by BIT.
ADDITIONAL INFORMATION ABOUT INVESTMENT ADVISERS,
DISTRIBUTORS AND ADMINISTRATORS
PAMG, PIMC, PCM, PEAC, BLACKROCK AND MORGAN GRENFELL. PIMC's principal
offices are located at Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809. PCM's principal offices are located at 1700 Market
Street, 27th Floor, Philadelphia, Pennsylvania 19103. PEAC's principal offices
are located at 1835 Market Street, 15th Floor, Philadelphia, Pennsylvania 19103.
BlackRock's principal offices are located at 345 Park Avenue, New York, New York
10154. Each of these companies is registered as an investment adviser under the
Investment Advisers Act of 1940.
PIMC, PCM, PEAC and BlackRock are wholly-owned corporate subsidiaries of
PAMG. All of the capital stock of PAMG, which is located at 1835 Market Street,
15th Floor, Philadelphia, Pennsylvania 19103, is owned by PNC Bank. All of the
capital stock of PNC Bank, which has principal offices at Broad and
79
<PAGE> 86
Chestnut Streets, Philadelphia, Pennsylvania 19101, is owned by PNC Bancorp,
Inc. All of the capital stock of PNC Bancorp, Inc., which is located at 3411
Silverside Road, Wilmington, Delaware 19810, is owned by PNC Bank Corp. PNC Bank
Corp. is a publicly held bank holding company with principal offices at 5th and
Wood Streets, Pittsburgh, Pennsylvania 15265.
BlackRock Financial Management L.P. (the predecessor of BlackRock) sold its
business to PAMG on February 28, 1995. At the time of the sale, BlackRock
Financial Management L.P. changed from a limited partnership to a corporation
and changed its name to BlackRock Financial Management Inc.
To PNC's knowledge, no person owned beneficially or of record 10% or more
of any class of issued and outstanding voting securities of PNC Bank Corp. at
September 29, 1995.
The name and principal occupation of the principal executive officer and
each director of PAMG as of October 12, 1995 were as follows: Richard C.
Caldwell, Chairman of PAMG and Executive Vice President of PNC Bank Corp.; J.
Richard Carnall, Chairman of PIMC and Executive Vice President, PNC Bank, N.A.;
Young D. Chin, Chairman and Chief Executive Officer of PCM; Robert J. Christian,
Chief Investment Officer of PNC Bank, N.A.; Vincent J. Ciavardini, President,
Chief Financial Officer and Director of PFPC Inc., Senior Vice President of
PIMC; Laurence D. Fink, Chairman and Chief Executive Officer of BlackRock; Ralph
L. Schlosstein, President of BlackRock; and Thomas Whitford, Senior Vice
President of PAMG. All of the above persons may be reached c/o PAMG, 1835 Market
Street, 15th Floor, Philadelphia, Pennsylvania 19103.
The name and principal occupation of the principal executive officer and
each director of PIMC as of October 12, 1995 were as follows: J. Richard
Carnall, Chairman of PIMC and Executive Vice President, PNC Bank, N.A.; Richard
C. Caldwell, Executive Vice President, PNC Bank Corp.; Richard L. Smoot,
President and Chief Executive Officer, PNC Bank, N.A. (Philadelphia); Joseph N.
Sgroi, Jr., Vice President and Secretary, PNC Bank, Delaware, N.A.; and Thomas
H. Nevin, President and Chief Investment Officer. All of the above persons may
be reached c/o PIMC, 400 Bellevue Parkway, Wilmington, Delaware 19809.
The name and principal occupation of the principal executive officer and
each director of PCM as of October 12, 1995 were as follows: Young D. Chin,
President and Chief Executive Officer of PCM; Richard C. Caldwell, Executive
Vice President of PNC Bank Corp.; Ernest E. Cecilia, Chief Investment Officer,
President and Chief Executive Officer of PEAC; Robert J. Christian, Chief
Investment Officer of PNC Bank, N.A.; Timothy M. Alles, Chief Financial Officer
and Treasurer of PEAC; and Lynn K. Shipman, Secretary of PCM. All of the above
persons may be reached c/o PCM, 1700 Market Street, 27th Floor, Philadelphia,
Pennsylvania 19103.
The name and principal occupation of the principal executive officer and
each director of PEAC as of October 12, 1995 were as follows: Ernest E. Cecilia,
Chief Investment Officer, President and Chief Executive Officer of PEAC; Timothy
M. Alles, Chief Financial Officer and Treasurer of PEAC; Richard C. Caldwell,
Executive Vice President of PNC Bank Corp.; Young D. Chin, President and Chief
Executive Officer of PCM; Robert J. Christian, Chief Investment Officer of PNC
Bank, N.A.; Lisa P. Howard, Chief Compliance Officer of PEAC; Leah L. Tompkins,
Secretary and Chief Legal Counsel of PEAC; and Thomas H. O'Brien, Chief
Executive Officer of PNC Bank Corp. All of the above persons may be reached c/o
PEAC, 1835 Market Street, 15th Floor, Philadelphia, Pennsylvania 19103.
The name and principal occupation of the principal executive officers and
each director of BlackRock as of October 12, 1995 were as follows: Laurence D.
Fink, Chairman and Chief Executive Officer; Ralph L. Schlosstein, President; and
Richard C. Caldwell, Executive Vice President of PNC Bank Corp. All of the above
may be reached c/o BlackRock, 345 Park Avenue, New York, New York 10154.
Morgan Grenfell Investment Services Limited ("Morgan Grenfell") is located
at 20 Finsbury Circus, London, ECZM 1NB England. Morgan Grenfell is a registered
investment adviser under the Investment Advisers Act of 1940. Morgan Grenfell is
a wholly-owned subsidiary of Morgan Grenfell Asset Management ("MGAM"), which is
located at 20 Finsbury Circus, London, ECZM 1NB England. MGAM is a wholly-owned
subsidiary of Morgan Grenfell Group, P.L.C. ("MGG"), which is located at 23
Great Winchester
80
<PAGE> 87
Street, London EC2P 2AX England. MGG is in turn a wholly-owned subsidiary of
Deutsche Bank, A.G., a German financial services conglomerate, which is located
at Taunusanlage 12, 60325 Frankfurt, Germany.
The name and principal occupation of the principal executive officers and
each director of Morgan Grenfell as of October 12, 1995 were as follows: Graham
David Bamping, Director; Michael Bullock, Chairman and Chief Investment Officer;
Patrick William Wynn Disney, Chief Executive; Martin Alexander Hall, Director;
Julian Ross Johnston, Director; Ian Donald Kelson, Director; Richard Llewelyn,
Director; Jeremy Goulding Lodwick, Director; William Gethin Mayrick Thomas,
Director; Patrick Nicholas Charles Walker, Director; Stephen Andrew Jonathan
Ward, Director; and Alan Michael Wheatley, Director. All of the above persons
may be reached c/o Morgan Grenfell, 20 Finsbury Circus, London ECZM 1NB England.
OTHER INVESTMENT COMPANIES ADVISED BY PIMC, PEAC, PCM, BLACKROCK AND MORGAN
GRENFELL. The tables below set forth certain information concerning other
investment companies that have similar investment objectives for which PIMC,
PEAC, PCM, BlackRock and Morgan Grenfell act as investment adviser or sub-
adviser, and describe the existing fee agreements with these companies as of
August 31, 1995. PIMC, PEAC, PCM, BlackRock and Morgan Grenfell were waiving, as
of the date of this Combined Proxy Statement/Prospectus, some or all of the fees
payable by certain of the companies listed below. Those waivers are not
reflected in the tables. As of the date of this Combined Proxy
Statement/Prospectus, PAMG did not serve as investment adviser or sub-adviser to
any investment company.
PIMC ADVISED FUNDS
<TABLE>
<CAPTION>
NET ASSETS
AS OF
NAME OF INVESTMENT COMPANY AUGUST 31, 1995 ANNUAL FEE
AND/OR PORTFOLIO (000S) (BASED ON AVERAGE NET ASSETS)
- ------------------------------------- --------------- ----------------------------------------
<S> <C> <C>
Independence Square Income $ 33,064 .20% of net assets.
Securities Inc.
The PNC Fund, Index Equity Portfolio $ 249,021 .20% of net assets.
The PNC Fund, Small Cap Value Equity $ 246,496 .55% of the first $1 billion;
Portfolio .50% of the next $1 billion;
.475% of the next $1 billion;
.45% of net assets over $3 billion.
The PNC Fund, Core Equity Portfolio $ 247,327 Same as PNC Small Cap Value Equity
Portfolio.
The PNC Fund, International Emerging $ 45,288 1.25% of the first $1 billion;
Markets Portfolio 1.20% of the next $1 billion;
1.155% of the next $1 billion;
1.10% of net assets over $3 billion.
The PNC Fund, Managed Income $ 563,512 .50% of the first $1 billion;
Portfolio .45% of the next $1 billion;
.425% of the next $1 billion;
.40% of net assets over $3 billion.
The PNC Fund, Intermediate Government $ 192,356 Same as PNC Managed Income Portfolio.
Portfolio
The PNC Fund, Intermediate-Term Bond $ 158,727 Same as PNC Managed Income Portfolio.
Portfolio
The PNC Fund, Government Income $ 12,559 Same as PNC Managed Income Portfolio.
Portfolio
Provident Institutional Funds, Inc. $ 81,340 .40% of net assets.
Short Duration Fund
Provident Institutional Funds, Inc. $ 20,573 .40% of net assets.
Intermediate Duration Fund
</TABLE>
81
<PAGE> 88
<TABLE>
<CAPTION>
NET ASSETS
AS OF
NAME OF INVESTMENT COMPANY AUGUST 31, 1995 ANNUAL FEE
AND/OR PORTFOLIO (000S) (BASED ON AVERAGE NET ASSETS)
- ------------------------------------- --------------- ----------------------------------------
<S> <C> <C>
Municipal Fund for Temporary $ 6,432 .20% of net assets.
Investment Intermediate Municipal
Fund Portfolio
Municipal Fund for Temporary $ 712,642 .175% of the first $1 billion;
Investment MuniFund Portfolio .15% of the next $1 billion;
.125% of the next $1 billion;
.1% of the next $1 billion;
.095% of the next $1 billion;
.09% of the next $1 billion;
.085% of the next $1 billion;
.08% of net assets over $7 billion.
Municipal Fund for Temporary $ 406,890 Same as MuniFund Portfolio.
Investment MuniCash Portfolio
Trust for Federal Securities, Federal $ 289,683 .175% of the first $1 billion of the
Trust Fund combined net assets of FedFund, T-Fund,
FedCash Fund, T-Cash Fund, Federal Trust
Fund and Treasury Trust Fund;
.150% of the next $1 billion;
.125% of the next $1 billion;
.100% of the next $1 billion;
.095% of the next $1 billion;
.090% of the next $1 billion;
.085% of the next $1 billion;
.080% of combined net assets over $7
billion.
Trust for Federal Securities, FedCash $ 429,340 Same as Federal Trust Fund.
Fund
Trust for Federal Securities, $1,275,889 Same as Federal Trust Fund.
Treasury Trust Fund
Trust for Federal Securities, T-Fund $1,393,108 Same as Federal Trust Fund.
Trust for Federal Securities, T-Cash $ 478,584 Same as Federal Trust Fund.
Portfolio
Trust for Federal Securities, FedFund $1,487,959 Same as Federal Trust Fund.
Trust for Federal Securities, Short $ 4,488 .20% of net assets.
Government Portfolio
Temporary Investment Fund, Inc., $5,955,973 .175% of the first $1 billion;
TempFund .15% of the next $1 billion;
.125% of the next $1 billion;
.1% of the next $1 billion;
.095% of the next $1 billion;
.09% of the next $1 billion;
.08% of the next $1 billion;
.075% of the next $1 billion;
.07% of its net assets over $8 billion.
Temporary Investment Fund, Inc., $2,530,175 .175% of the first $1 billion;
TempCash Portfolio .15% of the next $1 billion;
.125% of the next $1 billion;
.1% of the next $1 billion;
.095% of the next $1 billion;
.09% of the next $1 billion;
.085% of the next $1 billion;
.08% of its net assets over $7 billion.
</TABLE>
82
<PAGE> 89
<TABLE>
<CAPTION>
NET ASSETS
AS OF
NAME OF INVESTMENT COMPANY AUGUST 31, 1995 ANNUAL FEE
AND/OR PORTFOLIO (000S) (BASED ON AVERAGE NET ASSETS)
- ------------------------------------- --------------- ----------------------------------------
<S> <C> <C>
The RBB Fund, Inc., Money Market $1,821,372 .45% of first $250 million;
Portfolio .40% of next $250 million;
.35% of net assets over $500 million.
The RBB Fund, Inc., Government $ 512,459 Same as RBB Money Market Portfolio.
Obligations Money Market Portfolio
The RBB Fund, Inc., Municipal Money $ 422,754 .35% of first $250 million;
Market Portfolio .30% of next $250 million;
.25% of net assets in excess of $500
million.
The RBB Fund, Inc., Government $ 10,771 .40% of first $250 million;
Securities Portfolio .35% of next $250 million;
.30% in excess of $500 million.
Chestnut Street Exchange Fund $ 238,255 .50% of the first $100 million;
.40% of net assets exceeding $100
million.
Alex Brown Cash Reserve Fund, Inc. $ 522,765 .15% of first $250 million;
Tax-Free Series .13% of the next $250 million;
.11% of the next $250 million;
.09% of the next $250 million;
.075% of the next $3 billion;
.06% in excess of $4 billion.
First Funds US Treasury Money Market $ 75,830 .08% of first $500 million of the;
Portfolio combined net assets of the U.S. Treasury
Money Market; U.S. Government Money
Market; Municipal Money Market and Cash
Reserve Portfolios;
.06% of next $500 million;
.05% of combined net assets over $1
billion.
First Funds US Government Money $ 103,763 Same as U.S. Treasury Money Market
Market Portfolio Portfolio
First Funds Municipal Money Market $ 109,013 Same as U.S. Treasury Money Market
Portfolio Portfolio
First Funds Cash Reserve Portfolio $ 15,403 Same as U.S. Treasury Money Market
Portfolio
Warburg Pincus Cash Reserve Fund $ 273,891 .25% of net assets.
Warburg Pincus New York Tax-Exempt $ 72,704 .25% of net assets.
Fund
</TABLE>
PCM SUB-ADVISED FUNDS
<TABLE>
<CAPTION>
NET ASSETS
AS OF
NAME OF INVESTMENT COMPANY AUGUST 31, 1995 ANNUAL FEE
AND/OR PORTFOLIO (000S) (BASED ON AVERAGE NET ASSETS)
- ------------------------------------- --------------- ----------------------------------------
<S> <C> <C>
The PNC Fund, International Emerging See PIMC 1.10% of the first $1 billion;
Markets Portfolio Advised Funds 1.05% of the next $1 billion;
1.005% of the next $1 billion;
.45% of net assets over $3 billion.
The PNC Fund, Small Cap Value See PIMC .40% of the first billion;
Equity Portfolio Advised Funds .35% of the next billion;
.325% of the next billion;
.30% of net assets over $3 billion.
</TABLE>
83
<PAGE> 90
<TABLE>
<CAPTION>
NET ASSETS
AS OF
NAME OF INVESTMENT COMPANY AUGUST 31, 1995 ANNUAL FEE
AND/OR PORTFOLIO (000S) (BASED ON AVERAGE NET ASSETS)
- ------------------------------------- --------------- ----------------------------------------
<S> <C> <C>
The PNC Fund, Core Equity Portfolio See PIMC Same as PNC Small Cap Value
Advised Funds Equity Portfolio.
The PNC Fund, Index Equity Portfolio See PIMC .15% of net assets.
Advised Funds
</TABLE>
BLACKROCK ADVISED FUNDS
<TABLE>
<CAPTION>
NET ASSETS
AS OF
NAME OF INVESTMENT COMPANY AUGUST 31, 1995 ANNUAL FEE
AND/OR PORTFOLIO (000S) (BASED ON AVERAGE NET ASSETS)
- ------------------------------------- --------------- ----------------------------------------
<S> <C> <C>
The BlackRock Advantage Term $ 95,054 .60% of the average weekly net assets
Trust Inc. until December 31, 1995; .50% from
January 1, 1996 through December 31,
2000; .40% from January 1, 2001 through
termination.
The BlackRock Income Trust Inc. $ 475,096 .65% of the average weekly net assets.
The BlackRock Municipal Target Term $ 496,610 .35% of the average weekly total assets.
Trust Inc.
The BlackRock 1998 Term Trust Inc. $ 562,149 .50% of the average weekly net assets
until December 31, 1994; .40% from
January 1, 1995 through December 31,
1996; .30% from January 1, 1997 through
termination.
The BlackRock 1999 Term Trust Inc. $ 195,107 .40% of the average weekly net assets.
The BlackRock 2001 Term Trust Inc. $1,237,786 .40% of the average weekly net assets.
The BlackRock Insured Municipal 2008 $ 425,308 .35% of the average weekly total assets.
Term Trust Inc.
The BlackRock Broad Investment Grade $ 38,743 .55% of the average weekly net assets.
2009 Term Trust Inc.
The BlackRock North American $ 398,488 .60% of the average weekly net assets.
Government Income Trust Inc.
The BlackRock Strategic Term Trust $ 511,146 .60% of the average weekly net assets
Inc. until December 31, 1994; .45% from
January 1, 1995 through December 31,
1998; .30% from January 1, 1999 through
termination.
The BlackRock Target Term Trust Inc. $ 931,501 .45% of the average weekly net assets
until December 31, 1996; .30% from
January 1, 1997 through termination.
The BlackRock Insured Municipal Term $ 275,849 .35% of the average weekly total assets.
Trust Inc.
The BlackRock Investment Quality Term $ 236,030 .60% of the average weekly net assets
Trust Inc. until December 31, 1998; .50% from
January 1, 1999 through December 31,
2002; .40% from January 1, 2003 through
termination.
</TABLE>
84
<PAGE> 91
<TABLE>
<CAPTION>
NET ASSETS
AS OF
NAME OF INVESTMENT COMPANY AUGUST 31, 1995 ANNUAL FEE
AND/OR PORTFOLIO (000S) (BASED ON AVERAGE NET ASSETS)
- ------------------------------------- --------------- ----------------------------------------
<S> <C> <C>
The BlackRock Investment Quality $ 230,641 .35% of the average weekly total assets.
Municipal Trust Inc.
The BlackRock New Jersey Investment $ 13,184 .35% of the average weekly total assets.
Quality Municipal Trust Inc.
</TABLE>
BLACKROCK SUB-ADVISED FUNDS
<TABLE>
<CAPTION>
NET ASSETS
AS OF
NAME OF INVESTMENT COMPANY AUGUST 31, 1995 ANNUAL FEE
AND/OR PORTFOLIO (000S) (BASED ON AVERAGE NET ASSETS)
- ------------------------------------- --------------- ----------------------------------------
<S> <C> <C>
The PNC Fund, Managed See PIMC .35% of the first $1 billion;
Income Portfolio Advised Funds .30% of the next $1 billion;
.275% of the next $1 billion;
.25% of net assets over $3 billion.
The PNC Fund, Intermediate Government See PIMC .35% of the first $1 billion;
Portfolio Advised Funds .30% of the next $1 billion;
.275% of the next $1 billion;
.25% of net assets over $3 billion.
The PNC Fund, Intermediate-Term See PIMC .35% of the first $1 billion;
Bond Portfolio Advised Funds .30% of the next $1 billion;
.275% of the next $1 billion;
.25% of net assets over $3 billion.
The PNC Fund, Government See PIMC .35% of the first $1 billion;
Income Portfolio Advised Funds .30% of the next $1 billion;
.275% of the next $1 billion;
.25% of net assets over $3 billion.
Provident Institutional Funds, Inc. See PIMC .25% of net assets.
Short Duration Fund Advised Funds
Provident Institutional Funds, Inc. See PIMC .25% of net assets.
Intermediate Duration Fund Advised Funds
Investors Trust Government Fund $1,183,027 .15% of average daily net asset value up
to $5 million;
.10% of the next $250 million;
.05% of next $500 million;
.045% in excess of $1.25 billion.
Sierra Variable Trust -- U.S. $ 48,343 .185% of average daily net asset value
Government Fund up to $650 million;
.15% of the next $350 million;
.10% in excess of $1 billion.
Sierra Trust Funds -- $ 487,889 .185% of average daily net asset value
U.S. Government Fund up to $650 million;
.15% of the next $350 million;
.10% in excess of $1 billion.
Sierra Trust Funds -- $ 2,948 Greater of .05% of average daily net
Target Maturity 2008 assets or $25,000.
</TABLE>
85
<PAGE> 92
<TABLE>
<CAPTION>
NET ASSETS
AS OF
NAME OF INVESTMENT COMPANY AUGUST 31, 1995 ANNUAL FEE
AND/OR PORTFOLIO (000S) (BASED ON AVERAGE NET ASSETS)
- ------------------------------------- --------------- ----------------------------------------
<S> <C> <C>
Frank Russell Investment Company $ 45,822 .25% of average daily net assets up to
Volatility Constrained Bond Fund $1 billion; .20% in excess of $1
billion.
Frank Russell Investment Company $ 39,260 .25% of average daily net assets up to
Fixed Income II Fund $1 billion;
.20% in excess of $1 billion.
</TABLE>
MORGAN GRENFELL ADVISED FUNDS
<TABLE>
<CAPTION>
NET ASSETS
AS OF
NAME OF INVESTMENT COMPANY AUGUST 31, 1995 ANNUAL FEE
AND/OR PORTFOLIO (000S) (BASED ON AVERAGE NET ASSETS)
- ------------------------------------- --------------- --------------------------------------
<S> <C> <C>
Dean Witter Euro Growth Fund $ 829,700,000 1.0% of the first $500 million;
.95% of net assets over $500 million.
Dean Witter Pacific Growth Fund $1,474,900,000 1.00% of the first $1 billion;
0.95% of net assets over $1 billion.
Dean Witter Variable Pacific Fund $ 90,100,000 1.00% of net assets.
Dean Witter Variable European Fund $ 176,000,000 1.00% of net assets.
Dean Witter Small Cap Fund $ 102,000,000 1.25% of net assets.
Dean Witter Global Asset $ 19,500,000 0.225% of net assets.
Allocation Fund
Dean Witter World Wide Fund $ 363,000,000 .3% of net assets.
SEI European Equity Portfolio $ 186,700,000 .325% of net assets.
RSI Retirement Fund $ 30,800,000 .6% of first $50 million;
0.5% of net assets over $50 million.
Morgan Grenfell International $ 2,687,652 .70% of net assets.
Equity Fund
Morgan Grenfell Small Cap Equity Fund $ 69,108,901 1.00% of net assets.
Morgan Grenfell European Small Cap $ 9,125,943 1.00% of net assets.
Equity Fund
Morgan Grenfell Emerging Markets $ 2,651,772 1.00% of net assets.
Equity Fund
Morgan Grenfell Global $ 117,597,563 .50% of net assets.
Fixed Income Fund
Morgan Grenfell International $ 26,786,917 .50% of net assets.
Fixed Income Fund
Morgan Grenfell Emerging Markets $ 72,110,780 1.50% of net assets.
Debt Fund
</TABLE>
The Glass-Steagall Act, among other things, prohibits banks from engaging
to any extent in the business of underwriting securities, although national and
state-chartered banks generally are permitted to purchase and sell securities
upon the order and for the account of their customers. In 1971, the United
States Supreme Court held in Investment Company Institute v. Camp that the
Glass-Steagall Act prohibits a national bank from operating a fund for the
collective investment of managing agency accounts. Subsequently, the Board of
Governors of the Federal Reserve System (the "Board") issued a regulation and
interpretation to the effect that the Glass-Steagall Act and such decision
forbid a bank-holding company registered under the Federal
86
<PAGE> 93
Bank Holding Company Act of 1956 (the "Holding Company Act") or any non-bank
affiliate thereof from sponsoring, organizing or controlling a registered,
open-end investment company continuously engaged in the issuance of its shares,
but do not prohibit such a holding company or affiliate from acting as
investment adviser, transfer agent and custodian to an investment company. In
1981, the United States Supreme Court held in Board of Governors of the Federal
Reserve System v. Investment Company Institute that the Board did not exceed its
authority under the Holding Company Act when it adopted its regulation and
interpretation authorizing bank holding companies and their non-bank affiliates
to act as investment advisers to registered closed-end investment companies.
PAMG, PIMC, PCM, PEAC and BlackRock believe that they may perform the
services contemplated by their agreements without violation of the
Glass-Steagall Act or other applicable banking laws or regulations. If, however,
they were prevented by judicial or administrative decisions or interpretations
from performing the services by their advisory and sub-advisory agreements, it
is anticipated that the Board would consider the possibility of selecting other
qualified companies. Any new investment advisory or sub-advisory agreement would
normally be subject to shareholder approval.
INFORMATION ABOUT DISTRIBUTORS AND ADMINISTRATORS. SEI Financial
Management Corporation, 680 East Swedesford Road, Wayne, Pennsylvania 19087,
serves as the administrator for the Compass Portfolios and SEI Financial
Services Company, 680 Swedesford Road, Wayne, Pennsylvania 19087, serves as
their distributor. PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809
and Provident Distributors, Inc., 259 Radnor-Chester Road, Suite 120, Radnor,
Pennsylvania 19087, serve as co-administrators for each of the PNC Portfolios
and BIT Portfolios, and Provident Distributors, Inc. serves as their
distributor. CCGI, 345 Park Avenue, New York, New York 10154 will also serve as
a co-administrator of the PNC Portfolios.
FINANCIAL STATEMENTS AND EXPERTS
The financial statements for Service and Institutional Shares of the PNC
Portfolios for the annual period ended September 30, 1994 and six-month period
ended March 31, 1995 are incorporated by reference into the statement of
additional information related to this Combined Proxy Statement/Prospectus. In
addition, the financial statements for shares of the Compass Portfolios for the
annual period ended February 28, 1995 and the six-month period ended August 31,
1995, as well as the financial statements for shares of the BIT Portfolios for
the annual period ended June 30, 1995, are incorporated by reference into the
statement of additional information related to this Combined Proxy
Statement/Prospectus.
The annual financial statements of PNC and Compass have been audited by
Coopers and Lybrand L.L.P., and the annual financial statements of BIT have been
audited by Deloitte & Touche LLP to the extent indicated in their reports
thereon, which are also incorporated by reference into such statement of
additional information, and have been incorporated therein by reference in
reliance upon such reports given upon the authority of such firms as experts in
accounting and auditing.
OTHER BUSINESS
The Compass Board of Trustees knows of no other business to be brought
before the Compass Meeting. The BIT Board of Directors knows of no other
business to be brought before the BIT Meeting. However, if any other matters
come before the Compass Meeting or the BIT Meeting, respectively, it is the
intention that proxies which do not contain specific restrictions to the
contrary will be voted on such matters in accordance with the judgment of the
persons named in the enclosed form of proxy.
87
<PAGE> 94
SHAREHOLDER INQUIRIES
Inquiries of Compass shareholders may be addressed to The Compass Capital
Group in writing at the address on the cover page of this Combined Proxy
Statement/Prospectus or by telephoning 1-800-451-8371. Inquiries of BIT
shareholders may be addressed to The BFM Institutional Trust Inc. in writing at
the address on the cover page of this Combined Proxy Statement/Prospectus or by
telephoning 1-800-227-7236.
***
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE RESPECTIVE MEETINGS ARE
REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
COMPASS WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS 1995 ANNUAL AND
SEMI-ANNUAL SHAREHOLDER REPORTS TO ANY SHAREHOLDER UPON REQUEST ADDRESSED TO 680
SWEDESFORD ROAD, WAYNE, PENNSYLVANIA 19087 OR BY TELEPHONE AT 1-800-451-8371.
BIT WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS 1995 ANNUAL SHAREHOLDERS
REPORT TO ANY SHAREHOLDER UPON REQUEST ADDRESSED TO 345 PARK AVENUE, NEW YORK,
NEW YORK 10154 OR BY TELEPHONE AT 1-800-227-7236.
88
<PAGE> 95
APPENDIX I
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
THE PNC(R) FUND
AND
THE COMPASS CAPITAL GROUP(R)
DATED: AS OF OCTOBER 30, 1995
I-1
<PAGE> 96
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Conveyance of Assets of Compass Portfolios............................................ I-3
Liquidation and Dissolution of Compass Portfolios..................................... I-5
Valuation Time........................................................................ I-5
Certain Representations, Warranties and Agreements of Compass......................... I-6
Certain Representations, Warranties and Agreements of PNC............................. I-8
Shareholder Action.................................................................... I-9
Regulatory Filings.................................................................... I-10
Effective Time of the Compass Transaction............................................. I-10
PNC Conditions........................................................................ I-10
Compass Conditions.................................................................... I-12
Further Assurances.................................................................... I-13
Termination of Representations and Warranties......................................... I-14
Termination of Agreement.............................................................. I-14
Amendment and Waiver.................................................................. I-14
Governing Law......................................................................... I-14
Successors and Assigns................................................................ I-14
Beneficiaries......................................................................... I-14
Brokerage Fees and Expenses........................................................... I-14
PNC Liability......................................................................... I-14
Compass Liability..................................................................... I-15
Notices............................................................................... I-15
Expenses.............................................................................. I-15
Announcements......................................................................... I-15
Entire Agreement...................................................................... I-15
Counterparts.......................................................................... I-15
</TABLE>
I-2
<PAGE> 97
This ASSET PURCHASE AGREEMENT (the "Agreement") is made as of this 30th day
of October, 1995 by and between The Compass Capital Group(R) ("Compass"), a
Massachusetts business trust consisting of multiple investment portfolios named
the Municipal Money Fund, New Jersey Municipal Money Fund, Pennsylvania
Municipal Money Fund, Cash Reserve Fund, U.S. Treasury Fund, Municipal Bond
Fund, New Jersey Municipal Bond Fund, Pennsylvania Municipal Bond Fund, Equity
Income Fund, Growth Fund, Small Company Fund, International Equity Fund,
Balanced Fund, Short/Intermediate Fund, Fixed Income Fund and International
Fixed Income Fund (the "Compass Portfolios") and The PNC Fund(R) ("PNC"), a
Massachusetts business trust consisting of multiple investment portfolios which
include the Municipal Money Market Portfolio, New Jersey Municipal Money
Portfolio, Pennsylvania Municipal Money Portfolio, Money Market Portfolio,
Government Money Market Portfolio, Tax-Free Income Portfolio, New Jersey
Tax-Free Income Portfolio, Pennsylvania Tax-Free Income Portfolio, Value Equity
Portfolio, Growth Equity Portfolio, Small Cap Growth Equity Portfolio,
International Equity Portfolio, Balanced Portfolio, Short-Term Bond Portfolio,
Core Fixed Income Portfolio and International Fixed Income Portfolio (the "PNC
Portfolios").
WHEREAS, Compass and PNC are each an open-end management investment company
registered with the Securities and Exchange Commission (the "SEC") under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, Compass currently receives investment advisory services from
Midlantic Bank, N.A., an affiliate of Midlantic Corporation, and PNC currently
receives investment advisory services from affiliates of PNC Bank Corp.; and
WHEREAS, Midlantic Corporation and PNC Bank Corp. have entered into an
agreement providing for their merger (the "Bank Holding Company Merger"); and
WHEREAS, subject to the consummation of the Bank Holding Company Merger,
the parties desire that the assets and liabilities of each Compass Portfolio be
conveyed to, and be acquired and assumed by, the respective PNC Portfolio
corresponding thereto, as stated herein, in exchange for "Service" class shares
of the corresponding PNC Portfolio which shall thereafter be distributed by
Compass to the shareholders of the Compass Portfolio in connection with its
liquidation and dissolution as described in this Agreement (the "Compass
Transaction"); and
WHEREAS, PNC also maintains twelve additional investment portfolios -- Ohio
Municipal Money Market Portfolio, North Carolina Municipal Money Market
Portfolio, Virginia Municipal Money Market Portfolio, Intermediate Government
Portfolio, Ohio Tax-Free Income Portfolio, Intermediate-Term Bond Portfolio,
Government Income Portfolio, Managed Income Portfolio, Core Equity Portfolio,
Small Cap Value Equity Portfolio, Index Equity Portfolio and International
Emerging Markets Portfolio -- that are not parties to the Compass Transaction;
and
WHEREAS, the parties anticipate that PNC may enter into separate
acquisition agreements with The BFM Institutional Trust Inc. (the "BIT
Agreement") or other entities that provide for the acquisition of additional
investment portfolios by the PNC Portfolios, and the parties intend that the
execution and consummation of this Agreement shall neither prevent nor be
subject to the execution or consummation of any such agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and subject to the terms and conditions hereof, the
parties hereto, intending to be legally bound, agree as follows:
1. Conveyance of Assets of Compass Portfolios. At the Effective Time of
the Compass Transaction as defined in Section 8, all property of every
description, and all interests, rights, privileges and powers of each of the
Compass Portfolios, subject to all liabilities of such Portfolios, whether
accrued, absolute, contingent or otherwise existing as of the Effective Time of
the Compass Transaction (such assets subject to such liabilities are herein
referred to as the "Fund Assets"), shall be transferred and conveyed by each
Compass Portfolio to the corresponding PNC Portfolio (as set forth below) and
shall be accepted and assumed by said PNC Portfolio as more particularly set
forth in the following paragraph, such that at and after the Effective Time of
the Compass Transaction: (a) all assets of the Compass Portfolios shall become
and be the assets of the
I-3
<PAGE> 98
respective corresponding PNC Portfolios; and (b) all such liabilities and
obligations of the Compass Portfolios that are so existing shall attach to the
respective corresponding PNC Portfolios as aforesaid and may thenceforth be
enforced against the respective PNC Portfolios to the extent as if the same had
been incurred by them.
Without limiting the generality of the foregoing, it is understood that the
Fund Assets shall include all property and assets of any nature whatsoever,
including, without limitation, all cash, cash equivalents, securities, claims
and receivables (including dividend and interest receivables) owned by each
Compass Portfolio, and any deferred or prepaid expenses shown as an asset on
each Compass Portfolio's books, at the Effective Time of the Compass
Transaction, and all good will, all other intangible property and all books and
records belonging to the Compass Portfolios, including the "Compass" name and
registered marks, if any.
In particular, the Fund Assets of each Compass Portfolio shall be
transferred and conveyed to the corresponding PNC Portfolio, as set forth below:
<TABLE>
<CAPTION>
CORRESPONDING
COMPASS PORTFOLIO PNC PORTFOLIO
---------------------------------------- ----------------------------------------------
<S> <C>
Municipal Money Fund Municipal Money Market Portfolio
New Jersey Municipal Money Fund New Jersey Municipal Money Market Portfolio
Pennsylvania Municipal Money Fund Pennsylvania Municipal Money Market Portfolio
Cash Reserve Fund Money Market Portfolio
U.S. Treasury Fund Government Money Market Portfolio
Municipal Bond Fund Tax-Free Income Portfolio
New Jersey Municipal Bond Fund New Jersey Tax-Free Income Portfolio
Pennsylvania Municipal Bond Fund Pennsylvania Tax-Free Income Portfolio
Equity Income Fund Value Equity Portfolio
Growth Fund Growth Equity Portfolio
Small Company Fund Small Cap Growth Equity Portfolio
International Equity Fund International Equity Portfolio
Balanced Fund Balanced Portfolio
Short-Term Intermediate Fund Short-Term Bond Portfolio
Fixed Income Fund Core Fixed Income Portfolio
International Fixed Income Fund International Fixed Income Portfolio
</TABLE>
In exchange for the transfer of the Fund Assets, each PNC Portfolio shall
simultaneously issue to the corresponding Compass Portfolio at the Effective
Time of the Compass Transaction full and fractional shares of beneficial
interest in said PNC Portfolio's so-called "Service" share class having an
aggregate net asset value equal to the net value of the Fund Assets so conveyed
to such PNC Portfolio, all determined and adjusted as provided in this Section
1. In particular, each PNC Portfolio shall deliver to the corresponding Compass
Portfolio the number of shares of its "Service" share class, including
fractional shares, determined by dividing the value of the Fund Assets of the
corresponding Compass Portfolio that are so conveyed, computed in the manner and
as of the time and date set forth in this Section, by the net asset value of one
PNC Portfolio "Service" share that is to be delivered with respect thereto,
computed in the manner and as of the time and date set forth in this Section. It
is contemplated that at the Effective Time of the Compass Transaction the net
asset value of one PNC Portfolio Service Share will be the same as the net asset
value of one share of its corresponding Compass Portfolio in the case of the PNC
New Jersey Tax-Free Income Portfolio and PNC International Fixed Income
Portfolio and, in the event that the Effective Time of the Compass Transaction
occurs simultaneously with the effective time of the transaction contemplated in
the BIT Agreement, that the net asset value of one PNC Portfolio Service Share
will be adjusted to be the same as the net asset value of one share of the
corresponding portfolio of The BFM Institutional Trust Inc. in the case of the
PNC Short-Term Bond Portfolio and PNC Core Fixed Income Portfolio. All
computations shall be made by PNC in consultation with Coopers & Lybrand, L.L.P.
I-4
<PAGE> 99
The net asset value of shares to be delivered by the PNC Portfolios, and
the net value of the Fund Assets to be conveyed by the Compass Portfolios,
shall, in each case, be determined as of the Valuation Time specified in Section
3. The net asset value of shares of the PNC Portfolios shall be computed in the
manner set forth in the PNC Portfolios' then current prospectuses under the
Securities Act of 1933, as amended (the "1933 Act"). The net value of the Fund
Assets to be transferred by the Compass Portfolios shall be computed by PNC and
shall be subject to adjustment by the amount, if any, agreed to by PNC and the
respective Compass Portfolios. In determining the value of the securities
transferred by the Compass Portfolios to the PNC Portfolios, each security shall
be priced in accordance with the policies and procedures of PNC described in its
then current prospectuses and statements of additional information and adopted
by PNC's Board of Trustees. For such purposes, price quotations and the security
characteristics relating to establishing such quotations shall be determined by
PNC, provided that such determination shall be subject to the approval of
Compass.
It is understood and agreed that the value of the Fund Assets of the
Compass Municipal Money Fund, New Jersey Municipal Money Fund, Pennsylvania
Municipal Money Fund, Cash Reserve Fund and U.S. Treasury Fund (each a "Compass
Money Market Fund") and the value of shares of the corresponding PNC Portfolios
for purposes of sales and redemptions shall be based on the amortized cost
valuation procedures that have been adopted by the Boards of Trustees of Compass
and PNC, respectively; provided that if the difference between the per share net
asset values of a Compass Money Market Fund and its corresponding PNC Portfolio
equals or exceeds $.0025 at the Valuation Time, as computed by using such market
values in accordance with the policies and procedures established by PNC (or as
otherwise mutually determined by the Boards of Trustees of Compass and PNC),
either the Board of Trustees of Compass or the Board of Trustees of PNC shall
have the right to postpone the Valuation Time and the Effective Time of the
Compass Transaction with respect to such Compass Money Market Fund until such
time as the per share difference is less than $.0025.
2. Liquidation and Dissolution of Compass Portfolios. At the Effective
Time of the Compass Transaction, each of the Compass Portfolios shall make a
liquidating distribution to its shareholders as follows. Shareholders of record
as of the Valuation Time of each Compass Portfolio shall be credited with full
and fractional shares of the class of beneficial interest that are issued by the
corresponding PNC Portfolio in connection with the Compass Transaction in
exchange for the Compass Portfolio shares that are held of record by the
shareholder. In addition, each shareholder of record of a Compass Portfolio
shall have the right to receive any unpaid dividends or other distributions
which were declared before the Effective Time of the Compass Transaction with
respect to the shares of such Compass Portfolio that are held by the shareholder
at the Effective Time of the Compass Transaction. In accordance with
instructions it receives from Compass, PNC shall record on its books the
ownership of the respective PNC Portfolio shares by the shareholders of record
as of the Valuation Time of the Compass Portfolios (the "Transferor Record
Holders"). No redemption or repurchase of any PNC Portfolio shares credited to
former shareholders of the Compass Portfolios that are represented by
unsurrendered share certificates shall be permitted until such certificates have
been surrendered to PNC's transfer agent for cancellation. All of the issued and
outstanding shares of the Compass Portfolios at the Effective Time of the
Compass Transaction shall be redeemed and cancelled on the books of Compass at
such time. As soon as practicable after the Effective Time of the Compass
Transaction, Compass shall make all filings and take all other steps as shall be
necessary and proper to effect its complete dissolution, and shall file an
application pursuant to Section 8(f) of the 1940 Act for an order declaring that
it has ceased to be an investment company. After the Effective Time of the
Compass Transaction, Compass shall not conduct any business except in connection
with its liquidation, dissolution and deregistration.
3. Valuation Time. The Valuation Time for each of the Compass Portfolios
and the PNC Portfolios shall be 4:01 P.M., Eastern Time, on January 12, 1996 or
such earlier or later date as agreed to by the parties to this Agreement.
I-5
<PAGE> 100
4. Certain Representations, Warranties and Agreements of
Compass. Compass, on behalf of itself and the Compass Portfolios, represents
and warrants to, and agrees with, PNC as follows (such representations,
warranties and agreements being made on behalf of each Compass Portfolio on a
several and not joint, nor joint and several, basis):
(a) Compass is a Massachusetts business trust duly created pursuant to
its Declaration of Trust for the purpose of acting as a management
investment company under the 1940 Act, and is validly existing under the
laws of the Commonwealth of Massachusetts. Compass is registered as an
open-end management investment company under the 1940 Act, and its
registration with the SEC as an investment company is in full force and
effect.
(b) Compass has the power to own all of its properties and assets and,
subject to the approvals of shareholders referred to in Section 6, to carry
out and consummate the transactions contemplated herein, and has all
necessary federal, state and local authorizations to carry on its business
as now being conducted and to consummate the transactions contemplated by
this Agreement.
(c) This Agreement has been duly authorized, executed and delivered by
Compass, and represents a valid and binding contract, enforceable in
accordance with its terms, subject as to enforcement to bankruptcy,
insolvency, reorganization, arrangement, moratorium, and other similar laws
of general applicability relating to or affecting creditors' rights and to
general equity principles. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated by this
Agreement will not, violate the Amended and Restated Agreement and
Declaration of Trust or By-laws of Compass or, except as previously
disclosed to PNC in writing, any agreement or arrangement to which Compass
is a party or by which it is bound.
(d) Each Compass Portfolio has elected to qualify and has qualified as
a regulated investment company under Part I of Subchapter M of Subtitle A,
Chapter 1, of the Internal Revenue Code of 1986, as amended (the "Code"),
as of and since its first taxable year; has been a regulated investment
company under such Part of the Code at all times since the end of its first
taxable year when it so qualified; and qualifies and shall continue to
qualify as a regulated investment company for its taxable year ending upon
its liquidation.
(e) The audited financial statements of Compass for its fiscal year
ended February 28, 1995 (copies of which have been previously furnished to
PNC), and the unaudited financial statements of Compass for its six-month
period ended August 31, 1995 (copies of which will be promptly furnished to
PNC when available), present (or will present in the case of said unaudited
financial statements) fairly the financial position of the Compass
Portfolios as of the dates indicated and the results of their operations
for the periods indicated, in conformity with generally accepted accounting
principles applied on a consistent basis. There has been no material
adverse change in the financial position of any Compass Portfolio since the
dates of said financial statements.
(f) Except as previously disclosed to PNC in writing, there are no
contingent liabilities of any Compass Portfolio not disclosed in said
financial statements delivered pursuant to Section 4(e).
(g) Each Compass Portfolio has valued, and will continue to value, its
portfolio securities and other assets in accordance with applicable legal
requirements.
(h) Except as previously disclosed to PNC in writing, there are no
material legal, administrative or other proceedings pending or, to its
knowledge threatened, against Compass or the Compass Portfolios which could
result in liability on the part of Compass or the Compass Portfolios.
(i) At the Effective Time of the Compass Transaction, all federal and
other tax returns and reports of each Compass Portfolio required by law to
have been filed by such time shall have been filed, and all federal and
other taxes shall have been paid so far as due, or provision shall have
been made for the payment thereof and, to the best knowledge of each
Compass Portfolio, no such return or report shall be currently under audit
and no assessment shall have been asserted with respect to such returns or
reports.
I-6
<PAGE> 101
(j) Subject to the approvals of shareholders referred to in Section 6,
at both the Valuation Time and the Effective Time of the Compass
Transaction, Compass shall have full right, power and authority to sell,
assign, transfer and deliver the Fund Assets and, upon delivery and payment
for the Fund Assets as contemplated herein, the PNC Portfolios shall
acquire good and marketable title thereto, subject to no restrictions on
the ownership or transfer thereof (except as imposed by federal or state
securities laws).
(k) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by Compass of the
transactions contemplated by this Agreement, except such as may be required
under the 1933 Act, the Securities Exchange Act of 1934, as amended ("1934
Act"), the 1940 Act, the rules and regulations under those Acts, or state
securities laws.
(l) Insofar as the following relate to Compass, the registration
statement filed by PNC on Form N-14 relating to the shares of the PNC
Portfolios that will be registered with the SEC pursuant to this Agreement,
which shall include or incorporate by reference the proxy statement of the
Compass Portfolios and prospectuses of the PNC Portfolios with respect to
the transactions contemplated by this Agreement, and any supplement or
amendment thereto or to the documents contained or incorporated therein by
reference (the "N-14 Registration Statement"), and the proxy materials of
Compass, if any, otherwise filed with the SEC pursuant to Section 14(a) of
the 1934 Act and Section 20(a) of the 1940 Act with respect to the
transactions contemplated by this Agreement, and any supplement or
amendment thereto or the documents appended thereto (the "Compass
Transaction Proxy Materials"), on their effective and clearance dates with
the SEC, at the time of the shareholders meeting referred to in Section 6
and at the Effective Time of the Compass Transaction: (i) shall comply in
all material respects with the provisions of the 1933 Act, 1934 Act and the
1940 Act, the rules and regulations thereunder, and state securities laws,
and (ii) shall not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, that the representations
and warranties made by Compass in this subsection shall not apply to
statements in or omissions from the N-14 Registration Statement or to the
Compass Transaction Proxy Materials made in reliance upon and in conformity
with information furnished by PNC for use therein as provided in Section 7.
(m) All of the issued and outstanding shares of each of the Compass
Portfolios have been validly issued and are fully paid and non-assessable,
and were offered for sale and sold in conformity with all applicable
federal and state securities laws.
(n) Compass shall not sell or otherwise dispose of any shares of the
PNC Portfolios to be received in the transactions contemplated herein,
except in distribution to its shareholders as contemplated herein.
(o) Compass shall operate its business in the ordinary course between
the date hereof and the Effective Time of the Compass Transaction. It is
understood that such ordinary course of business will include the
declaration and payment of customary dividends and distributions and any
other dividends and distributions deemed advisable, and the continued good
faith performance by the investment adviser, sub-advisers, administrator,
distributor and other service providers of Compass of their respective
responsibilities in accordance with the provisions of their agreements with
Compass and applicable law.
(p) Except for agreements or other arrangements relating to the
purchase and sale of portfolio securities, Compass has furnished PNC with
copies or descriptions of all contracts or legally binding arrangements to
which it is a party.
(q) Each Compass Portfolio shall deliver to PNC on November 30, 1995 a
statement of all of the specific assets and specific liabilities of the
Compass Portfolios, together with a list of the portfolio securities of
each Compass Portfolio showing the tax costs of such securities by lot and
the holding periods of such securities, and clearly reflecting the basis
used for determination of gain or loss realized on the partial sale of any
security. Each Compass Portfolio shall immediately notify PNC of any
portfolio security thereafter acquired or sold by the Compass Portfolio
and, upon PNC's request, shall promptly and periodically update the other
information described in this paragraph. Upon notice by PNC, each
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Compass Portfolio shall immediately sell any portfolio security that PNC
identifies as impermissible under the investment policies, objectives and
limitations of the corresponding PNC Portfolio.
(r) Subject to the approvals required by law and by the Compass
Declaration of Trust and By-laws, each Compass Portfolio shall enter into
an interim investment advisory agreement and/or sub-investment advisory
agreement that will be effective for the period beginning at the time the
Bank Holding Company Merger is effective and ending at the Effective Time
of the Compass Transaction in the event these two times are not concurrent.
5. Certain Representations, Warranties and Agreements of PNC. PNC, on
behalf of itself and the PNC Portfolios, represents and warrants to, and agrees
with, Compass as follows (such representations, warranties and agreements being
made on behalf of each PNC Portfolio on a several and not joint, nor joint and
several, basis):
(a) PNC is a Massachusetts business trust duly created pursuant to its
Declaration of Trust for the purpose of acting as a management investment
company under the 1940 Act, and is validly existing under the laws of the
Commonwealth of Massachusetts. PNC is registered as an open-end management
investment company under the 1940 Act and its registration with the SEC as
an investment company is in full force and effect.
(b) PNC has the power to own all of its properties and assets and to
consummate the transactions contemplated herein, and has all necessary
federal, state and local authorizations to carry on its business as now
being conducted and to consummate the transactions contemplated by this
Agreement.
(c) This Agreement has been duly authorized, executed and delivered by
PNC, and represents a valid and binding contract, enforceable in accordance
with its terms, subject as to enforcement to bankruptcy, insolvency,
reorganization, arrangement, moratorium and other similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles. The execution and delivery of this Agreement does not,
and the consummation of the transactions contemplated by this Agreement
will not, violate PNC's Declaration of Trust, as amended, or the Code of
Regulations or any agreement or arrangement to which PNC is a party or by
which it is bound.
(d) Each PNC Portfolio that has not conducted operations prior to the
Effective Time of the Compass Transaction intends to qualify as a regulated
investment company under Part I of Subchapter M of the Code, and with
respect to each PNC Portfolio that has conducted operations prior to the
Effective Time of the Compass Transaction, has elected to qualify and has
qualified as a regulated investment company under Part I of Subchapter M of
Subtitle A, Chapter 1, of the Code, as of and since its first taxable year;
has been a regulated investment company under such Part of the Code at all
times since the end of its first taxable year when it so qualified; and
qualifies and shall continue to qualify as a regulated investment company
for its current taxable year.
(e) The audited financial statements of PNC for its fiscal year ended
September 30, 1994, and the unaudited financial statements of PNC for the
six-month period ended March 31, 1995 (copies of which have been previously
furnished to Compass), and the audited financial statements of PNC for the
fiscal year ended September 30, 1995 (copies of which will be promptly
furnished to Compass when available), present (or will present in the case
of said audited financial statements for its fiscal year ended September
30, 1995) fairly the financial position of the PNC Portfolios as of the
dates indicated and the results of their operations for the periods
indicated, in conformity with generally accepted accounting principles
applied on a consistent basis. There has been no material adverse change in
the financial position of any PNC Portfolio since the dates of said
financial statements.
(f) Each PNC Portfolio has valued, and will continue to value, its
portfolio securities and other assets in accordance with applicable legal
requirements.
(g) There are no material legal, administrative or other proceedings
pending or, to its knowledge threatened, against PNC or the PNC Portfolios
which could result in liability on the part of PNC or the PNC Portfolios.
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(h) At the Effective Time of the Compass Transaction, all federal and
other tax returns and reports of each PNC Portfolio required by law to have
been filed by such time shall have been filed, and all federal and other
taxes shall have been paid so far as due, or provision shall have been made
for the payment thereof and, to the best knowledge of each PNC Portfolio,
no such return or report shall be currently under audit and no assessment
shall have been asserted with respect to such returns or reports.
(i) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by PNC of the
transactions contemplated by this Agreement, except such as may be required
under 1933 Act, the 1934 Act, the 1940 Act, the rules and regulations under
those Acts, or state securities laws.
(j) The N-14 Registration Statement and the Compass Transaction Proxy
Materials, on their effective and clearance dates with the SEC, at the time
of the shareholders meeting referred to in Section 6 and at the Effective
Time of the Compass Transaction, insofar as they relate to PNC (i) shall
comply in all material respects with the provisions of the 1933 Act, 1934
Act and the 1940 Act, the rules and regulations thereunder, and state
securities laws, and (ii) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, that the representations and warranties in this subsection shall
not apply to statements in or omissions from the N-14 Registration
Statement or the Compass Transaction Proxy Materials made in reliance upon
and in conformity with information furnished by Compass for use therein as
provided in Section 7.
(k) The shares of the PNC Portfolios to be issued and delivered to the
Compass Portfolios for the account of the shareholders of the Compass
Portfolios, pursuant to the terms hereof, shall have been duly authorized
as of the Effective Time of the Compass Transaction and, when so issued and
delivered, shall be duly and validly issued, fully paid and non-assessable,
and no shareholder of PNC shall have any preemptive right of subscription
or purchase in respect thereto.
(l) PNC shall operate its business in the ordinary course between the
date hereof and the Effective Time of the Compass Transaction. It is
understood that (i) such ordinary course of business will include the
declaration and payment of customary dividends and distributions and any
other dividends and distributions deemed advisable, and the continued good
faith performance by the investment advisers, sub-advisers, administrators,
distributor and other service providers of PNC of their respective
responsibilities in accordance with the provisions of their agreements with
PNC and applicable law; and (ii) nothing in this Agreement shall prevent
PNC from entering into and consummating the BIT Agreement or any other
agreement providing for the acquisition of additional investment portfolios
(whether or not registered under the 1940 Act) by the PNC Portfolios.
6. Shareholder Action. As soon as practicable after the effective date of
the N-14 Registration Statement and SEC clearance of the proxy solicitation
materials referred to in Section 7, but in any event prior to the Effective Time
of the Compass Transaction and as a condition thereto, the Board of Trustees of
Compass shall call, and Compass shall hold, a meeting of the shareholders of all
of its investment portfolios for the purpose of considering and voting upon:
(a) In the case of all investment portfolios, approval of this
Agreement and the transactions contemplated hereby.
(b) In the case of all investment portfolios, approval of interim
investment advisory agreements and/or sub-investment advisory agreements
which would be effective for the period beginning at the time the Bank
Holding Company Merger is effective and ending at the Effective Time of the
Compass Transaction in the event those two times are not concurrent.
(c) Such other matters as may be determined by the Boards of Trustees
of the parties.
The matter referred to in paragraph (b) above has been, or shall be,
approved by the Board of Trustees of Compass in accordance with the requirements
of the 1940 Act and Board policy.
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7. Regulatory Filings. PNC shall file a post-effective amendment (the
"N-1A Post-Effective Amendment") to its registration statement on Form N-1A
(File No. 33-26305) with the SEC, and with the appropriate state securities
commissions, as promptly as practicable so that all PNC Portfolios and their
shares are registered under the 1933 Act, 1940 Act and applicable state
securities laws. In addition, PNC shall file an N-14 Registration Statement with
the SEC and the appropriate state securities commissions relating to the matters
described in Section 6 as promptly as practicable. PNC and Compass have
cooperated and shall continue to cooperate with each other, and have furnished
and shall continue to furnish each other with the information relating to itself
that is required by the 1933 Act, the 1934 Act, the 1940 Act, the rules and
regulations under each of those Acts and state securities laws, to be included
in the N-1A Post-Effective Amendment, the N-14 Registration Statement and the
Compass Transaction Proxy Materials.
8. Effective Time of the Compass Transaction. Delivery of the Fund Assets
and the shares of the PNC Portfolios to be issued pursuant to Section 1 and the
liquidation and dissolution of the Compass Portfolios pursuant to Section 2
shall occur on the next business day following the Valuation Time, or on such
other date, and at such place and time, agreed to by each of the parties. The
date and time at which such actions are taken are referred to herein as the
"Effective Time of the Compass Transaction." To the extent any Fund Assets are,
for any reason, not transferred at the Effective Time of the Compass
Transaction, Compass shall cause such Fund Assets to be transferred in
accordance with this Agreement at the earliest practicable date thereafter.
9. PNC Conditions. The obligations of PNC hereunder shall be subject to
the following conditions precedent:
(a) This Agreement and the transactions contemplated by this Agreement
shall have been approved by the Board of Trustees of Compass and, subject
to the provisions of Section 14, by the shareholders of the respective
Compass Portfolios voting separately on a portfolio-by-portfolio basis.
(b) Each Compass Portfolio shall have delivered to its corresponding
PNC Portfolio a statement of the specific assets and specific liabilities
of the Compass Portfolio, together with a list of the portfolio securities
of the Compass Portfolio showing the tax costs of such securities by lot
and the holding periods of such securities, as of the Valuation Time, and
clearly reflecting the basis used for determination of gain or loss
realized on the partial sale of any security transferred to PNC, certified
by the Treasurer or Assistant Treasurer of the Compass Portfolio.
(c) Compass shall have duly executed and delivered to PNC such bills
of sale, assignments, certificates and other instruments of transfer
("Transfer Documents") as PNC may deem necessary or desirable to transfer
all of each Compass Portfolio's right, title and interest in and to the
Fund Assets. Such Assets shall be accompanied by all necessary state stock
transfer stamps or cash for the appropriate purchase price therefor.
(d) Each Compass Portfolio shall have delivered to its corresponding
PNC Portfolio a copy of the shareholder ledger accounts for all the
shareholders of record of said Compass Portfolio as of the Effective Time
of the Compass Transaction who are to become shareholders of the
corresponding PNC Portfolio as a result of the Compass Transaction,
certified by its Transfer Agent or its President to the best of his or her
knowledge and belief.
(e) As of the Valuation Time and the Effective Time of the Compass
Transaction there shall have been no material adverse change in the
financial position of any Compass Portfolio since the dates of the
financial statements referred to in Section 4(e).
(f) All representations and warranties of Compass and the Compass
Portfolios made in this Agreement shall be true and correct in all material
respects as if made at and as of the Valuation Time and the Effective Time
of the Compass Transaction.
(g) Compass shall have delivered to PNC a certificate executed in its
name by its President or Vice President and its Treasurer or Assistant
Treasurer, in a form reasonably satisfactory to PNC and dated as of the
Effective Time of the Compass Transaction, to the effect that the
representations and warranties of Compass and the Compass Portfolios made
in this Agreement are true and correct at and as of the
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Effective Time of the Compass Transaction, except as they may be affected
by the transactions contemplated by this Agreement.
(h) PNC shall have received an opinion of Morgan, Lewis & Bockius,
counsel to Compass, in form reasonably satisfactory to PNC and dated the
Effective Time of the Compass Transaction, substantially to the effect that
(i) Compass is a Massachusetts business trust duly established and validly
existing under the laws of the Commonwealth of Massachusetts; (ii) this
Agreement and the Transfer Documents have been duly authorized, executed
and delivered by Compass and represent legal, valid and binding contracts,
enforceable in accordance with their terms, subject to the effect of
bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws
relating to or affecting creditors' rights generally and court decisions
with respect thereto, and such counsel shall express no opinion with
respect to the application of equitable principles in any proceeding,
whether at law or in equity; (iii) the execution and delivery of this
Agreement did not, and the consummation of the transactions contemplated by
this Agreement will not, violate the Amended and Restated Agreement and
Declaration of Trust or By-laws of Compass or any material contract known
to such counsel to which Compass is a party or by which it is bound; and
(iv) no consent, approval, authorization or order of any court or
governmental authority is required for the consummation by Compass of the
transactions contemplated by this Agreement, except such as have been
obtained under the 1933 Act, the 1934 Act, the 1940 Act, the rules and
regulations under those Acts and such as may be required under the state
securities laws. Such opinion may rely on the opinion of other counsel to
the extent set forth in such opinion, provided such other counsel is
reasonably acceptable to PNC.
(i) PNC shall have received an opinion of Drinker Biddle & Reath
addressed to PNC and Compass in form reasonably satisfactory to them, and
dated the Effective Time of the Compass Transaction, substantially to the
effect that for federal income tax purposes (i) the transfer by each
Compass Portfolio of all of its Fund Assets to the corresponding PNC
Portfolio in exchange for shares of the corresponding PNC Portfolio, and
the distribution of said shares to the shareholders of the Compass
Portfolio, as provided in this Agreement, will constitute a tax-free
transaction within the meaning of Section 368(a)(1)(C), (D) or (F) of the
Code; (ii) in accordance with Sections 361(a), 361(c)(1) and 357(a) of the
Code, no gain or loss will be recognized by the Compass Portfolios as a
result of such transactions; (iii) in accordance with Section 1032(a) of
the Code, no gain or loss will be recognized by the PNC Portfolios as a
result of such transactions; (iv) in accordance with Section 354(a)(1) of
the Code, no gain or loss will be recognized by the shareholders of the
Compass Portfolios on the distribution to them by the Compass Portfolios of
shares of the corresponding PNC Portfolios in exchange for their shares of
the Compass Portfolios; (v) in accordance with Section 358(a)(1) of the
Code, the aggregate basis of the PNC Portfolio shares received by each
shareholder of a Compass Portfolio will be the same as the aggregate basis
of the shareholder's Compass Portfolio shares immediately prior to the
transactions; (vi) in accordance with Section 362(b) of the Code, the basis
of the Fund Assets received by each PNC Portfolio will be the same as the
basis of such Fund Assets in the hands of the corresponding Compass
Portfolio immediately prior to the transactions; (vii) in accordance with
Section 1223(1) of the Code, a shareholder's holding period for PNC
Portfolio shares will be determined by including the period for which the
shareholder held the shares of the Compass Portfolio exchanged therefor,
provided that the shareholder held such shares of the Compass Portfolio as
a capital asset; (viii) in accordance with Section 1223(2) of the Code, the
holding period of the PNC Portfolios with respect to the Fund Assets will
include the period for which such Fund Assets were held by the
corresponding Compass Portfolios; and (ix) in accordance with Section
381(a) of the Code, each PNC Portfolio will succeed to the tax attributes
of the corresponding Compass Portfolios described in Section 381(c) of the
Code.
(j) The Fund Assets to be transferred to a PNC Portfolio under this
Agreement shall include no assets which such PNC Portfolio may not properly
acquire pursuant to its investment limitations or objectives or may not
otherwise lawfully acquire.
(k) The N-1A Post-Effective Amendment and the N-14 Registration
Statement shall have become effective under the 1933 Act and no stop order
suspending such effectiveness shall have been instituted or, to the
knowledge of PNC, contemplated by the SEC and the parties shall have
received all permits
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and other authorizations necessary under state securities laws to
consummate the transactions contemplated by this Agreement.
(l) No action, suit or other proceeding shall be threatened or pending
before any court or governmental agency in which it is sought to restrain
or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
(m) Prior to the Valuation Time, each Compass Portfolio shall have
declared a dividend or dividends, with a record date and ex-dividend date
prior to the Effective Time of the Compass Transaction, which, together
with all previous dividends, shall have the effect of distributing to its
shareholders all of its net investment company income, if any, for the
taxable periods or years ending February 28, 1995 and for the periods from
said date to and including the Effective Time of the Compass Transaction
(computed without regard to any deduction for dividends paid), and all of
its net capital gain, if any, realized in taxable periods or years ending
February 28, 1995 and in the periods from said date to and including the
Effective Time of Compass Transaction.
(n) Compass shall have performed and complied in all material respects
with each of its agreements and covenants required by this Agreement to be
performed or complied with by it prior to or at the Valuation Time and the
Effective Time of the Compass Transaction.
(o) The SEC shall not have issued any unfavorable advisory report
under Section 25(b) of the 1940 Act nor instituted any proceeding seeking
to enjoin consummation of the transactions contemplated by this Agreement
under Section 25(c) of the 1940 Act.
(p) The Bank Holding Company Merger referred to in the recitals shall
have been consummated.
(q) PNC shall have been furnished at the Effective Time of the Compass
Transaction with a certificate signed by any Vice President or Treasurer of
SEI Financial Management Corporation ("SEI") dated as of said date stating
that all statistical and research data, clerical, accounting and
bookkeeping records, periodic reports to the SEC and any state securities
agencies, tax returns and other tax filings, shareholder lists and other
material shareholder data, complaint files and all other information,
books, records and documents maintained by SEI (or any affiliate of SEI)
and belonging to the Compass Portfolios, including those required to be
maintained by Section 31(a) of the 1940 Act and Rules 31a-1 to 31a-3
thereunder, have been delivered to PNC.
10. Compass Conditions. The obligations of Compass hereunder shall be
subject to the following conditions precedent:
(a) This Agreement shall have been adopted and the transactions
contemplated by this Agreement shall have been approved by the Board of
Trustees of PNC and, subject to the provisions of Section 14, by the
shareholders of the respective Compass Portfolios voting separately on a
portfolio-by-portfolio basis.
(b) As of the Valuation Time and the Effective Time of the Compass
Transaction there shall have been no material adverse change in the
financial position of any PNC Portfolio since the dates of the financial
statements referred to in Section 5(e).
(c) All representations and warranties of PNC and the PNC Portfolios
made in this Agreement shall be true and correct in all material respects
as if made at and as of the Valuation Time and the Effective Time of the
Compass Transaction.
(d) PNC shall have delivered to Compass a certificate executed in its
name by its President or Vice President and its Treasurer or Assistant
Treasurer, in a form reasonably satisfactory to Compass and dated as of the
Effective Time of the Compass Transaction, to the effect that the
representations and warranties of PNC and the PNC Portfolios made in this
Agreement are true and correct at and as of the Effective Time of the
Compass Transaction, except as they may be affected by the transactions
contemplated by this Agreement and that, to its best knowledge, the Fund
Assets to be transferred to each PNC Portfolio under this Agreement as set
forth in Section 9(b) include only assets which such
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PNC Portfolio may properly acquire under its investment policies,
limitations and objectives and may otherwise be lawfully acquired by such
PNC Portfolio.
(e) Compass shall have received an opinion of Drinker Biddle & Reath,
counsel to PNC, in form reasonably satisfactory to Compass and dated the
Effective Time of the Compass Transaction, substantially to the effect that
(i) PNC is a Massachusetts business trust duly established and validly
existing under the laws of the Commonwealth of Massachusetts; (ii) the
shares of the PNC Portfolios to be delivered to the Compass Portfolios as
provided for by this Agreement are duly authorized and upon delivery will
be validly issued, fully paid and non-assessable by PNC; (iii) this
Agreement has been duly authorized, executed and delivered by PNC, and
represents a legal, valid and binding contract, enforceable in accordance
with its terms, subject to the effect of bankruptcy, insolvency,
moratorium, fraudulent conveyance and similar laws relating to or affecting
creditors' rights generally and court decisions with respect thereto, and
such counsel shall express no opinion with respect to the application of
equitable principles in any proceeding whether at law or in equity; (iv)
the execution and delivery of this Agreement did not, and the consummation
of the transaction contemplated by this Agreement will not, violate the
Declaration of Trust, as amended, or the Code of Regulations of PNC or any
material contract known to such counsel to which PNC is a party or by which
it is bound; and (v) no consent, approval, authorization or order of any
court or governmental authority is required for the consummation by PNC of
the transactions contemplated by this Agreement, except such as have been
obtained under the 1933 Act, the 1934 Act, the 1940 Act, the rules and
regulations under those Acts and such as may be required by state
securities laws. Such opinion may rely on the opinion of other counsel to
the extent set forth in such opinion, provided such other counsel is
reasonably acceptable to Compass.
(f) Compass shall have received an opinion of Drinker Biddle & Reath
addressed to PNC and Compass in form reasonably satisfactory to them, and
dated the Effective Time of the Compass Transaction, with respect to the
matters specified in Section 9(i).
(g) The N-1A Post-Effective Amendment and the N-14 Registration
Statement shall have become effective under the 1933 Act and no stop order
suspending the effectiveness shall have been instituted, or to the
knowledge of PNC, contemplated by the SEC and the parties shall have
received all permits and other authorizations necessary under state
securities laws to consummate the transactions contemplated herein.
(h) No action, suit or other proceeding shall be threatened or pending
before any court or governmental agency in which it is sought to restrain
or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
(i) PNC shall have performed and complied in all material respects
with each of its agreements and covenants required by this Agreement to be
performed or complied with by it prior to or at the Valuation Time and the
Effective Time of the Compass Transaction.
(j) The SEC shall not have issued any unfavorable advisory report
under Section 25(b) of the 1940 Act nor instituted any proceeding seeking
to enjoin consummation of the transactions contemplated by this Agreement
under Section 25(c) of the 1940 Act.
(k) The Bank Holding Company Merger referred to in the recitals shall
have been consummated.
11. Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto shall use its best efforts to take, or
cause to be taken, such action, to execute and deliver, or cause to be executed
and delivered, such additional documents and instruments and to do, or cause to
be done, all things necessary, proper or advisable under the provisions of this
Agreement and under applicable law to consummate and make effective the
transactions contemplated by this Agreement, including without limitation,
delivering and/or causing to be delivered to the other party hereto each of the
items required under this Agreement as a condition to such party's obligations
hereunder. In addition, Compass shall deliver or cause to be delivered to PNC,
each account, book, record or other document of the Compass Portfolios required
to be maintained by Section 31(a) of the 1940 Act and Rules 31a-1 to 31a-3
thereunder (regardless of whose possession they are in).
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12. Termination of Representations and Warranties. The representations
and warranties of the parties set forth in this Agreement shall terminate upon
the delivery of the Fund Assets to the PNC Portfolios and the issuance of the
shares of the PNC Portfolios at the Effective Time of the Compass Transaction.
13. Termination of Agreement. This Agreement may be terminated by a party
at any time at or prior to the Effective Time of the Compass Transaction by a
vote of a majority of its Board of Trustees as provided below:
(a) By PNC if the conditions set forth in Section 9 are not satisfied
as specified in said Section;
(b) By Compass if the conditions set forth in Section 10 are not
satisfied as specified in said Section; or
(c) By mutual consent of both parties.
14. Amendment and Waiver. At any time prior to or (to the fullest extent
permitted by law) after approval of this Agreement by the shareholders of
Compass (a) the parties hereto may, by written agreement authorized by their
respective Boards of Trustees and with or without the further approval of their
shareholders, amend any of the provisions of this Agreement, and (b) either
party may waive any breach by the other party or the failure to satisfy any of
the conditions to its obligations (such waiver to be in writing and authorized
by the Board of Trustees of the waiving party with or without the approval of
such party's shareholders). Without limiting the foregoing, in the event
shareholder approval of the matters specified in Sections 6, 9(a) and 10(a) is
obtained with respect to certain Compass Portfolios but not with respect to the
other Compass Portfolios, with the result that the transactions contemplated by
this Agreement may be consummated with respect to some but not all of the
Compass Portfolios, the Board of Trustees of PNC may, in the exercise of its
sole and unilateral discretion, determine to either abandon this Agreement with
respect to all of the Compass Portfolios or direct that the Compass Transaction
and other transactions described herein be consummated to the degree the Board
deems advisable.
15. Governing Law. This Agreement and the transactions contemplated
hereby shall be governed, construed and enforced in accordance with the laws of
the Commonwealth of Massachusetts.
16. Successors and Assigns. This Agreement shall be binding upon the
respective successors and permitted assigns of the parties hereto. This
Agreement and the rights, obligations and liabilities hereunder may not be
assigned by either party without the consent of the other party.
17. Beneficiaries. Nothing contained in this Agreement shall be deemed to
create rights in persons not parties hereto, other than the successors and
permitted assigns of the parties.
18. Brokerage Fees and Expenses. Compass and PNC each represents and
warrants to the other that there are no brokers or finders entitled to receive
any payments in connection with the transactions provided for herein.
19. PNC Liability. The names "The PNC Fund" and "Trustees of The PNC
Fund" refer respectively to the Trust created and the Trustees, as trustees but
not individually or personally, acting from time to time under a Declaration of
Trust dated December 22, 1988 which is hereby referred to and a copy of which is
on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of "The
PNC Fund" entered into in the name of or on behalf thereof by any of its
Trustees, officers, representatives or agents are made not individually, but in
such capacities, and are not binding upon any of the Trustees, shareholders,
officers, representatives or agents of the Trust personally, but bind only the
Trust Property (as defined in the Declaration of Trust), and all persons dealing
with any class of shares of the Trust must look solely to the Trust Property
belonging to such class for the enforcement of any claims against the Trust.
Both parties specifically acknowledge and agree that any liability of PNC under
this Agreement in connection with the transactions contemplated herein with
respect to a PNC Portfolio or its corresponding Compass Portfolio shall be
discharged only out of the assets of that PNC Portfolio and that no other
portfolio of PNC shall be liable with respect thereto.
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20. Compass Liability. The names "The Compass Capital Group" and
"Trustees of The Compass Capital Group" refer respectively to the Trust created
and the Trustees, as trustees but not individually or personally, acting from
time to time under a Declaration of Trust dated as of October 1, 1987 to which
reference is hereby made and a copy of which is on file at the office of the
Secretary of State of The Commonwealth of Massachusetts and elsewhere as
required by law, and to any and all amendments thereto so filed or hereafter
filed. The obligations of "The Compass Capital Group" entered into in the name
or on behalf thereof by any of the Trustees, representatives or agents are made
not individually, but in such capacities, and are not binding upon any of the
Trustees, interest holders or representatives of the Trust personally, but bind
only the assets of the Trust, and all persons dealing with any Portfolio of the
Trust must look solely to the assets of the Trust belonging to such Portfolio
for the enforcement of any claims against the Trust.
21. Notices. All notices required or permitted herein shall be in writing
and shall be deemed to be properly given when delivered personally or by
telecopier to the party entitled to receive the notice or when sent by certified
or registered mail, postage prepaid, or delivered to an internationally
recognized overnight courier service, in each case properly addressed to the
party entitled to receive such notice at the address or telecopier number stated
below or to such other address or telecopier number as may hereafter be
furnished in writing by notice similarly given by one party to the other party
hereto:
If to PNC:
The PNC(R) Fund
c/o Karen H. Sabath
BlackRock Financial Management, Inc.
345 Park Avenue
New York, New York 10154
With copies to:
Jeffrey A. Dalke, Esq.
Drinker Biddle & Reath
1345 Chestnut Street
Philadelphia, PA 19107
If to Compass:
The Compass Capital Group(R)
680 E. Swedesford Road
Wayne, PA 19087
With copies to:
Richard W. Grant, Esq.
Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, PA 19103
22. Expenses. To the extent not borne by their respective investment
advisers, each party shall be responsible for the payment of all expenses
incurred by such party in connection with this Agreement and the transactions
contemplated hereby.
23. Announcements. Any announcement or similar publicity with respect to
this Agreement or the transactions contemplated herein shall be made only at
such time and in such manner as the parties shall agree; provided that nothing
herein shall prevent either party upon notice to the other party from making
such public announcements as such party's counsel may consider advisable in
order to satisfy the party's legal and contractual obligations in such regard.
24. Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties hereto and supersedes any and all prior agreements,
arrangements and understandings relating to matters provided for herein.
25. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered shall be deemed to be
an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers designated below as of the date first
written above.
[SIGNATURE LINES OMITTED]
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<PAGE> 110
APPENDIX II
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
THE PNC(R) FUND
AND
THE BFM INSTITUTIONAL TRUST INC.
DATED: AS OF OCTOBER 30, 1995
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<PAGE> 111
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Conveyance of Assets of BIT Portfolios............................................... II-3
Liquidation and Dissolution of BIT Portfolios........................................ II-4
Valuation Time....................................................................... II-5
Certain Representations, Warranties and Agreements of BIT............................ II-5
Certain Representations, Warranties and Agreements of PNC............................ II-7
Shareholder Action................................................................... II-8
Regulatory Filings................................................................... II-8
Effective Time of the BIT Transaction................................................ II-8
PNC Conditions....................................................................... II-9
BIT Conditions....................................................................... II-11
Further Assurances................................................................... II-12
Termination of Representations and Warranties........................................ II-12
Termination of Agreement............................................................. II-12
Amendment and Waiver................................................................. II-12
Governing Law........................................................................ II-12
Successors and Assigns............................................................... II-12
Beneficiaries........................................................................ II-13
Brokerage Fees and Expenses.......................................................... II-13
PNC and BIT Liability................................................................ II-13
Notices.............................................................................. II-13
Expenses............................................................................. II-13
Announcements........................................................................ II-14
Entire Agreement..................................................................... II-14
Counterparts......................................................................... II-14
</TABLE>
II-2
<PAGE> 112
This ASSET PURCHASE AGREEMENT (the "Agreement") is made as of this 30th day
of October, 1995 by and between The BFM Institutional Trust Inc. ("BIT"), a
Maryland corporation consisting of multiple investment portfolios including the
Short Duration Portfolio, Core Fixed Income Portfolio and Multi-Sector Mortgage
Securities Portfolio III (the "BIT Portfolios") and The PNC(R) Fund ("PNC"), a
Massachusetts business trust consisting of multiple investment portfolios which
include the Short-Term Bond Portfolio, the Core Fixed Income Portfolio and
Multi-Sector Mortgage Securities Portfolio III (the "PNC Portfolios").
WHEREAS, BIT and PNC are each an open-end management investment company
registered with the Securities and Exchange Commission (the "SEC") under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the parties desire that the assets and liabilities of each BIT
Portfolio be conveyed to, and be acquired and assumed by, the respective PNC
Portfolio corresponding thereto, as stated herein, in exchange for
"Institutional" class shares of the corresponding PNC Portfolio which shall
thereafter be distributed by BIT to the shareholders of the BIT Portfolio in
connection with its liquidation and dissolution as described in this Agreement
(the "BIT Transaction"); and
WHEREAS, PNC also maintains twenty-three additional investment portfolios
that are not parties to the BIT Transaction; and
WHEREAS, the parties anticipate that PNC may enter into separate
acquisition agreements with The Compass Capital Group(R) (the "Compass
Agreement") or other entities that provide for the acquisition of additional
investment portfolios by the PNC Portfolios, and the parties intend that the
execution and consummation of this Agreement shall neither prevent nor be
subject to the execution or consummation of any such agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and subject to the terms and conditions hereof, the
parties hereto, intending to be legally bound, agree as follows:
1. Conveyance of Assets of BIT Portfolios. Prior to the Effective Time of
the BIT Transaction as defined in Section 8, BIT shall execute and file Articles
of Transfer with respect to the transactions contemplated hereby with the
Department of Assessments and Taxation of the State of Maryland (the "Department
of Assessments"). At the Effective Time of the BIT Transaction, all property of
every description, and all interests, rights, privileges and powers of each of
the BIT Portfolios, subject to and including any and all liabilities,
obligations, legal actions, commitments or expenses of any kind of such
Portfolios, whether accrued, absolute, contingent known or unknown, now existing
or arising hereinafter (such assets, subject to such present or future
liabilities are herein referred to as the "Fund Assets"), shall be transferred
and conveyed by BIT and each BIT Portfolio to its corresponding PNC Portfolio
(as set forth below) and shall be accepted and assumed by said PNC Portfolio as
more particularly set forth below and in the following paragraph, such that at
and after the Effective Time of the BIT Transaction: (a) all assets of the BIT
Portfolios shall become and be the assets of the respective corresponding PNC
Portfolios; and (b) all such liabilities and obligations of the BIT Portfolios
whether existing or arising in the future, shall attach, be assumed by and
become the responsibility of the respective corresponding PNC Portfolios at the
Effective Time of the BIT Transaction, and thenceforth to be enforced against
each respective PNC Portfolio to the extent as if the same had been incurred by
them. For purposes of the foregoing, liabilities assumed by the PNC Portfolios
pursuant to this Agreement shall include any unpaid dividend or dividends
declared by any BIT Portfolio with a record date or an ex-dividend date prior to
the Effective Time of the BIT transaction.
Without limiting the generality of the foregoing, it is understood that the
Fund Assets shall include all property and assets of any nature whatsoever,
including, without limitation, all cash, cash equivalents, securities, claims
and receivables (including dividend and interest receivables) owned by each BIT
Portfolio, and any deferred or prepaid expenses shown as an asset on each BIT
Portfolio's books, at the Effective Time of the BIT Transaction, and all
contracts, all intangible property including good will and all books and records
belonging to the BIT Portfolios, but excluding BIT's name and registered marks,
if any.
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<PAGE> 113
In particular, the Fund Assets of each BIT Portfolio shall be transferred
and conveyed to the corresponding PNC Portfolio, as set forth below:
<TABLE>
<CAPTION>
CORRESPONDING
BIT PORTFOLIO PNC PORTFOLIO
- ---------------------------- ----------------------------
<S> <C>
Short Duration Portfolio Short-Term Bond Portfolio
Core Fixed Income Portfolio Core Fixed Income Portfolio
Multi-Sector Mortgage Multi-Sector Mortgage
Securities Portfolio III Securities Portfolio III
</TABLE>
In exchange for the transfer of the Fund Assets, each PNC Portfolio shall
simultaneously issue to the corresponding BIT Portfolio at the Effective Time of
the BIT Transaction full and fractional shares of beneficial interest in said
PNC Portfolio's so-called "Institutional" Share class having an aggregate net
asset value equal to the net value of the Fund Assets so conveyed to such PNC
Portfolio, all determined and adjusted as provided in this Section 1. In
particular, each PNC Portfolio shall deliver to the corresponding BIT Portfolio
the number of shares of its "Institutional" share class, including fractional
shares determined by dividing the value of the Fund Assets of the corresponding
BIT Portfolio that are so conveyed, computed in the manner and as of the time
and date set forth in this Section, by the net asset value of one PNC Portfolio
"Institutional" share that is to be delivered with respect thereto, computed in
the manner and as of the time and date set forth in this Section. It is
contemplated that at the Effective Time of the BIT Transaction the net asset
value of one PNC Portfolio Institutional Share will have been adjusted to be the
same as the net asset value of one share of the corresponding BIT Portfolio. All
computations shall be made by PNC in consultation with Coopers & Lybrand, L.L.P.
The net asset value of shares to be delivered by the PNC Portfolios, and
the net value of the Fund Assets to be conveyed by the BIT Portfolios, shall, in
each case, be determined as of the Valuation Time specified in Section 3. The
net asset value of shares of the PNC Portfolios shall be computed in the manner
set forth in the PNC Portfolios' then current prospectuses under the Securities
Act of 1933, as amended (the "1933 Act"). The net value of the Fund Assets to be
transferred by the BIT Portfolios shall be computed by BIT and shall be subject
to adjustment by the amount, if any, agreed to by PNC and the respective BIT
Portfolios. In determining the value of the securities transferred by the BIT
Portfolios to the PNC Portfolios, each security shall be priced in accordance
with the policies and procedures of PNC described in its then current
prospectuses and statements of additional information and adopted by PNC's Board
of Trustees, which are and shall be consistent with the policies now in effect
for BIT. For such purposes, price quotations and the security characteristics
relating to establishing such quotations shall be determined by PNC, provided
that such determination shall be subject to the approval of BIT.
2. Liquidation and Dissolution of BIT Portfolios. Immediately following
the Effective Time of the BIT Transaction, each of the BIT Portfolios shall make
a liquidating distribution to its shareholders as follows. Each shareholder of
record as of the Valuation Time of each BIT Portfolio shall be credited with
full and fractional shares of the class of beneficial interest that are issued
by the corresponding PNC Portfolio in connection with the BIT Transaction in
exchange for the BIT Portfolio shares that are held of record by the
shareholder. In addition, each shareholder of record of a BIT Portfolio shall
have the right to receive any unpaid dividends or other distributions which were
declared before the Effective Time of the BIT Transaction with respect to the
shares of such BIT Portfolio that are held by the shareholder at the Effective
Time of the BIT Transaction, provided such shareholder is also the shareholder
of record for purposes of such dividend or distribution. In accordance with
instructions it receives from BIT, PNC shall record on its books the ownership
of the respective PNC Portfolio shares by the shareholders of record as of the
Valuation Time of the BIT Portfolios (the "Transferor Record Holders"). No
redemption or repurchase of any PNC Portfolio shares credited to former
shareholders of the BIT Portfolios that are represented by unsurrendered share
certificates of the BIT Portfolios shall be permitted until such certificates
have been surrendered to PNC's transfer agent for cancellation. All of the
issued and outstanding shares of the BIT Portfolios at the Effective Time of the
BIT Transaction shall be cancelled on the books of BIT at the earliest
practicable time permitted under the Maryland General Corporation Law. As soon
as practicable after the Effective Time of the BIT Transaction, BIT shall file
Articles of Dissolution for recordation with the Department of Assessments, and
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<PAGE> 114
shall take, in accordance with Maryland General Corporation Law, all other steps
as shall be necessary and proper to effect its complete dissolution, and shall
file an application pursuant to Section 8(f) of the 1940 Act for an order
declaring that it has ceased to be an investment company. After the Effective
Time of the BIT Transaction, BIT shall not conduct any business except in
connection with its liquidation, dissolution, and deregistration.
3. Valuation Time. The Valuation Time for each of the BIT Portfolios and
the PNC Portfolios shall be 4:01 P.M., Eastern Time, on January 12, 1996, or
such earlier or later date as agreed to by the parties to this Agreement.
4. Certain Representations, Warranties and Agreements of BIT. BIT, on
behalf of itself and the BIT Portfolios, represents and warrants to, and agrees
with, PNC as follows:
(a) BIT is a Maryland corporation duly created pursuant to its
Articles of Incorporation for the purpose of acting as a management
investment company under the 1940 Act, and is validly existing under the
laws of the State of Maryland. BIT is registered as an open-end management
investment company under the 1940 Act, and its registration with the SEC as
an investment company is in full force and effect.
(b) BIT has the power to own all of its properties and assets and,
subject to the approvals of shareholders referred to in Section 6, to carry
out and consummate the transactions contemplated herein, and has all
necessary federal, state and local authorizations to carry on its business
as now being conducted and to consummate the transactions contemplated by
this Agreement.
(c) This Agreement has been duly authorized, executed and delivered by
BIT, and represents a valid and binding contract, enforceable in accordance
with its terms, subject as to enforcement to bankruptcy, insolvency,
reorganization, arrangement, moratorium, and other similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles. The execution and delivery of this Agreement does not,
and the consummation of the transactions contemplated by this Agreement
will not, violate BIT's Charter or By-laws or any agreement or arrangement
to which BIT is a party or by which it is bound.
(d) Each BIT Portfolio has elected to qualify and has qualified as a
regulated investment company under Part I of Subchapter M of Subtitle A,
Chapter 1, of the Internal Revenue Code of 1986, as amended (the "Code"),
as of and since its first taxable year; has been a regulated investment
company under such Part of the Code at all times since the end of its first
taxable year when it so qualified; and qualifies and shall continue to
qualify as a regulated investment company for its taxable year ending upon
its liquidation.
(e) The audited financial statements of BIT for its fiscal year ended
June 30, 1995 (copies of which have been previously furnished to PNC),
present fairly in all material respects the financial position of the BIT
Portfolios as of the date indicated and the results of their operations for
the periods indicated, in conformity with generally accepted accounting
principles. There has been no material adverse change in the financial
position of any BIT Portfolio since the date of said financial statements.
(f) There are no contingent liabilities of any BIT Portfolios not
disclosed in financial statements delivered pursuant to Section 4(e).
(g) Each BIT Portfolio has valued, and will continue to value, its
portfolio securities and other assets in accordance with applicable legal
requirements.
(h) There are no material legal, administrative or other proceedings
pending or, to its knowledge threatened, against BIT or the BIT Portfolios
which could result in liability on the part of BIT or the BIT Portfolios.
(i) At the Effective Time of the BIT Transaction, all federal and
other tax returns and reports of each BIT Portfolio required by law to have
been filed by such time shall have been filed, and all federal and other
taxes shall have been paid so far as due, or provision shall have been made
for the payment
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<PAGE> 115
thereof and, to the best knowledge of each BIT Portfolio, no such return or
report shall be currently under audit and no assessment shall have been
asserted with respect to such returns or reports.
(j) Subject to the approvals of shareholders referred to in Section 6,
at both the Valuation Time and the Effective Time of the BIT Transaction,
BIT shall have full right, power and authority to sell, assign, transfer
and deliver the Fund Assets and, upon delivery and payment for the Fund
Assets as contemplated herein, the PNC Portfolios shall acquire good and
marketable title thereto, subject to no restrictions on the ownership or
transfer thereof (except as imposed by federal or state securities laws).
(k) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by BIT of the
transactions contemplated by this Agreement, except such as may be required
under the 1933 Act, the Securities Exchange Act of 1934, as amended ("1934
Act"), the 1940 Act, the rules and regulations under those Acts, or state
securities laws.
(l) Insofar as the following relate to BIT, the registration statement
filed by PNC on Form N-14 relating to the shares of the PNC Portfolios that
will be registered with the SEC pursuant to this Agreement, which shall
include or incorporate by reference the proxy statement of the BIT
Portfolios and prospectuses of the PNC Portfolios with respect to the
transactions contemplated by this Agreement, and any supplement or
amendment thereto or to the documents contained or incorporated therein by
reference (the "N-14 Registration Statement"), and the proxy materials of
BIT, if any, otherwise filed with the SEC pursuant to Section 14(a) of the
1934 Act and Section 20(a) of the 1940 Act with respect to the transactions
contemplated by this Agreement, and any supplement or amendment thereto or
the documents appended thereto (the "BIT Transaction Proxy Materials"), on
their effective and clearance dates with the SEC, at the time of the
shareholders meeting referred to in Section 6 and at the Effective Time of
the BIT Transaction: (i) shall comply in all material respects with the
provisions of the 1933 Act, 1934 Act and the 1940 Act, the rules and
regulations thereunder, and state securities laws, and (ii) shall not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, that the representations and warranties
made by BIT in this subsection shall not apply to statements in or
omissions from the N-14 Registration Statement or the BIT Transaction Proxy
Materials made in reliance upon and in conformity with information
furnished by PNC for use therein as provided in Section 7.
(m) All of the issued and outstanding shares of each of the BIT
Portfolios have been validly issued and are fully paid and non-assessable,
and were offered for sale and sold in conformity with all applicable
federal and state securities laws.
(n) BIT shall not sell or otherwise dispose of any shares of the PNC
Portfolios to be received in the transactions contemplated herein, except
in distribution to its shareholders as contemplated herein.
(o) BIT shall operate its business in the ordinary course between the
date hereof and the Effective Time of the BIT Transaction. It is understood
that such ordinary course of business will include the declaration and
payment of customary dividends and distributions and any other dividends
and distributions deemed advisable, and the continued good faith
performance by the investment adviser, administrator, distributor and other
service providers of BIT of their respective responsibilities in accordance
with the provisions of their agreements with BIT and applicable law.
(p) Except for agreements or other arrangements relating to the
purchase and sale of portfolio securities, BIT has furnished PNC with
copies or descriptions of all contracts or legally binding arrangements to
which it is a party.
(q) Each BIT Portfolio shall deliver to PNC on November 30, 1995 a
statement of all of the specific assets and specific liabilities of the BIT
Portfolios, together with a list of the portfolio securities of each BIT
Portfolio showing the tax costs of such securities by lot and the holding
periods of such securities, and clearly reflecting the basis used for the
determination of gain or loss realized on the partial sale of any security.
Each BIT Portfolio shall immediately notify PNC of any portfolio security
thereafter acquired or sold by the BIT Portfolio and, upon PNC's request,
shall promptly and periodically update
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<PAGE> 116
the other information described in this sub-paragraph. Upon notice by PNC,
each BIT Portfolio shall immediately sell any portfolio security that PNC
identifies as impermissible under the investment policies, objectives and
limitations of the corresponding PNC Portfolio.
5. Certain Representations, Warranties and Agreements of PNC. PNC, on
behalf of itself and the PNC Portfolios, represents and warrants to, and agrees
with, BIT as follows (such representations, warranties and agreements being made
on behalf of each PNC Portfolio on a several and not joint, nor joint and
several, basis):
(a) PNC is a Massachusetts business trust duly created pursuant to its
Declaration of Trust for the purpose of acting as a management investment
company under the 1940 Act, and is validly existing under the laws of the
Commonwealth of Massachusetts. PNC is registered as an open-end management
investment company under the 1940 Act and its registration with the SEC as
an investment company is in full force and effect.
(b) PNC has the power to own all of its properties and assets and to
consummate the transactions contemplated herein, and has all necessary
federal, state and local authorizations to carry on its business as now
being conducted and to consummate the transactions contemplated by this
Agreement.
(c) This Agreement has been duly authorized, executed and delivered by
PNC, and represents a valid and binding contract, enforceable in accordance
with its terms, subject as to enforcement to bankruptcy, insolvency,
reorganization, arrangement, moratorium and other similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles. The execution and delivery of this Agreement does not,
and the consummation of the transactions contemplated by this Agreement
will not, violate PNC's Declaration of Trust, as amended, or the Code of
Regulations or any agreement or arrangement to which PNC is a party or by
which it is bound.
(d) Each PNC Portfolio intends to qualify as a regulated investment
company under Part I of Subchapter M of the Code, and with respect to each
PNC Portfolio that has conducted operations prior to the Effective Time of
the BIT Transaction, has elected to qualify and has qualified as a
regulated investment company under Part I of Subchapter M of Subtitle A,
Chapter 1, of the Code, as of and since its first taxable year; has been a
regulated investment company under such Part of the Code at all times since
the end of its first taxable year when it so qualified; and qualifies and
shall continue to qualify as a regulated investment company for its current
taxable year.
(e) The audited financial statements of PNC for its fiscal year ended
September 30, 1994, and the unaudited financial statements of PNC for the
six-month period ended March 31, 1995 (copies of which have been previously
furnished to BIT), and the audited financial statements of PNC for the
fiscal year ended September 30, 1995 (copies of which will be promptly
furnished to BIT when available) present (or will present in the case of
said audited financial statements for its fiscal year ended September 30,
1995), fairly the financial position of the PNC Portfolios as of the dates
indicated and the results of their operations for the periods indicated, in
conformity with generally accepted accounting principles applied on a
consistent basis. There has been no material adverse change in the
financial position of any PNC Portfolio since the dates of said financial
statements.
(f) Each PNC Portfolio has valued, and will continue to value, its
portfolio securities and other assets in accordance with applicable legal
requirements.
(g) There are no material legal, administrative or other proceedings
pending or, to its knowledge threatened, against PNC or the PNC Portfolios
which could result in liability on the part of PNC or the PNC Portfolios.
(h) At the Effective Time of the BIT Transaction, all federal and
other tax returns and reports of each PNC Portfolio required by law to have
been filed by such time shall have been filed, and all federal and other
taxes shall have been paid so far as due, or provision shall have been made
for the payment thereof and, to the best knowledge of each PNC Portfolio,
no such return or report shall be currently under audit and no assessment
shall have been asserted with respect to such returns or reports.
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(i) No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by PNC of the
transactions contemplated by this Agreement, except such as may be required
under 1933 Act, the 1934 Act, the 1940 Act, the rules and regulations under
those Acts, or state securities laws.
(j) The N-14 Registration Statement and the BIT Transaction Proxy
Materials, on their effective and clearance dates with the SEC, at the time
of the shareholders meeting referred to in Section 6 and at the Effective
Time of the BIT Transaction, insofar as they relate to PNC (i) shall comply
in all material respects with the provisions of the 1933 Act, 1934 Act and
the 1940 Act, the rules and regulations thereunder, and state securities
laws, and (ii) shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, that the
representations and warranties in this subsection shall not apply to
statements in or omissions from the N-14 Registration Statement or the BIT
Transaction Proxy Materials made in reliance upon and in conformity with
information furnished by BIT for use therein as provided in Section 7.
(k) The shares of the PNC Portfolios to be issued and delivered to the
BIT Portfolios for the account of the shareholders of the BIT Portfolios,
pursuant to the terms hereof, shall have been duly authorized as of the
Effective Time of the BIT Transaction and, when so issued and delivered,
shall be duly and validly issued, fully paid and nonassessable, and no
shareholder of PNC shall have any preemptive right of subscription or
purchase in respect thereto.
(l) PNC shall operate its business in the ordinary course between the
date hereof and the Effective Time of the BIT Transaction. It is understood
that (i) such ordinary course of business will include the declaration and
payment of customary dividends and distributions and any other dividends
and distributions deemed advisable, and the continued good faith
performance by the investment advisers, sub-advisers, administrators,
distributor and other service providers of PNC of their respective
responsibilities in accordance with the provisions of their agreements with
PNC and applicable law; and (ii) nothing in this Agreement shall prevent
PNC from entering into and consummating the Compass Agreement or any other
agreement providing for the acquisition of additional investment portfolios
(whether or not registered under the 1940 Act) by the PNC Portfolios.
6. Shareholder Action. As soon as practicable after the effective date of
the N-14 Registration Statement and SEC clearance of the proxy solicitation
materials referred to in Section 7, but in any event prior to the Effective Time
of the BIT Transaction and as a condition thereto, the Board of Directors of BIT
shall call, and BIT shall hold, a meeting of the shareholders of the BIT
Portfolios for the purpose of considering and voting upon:
(a) Approval of this Agreement and the transactions contemplated
hereby.
(b) Such other matters as may be determined by the governing Boards of
the parties.
7. Regulatory Filings. PNC shall file a post-effective amendment (the
"N-1A Post-Effective Amendment") to its registration statement on Form N-1A
(File No. 33-26305) with the SEC, and with the appropriate state securities
commissions, as promptly as practicable so that all PNC Portfolios and their
shares are registered under the 1933 Act, 1940 Act and applicable state
securities laws. In addition, PNC shall file an N-14 Registration Statement with
the SEC and with appropriate state securities commissions relating to the
matters described in Section 6 as promptly as practicable. PNC and BIT have
cooperated and shall continue to cooperate with each other, and have furnished
and shall continue to furnish each other with the information relating to itself
that is required by the 1933 Act, the 1934 Act, the 1940 Act, the rules and
regulations under each of those Acts and state securities laws, to be included
in the N-1A Post-Effective Amendment, the N-14 Registration Statement and the
BIT Transaction Proxy Materials.
8. Effective Time of the BIT Transaction. Delivery of the Fund Assets and
the shares of the PNC Portfolios to be issued pursuant to Section 1 and the
liquidation of the BIT Portfolios pursuant to Section 2 shall occur on the next
business day following the Valuation Time, or on such other date, and at such
place and time, agreed to by each of the parties. The date and time at which
such actions are taken are referred to
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herein as the "Effective Time of the BIT Transaction." To the extent any Fund
Assets are, for any reason, not transferred at the Effective Time of the BIT
Transaction, BIT shall cause such Fund Assets to be transferred in accordance
with this Agreement at the earliest practicable date thereafter.
9. PNC Conditions. The obligations of PNC hereunder shall be subject to
the following conditions precedent:
(a) This Agreement and the transactions contemplated by this Agreement
shall have been approved by the Board of Directors of BIT and, subject to
the provisions of Section 14, by the shareholders of the respective BIT
Portfolios voting separately on a portfolio-by-portfolio basis.
(b) Each BIT Portfolio shall have delivered to its corresponding PNC
Portfolio a statement of the specific assets and specific liabilities of
the BIT Portfolio, together with a list of the portfolio securities of the
BIT Portfolio showing the tax costs of such securities by lot and the
holding periods of such securities, as of the Valuation Time, and clearly
reflecting the basis used for the determination of gain or loss realized on
the partial sale of any security transferred to PNC, certified by the
Treasurer or Assistant Treasurer of the BIT Portfolio.
(c) BIT shall have duly executed and delivered to PNC such bills of
sale, assignments, certificates and other instruments of transfer
("Transfer Documents") as PNC may deem necessary or desirable to transfer
all of each BIT Portfolio's right, title and interest in and to the Fund
Assets. Such Assets shall be accompanied by all necessary state stock
transfer stamps or cash for the appropriate purchase price therefor.
(d) Each BIT Portfolio shall have delivered to its corresponding PNC
Portfolio a copy of the shareholder ledger accounts for all of the
shareholders of record of said BIT Portfolio as of the Effective Time of
the BIT Transaction who are to become shareholders of the corresponding PNC
Portfolio as a result of the BIT Transaction, certified by its Transfer
Agent or its President to the best of his or her knowledge and belief.
(e) As of the Valuation Time and the Effective Time of the BIT
Transaction there shall have been no material adverse change in the
financial position of any BIT Portfolio since the date of the financial
statements referred to in Section 4(e).
(f) All representations and warranties of BIT and the BIT Portfolios
made in this Agreement shall be true and correct in all material respects
as if made at and as of the Valuation Time and the Effective Time of the
BIT Transaction.
(g) BIT shall have delivered to PNC a certificate executed in its name
by its President or Vice President and its Treasurer or Assistant
Treasurer, in a form reasonably satisfactory to PNC and dated as of the
Effective Time of the BIT Transaction, to the effect that the
representations and warranties of BIT and the BIT Portfolios made in this
Agreement are true and correct at and as of the Effective Time of the BIT
Transaction, except as they may be affected by the transactions
contemplated by this Agreement.
(h) PNC shall have received an opinion of Skadden, Arps, Slate,
Meagher & Flom, counsel to BIT, in form reasonably satisfactory to PNC and
dated the Effective Time of the BIT Transaction, substantially to the
effect that (i) BIT is a Maryland corporation duly established and validly
existing under the laws of the State of Maryland; (ii) this Agreement and
the Transfer Documents have been duly authorized, executed and delivered by
BIT and represent legal, valid and binding contracts, enforceable in
accordance with their terms, subject to the effect of bankruptcy,
insolvency, moratorium, fraudulent conveyance and similar laws relating to
or affecting creditors' rights generally and court decisions with respect
thereto, and such counsel shall express no opinion with respect to the
application of equitable principles in any proceeding, whether at law or in
equity; (iii) the execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated by this Agreement will not,
violate the Charter or By-laws of BIT or any material contract known to
such counsel to which BIT is a party or by which it is bound; and (iv) no
consent, approval, authorization or order of any court or governmental
authority is required for the consummation by BIT of the transactions
contemplated by this
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Agreement, except such as have been obtained under the 1933 Act, the 1934
Act, the 1940 Act, the rules and regulations under those Acts and such as
may be required under the state securities laws. Such opinion may rely on
the opinion of other counsel to the extent set forth in such opinion,
provided such other counsel is reasonably acceptable to PNC.
(i) PNC shall have received an opinion of Drinker Biddle & Reath
addressed to PNC and BIT in form reasonably satisfactory to them, and dated
the Effective Time of the BIT Transaction, substantially to the effect that
for federal income tax purposes (i) the transfer by each BIT Portfolio of
all of its Fund Assets to the corresponding PNC Portfolio in exchange for
shares of the corresponding PNC Portfolio, and the distribution of said
shares to the shareholders of the BIT Portfolio, as provided in this
Agreement, will constitute a tax-free transaction within the meaning of
Section 368(a)(1)(C), (D) or (F) of the Code; (ii) in accordance with
Sections 361(a), 361(c)(1) and 357(a) of the Code, no gain or loss will be
recognized by the BIT Portfolios as a result of such transactions; (iii) in
accordance with Section 1032(a) of the Code, no gain or loss will be
recognized by the PNC Portfolios as a result of such transactions; (iv) in
accordance with Section 354(a)(1) of the Code, no gain or loss will be
recognized by the shareholders of the BIT Portfolios on the distribution to
them by the BIT Portfolios of shares of the corresponding PNC Portfolios in
exchange for their shares of the BIT Portfolios; (v) in accordance with
Section 358(a)(1) of the Code, the basis of the PNC Portfolio shares
received by each shareholder of a BIT Portfolio will be the same as the
basis of the shareholder's BIT Portfolio shares immediately prior to the
transactions; (vi) in accordance with Section 362(b) of the Code, the basis
of the Fund Assets received by each PNC Portfolio will be the same as the
basis of such Fund Assets in the hands of the corresponding BIT Portfolio
immediately prior to the transactions; (vii) in accordance with Section
1223(1) of the Code, a shareholder's holding period for PNC Portfolio
shares will be determined by including the period for which the shareholder
held the shares of the BIT Portfolio exchanged therefor, provided that the
shareholder held such shares of the BIT Portfolio as a capital asset;
(viii) in accordance with Section 1223(2) of the Code, the holding period
of the PNC Portfolios with respect to the Fund Assets will include the
period for which such Fund Assets were held by the corresponding BIT
Portfolios; and (ix) in accordance with Section 381(a) of the Code, each
PNC Portfolio will succeed to the tax attributes of the corresponding BIT
Portfolios described in Section 381(c) of the Code.
(j) The Fund Assets to be transferred to a PNC Portfolio under this
Agreement shall include no assets which such PNC Portfolio may not properly
acquire pursuant to its investment limitations or objectives or may not
otherwise lawfully acquire.
(k) The N-1A Post-Effective Amendment and the N-14 Registration
Statement shall have become effective under the 1933 Act and no stop order
suspending such effectiveness shall have been instituted or, to the
knowledge of PNC, contemplated by the SEC and the parties shall have
received all permits and other authorizations necessary under state
securities laws to consummate the transactions contemplated by this
Agreement.
(l) No action, suit or other proceeding shall be threatened or pending
before any court or governmental agency in which it is sought to restrain
or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
(m) Prior to the Valuation Time, each BIT Portfolio shall have
declared a dividend or dividends, with a record date and ex-dividend date
prior to the Effective Time of the BIT Transaction, which, together with
all previous dividends, shall have the effect of distributing to its
shareholders all of its net investment company income, if any, for the
taxable periods or years ending June 30, 1995 and for the periods from said
date to and including the Effective Time of the BIT Transaction (computed
without regard to any deduction for dividends paid), and all of its net
capital gain, if any, realized in taxable periods or years ending June 30,
1995 and in the periods from said date to and including the Effective Time
of BIT Transaction.
(n) BIT shall have performed and complied in all material respects
with each of its agreements and covenants required by this Agreement to be
performed or complied with by it prior to or at the Valuation Time and the
Effective Time of the BIT Transaction.
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(o) The SEC shall not have issued any unfavorable advisory report
under Section 25(b) of the 1940 Act nor instituted any proceeding seeking
to enjoin consummation of the transactions contemplated by this Agreement
under Section 25(c) of the 1940 Act.
10. BIT Conditions. The obligations of BIT hereunder shall be subject to
the following conditions precedent:
(a) This Agreement shall have been adopted and the transactions
contemplated by this Agreement shall have been approved by the Board of
Trustees of PNC and, subject to the provisions of Section 14, by the
shareholders of the respective BIT Portfolios voting separately on a
portfolio-by-portfolio basis.
(b) As of the Valuation Time and the Effective Time of the BIT
Transaction there shall have been no material adverse change in the
financial position of any PNC Portfolio since the dates of the financial
statements referred to in Section 5(e).
(c) All representations and warranties of PNC and the PNC Portfolios
made in this Agreement shall be true and correct in all material respects
as if made at and as of the Valuation Time and the Effective Time of the
BIT Transaction.
(d) PNC shall have delivered to BIT a certificate executed in its name
by its President or Vice President and its Treasurer or Assistant
Treasurer, in a form reasonably satisfactory to BIT and dated as of the
Effective Time of the BIT Transaction, to the effect that the
representations and warranties of PNC and the PNC Portfolios made in this
Agreement are true and correct at and as of the Effective Time of the BIT
Transaction, except as they may be affected by the transactions
contemplated by this Agreement and that, to its best knowledge, the Fund
Assets to be transferred to each PNC Portfolio under this Agreement as set
forth in Section 9(b) include only assets which such PNC Portfolio may
properly acquire under its investment policies, limitations and objectives
and may otherwise be lawfully acquired by such PNC Portfolio.
(e) BIT shall have received an opinion of Drinker Biddle & Reath in
form reasonably satisfactory to BIT and dated the Effective Time of the BIT
Transaction, substantially to the effect that (i) PNC is a Massachusetts
business trust duly established and validly existing under the laws of the
Commonwealth of Massachusetts; (ii) the shares of the PNC Portfolios to be
delivered to the BIT Portfolios as provided for by this Agreement are duly
authorized and upon delivery will be validly issued, fully paid and non-
assessable by PNC; (iii) this Agreement has been duly authorized, executed
and delivered by PNC, and represents a legal, valid and binding contract,
enforceable in accordance with its terms, subject to the effect of
bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws
relating to or affecting creditors' rights generally and court decisions
with respect thereto, and such counsel shall express no opinion with
respect to the application of equitable principles in any proceeding
whether at law or in equity; (iv) the execution and delivery of this
Agreement did not, and the consummation of the transaction contemplated by
this Agreement will not, violate the Declaration of Trust, as amended, or
the Code of Regulations of PNC or any material contract known to such
counsel to which PNC is a party or by which it is bound; and (v) no
consent, approval, authorization or order of any court or governmental
authority is required for the consummation by PNC of the transactions
contemplated by this Agreement, except such as have been obtained under the
1933 Act, the 1934 Act, the 1940 Act, the rules and regulations under those
Acts and such as may be required by state securities laws. Such opinion may
rely on the opinion of other counsel to the extent set forth in such
opinion, provided such other counsel is reasonably acceptable to BIT.
(f) BIT shall have received an opinion of Drinker Biddle & Reath
addressed to PNC and BIT in form reasonably satisfactory to them, and dated
the Effective Time of the BIT Transaction, with respect to the matters
specified in Section 9(i).
(g) The N-1A Post-Effective Amendment and the N-14 Registration
Statement shall have become effective under the 1933 Act and no stop order
suspending the effectiveness shall have been instituted, or to the
knowledge of PNC, contemplated by the SEC and the parties shall have
received all permits and other authorizations necessary under state
securities laws to consummate the transactions contemplated herein.
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(h) No action, suit or other proceeding shall be threatened or pending
before any court or governmental agency in which it is sought to restrain
or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
(i) PNC shall have performed and complied in all material respects
with each of its agreements and covenants required by this Agreement to be
performed or complied with by it prior to or at the Valuation Time and the
Effective Time of the BIT Transaction.
(j) The SEC shall not have issued any unfavorable advisory report
under Section 25(b) of the 1940 Act nor instituted any proceeding seeking
to enjoin consummation of the transactions contemplated by this Agreement
under Section 25(c) of the 1940 Act.
11. Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto shall use its best efforts to take, or
cause to be taken, such action, to execute and deliver, or cause to be executed
and delivered, such additional documents and instruments and to do, or cause to
be done, all things necessary, proper or advisable under the provisions of this
Agreement and under applicable law to consummate and make effective the
transactions contemplated by this Agreement, including without limitation,
delivering and/or causing to be delivered to the other party hereto each of the
items required under this Agreement as a condition to such party's obligations
hereunder. In addition, BIT shall deliver or cause to be delivered to PNC, each
account, book, record or other document of the BIT Portfolios required to be
maintained by Section 31(a) of the 1940 Act and Rules 31a-1 to 31a-3 thereunder
(regardless of whose possession they are in).
12. Termination of Representations and Warranties. The representations and
warranties of the parties set forth in this Agreement shall terminate upon the
delivery of the Fund Assets to the PNC Portfolios and the issuance of the shares
of the PNC Portfolios at the Effective Time of the BIT Transaction.
13. Termination of Agreement. This Agreement may be terminated by a party
at any time at or prior to the Effective Time of the BIT Transaction by a vote
of a majority of its governing Board as provided below:
(a) By PNC if the conditions set forth in Section 9 are not satisfied
as specified in said Section;
(b) By BIT if the conditions set forth in Section 10 are not satisfied
as specified in said Section; and
(c) By mutual consent of both parties.
14. Amendment and Waiver. At any time prior to or (to the fullest extent
permitted by law) after approval of this Agreement by the shareholders of BIT
(a) the parties hereto may, by written agreement authorized by their respective
governing Boards and with or without the further approval of their shareholders,
amend any of the provisions of this Agreement, and (b) either party may waive
any breach by the other party or the failure to satisfy any of the conditions to
its obligations (such waiver to be in writing and authorized by the governing
Board of the waiving party with or without the approval of such party's
shareholders). Without limiting the foregoing, in the event shareholder approval
of the matters specified in Sections 6, 9(a) and 10(a) is obtained with respect
to one or more BIT Portfolios but not with respect to other BIT Portfolios, with
the result that the transactions contemplated by this Agreement may be
consummated with respect to one or more, but not all, of the BIT Portfolios, the
Board of Trustees of PNC may, in the exercise of its sole and unilateral
discretion, determine to either abandon this Agreement with respect to all of
the BIT Portfolios or direct that the BIT Transaction and other transactions
described herein be consummated to the degree the Board deems advisable and to
the degree such transactions may be lawfully effected in accordance with the
Maryland General Corporation Law and BIT's Charter.
15. Governing Law. This Agreement and the transactions contemplated hereby
shall be governed, construed and enforced in accordance with the laws of the
Commonwealth of Massachusetts.
16. Successors and Assigns. This Agreement shall be binding upon the
respective successors and permitted assigns of the parties hereto. This
Agreement and the rights, obligations and liabilities hereunder may not be
assigned by either party without the consent of the other party.
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<PAGE> 122
17. Beneficiaries. Nothing contained in this Agreement shall be deemed to
create rights in persons not parties hereto, other than the successors and
permitted assigns of the parties.
18. Brokerage Fees and Expenses. Each of BIT and PNC represents and
warrants to the other that there are no brokers or finders entitled to receive
any payments in connection with the transactions provided for herein.
19. PNC and BIT Liability. The names "The PNC Fund" and "Trustees of The
PNC Fund" refer respectively to the trust created and the Trustees, as trustees
but not individually or personally, acting from time to time under a Declaration
of Trust dated December 22, 1988, which is hereby referred to and a copy of
which is on file at the office of the State Secretary of the Commonwealth of
Massachusetts and at the principal office of the Trust. The obligations of "The
PNC Fund" entered into in the name of or on behalf thereof by any of the
Trustees, officers, representatives or agents are made not individually, but in
such capacities, and are not binding upon any of the Trustees, shareholders,
officers representatives or agents of the Trust personally, but bind only the
Trust Property (as defined in the Declaration of Trust), and all persons dealing
with any class of shares of the Trust must look solely to the Trust Property
belonging to such class for the enforcement of any claims against the Trust.
Both parties specifically acknowledge and agree that any liability of PNC
under this Agreement in connection with the transactions contemplated herein
with respect to a PNC Portfolio or its corresponding BIT Portfolio shall be
discharged only out of the assets of that PNC Portfolio and that no other
portfolio of PNC shall be liable with respect thereto.
Both parties specifically acknowledge and agree that any liability of BIT
under this Agreement in connection with the transactions contemplated herein
with respect to a BIT Portfolio or its corresponding PNC Portfolio shall be
discharged only out of the assets of that BIT Portfolio and that no other
portfolio of BIT shall be liable with respect thereto.
20. Notices. All notices required or permitted herein shall be in writing
and shall be deemed to be properly given when delivered personally or by
telecopier to the party entitled to receive the notice or when sent by certified
or registered mail, postage prepaid, or delivered to an internationally
recognized overnight courier service, in each case properly addressed to the
party entitled to receive such notice at the address or telecopier number stated
below or to such other address or telecopier number as may hereafter be
furnished in writing by notice similarly given by one party to the other party
hereto:
Both parties specifically acknowledge and agree that any liability of BIT
under this Agreement in connection with the transactions contemplated herein
with respect to a BIT Portfolio or its corresponding PNC Portfolio shall be
discharged only out of the assets of that BIT Portfolio and that no other
portfolio of BIT shall be liable with respect thereto.
<TABLE>
<S> <C>
If to PNC: If to BIT:
The PNC(R) Fund The BFM Institutional Trust Inc.
c/o Karen H. Sabath 345 Park Avenue
BlackRock Financial Management, Inc. New York, New York 10154
345 Park Avenue
New York, NY 10154 With copies to:
With copies to: Richard T. Prins, Esq.
Skadden, Arps, Slate, Meagher & Flom
Jeffrey A. Dalke, Esq. 919 Third Avenue
Drinker Biddle & Reath New York, New York 10022
1345 Chestnut Street
Philadelphia, PA 19107
</TABLE>
21. Expenses. Each party shall be responsible for the payment of all
expenses incurred by such party in connection with this Agreement and the
transactions contemplated hereby.
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22. Announcements. Any announcement or similar publicity with respect to
this Agreement or the transactions contemplated herein shall be made only at
such time and in such manner as the parties shall agree; provided that nothing
herein shall prevent either party upon notice to the other party from making
such public announcements as such party's counsel may consider advisable in
order to satisfy the party's legal and contractual obligations in such regard.
23. Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties hereto and supersedes any and all prior agreements,
arrangements and understandings relating to matters provided for herein.
24. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered shall be deemed to be
an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers designated below as of the date first
written above.
[SIGNATURE LINES OMITTED]
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APPENDIX III
INVESTMENT OBJECTIVES AND FUNDAMENTAL LIMITATIONS
OF COMPASS PORTFOLIOS, BIT PORTFOLIOS AND PNC PORTFOLIOS
This Appendix sets forth the investment objectives and fundamental
limitations of the Compass Portfolios, BIT Portfolios and their corresponding
PNC Portfolios. This Appendix also includes comments on the differences among
certain important non-fundamental investment policies of these Portfolios.
Except where noted below, (i) each PNC Portfolio's investment objective and
policies may be changed by the PNC Board of Trustees without a shareholder vote;
and (ii) each Compass Portfolio and BIT Portfolio may not change its investment
objective without a vote of a majority of the outstanding shares of the
Portfolio, but may change its investment policies without a shareholder vote.
I. MONEY MARKET PORTFOLIOS
A. INVESTMENT OBJECTIVES AND POLICIES -- TAXABLE MONEY MARKET PORTFOLIOS
1. Compass Cash Reserve Fund: To produce current income with liquidity
and stability of principal.
2. PNC Money Market Portfolio: To provide as high a level of current
interest income as is consistent with maintaining liquidity and stability of
principal.
Comment: Each of these Portfolios is a money market fund that seeks to
maintain a net asset value of $1.00 per share, although there is no assurance
either will be able to do so. Both the Compass Cash Reserve Fund and the PNC
Money Market Portfolio may invest in a broad range of U.S. dollar-denominated,
high quality, short-term debt instruments, including U.S. Government
obligations, repurchase agreements and bank obligations. The PNC Money Market
Portfolio must normally invest at least 25% of its total assets in obligations
of issuers in the banking industry and instruments, such as repurchase
agreements, secured by such obligations. The Compass Cash Reserve Fund does not
have a similar policy.
The Compass Cash Reserve Fund may only invest in money market instruments
rated in the highest short-term rating category by at least two nationally
recognized statistical rating organizations ("NRSROs") or, if unrated, are of
comparable quality. The PNC Money Market Portfolio may invest its assets in
securities that are rated in the highest two rating categories, provided that
investments in securities that are not "First Tier Securities" (as defined
below) may not exceed 5% of its assets, and investments in securities of any
single issuer that is not "First Tier" may not exceed the greater of 1% of the
Portfolio's total assets or $1 million. "First Tier Securities" are securities
that (i) are rated in the highest rating category by an NRSRO; (ii) are rated in
the highest rating category by at least two NRSROs, if rated by more than one
NRSRO; (iii) have no short-term rating, but have been issued by an issuer that
has other outstanding short-term obligations that have been so rated and are of
comparable quality; and (iv) are unrated but have been determined to be of
comparable quality.
The PNC Money Market Portfolio may invest in interest-bearing savings
deposits not in excess of 5% of its total assets. The Compass Cash Reserve Fund
is not bound by this restriction. In addition, the PNC Money Market Portfolio
may invest in bank obligations of issuers having total assets at the time of
purchase in excess of $1 billion; the Compass Cash Reserve Fund may invest in
bank obligations of issuers having capital, surplus and undivided profits at the
time of purchase in excess of $100 million. The Compass Cash Reserve Fund may
invest up to 10% of its total assets in guaranteed investment contracts issued
by insurance companies, while the PNC Money Market Portfolio may only invest up
to 5% of its assets in such securities.
3. Compass U.S. Treasury Fund: To produce current income with liquidity
and stability of principal.
4. PNC Government Money Market Fund: To provide as high a level of
current interest income as is consistent with maintaining liquidity and
stability of principal.
Comment: Each of these Portfolios is a money market fund that seeks to
maintain a net asset value of $1.00 per share, although there is no assurance
either will be able to do so. The Compass U.S. Treasury Fund
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invests exclusively in short-term obligations issued by the U.S. Treasury, some
of which may be subject to repurchase agreements collateralized by the
underlying U.S. Treasury obligations. The PNC Government Money Market Portfolio
invests in obligations issued by U.S. Government agencies and instrumentalities,
as well as U.S. Treasury obligations, and in repurchase agreements
collateralized by these obligations. The PNC Government Money Market Portfolio
will, however, change its name and investment policies before the Effective Time
of the Compass Transaction to provide that it will invest only in U.S. Treasury
securities and related repurchase agreements.
B. INVESTMENT OBJECTIVES AND POLICIES -- MUNICIPAL MONEY MARKET PORTFOLIOS
1. Compass Municipal Money Fund: To seek current income that is exempt
from Federal taxation with preservation of capital and relative stability of
principal.
2. Compass New Jersey/Pennsylvania Municipal Money Funds: To seek current
income that is exempt from Federal and New Jersey or Pennsylvania, respectively,
personal income taxation with preservation of capital and relative stability of
principal.
3. PNC Municipal Money Market Portfolio: To provide as high a level of
current interest income exempt from Federal income taxes as is consistent with
maintaining liquidity and stability of principal.
4. PNC New Jersey/Pennsylvania Municipal Money Market Portfolios: To seek
as high a level of current income exempt from Federal and, to the extent
possible, from New Jersey or Pennsylvania, respectively, income tax as is
consistent with maintaining liquidity and stability of principal.
Comment: Each of these Portfolios is a money market fund that seeks to
maintain a net asset value of $1.00 per share, although there is no assurance
they will be able to do so.
(i) Compass/PNC Municipal Money Funds: The Compass Municipal Money Fund
invests at least 80% of its assets in municipal securities the interest on which
is exempt from regular Federal income tax, without regard to Federal alternative
minimum tax. The PNC Municipal Money Market Portfolio invests at least 80% of
its net assets in municipal securities, the interest on which is both exempt
from regular Federal income tax and not an item of tax preference for purposes
of the Federal alternative minimum tax.
(ii) Compass/PNC New Jersey/Pennsylvania Municipal Money Funds: The
Compass New Jersey/Pennsylvania Municipal Money Funds, like the PNC New
Jersey/Pennsylvania Municipal Money Market Portfolios, invest at least 80% of
their total assets in municipal securities, the interest on which is exempt from
regular Federal income tax without regard to Federal alternative minimum tax. In
addition, the Compass New Jersey/Pennsylvania Municipal Money Funds must
normally invest at least 80% of their total assets in municipal securities that
are exempt from New Jersey and Pennsylvania personal income tax, respectively,
or, in the case of the Compass New Jersey Municipal Money Fund, direct
obligations of the United States, its territories and certain of its agencies
and instrumentalities. The PNC New Jersey/ Pennsylvania Money Market Portfolios
must normally invest at least 65% of their respective total assets in New Jersey
and Pennsylvania municipal securities.
(iii) Quality of Investments: The Compass Municipal Money Fund and the
Compass New Jersey/Pennsylvania Municipal Money Funds limit their investments to
those obligations that, at the time of purchase, are "First Tier Securities" as
defined above in the Comment under "Investment Objectives and
Policies -- Taxable Money Market Portfolios." The PNC Municipal Money Market
Portfolio and the PNC New Jersey/Pennsylvania Money Market Portfolios may invest
in securities in the two highest ratings categories or, if unrated, are
determined to be of comparable quality. These PNC Portfolios may invest in
municipal leases and tax-exempt derivative securities.
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II. BOND PORTFOLIOS
INVESTMENT OBJECTIVES AND POLICIES
1. Compass Municipal Bond Fund: To seek current income that is exempt
from Federal taxation with preservation of capital.
2. PNC Tax-Free Income Portfolio: To seek as high a level of current
income exempt from Federal income tax as is consistent with preservation of
capital.
Comment: Under normal market conditions, both the Compass Municipal Bond
Fund and the PNC Tax-Free Income Portfolio must invest at least 80% of their
respective assets in municipal securities the interest on which is exempt from
regular Federal income tax and, in the case of the PNC Tax-Free Income
Portfolio, is not an item of tax preference for purposes of the Federal
alternative minimum tax. The Compass Municipal Bond Fund may invest in municipal
securities without regard to Federal alternative minimum tax. The Compass
Municipal Bond Fund invests only in securities rated at the time of purchase in
the three highest rating categories or unrated securities of comparable quality;
the PNC Tax-Free Income Portfolio may invest in securities rated in the four
highest rating categories or unrated securities determined to be of comparable
quality. Normally, the dollar-weighted average portfolio maturity of the Compass
Municipal Bond Fund will be between five and eighteen years, and the
dollar-weighted average portfolio maturity of the PNC Tax-Free Income Portfolio
will be between ten and twenty-five years. The PNC Tax-Free Income Portfolio may
invest in municipal leases and tax-exempt derivative securities.
3. Compass New Jersey/Pennsylvania Municipal Bond Funds: To seek current
income exempt from Federal and New Jersey or Pennsylvania, respectively, income
taxation with preservation of capital.
4. PNC New Jersey/Pennsylvania Tax-Free Income Portfolios: To seek as
high a level of current income exempt from Federal and, to the extent possible,
from New Jersey or Pennsylvania, respectively, income tax as is consistent with
preservation of capital.
Comment: The Compass New Jersey/Pennsylvania Municipal Bond Funds must
normally invest at least 80% of their respective total assets in municipal
securities the interest on which is exempt from regular Federal income tax
without regard to Federal alternative minimum tax. In addition, the Compass New
Jersey/Pennsylvania Municipal Bond Funds must normally invest at least 80% of
their respective total assets in municipal securities that are exempt from New
Jersey and Pennsylvania personal income tax, respectively, or, in the case of
the Compass New Jersey Municipal Bond Fund, direct obligations of the United
States, its territories and certain of its agencies and instrumentalities. The
PNC New Jersey/Pennsylvania Tax-Free Income Portfolios must normally invest at
least 80% of their net assets in municipal securities the interest on which is
exempt from regular Federal income tax and is not an item of tax preference for
purposes of the Federal alternative minimum tax. In addition, the PNC New
Jersey/Pennsylvania Money Market Portfolios must normally invest at least 65% of
their respective total assets in New Jersey and Pennsylvania municipal
securities.
The Compass New Jersey/Pennsylvania Municipal Bond Funds invest only in
securities rated at the time of purchase in the three highest rating categories
or unrated New Jersey/Pennsylvania securities of comparable quality; the PNC New
Jersey/ Pennsylvania Tax-Free Income Portfolios may invest in securities rated
in the four highest rating categories or unrated securities determined to be of
comparable quality. Normally, the dollar-weighted average portfolio maturities
of the Compass New Jersey/Pennsylvania Municipal Bond Funds will be between five
and eighteen years, and the dollar-weighted average portfolio maturities of the
PNC New Jersey/Pennsylvania Tax-Free Income Portfolios will be between ten and
twenty-five years. The PNC New Jersey/Pennsylvania Tax-Free Income Portfolios
may invest in municipal leases and tax-exempt derivative securities.
5. Compass Short/Intermediate Fund: To seek current income as well as
preservation of capital.
6. BIT Short Duration Portfolio: To realize a total rate of return that
exceeds the total rate of return of the Merrill Lynch 1-3 year Treasury Index.
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7. PNC Short-Term Bond Portfolio: To seek a high level of current income
consistent with prudent investment risk.
[NOTE: It is expected that after the Effective Time of the Compass
Transaction and BIT Transaction the investment objective of the PNC Short-Term
Bond Portfolio will be modified to read as follows: "To seek to realize a rate
of return that exceeds the total return of the Merrill Lynch 1-3 year Treasury
Index."]
Comment: Each of these three portfolios invests primarily in debt
securities. The Compass Short/Intermediate Fund invests in securities rated in
the three highest rating categories at the time of purchase (or unrated
securities deemed to be of comparable quality) and under normal conditions
maintains a dollar-weighted average portfolio maturity between two and five
years; the BIT Short Duration Portfolio invests in U.S. Government and other
securities rated in the highest rating category at the time of purchase (or
unrated securities deemed to be of comparable quality) and under normal
conditions maintains a dollar-weighted average maturity longer than three years
(although its "duration" as defined in its prospectus is normally between one
and three years); and the PNC Short-Term Bond Portfolio may currently invest in
investment grade securities rated in the four highest rating categories at the
time of purchase (or unrated securities deemed to be of comparable quality) and
under normal conditions maintains a dollar-weighted average maturity of five
years or less. The PNC Short-Term Bond Portfolio will, however, change its
investment policies before the Effective Times of the respective Transactions to
be consistent with those of the BIT Short Duration Portfolio stated above. (As
used above, "duration" is a measure of the expected life of fixed income
security on a present value basis and is indicative of a security's price
volatility or risk associated with changes in interest rates.)
The Compass Short/Intermediate Fund and PNC Short-Term Bond Portfolio, but
not the BIT Short Duration Portfolio, may invest in U.S. dollar-denominated
"Yankee" and "Eurodollar" obligations, and may make other investments in foreign
issuers. On the other hand, the BIT Short Duration Portfolio and the PNC
Short-Term Bond Portfolio, but not the Compass Short/Intermediate Fund, may
engage in reverse repurchase agreements for leveraging purposes, interest rate
swap, cap and floor transactions, short sales "against the box" and transactions
in inverse floating rate instruments as discussed in the Comment following
paragraph 10 below. The PNC Short-Term Bond Portfolio and BIT Short Duration
Portfolio, but not the Compass Short/Intermediate Fund, may also participate in
dollar roll transactions, while the Compass Short/Intermediate Fund may not. The
BIT Short Duration Portfolio currently invests, and after the Effective Times of
the respective Transactions the PNC Short-Term Bond Portfolio expects to invest,
principally in U.S. Government, mortgage-backed, asset-backed and, to a lesser
extent, corporate debt securities.
8. Compass Fixed Income Fund: To seek current income as well as
preservation of capital.
9. BIT Core Fixed Income Portfolio: To realize a total rate of return
that exceeds the total return of the Lehman Brothers Aggregate Index consistent
with preservation of capital and prudent investment management.
10. PNC Core Fixed Income Portfolio: To realize a total rate of return
that exceeds the total return of the Lehman Brothers Aggregate Index consistent
with preservation of capital and prudent investment management.
Comment: The Compass Fixed Income Fund invests in securities within the
three highest rating categories and unrated securities deemed to be of
comparable quality. The BIT Core Fixed Income Portfolio and PNC Core Fixed
Income Portfolio invest in securities rated in the four highest rating
categories (and unrated securities deemed to be of comparable quality). The
Compass Fixed Income Fund's dollar-weighted average portfolio maturity ranges
between five and eighteen years. The BIT Core Fixed Income Portfolio and PNC
Core Fixed Income Portfolio do not have limits on their portfolio maturities,
but each Portfolio normally maintains a target "duration" (as defined above in
the immediately preceding "Comment") in the range of plus or minus 20% around
the current duration of the Lehman Brothers Aggregate Index. Unlike the Compass
Fixed Income Portfolio, the BIT Core Fixed Income Portfolio and PNC Core Fixed
Income Portfolio may engage in: (i) interest rate swap, cap and floor
transactions, (ii) short sales "against the box," (iii) dollar roll transactions
and (iv) transactions in inverse floating rate securities (which may exhibit
high price volatility
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because, among other things, the interest rate on these securities will change
inversely to changes in prevailing interest rates) subject to a 10% total asset
limit.
Interest rate swaps involve the exchange by a Portfolio with another party
of their respective commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments. The purchase of an interest rate
cap entitles the purchaser, to the extent that a specified index exceeds a
predetermined interest rate, to receive payments of interest on a notional
principal amount from the party selling such interest rate cap. The purchase of
an interest rate floor entitles the purchaser, to the extent that a specified
index falls below a predetermined interest rate, to receive payments of interest
on a notional principal amount from the party selling such interest rate floor.
The Portfolios expect to enter into these transactions primarily to preserve a
return or spread on a particular investment or portion of their respective
portfolios, as a duration management technique or to protect against an increase
in the price of securities a Portfolio anticipates purchasing at a later date.
The Portfolios intend to use these transactions as a hedge and not as a
speculative investment. Each Portfolio may enter into interest rate swaps, caps
and floors on either an asset-based or liability-based basis, depending on
whether it is hedging its assets or its liabilities, and will enter into
interest rate swaps on a net basis, i.e., the two payment streams are netted
out, with the Portfolio receiving or paying, as the case may be, only the net
amount of the two payments. A Portfolio will accrue the net amount of the
excess, if any, of its obligations over its entitlements with respect to each
interest rate swap on a daily basis and will deliver an amount of cash, U.S.
Government securities or liquid high-grade debt securities having an aggregate
net asset value at least equal to the accrued excess to a custodian that
satisfies the requirements of the 1940 Act.
The BIT Core Fixed Income Portfolio and the PNC Core Fixed Income Portfolio
may enter into dollar rolls in which the Portfolio sells securities for delivery
in the current month and simultaneously contracts to repurchase substantially
similar (same type and coupon) securities on a specified future date from the
same party. During the roll period, the Portfolio forgoes principal and interest
paid on the securities. The Portfolio is compensated by the difference between
the current sales price and the forward price for the future purchase (often
referred to as the "drop") as well as by the interest earned on the cash
proceeds of the initial sale. Dollar rolls involve the risk that the market
value of the securities retained by a Portfolio may decline below the price of
the securities the Portfolio has sold but is obligated to repurchase under the
agreement.
The BIT Core Fixed Income Portfolio and PNC Core Fixed Income Portfolio may
only make short sales of securities "against-the-box." A short sale is a
transaction in which a Portfolio sells a security it does not own in
anticipation that the market price of that security will decline. The Portfolios
expect to make short sales both as a form of hedging to offset potential
declines in long positions in similar securities and in order to maintain
portfolio flexibility. In a short sale "against-the-box," at the time of the
sale, the Portfolio owns or has the immediate and unconditional right to acquire
the identical security at no additional cost. When selling short
"against-the-box," a Portfolio forgoes an opportunity for capital appreciation
in the security.
While each of the Compass Fixed Income Fund, BIT Core Fixed Income
Portfolio and PNC Core Fixed Income Portfolio may invest in various types of
futures contracts and put and call options, the Compass Fixed Income Fund is
subject to a 33% limit on such transactions, while the BIT Core Fixed Income
Portfolio and PNC Core Fixed Income Portfolio are subject to a 10% limit on
options. The BIT Core Fixed Income Portfolio and PNC Core Fixed Income
Portfolio, but not the Compass Fixed Income Fund, may engage in reverse
repurchase agreements for leveraging purposes, and are expected to have high
turnover rates that may increase transaction costs borne by the Portfolios.
The use of reverse repurchase agreements, borrowing and other leveraging
techniques presents the following risks: (i) leveraging exaggerates any increase
or decrease in the value of a Portfolio; (ii) the costs of borrowing may exceed
the income from the portfolio securities purchased with borrowed money; (iii) a
decline in net asset value results if the investment performance of the
additional securities purchased through borrowings fails to cover their cost to
the Portfolio (including any interest paid on borrowed money); (iv) if the asset
coverage for borrowings declines to less than three hundred percent (as a result
of market fluctuations or otherwise), the Portfolio may be required to sell a
portion of its investments when it may be disadvantageous to do so; (v) the
market value of the securities sold by a Portfolio pursuant to a reverse
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repurchase agreement may decline below the price of the securities the Portfolio
is obligated to repurchase; and (vi) the securities sold pursuant to a reverse
repurchase agreement may not be returned to a Portfolio.
11. Compass International Fixed Income Fund: To seek current income and
preservation of capital consistent with reasonable investment risk.
12. PNC International Fixed Income Portfolio: To achieve as high a level
of current income as is consistent with prudent investment risk.
Comment: Both the Compass International Fixed Income Fund and the PNC
International Fixed Income Portfolio invest at least 65% of their respective
total assets in fixed income obligations of foreign issuers. Under normal market
conditions, the Compass International Fixed Income Fund's dollar-weighted
average portfolio maturity will range between two and eighteen years. The PNC
International Fixed Income Portfolio is not restricted to any minimum or maximum
time to maturity. The PNC International Fixed Income Portfolio may invest in
securities rated in the four highest rating categories (and unrated securities
deemed to be of comparable quality), and may invest up to 5% of its net assets
in securities rated below investment grade; the Compass International Fixed
Income Fund may only invest in debt securities that have at the time of purchase
one of the three highest ratings or, if unrated, are deemed to be of comparable
quality.
13. BIT Multi-Sector Mortgage Securities Portfolio III: To seek to
provide a total ratio of return before fees and expenses over rolling
twelve-month periods that exceeds the total return of the Salomon Broad
Investment Grade Index over the same period by at least 1.60% on an annualized
basis.
14. PNC Multi-Sector Mortgage Securities Portfolio III: To seek to
provide a total ratio of return before fees and expenses over rolling
twelve-month periods that exceeds the total return of the Salomon Broad
Investment Grade Index over the same period by at least 1.60% on an annualized
basis.
Comment: Both the BIT Multi-Sector Mortgage Securities Portfolio III and
the PNC Multi-Sector Mortgage Securities Portfolio III seek to achieve their
investment objectives by investing in a portfolio of fixed income securities
consisting primarily of commercial and residential mortgage-backed securities.
Each Portfolio may also invest in securities that are not mortgage-backed
securities issued by the U.S. Government, its agencies or instrumentalities.
Each of the Portfolios may invest up to 25% of its assets in non-investment
grade securities rated BB or B, of which no more than half (or 12.5% of the
Portfolio's assets) may be rated B. Each Portfolio has a policy of maintaining a
dollar-weighted average credit quality of at least A-/A3. Non-investment grade
securities (those that are rated Ba or lower) are commonly referred to as "junk"
bonds. Particular risks associated with lower-rated securities are: (i) the
relative youth and growth of the market for such securities; (ii) the
sensitivity of such securities to interest rate and economic changes; (iii) the
lower degree of protection of principal and interest payments; (iv) the
relatively low trading market liquidity for the securities; (v) the impact that
legislation may have on the high yield bond market (and, in turn, on a
Portfolio's net asset value and investment practices); and (vi) the
creditworthiness of the issuers of such securities. During an economic downturn
or substantial period of rising interest rates, leveraged issuers may experience
financial stress which would adversely affect their ability to service their
principal and interest payment obligations, to meet project business goals, and
to obtain additional financing. An economic downturn could also disrupt the
market for lower-rated securities and adversely affect the value of outstanding
securities and the ability of the issuers to repay principal and interest. If
the issuer of a lower rated security held by a Portfolio defaulted, the
Portfolio could incur additional expenses to seek recovery. Adverse publicity
and investor perceptions, whether or not based on fundamental analysis, may also
decrease the values and liquidity of lower-rated securities held by a Portfolio,
especially in a thinly traded market.
Each of the Portfolios may invest in futures, options, swaps, caps and
floors for bona fide hedging and duration management purposes. Each Portfolio
does not have a limit on its portfolio maturity, but normally maintains a target
"duration" in the range of plus or minus 20% around the current duration of the
Salomon Brothers Mortgage Index.
The investment objectives of both the BIT Multi-Sector Mortgage Securities
Portfolio III and PNC Multi-Sector Mortgage Securities Portfolio III are
fundamental and may not be changed without a shareholder vote.
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III. EQUITY PORTFOLIOS
INVESTMENT OBJECTIVES AND POLICIES
1. Compass Equity Income Fund: To seek a combination of current income
and capital appreciation.
2. PNC Value Equity Portfolio: To seek long-term appreciation.
Comment: The Compass Equity Income Fund generally limits its investments to
domestic companies with market capitalizations in excess of $200 million without
regard to any specific industry, region or trading market. On average, stocks
selected for the Compass Equity Income Fund are expected to provide a higher
current yield than that of the general market, as characterized by the S&P 500.
Price-to-earnings and price-to-book ratios are also part of the stock selection
process, and the Compass Equity Income Fund normally ranks lower in these two
categories than the S&P 500 composite. The Compass Equity Income Fund may invest
up to 35% of its total assets in preferred stocks, high quality corporate bonds,
notes, warrants, obligations issued by foreign branches of U.S. domestic and
foreign banks and high quality, short-term obligations. The PNC Value Equity
Portfolio invests primarily in corporate stocks and securities convertible into
common stocks, selected on the basis of fundamental and/or traditional research,
that appear to represent good relative value. The ratios of a security's
price-to-earnings and book value, its earnings trend and its dividend growth
rate are factors considered in security selection.
3. Compass Growth Fund: To seek primarily capital appreciation.
4. PNC Growth Equity Portfolio: To seek long-term growth of capital and,
secondarily, to achieve current income and dividend growth potential.
Comment: Both the Compass Growth Fund and PNC Growth Equity Portfolio
invest primarily in equity securities. The Compass Growth Fund limits its
investments to companies considered to have favorable equity-to-debt ratios and
market capitalizations in excess of $200 million. Emphasis is placed on
companies that have demonstrated consistent historical earnings growth; recent
earnings momentum and price-to-earnings ratios are also considered. The PNC
Growth Equity Portfolio emphasizes companies in the middle and higher
capitalization ranges (over $1 billion market capitalization at the time of
purchase) and growth prospects exceeding that of the general economy.
5. Compass Small Company Fund: To seek primarily capital appreciation.
6. PNC Small Cap Growth Equity Portfolio: To seek long-term capital
appreciation.
Comment: Both the Compass Small Company Fund and the PNC Small Cap Growth
Equity Portfolio invest primarily in securities of domestic companies with a
market capitalization of less than $1 billion at the time of purchase. The PNC
Small Cap Growth Equity Portfolio invests primarily in stocks of companies which
the portfolio's sub-adviser considers to have favorable and above average
earnings growth prospects.
7. Compass International Equity Fund: To seek primarily long-term capital
appreciation and, secondarily, income.
8. PNC International Equity Portfolio: To provide long-term capital
appreciation.
Comment: The Compass International Equity Portfolio invests at least 65% of
its assets in equity securities of foreign companies, and may invest up to 35%
of its assets in equity and investment grade fixed income securities of
companies domiciled in the United States. The PNC International Equity Income
Portfolio must invest at least 80% of its assets in equity securities of foreign
issuers, and does not normally intend to invest in the equity securities of
domestic companies. The PNC International Equity Portfolio places primary
emphasis on the securities of issuers in countries included in the MSCI Europe,
Australia and Far East Index ("EAFE") whose prices in their home market or stock
exchange are low in relation to current earnings.
B. INVESTMENT OBJECTIVES -- BALANCED FUND
1. Compass Balanced Fund: To provide capital appreciation and current
income.
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2. PNC Balanced Portfolio: To achieve total return through a combination
of long-term growth of capital and current income consistent with preservation
of capital.
Comment: The Compass Balanced Fund invests at least 30% of its total assets
in fixed income securities with the remainder in common stocks and securities
convertible into common stocks; the PNC Balanced Portfolio invests at least 25%
of its total assets in fixed income senior securities with the remainder in
common stocks and convertible securities. Fixed income securities acquired by
both the Compass Balanced Fund and the PNC Balanced Portfolio are investment
grade. Equity investments by the Compass Balanced Fund are primarily in
large-capitalization companies (those companies with market capitalizations of
over $1 billion). Both Portfolios may invest in foreign securities, but the PNC
Balanced Portfolio's investments in securities of foreign issuers are limited to
5% of the Portfolio's total assets.
IV. FUNDAMENTAL LIMITATIONS --
ALL COMPASS, BIT AND PNC PORTFOLIOS
Except where noted below, the following investment limitations are
fundamental, and may not be changed without shareholder approval, for the
Compass Portfolios, the BIT Portfolios and the PNC Portfolios. The following
discussion does not apply to the fundamental limitations of PNC Multi-Sector
Mortgage Securities Portfolio III, which are the same as the fundamental
limitations of its corresponding BIT Portfolio set forth in the current
Prospectus and Statement of Additional Information for that Portfolio.
1. DIVERSIFICATION
a. The Compass Portfolios may not purchase securities of any one issuer,
other than obligations issued or guaranteed by the U.S. Government or its
agencies and instrumentalities, if immediately after such purchase, more than 5%
of the value of their respective total assets would be invested in any one
issuer or a Portfolio would hold more than 10% of any class of securities of
such issuer or more than 10% of the outstanding voting securities of such
issuer, except that (i) with respect to each Compass Portfolio, except the New
Jersey Municipal Money Fund, Pennsylvania Municipal Money Fund, New Jersey
Municipal Bond Fund and the Pennsylvania Municipal Bond Fund, up to 25% of the
value of such Compass Portfolio's total assets may be invested without regard to
such limitation, (ii) with respect to the Compass New Jersey Municipal Money
Fund, Pennsylvania Municipal Money Fund, New Jersey Municipal Bond Fund and
Pennsylvania Municipal Bond Fund, up to 50% of the value of each such
Portfolio's respective total assets may be invested in as few as two issuers.
b. The PNC Portfolios, except the PNC New Jersey Municipal Money Market
Portfolio, Pennsylvania Money Market Portfolio, New Jersey Tax-Free Income
Portfolio and Pennsylvania Tax-Free Income Portfolio, may not purchase
securities of any one issuer (other than securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities or certificates of deposit
for such securities) if more than 5% of the value of the respective Portfolio's
total assets (taken at current value) would be invested in the securities of
such issuer, or more than 10% of the issuer's outstanding voting securities
would be owned by the Portfolio or by PNC, except that up to 25% of the value of
a Portfolio's total assets (taken at current value) may be invested without
regard to these limitations.
NOTE: The PNC New Jersey Municipal Money Market Portfolio, Pennsylvania
Money Market Portfolio, New Jersey Tax-Free Income Portfolio and Pennsylvania
Tax-Free Income Portfolio do not have a fundamental investment limitation on
diversification.
c. The BIT Portfolios may not (i) purchase any security (other than
obligations of the U.S. Government, its agencies and instrumentalities) if as a
result, with respect to 75% of their respective total assets, more than 5% of
such total assets would then be invested in securities of a single issuer, and
(ii) purchase more than 10% of all outstanding voting securities of any one
issuer.
NOTE: Under the foregoing investment limitations, each Compass, PNC and BIT
Portfolio is classified as a diversified portfolio under the 1940 Act except the
Compass New Jersey Municipal Money Market Fund, Compass Pennsylvania Municipal
Money Market Fund, Compass New Jersey Municipal Bond Fund,
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Compass Pennsylvania Municipal Bond Fund and their corresponding PNC Portfolios.
In addition, the PNC Multi-Sector Mortgage Securities Portfolio III and BIT
Multi-Sector Mortgage Securities Portfolio III are classified as non-diversified
portfolios under the 1940 Act.
2. CONCENTRATION
a. The Compass Portfolios may not purchase securities that would cause more
than 25% of the value of their total assets at the time of purchase to be
invested in securities of one or more issuers conducting their principal
business activities in the same industry, provided that: (i) there is no
limitation with respect to obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, domestic bank certificates of
deposit or bankers' acceptances and repurchase agreements secured by such
obligations; (ii) this limitation does not apply to municipal securities or
government guarantees of municipal securities purchased by the Compass Municipal
Money Market Fund, New Jersey Municipal Money Fund, Pennsylvania Municipal Money
Fund, Municipal Bond Fund, New Jersey Municipal Bond Fund and Pennsylvania
Municipal Bond Fund; (iii) wholly-owned finance companies will be considered to
be in the industries of their parents if their activities are primarily related
to financing the activities of their parents; and (iv) utilities will be divided
according to their services.
b. The PNC Portfolios may not purchase securities that would cause 25% or
more of the value of their respective total assets at the time of purchase to be
invested in the securities of one or more issuers conducting their principal
business activities in the same industry; except that the PNC Money Market
Portfolio may not purchase any securities that would cause, at the time of
purchase, less than 25% of the value of its total assets to be invested in the
obligations of issuers in the banking industry, or in obligations, such as
repurchase agreements, secured by such obligations (unless the Portfolio is in a
temporary defensive position) or which would cause, at the time of purchase,
more than 25% of the value of its total assets to be invested in the obligations
of issuers in any other industry. These limitations are not applied to (i)
instruments issued or guaranteed by the United States, any state, territory or
possession of the United States, the District of Columbia or any of their
authorities, agencies, instrumentalities or political subdivisions; (ii) with
respect to PNC's money market funds only, instruments issued by domestic banks
(which may include U.S. branches of foreign banks); (iii) repurchase agreements
secured by the instruments described in the foregoing clauses (i) and, with
respect to PNC's money market funds only, (ii); and wholly-owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their parents,
and utilities will be divided according to their services.
c. The BIT Portfolios may not purchase any security (other than obligations
of the U.S. Government, its agencies and instrumentalities) if, as a result, 25%
or more of a Portfolio's total assets would be invested in one or more issuers
having their principal business activities in the same industry.
3. BORROWINGS
a. The Compass Portfolios may not borrow or issue senior securities, except
that they may borrow from banks or enter into reverse repurchase agreements for
temporary purposes in amounts up to 10% of the value of their respective total
assets at the time of such borrowing; or mortgage, pledge, or hypothecate any
assets, except in connection with any such borrowing and in amounts not in
excess of the lesser of the dollar amounts borrowed or 10% of the value of its
total assets at the time of the borrowing. The Compass Portfolios may not
purchase securities while their respective borrowings (including reverse
repurchase agreements) exceed 5% of their respective total assets.
b. The PNC Portfolios may not borrow money or issue senior securities,
except that they may borrow from banks and (other than PNC's tax-exempt money
market funds) enter into reverse repurchase agreements for temporary purposes in
amounts up to one-third of the value of their respective total assets at the
time of the borrowing; or mortgage, pledge or hypothecate any assets, except in
connection with any such borrowing and then in amounts not in excess of
one-third of the value of the Portfolio's total assets at the time of such
borrowing. The Portfolios may not purchase securities when their respective
aggregate outstanding
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borrowings (including reverse repurchase agreements and borrowings from banks)
exceed 5% of their respective total assets.
c. The BIT Portfolios may not issue senior securities, borrow money or
pledge its assets, except that a Portfolio may borrow from banks or enter into
reverse repurchase agreements or dollar rolls up to 33 1/3% of the value of its
total assets (calculated when the loan is made) to take advantage of investment
opportunities and may pledge up to 33 1/3% of the value of its total assets to
secure such borrowings. Each Portfolio is also authorized to borrow an
additional 5% of its total assets without regard to the foregoing limitations
for temporary purposes such as clearance of portfolio transactions and share
redemptions. For purposes of these restrictions, the purchase or sale of
securities on a "when-issued", delayed delivery or forward commitment basis, the
purchase and sale of options and futures contracts and collateral arrangements
with respect thereto are not deemed to be the issuance of a senior security, a
borrowing or a pledge of assets.
NOTE: It is expected that after the Effective Times of the Compass
Transaction and the BIT Transaction the fundamental limitation on borrowings for
the PNC Short-Term Bond, Core Fixed Income, International Fixed Income and
Balanced Portfolios will be conformed to the fundamental limitations of the BIT
Portfolios stated above.
4. LOANS
a. The Compass Portfolios may not make loans, except that they may lend
their portfolio securities in accordance with their investment objectives and
policies and may enter into repurchase agreements.
b. The PNC Portfolios may not make loans, except that they may purchase and
hold debt instruments and enter into repurchase agreements in accordance with
their investment objectives and may lend their portfolio securities.
c. The BIT Portfolios may not make loans, except through (i) repurchase
agreements, and (ii) loans of portfolio securities limited to 50% of the value
of the Portfolio's total assets.
5. ILLIQUID SECURITIES
a. The Compass Portfolios may not invest (except with respect to variable
or floating rate notes subject to a seven-day or less demand feature) more than
15% of their respective total assets in illiquid securities, including
repurchase agreements providing for settlement more than seven days after
notice, and, with respect to the Compass International Fixed Income and
International Equity Funds, over-the-counter hedging transactions.
NOTE: As a matter of non-fundamental policy, the Compass Cash Reserve and
U.S. Treasury Funds will limit their investments in illiquid securities to 10%
of their respective total assets.
NOTE: PNC's money market funds have a 10% net asset limit, and the other
PNC Portfolios have a 15% net asset limit, on investments in illiquid
securities, but these policies are not fundamental for these Portfolios. The BIT
Portfolios are subject to a 15% limit on such securities, but this policy is not
fundamental to these Portfolios.
6. MARGIN TRANSACTIONS/TRADING ACCOUNTS
a. The Compass Portfolios may not purchase securities on margin, sell
securities short or maintain a short position, or participate on a joint or
joint and several basis in any securities trading account.
b. The PNC Portfolios may not purchase securities on margin, make short
sales of securities or maintain a short position, except that (i) this
investment limitation shall not apply to a Portfolio's transactions in futures
contracts and related options or a Portfolio's sale of securities short against
the box, and (ii) the Portfolios may obtain short-term credit as may be
necessary for the clearance of purchases and sales of a Portfolio's securities.
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c. The BIT Portfolios may not purchase securities on margin (but a
Portfolio may obtain such short-term credits as may be necessary for the
clearance of transactions); provided that the deposit or payment by a Portfolio
of initial or variation margin in connection with options or futures contracts
is not considered the purchase of a security on margin. The Portfolios may not
make short sales, except "against-the-box."
7. UNDERWRITING
a. The Compass Portfolios may not underwrite securities of other issuers,
except to the extent that a Portfolio may be deemed to be an underwriter under
certain securities laws in the disposition of "restricted securities" acquired
in accordance with the Portfolio's investment objective and policies.
b. The PNC Portfolios may not act as an underwriter within the meaning of
the Securities Act of 1933 except to the extent that the purchase of obligations
directly from the issuer thereof, or the disposition of securities, in
accordance with a Portfolio's investment objective, policies and limitations may
be deemed to be underwriting.
c. The BIT Portfolios may not act as underwriter except to the extent that,
in connection with the disposition of portfolio securities, it may be deemed to
be an underwriter under certain Federal securities laws.
8. OPTIONS
a. The Compass Portfolios may not write or sell straddles, spreads or
combinations thereof; the Compass Cash Reserve Fund and U.S. Treasury Fund may
not write or purchase put or call options; the Compass Municipal Bond Fund, New
Jersey Municipal Bond Fund, Pennsylvania Municipal Bond Fund, Municipal Money
Fund, New Jersey Municipal Money Fund and Pennsylvania Municipal Money Fund also
may not write or sell put or call options, except that they may acquire put
options with respect to municipal securities in their respective portfolios and
sell those put options in conjunction with a sale of those municipal securities;
the Compass Municipal Money Fund, New Jersey Municipal Money Fund and
Pennsylvania Municipal Money Fund will not acquire a put if, immediately after
such acquisition, over 5% of the total amortized cost value of their respective
assets would be subject to puts from the same institution, except that (i) up to
25% of the value of each Portfolio's total assets may be subject to puts without
regard to such 5% limitation, and (ii) the 5% limitation is inapplicable to puts
that, by their terms, would be readily exercisable in the event of a default in
payment of principal or interest on the underlying securities. In applying this
limitation, a Portfolio will aggregate securities subject to puts from any one
institution with such Portfolio's investments, if any, in securities issued or
guaranteed by that institution. In addition, a put will be considered to be from
a party to whom the Portfolio will look for payment of the exercise price. The
Compass Municipal Money Fund, New Jersey Municipal Money Fund and Pennsylvania
Municipal Money Fund will not acquire a put that, by its terms, would be readily
exercisable in the event of a default in payment of principal and interest on
the underlying security or securities if, immediately after that acquisition,
the amortized cost value of the security or securities underlying that put, when
aggregated with the amortized cost value of any other securities issued or
guaranteed by the issuer of the put, would exceed 10% of the total amortized
cost values of a Portfolio's assets.
b. The PNC Portfolios are not permitted to write or sell put options, call
options, straddles, spreads, or any combination thereof, except for transactions
in options on securities, securities indices, futures contracts and options on
futures contracts.
NOTE: The BIT Portfolios do not have a fundamental investment limitation on
options.
9. REAL ESTATE
a. The Compass Portfolios may not purchase or sell real estate, including
limited partnership interests (although investments by the Portfolios in
marketable securities of companies engaged in such activities, and the
investment in securities secured by real estate or interests therein, are not
precluded to the extent consistent with a Portfolio's investment objective).
III-11
<PAGE> 135
b. The PNC Portfolios may not purchase or sell real estate, except a
Portfolio may purchase securities of issuers that deal in real estate and may
purchase securities that are secured by interests in real estate.
c. The BIT Portfolios will not buy or sell real estate or interests in real
estate, except a the Portfolio may purchase and sell mortgage-backed securities,
securities collateralized by mortgages, securities that are secured by real
estate and securities of companies which invest or deal in real estate.
10. OTHER INVESTMENT COMPANIES
a. The Compass Municipal Money Fund, Cash Reserve Fund, U.S. Treasury Fund,
New Jersey Municipal Money Fund and New Jersey Municipal Bond Fund may not
invest in securities of other investment companies, except where such securities
may be acquired as part of a merger, consolidation, reorganization, or
acquisition of assets.
b. The PNC Portfolios may not acquire any other investment company or
investment company security except in connection with a merger, consolidation,
reorganization or acquisition of assets or where otherwise permitted by the 1940
Act.
NOTE: The BIT Portfolios do not have a fundamental investment limitation on
investments in other investment companies.
11. MISCELLANEOUS
a. The Compass Portfolios may not invest in any issuer for purposes of
exercising control of management; nor may they purchase or sell commodities,
commodity contracts (except with respect to the Bond, Equity and Balanced
Portfolios, futures contracts), oil, gas or mineral exploration or development
programs or leases (although investments by a Portfolio in marketable securities
of companies engaged in such activities are not precluded to the extent
appropriate to its investment objective). In addition, the Compass Portfolios
may not purchase or retain securities of any issuer if the officers or trustees
of Compass or the officers or directors of any of its investment advisers or
sub-advisers owning beneficially more than one-half of 1% of the securities of
such issuer together own beneficially more than 5% of such securities. The
Compass Portfolios also will not invest more than 10% of their total assets in
the securities of issuers that together with any predecessors have a record of
less than three years of continuous operation. The Compass Municipal Money Fund,
New Jersey Municipal Money Fund and Pennsylvania Municipal Money Fund will not
invest in private activity bonds where the payment of principal and interest are
the responsibility of a company (including its predecessors) with less than
three years of continuous operations.
b. The Compass Cash Reserve Fund may not buy common stocks, voting
securities or tax-exempt municipal securities. The Compass U.S. Treasury Fund
may not buy common stocks, voting securities or municipal securities.
c. The Compass U.S. Treasury Fund may not purchase securities other than
bills, notes and bonds issued by the U.S. Treasury, certain of which securities
may be subject to repurchase agreements collateralized by the underlying U.S.
Treasury obligations.
d. The Compass Pennsylvania Municipal Money Fund and Pennsylvania Municipal
Bond Fund have a fundamental policy that their securities may be varied only (i)
to eliminate unsafe investments and investments not consistent with the
preservation of their capital or the tax status of their investments; (ii) to
honor redemption orders, meet anticipated redemption requirements, and negate
gains from discount purchases; (iii) in the case of the Compass Pennsylvania
Municipal Money Fund, to maintain a constant net asset value per unit pursuant
to, and in compliance with, an order or rule of the United States Securities and
Exchange Commission; (iv) to reinvest earnings from securities in like
securities; or (v) to defray normal administrative expenses.
e. The PNC Portfolios may not purchase securities for the purpose of
exercising control; nor may they purchase or sell commodity contracts, or invest
in oil, gas or mineral exploration or development programs, except that the
Portfolios may, to the extent appropriate to their investment policies, purchase
securities
III-12
<PAGE> 136
(publicly-traded securities in the case of a money market fund) of companies
engaging in whole or in part in such activities and may enter into futures
contracts and related options.
f. The PNC New Jersey Municipal Money Market and Pennsylvania Municipal
Money Market Portfolios will invest at least 80% of their respective net assets
in private activity bonds the interest on which is an item of tax preference for
purposes of the Federal alternative minimum tax and instruments the interest on
which is exempt from regular Federal income tax, except during defensive periods
or during periods of unusual market conditions.
g. The PNC Municipal Money Market Portfolio will invest at least 80% of its
net assets in instruments the interest on which is exempt from regular Federal
income tax and is not an item of tax preference for purposes of Federal
alternative minimum tax, except during defensive periods or during periods of
unusual market conditions.
h. The BIT Portfolios may not make investments for the purpose of
exercising control or management. The Portfolios will not purchase securities,
other than U.S. Government securities, mortgage-backed securities or
asset-backed securities, of any issuer having a record, together with
predecessors, of less than three years of continuous operations if, immediately
after such purchase, more than 5% of a Portfolio's total assets would be
invested in such securities. The Portfolios also may not invest in oil, gas or
other mineral exploration or development programs, except that they may invest
in securities of companies that invest in or sponsor such programs. The BIT
Portfolios may not buy or sell commodities contracts, except that they may
purchase and sell futures contracts and options thereon.
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<PAGE> 137
APPENDIX IV
SHAREHOLDER TRANSACTIONS AND SERVICES
This Appendix compares the shareholder transactions and services that are
available in connection with: (1) Service Shares and Institutional Shares of the
PNC Portfolios, (2) the Compass Portfolios and (3) the BIT Portfolios.
I. PNC PORTFOLIOS -- SERVICE SHARES AND INSTITUTIONAL SHARES
CORRESPONDING COMPASS PORTFOLIOS* AND BIT PORTFOLIOS**
*(Includes Shares of the Compass Municipal Money Fund, New Jersey Municipal
Money Fund, Pennsylvania Municipal Money Fund, Cash Reserve Fund, U.S. Treasury
Fund, Municipal Bond Fund, New Jersey Municipal Bond Fund, Pennsylvania
Municipal Bond Fund, Equity Income Fund, Growth Fund, Small Company Fund,
International Equity Fund, Balanced Fund, Short/Intermediate Fund, Fixed Income
Fund and International Fixed Income Fund.)
**(Includes the BIT Short Duration Portfolio, Core Fixed Income Portfolio
and Multi-Sector Mortgage Securities Portfolio III.)
A. SALES CHARGES AND EXEMPTIONS.
PNC PORTFOLIOS -- SERVICE SHARES AND INSTITUTIONAL SHARES
1. Both Service Shares and Institutional Shares of each PNC Portfolio are
sold without a sales charge.
CORRESPONDING COMPASS PORTFOLIOS
(OTHER THAN THE COMPASS MUNICIPAL MONEY,
NEW JERSEY MUNICIPAL MONEY, PENNSYLVANIA
MUNICIPAL MONEY, CASH RESERVE AND U.S. TREASURY FUNDS,
WHICH ARE OFFERED WITHOUT A SALES CHARGE)
2.(a) Shares of the Compass Municipal Bond Fund, New Jersey Municipal Bond
Fund, Pennsylvania Municipal Bond Fund, Short/Intermediate Fund, Fixed Income
Fund and International Fixed Income Fund are offered with a maximum front-end
sales charge of 4.00% of the per share public offering price.
(b) Shares of the Compass Equity Income Fund, Growth Fund, Small Company
Fund, International Equity Fund and Balanced Fund are offered with a maximum
front-end sales charge of 4.50% of the per share public offering price.
(c) The Compass Portfolios offer exemptions from the sales charge (a) if a
shareholder (or a member of the shareholder's immediate family) has an existing
trust department relationship with Midlantic; (b) for the Compass Capital Group
Individual Retirement Plan and Custody Account when a trustee-to-trustee
transfer is made from an employer plan having Midlantic as a fiduciary; (c) for
qualified institutional investors (i.e. retirement plans with over $250,000 in
assets, charities and not-for-profit organizations); (d) if a shareholder (or a
member of the shareholder's immediate family) is a present or retired employee
of Midlantic; (e) if a shareholder (or a member of the shareholder's immediate
family) is a present employee of SEI Financial Services Company; (f) for
trustees or officers of Compass; or (g) for clients of Essex National
Securities, Inc. ("Essex") who have enrolled in asset allocation programs
sponsored or operated by Essex, including programs that are part of an
individual retirement plan. Additionally, if a shareholder previously redeemed
shares of any Compass Portfolio sold with a sales charge and re-enters the same
Portfolio, the sales charge will be waived so long as re-entry occurs within 12
months following redemption and so long as the shareholder notifies the transfer
agent at the time of the investment that the investment is a re-entry.
IV-1
<PAGE> 138
(d) The Compass Portfolios also offer rights of accumulation and letter of
intent programs that can reduce the sales charge payable on share purchases.
CORRESPONDING BIT PORTFOLIOS
3. Shares of the BIT Short Duration Portfolio, Core Fixed Income Portfolio
and Multi-Sector Mortgage Securities Portfolio III are sold without a sales
charge.
B. PURCHASE POLICIES
[NOTE: The chart below shows PNC Portfolios' existing purchase policies for
Service Shares and Institutional Shares. PNC and its service providers expect to
establish special purchase policies for Compass shareholders who receive Service
Shares in connection with the Compass Transaction that are substantially similar
to those currently offered by Compass.]
<TABLE>
<CAPTION>
PNC PORTFOLIOS -- SERVICE
SHARES AND INSTITUTIONAL
SHARES COMPASS PORTFOLIOS BIT PORTFOLIOS
------------------------- -------------------------- --------------------------
<S> <C> <C> <C>
Minimum Initial $5,000 for initial $2,500 ($500 for IRAs). $500,000 (although BIT may
Investments purchases of Service The minimum investment may in its discretion accept
Shares and Institutional be waived if share subscriptions for a lesser
Shares. purchases are made in amount).
connection with IRAs,
Keoghs, gifts to minors,
payroll deduction
programs, or similar plans
upon due notice from SEI
Financial Services
Company.
Minimum Subsequent No minimum. $100. (See above for No minimum.
Investments waivers.)
Automatic Investment No. Yes. Shares may be No.
Plan purchased on a monthly
basis through automatic
deductions from a
shareholder's checking or
savings account with a
$100 minimum and $100,000
maximum per transaction.
The minimum initial
purchase amounts and
minimum maintained balance
requirements may be waived
for purchases under the
Automatic Investment Plan.
Purchase Methods By telephone. Shares are sold by SEI By telephone.
Financial Services Company
directly and through
broker/dealers having a
dealer agreement with SEI,
or through procedures
established by SEI in
connection with the
requirements of accounts
at Midlantic; by mail; by
telephone.
Payment Methods Only in Federal funds By check (or other By wire of Federal funds.
or other immediately negotiable bank instrument (The investment adviser
available funds. or money order), by wire, may, at its discretion,
by Automated Clearing agree to accept securities
House (ACH). rather than cash to fund
the purchase of shares.)
</TABLE>
The PNC Portfolios, Compass Portfolios and BIT Portfolios each reserve the
right to reject any purchase order.
IV-2
<PAGE> 139
C. REDEMPTION POLICIES
[NOTE: The chart below shows PNC Portfolios' existing redemption policies
for Service Shares and Institutional Shares. PNC and its service providers
expect to establish special redemption policies for Compass shareholders who
receive Service Shares in connection with the Compass Transaction that are
substantially similar to those currently offered by Compass.]
<TABLE>
<CAPTION>
PNC
PORTFOLIOS -- SERVICE
SHARES AND INSTITUTIONAL
SHARES COMPASS PORTFOLIOS BIT PORTFOLIOS
------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
Redemption Methods By mail or telephone. By mail or telephone. By telephone, by
facsimile or by other
wire communication.
Payment Methods (Note: By wire (normally same By check, by wire or For BIT Core Fixed
see discussion or next business day for Automatic Clearing Income Short Duration
following chart for money market portfolios, House. There is a $7 Portfolios: By wire
information concerning next business day for charge for wiring and (normally within two
PNC Multi-Sector other portfolios, but redemption proceeds. business days). BIT Core
Mortgage Securities may take up to 7 days). Payment made within 7 Fixed Income and Short
Portfolio III and its days, but Compass Duration Portfolios
corresponding BIT attempts to honor reserve the right to pay
Portfolio.) requests for next day redemptions in kind.
payment of redemption
proceeds.
Check Writing Privilege No. Yes, for Compass No.
Municipal Money Fund,
New Jersey Municipal
Money Fund, Pennsylvania
Municipal Money Fund,
Cash Reserve Fund and
U.S. Treasury Fund only
($250 minimum).
Automatic Cash No. Yes ($10,000 minimum No.
Withdrawal Plan balance/$50 minimum per
transaction).
</TABLE>
For both the PNC Multi-Sector Mortgage Securities Portfolio III and the BIT
Multi-Sector Mortgage Securities Portfolio III, at least 30 days' notice is
required for cash redemptions; requests in excess of $250,000 by a single
shareholder in a 3-month period in a Portfolio may be made in kind unless 30
days' written notice is received and will be paid in kind if requested and other
shareholders are not adversely affected.
A shareholder of record may be required to redeem Service or Institutional
Shares, as the case may be, in any PNC Portfolio if the balance in the
shareholder's account in that Portfolio drops below $5,000 as the result of a
redemption request and the shareholder does not increase the balance to at least
$5,000 upon thirty days' written notice. The Compass Portfolios may redeem
involuntarily, upon sixty days' notice, shares of a shareholder whose account
decreases to a value of less than $2,500 ($500 for purchases made in connection
with IRA) because of redemptions. The BIT Portfolios have no such policy with
respect to involuntary redemptions. The PNC Portfolios, the Compass Portfolios
and the BIT Portfolios may also redeem shares involuntarily when appropriate in
light of their responsibilities under the 1940 Act, and may make payment for
redemptions in securities in lieu of cash.
A Compass shareholder who, at the Effective Time of the Compass
Transaction, meets the Compass, but not the PNC, minimum investment requirement,
will not be required to redeem the PNC shares received in connection with the
Compass Transaction, unless the balance in the shareholder's account drops below
the Compass minimum as a result of redemptions, or unless redemption appears
appropriate in light of PNC's responsibilities under the 1940 Act.
IV-3
<PAGE> 140
D. SHARE EXCHANGES
<TABLE>
<CAPTION>
PNC PORTFOLIOS -- SERVICE
SHARES
AND INSTITUTIONAL SHARES COMPASS PORTFOLIOS BIT PORTFOLIOS
------------------------------- ------------------ --------------
<S> <C> <C> <C>
By Mail No. Yes. No.
By Telephone No. Yes. Yes.
Minimum Inapplicable. No minimum. No minimum.
</TABLE>
Neither Service Shares nor Institutional Shares of the PNC Portfolios have
an exchange privilege. With respect to the Compass Portfolios, a shareholder may
exchange shares of a Compass Portfolio for shares of any other Compass Portfolio
at net asset value plus a sales charge, if applicable. Shares of a BIT Portfolio
may be exchanged for shares of any other BIT Portfolio based on the respective
net asset values of the shares involved. Exchanges are only available in states
where exchanges can lawfully be made from one Portfolio to another, and must
satisfy the requirements relating to the minimum initial investment in a
Portfolio. Compass and BIT reserve the right to reject any telephone exchange
request and to modify or terminate exchange privileges with 60 days' notice.
E. RESPONSIBILITY FOR TELEPHONE INSTRUCTIONS
The PNC Portfolios, Compass Portfolios, BIT Portfolios, their
administrators and their distributors are not liable for any loss, liability,
cost or expense for acting upon telephone instructions that are reasonably
believed to be genuine. In attempting to confirm that telephone instructions are
genuine, procedures are used that are considered reasonable, which may include
recording telephone instructions and requesting information as to account
registration (such as the name in which an account is registered, the account
number, recent transactions in the account and the account holder's Social
Security number, address and/or bank).
II. DIVIDENDS AND DISTRIBUTIONS
All PNC Portfolios, Compass Portfolios and BIT Portfolios distribute their
net capital gains to shareholders at least annually. The following table shows
the Portfolios' policies concerning the declaration and payment of dividends
from net investment income.
A. DIVIDENDS DECLARED DAILY/PAID MONTHLY
<TABLE>
<CAPTION>
PNC PORTFOLIOS COMPASS PORTFOLIOS BIT PORTFOLIOS
- ------------------------------------- ------------------------------- --------------------------
<S> <C> <C>
PNC Municipal Money Market Portfolio Compass Municipal Money Fund N/A
PNC New Jersey Municipal Money Market Compass New Jersey Municipal N/A
Portfolio Money Fund
PNC Pennsylvania Municipal Money Compass Pennsylvania Municipal N/A
Market Portfolio Money Fund
PNC Money Market Portfolio Compass Cash Reserve Fund N/A
PNC Government Money Market Portfolio Compass U.S. Treasury Fund N/A
PNC Pennsylvania Tax-Free Income See below N/A
Portfolio
PNC New Jersey Tax-Free Income See below N/A
Portfolio
PNC Short-Term Bond Portfolio See below BIT Short Duration
Portfolio
PNC Multi-Sector Mortgage N/A BIT Multi-Sector Mortgage
Securities Portfolio III Securities Portfolio III
</TABLE>
IV-4
<PAGE> 141
B. DIVIDENDS DECLARED MONTHLY/PAID MONTHLY
<TABLE>
<CAPTION>
PNC PORTFOLIOS COMPASS PORTFOLIOS BIT PORTFOLIOS
- ------------------------------------- ------------------------------- --------------------------
<S> <C> <C>
PNC Tax-Free Income Portfolio Compass Municipal Bond Fund N/A
See above Compass New Jersey Municipal N/A
Bond Fund
See above Compass Pennsylvania Municipal N/A
Bond Fund
See above Compass Short/Intermediate Fund See above
PNC Core Fixed Income Portfolio Compass Fixed Income Fund BIT Core Fixed Income
Portfolio
See below Compass Equity Income Fund N/A
See below Compass Growth Fund N/A
See below Compass Balanced Fund N/A
PNC International Fixed Income See below N/A
Portfolio
</TABLE>
C. DIVIDENDS DECLARED QUARTERLY/PAID QUARTERLY
<TABLE>
<CAPTION>
PNC PORTFOLIOS COMPASS PORTFOLIOS BIT PORTFOLIOS
- ------------------------------------- ------------------------------- --------------------------
<S> <C> <C>
PNC Value Equity Portfolio See above N/A
PNC Growth Equity Portfolio See above N/A
PNC Small Cap Growth Equity Portfolio Compass Small Company Fund N/A
PNC International Equity Portfolio See above N/A
PNC Balanced Portfolio See above N/A
</TABLE>
D. DIVIDENDS DECLARED SEMI-ANNUALLY/PAID SEMI-ANNUALLY
<TABLE>
<CAPTION>
PNC PORTFOLIOS COMPASS PORTFOLIOS BIT PORTFOLIOS
- ------------------------------------- ------------------------------- --------------------------
<S> <C> <C>
See above Compass International Fixed N/A
Income Fund
See above Compass International Equity N/A
Fund
</TABLE>
E. The PNC Portfolios, Compass Portfolios and BIT Portfolios all offer dividend
reinvestment programs.
IV-5
<PAGE> 142
APPENDIX V-A
FORM OF INTERIM INVESTMENT ADVISORY AGREEMENT
APPLICABLE TO ALL COMPASS PORTFOLIOS
AGREEMENT made as of [date] between THE COMPASS CAPITAL GROUP, a
Massachusetts business trust (herein called the "Group"), and [name of
Investment Adviser(s)], a corporation, having an office
at [address] (herein called the "Investment Adviser").
WHEREAS, the Group is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Group desires to retain the Investment Adviser to furnish
investment advisory and administrative services to certain investment
portfolio(s) of the Group identified on Schedule A hereto (collectively, the
"Fund(s)") and the Investment Adviser represents that it is willing and
possesses legal authority to so furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Group hereby appoints the Investment Adviser to act
as investment adviser to the Fund(s) for the period and on the terms set forth
in this Agreement. The Investment Adviser accepts such appointment and agrees to
furnish the services herein set forth for the compensation herein provided.
2. Delivery of Documents. The Group has furnished the Investment Adviser
with copies properly certified or authenticated of each of the following:
(a) the Group's Declaration of Trust, as executed on October 1, 1987
and as filed with the Secretary of State of The Commonwealth of
Massachusetts on October 2, 1987, and all amendments thereto or
restatements thereof (such Declaration, as presently in effect and as it
shall from time to time be amended or restated, is herein called the
"Declaration of Trust");
(b) the Group's By-laws and amendments thereto;
(c) resolutions of the Group's Board of Trustees authorizing the
appointment of the Investment Adviser and approving this Agreement;
(d) the Group's Notification of Registration on Form N-8A under the
1940 Act as filed with the Securities and Exchange Commission on December
31, 1987, and all amendments thereto;
(e) the Group's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended ("1933 Act"), (File No. 33-19416) and
under the 1940 Act as filed with the Securities and Exchange Commission on
December 31, 1987 and all amendments thereto; and
(f) the Funds' most recent prospectuses and Statement of Additional
Information (such prospectuses and Statement of Additional Information, as
presently in effect, and all amendments and supplements thereto are herein
collectively called the "Prospectus").
The Group will furnish the Investment Adviser from time to time with copies
of all amendments of or supplements to the foregoing.
3. Management. Subject to the supervision of the Group's Board of
Trustees, the Investment Adviser will provide a continuous investment program
for each Fund, including investment research and management with respect to all
securities and investments and cash equivalents in said Funds. The Investment
Adviser will determine from time to time what securities and other investments
will be purchased, retained or sold by the Group with respect to the Funds. The
Investment Adviser will provide the services under this Agreement in accordance
with each Fund's investment objective, policies, and restrictions as stated in
the Prospectus and resolutions of the Group's Board of Trustees. The Investment
Adviser further agrees that it:
(a) will use the same skill and care in providing such services as it
uses in providing services to fiduciary accounts for which it has
investment responsibilities;
V-A-1
<PAGE> 143
(b) will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission and in addition will conduct its
activities under this Agreement in accordance with any applicable
regulations of any governmental authority pertaining to the investment
advisory activities of the Investment Adviser;
(c) will not make loans to any person to purchase or carry units of
beneficial interest in the Group or make loans to the Group;
(d) will place orders pursuant to its investment determinations for
the Group either directly with the issuer or with any broker or dealer. In
placing orders with brokers and dealers, the Investment Adviser will
attempt to obtain prompt execution of orders in an effective manner at the
most favorable price. Consistent with this obligation, when the execution
and price offered by two or more brokers or dealers are comparable, the
Investment Adviser may, in its discretion, purchase and sell portfolio
securities to and from brokers and dealers who provide the Investment
Adviser with research advice and other services. In no instance will
portfolio securities be purchased from or sold to The Winsbury Company,
Midlantic National Bank, or any affiliated person of either the Group, The
Winsbury Company, or Midlantic National Bank;
(e) will maintain all books and records with respect to the Group's
securities transactions and will furnish the Group's Board of Trustees such
periodic and special reports as the Board may request;
(f) will treat confidentially and as proprietary information of the
Group all records and other information relative to the Group and prior,
present, or potential interest holders, and will not use such records and
information for any purpose other than performance of its responsibilities
and duties hereunder, except after prior notification to and approval in
writing by the Group, which approval shall not be unreasonably withheld and
may not be withheld where the Investment Adviser may be exposed to civil or
criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so
requested by the Group; and
(g) will maintain its policy and practice of conducting its fiduciary
functions independently. In making investment recommendations for the
Group, the Investment Adviser's personnel will not inquire or take into
consideration whether the issuers of securities proposed for purchase or
sale for the Group's account are customers of the Investment Adviser or of
its parent or its subsidiaries or affiliates. In dealing with such
customers, the Investment Adviser and its parent, subsidiaries, and
affiliates will not inquire or take into consideration whether securities
of those customers are held by the Group.
4. Services Not Exclusive. The investment management services furnished
by the Investment Adviser hereunder are not to be deemed exclusive, and the
Investment Adviser shall be free to furnish similar services to others so long
as its services under this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Investment Adviser hereby agrees that all records which
it maintains for the Group are the property of the Group and further agrees to
surrender promptly to the Group any of such records upon the Group's request.
The Investment Adviser further agrees to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act the records required to be maintained by Rule
31a-1 under the 1940 Act.
6. Expenses. During the term of this Agreement, the Investment Adviser
will pay all expenses incurred by it in connection with its activities under
this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the Group.
7. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, each of the Fund(s) will pay the Investment Adviser
and the Investment Adviser will accept as full compensation therefor a fee
computed daily and paid monthly at the applicable annual rate set forth on
Schedule A hereto. Each Fund's obligation to pay the above-described fee to the
Investment Adviser will begin as of the date of the initial public sale of
shares in that Fund.
If in any fiscal year the aggregate expenses of any Fund (as defined under
the securities regulations of any state having jurisdiction over the Group)
exceed the expense limitations of any such state, the Investment
V-A-2
<PAGE> 144
Adviser will reimburse the Fund for a portion of such excess expenses equal to
such excess times the ratio of the fees otherwise payable by the Fund to the
Investment Adviser hereunder to the aggregate fees otherwise payable by the Fund
to the Investment Adviser hereunder and to The Winsbury Company under the
Administration Agreement between The Winsbury Company and the Group. The
obligation of the Investment Adviser to reimburse the Fund(s) hereunder is
limited in any fiscal year to the amount of its fee hereunder for such fiscal
year, provided, however, that notwithstanding the foregoing, the Investment
Adviser shall reimburse the Fund(s) for such proportion of such excess expenses
regardless of the amount of fees paid to it during such fiscal year to the
extent that the securities regulations of any state having jurisdiction over the
Group so require. Such expense reimbursement, if any, will be estimated daily
and reconciled and paid on a monthly basis.
8. Limitation of Liability. The Investment Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Fund(s) in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Investment Adviser in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
9. Duration and Termination. This Agreement will become effective on the
date hereof, and, unless sooner terminated as provided herein, shall continue in
effect until July 31, 1996 and thereafter shall be renewed automatically for
successive five-year periods; provided that such continuance is specifically
approved at least annually (a) by the vote of a majority of those members of the
Group's Board of Trustees who are not parties to this Agreement or interested
persons of any party to this Agreement, cast in person at a meeting called for
the purpose of voting on such approval, and (b) by the vote of a majority of the
Group's Board of Trustees or by the vote of a majority of all votes attributable
to the outstanding Shares of such Fund. This Agreement is terminable, on not
less than sixty days' notice, by the Trust's Board of Trustees, by "vote of a
majority of the outstanding Shares" (as defined below) of the Trust, or by
Investment Adviser, and may be terminable in the event of its assignment. (As
used in this Agreement, the terms "majority of the outstanding voting
securities," "interested persons," and "assignment" shall have the same meaning
of such terms in the 1940 Act.)
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
11. Glass-Steagall Act. The Investment Adviser represents that it
believes that it possesses the legal authority to perform the investment
advisory services for the Fund(s) contemplated by this Agreement without
violating applicable banking laws or regulations.
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by the law of The Commonwealth of Massachusetts.
The names "The Compass Capital Group" and "Trustees of The Compass Capital
Group" refer respectively to the Trust created and the Trustees, as trustees but
not individually or personally, acting from time to time under a Declaration of
Trust dated as of October 1, 1987 to which reference is hereby made and a copy
of which is on file at the office of the Secretary of State of The Commonwealth
of Massachusetts and elsewhere as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of "The Compass Capital
Group" entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities, and
are not binding upon any of the Trustees, interest holders or representatives of
the Trust personally, but bind only the assets of the Trust, and all persons
dealing with any Fund of the Trust must look solely to the assets of the Trust
belonging to such Fund for the enforcement of any claims against the Trust.
V-A-3
<PAGE> 145
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
[SIGNATURE LINES OMITTED]
SCHEDULE A TO INTERIM INVESTMENT
ADVISORY AGREEMENT BETWEEN
THE COMPASS CAPITAL GROUP
AND
[NAME OF INVESTMENT ADVISER]
DATED AS OF [DATE]
Pursuant to Article 7, the Group shall pay the Investment Adviser
compensation, computed daily at an annual rate as follows:
<TABLE>
<CAPTION>
NAME OF PORTFOLIO COMPENSATION
- -------------------------------------------------------------------------------- --------------
<S> <C>
Cash Reserve Fund............................................................... .35%
U.S. Treasury Fund.............................................................. .35%
Municipal Money Fund............................................................ .40%
Equity Income Fund.............................................................. .70%
Growth Fund..................................................................... .70%
Short/Intermediate Fund......................................................... .60%
Fixed Income Fund............................................................... .60%
Municipal Bond Fund............................................................. .60%
NJ Municipal Money Fund......................................................... .40%
PA Municipal Money Fund......................................................... .40%
NJ Municipal Bond Fund.......................................................... .60%
PA Municipal Bond Fund.......................................................... .60%
Small Company Fund.............................................................. .90%
International Fixed Income Fund................................................. .80%
International Equity Fund....................................................... .90%
Balanced Fund................................................................... .70%
</TABLE>
[SIGNATURE LINES OMITTED]
V-A-4
<PAGE> 146
APPENDIX V-B
FORM OF INTERIM SUB-ADVISORY AGREEMENT
FOR THE COMPASS GROWTH FUND AND EQUITY INCOME FUND
AGREEMENT made this day of [date,] by and between PNC Asset Management
Group, Inc., a corporation, (the "Adviser") and [name of Sub-Adviser],
a corporation, (the "Sub-Adviser").
WHEREAS, The Compass Capital Group (the "Trust") is registered as an
open-end management investment company under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, the Adviser has entered into an Investment Advisory Agreement
dated [date] (the "Advisory Agreement") with the Trust, pursuant to which the
Adviser will act as investment adviser to the [name of Fund] (the "Portfolio");
and
WHEREAS, the Adviser desires to retain the Sub-Adviser as its agent to
provide investment advisory services to the Trust in connection with the
management of the Portfolio, and the Sub-Adviser is willing to render such
investment advisory services.
NOW, THEREFORE, the parties hereto agree as follows:
1.(a) Subject to supervision by the Adviser and the Trust's Board of
Trustees, the Sub-Adviser shall manage the investment operations of the
Portfolio and the composition of the Portfolio's portfolio, including the
purchase, retention and disposition thereof, in accordance with the Portfolio's
investment objectives, policies and restrictions as stated in the Portfolio's
Prospectus (such Prospectus and Statement of Additional Information, as
currently in effect and as amended or supplemented from time to time, being
herein called the "Prospectus"), and subject to the following understandings:
(1) The Sub-Adviser shall provide supervision of the Portfolio's
investments and determine from time to time what investments and securities
will be purchased, retained or sold by the Portfolio, and what portion of
the assets will be invested or held uninvested in cash or cash equivalents.
(2) In the performance of its duties and obligations under this
Agreement, the Sub-Adviser shall act in conformity with the Trust's
Declaration of Trust and the Prospectus and with the instructions and
directions of the Adviser and of the Board of Trustees and will conform to
and comply with the requirements of the 1940 Act, the Internal Revenue Code
of 1986 and all other applicable federal and state laws and regulations, as
each is amended from time to time.
(3) The Sub-Adviser shall determine the securities to be purchased or
sold by the Portfolio and will place orders with or through such persons,
brokers or dealers to carry out the policy with respect to brokerage set
forth in the Portfolio's Registration Statement (as defined herein) or as
the Board of Trustees or the Adviser may direct from time to time, in
conformity with federal securities laws. In providing the Portfolio with
investment supervision, the Sub-Adviser will give primary consideration to
securing the most favorable price and efficient execution. Within the
framework of this policy, the Sub-Adviser may consider the financial
responsibility, research and investment information and other services
provided by brokers or dealers who may effect or be a party to any such
transaction or other transactions to which the Sub-Adviser's other clients
may be a party. It is understood that it is desirable for the Portfolio
that the Sub-Adviser have access to supplemental investment and market
research and security and economic analysis provided by brokers who may
execute brokerage transactions at a higher cost to the Portfolio than may
result when allocating brokerage to other brokers on the basis of seeking
the most favorable price and efficient execution. Therefore, the
Sub-Adviser is authorized to place orders for the purchase and sale of
securities for the Portfolio with such brokers, subject to review by the
Trust's Board of Trustees from time to time with respect to the extent and
continuation of this practice. It is understood that the services provided
by such brokers may be useful to the Sub-Adviser in connection with the
Sub-Adviser's services to other clients.
V-B-1
<PAGE> 147
On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as other
clients of the Sub-Adviser, the Sub-Adviser, to the extent permitted by
applicable laws and regulations, may, but shall be under no obligation to,
aggregate the securities to be so purchased or sold in order to obtain the
most favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities so purchased or
sold, as well as the expenses incurred in the transaction, will be made by
the Sub-Adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Portfolio and to such
other clients.
(4) The Sub-Adviser shall maintain all books and records with respect
to the Portfolio's portfolio transactions required by subparagraphs (b)(5),
(6), (7), (9), (10) and (11) and paragraph (f) of Rule 31a-1 under the 1940
Act and shall render to the Adviser and the Trust's Board of Trustees such
periodic and special reports as the Trust's Board of Trustees may
reasonably request.
(5) The Sub-Adviser shall provide SEI Financial Management Corporation
on each business day with information relating to all transactions
concerning the Portfolio's assets and shall provide the Adviser with such
information upon request of the Adviser.
(6) The investment management services provided by the Sub-Adviser
under this Agreement are not to be deemed exclusive and the Sub-Adviser
shall be free to render similar services to others so long as such services
do not impair Sub-Adviser's services to the Portfolio.
(b) Services to be furnished by the Sub-Adviser under this Agreement may be
furnished through the medium of any of the Sub-Adviser's partners, officers or
employees.
(c) The Sub-Adviser shall keep the Portfolio's books and records required
to be maintained by the Sub-Adviser pursuant to paragraph 1(a) of this Agreement
and shall timely furnish to the Adviser all information relating to the
Sub-Adviser's services under this Agreement needed by the Adviser to keep the
other books and records of the Portfolio required by Rule 31a-1 under the 1940
Act. The Sub-Adviser agrees that all records that it maintains on behalf of the
Portfolio are property of the Portfolio and the Sub-Adviser will surrender
promptly to the Portfolio any of such records upon the Portfolio's request;
provided, however, that the Sub-Adviser may retain a copy of such records. The
Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act any such records as are required to be maintained by it
pursuant to paragraph 1(a) of this Agreement.
(d) The Adviser and the Sub-Adviser will each make its officers and
employees available to the other from time to time at reasonable times to review
investment policies of the Portfolio and to consult with each other regarding
the investment affairs of the Portfolio. The Sub-Adviser shall also make its
officers and employees available to the Trust's Board of Trustees at such times
as the Board of Trustees shall reasonably request.
(e) The Sub-Adviser shall have the right to execute and deliver, or cause
its nominee to execute and deliver, all proxies and notices of meetings and
other notices affecting or relating to the securities of the Trust.
2. The Adviser shall continue to have responsibility for all services to be
provided to the Portfolio pursuant to the Advisory Agreement and shall oversee
and review the Sub-Adviser's performance of its duties under this Agreement.
3. The Adviser has delivered to the Sub-Adviser copies of each of the
following documents and will deliver to it all future amendments and
supplements, if any:
(a) Declaration of Trust, as filed with the Secretary of State of
Massachusetts (such Declaration of Trust, as in effect on the date of this
Agreement and as amended from time to time, is herein called the
"Declaration of Trust");
(b) By-Laws of the Trust (such By-Laws, as in effect on the date of
this Agreement and as amended from time to time, are herein called the
"By-Laws");
V-B-2
<PAGE> 148
(c) Certified resolutions of the Trust's Board of Trustees authorizing
the appointment of the Adviser and the Sub-Adviser and approving the form
of this Agreement;
(d) Registration Statement under the 1940 Act and the Securities Act
of 1933, as amended, on Form N-1A (the "Registration Statement"), as filed
with the Securities and Exchange Commission (the "Commission") relating to
the Portfolio and units of beneficial interest of the Portfolio and all
amendments thereto;
(e) Notification of Registration of the Portfolio under the 1940 Act
on Form N-8A as filed with the Commission, and all amendments thereto; and
(f) Prospectus of the Portfolio.
4. For the services to be provided by the Sub-Adviser pursuant to this
Agreement, the Adviser will pay to the Sub-Adviser as full compensation therefor
a fee at an annual rate based upon the following levels of the Portfolio's
average daily net assets: [FOR THE EQUITY INCOME FUND] .40% on the first $100
million, .30% on the next $100 million, and .25% on assets in excess of $200
million [FOR THE GROWTH FUND] .325% on the first $50 million, .225% on the next
$100 million, .20% on the next $350 million, and .15% on assets in excess of
$500 million. This fee will be computed daily and paid to the Sub-Adviser
quarterly.
5. The Sub-Adviser shall not be liable for any error of judgment or for any
loss suffered by the Portfolio or the Adviser in connection with performance of
its obligations under this Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the 1940 Act), or a loss resulting from willful
misfeasance, bad faith or gross negligence on the Sub-Adviser's part in the
performance of its duties or from reckless disregard of its obligations and
duties under this Agreement, except as may otherwise be provided under
provisions of applicable state law which cannot be waived or modified hereby.
6. This Agreement shall continue in effect after July 31, 1996 only so long
as continuance is specifically approved at least annually in conformance with
the 1940 Act; provided, however, that this Agreement may be terminated (a) by
the Portfolio at any time, without the payment of any penalty, by the vote of a
majority of Trustees of the Trust or by the vote of a majority of the
outstanding voting securities of the Portfolio, (b) by the Adviser at any time,
without the payment of any penalty, on not more than 60 days' nor less than 30
days' written notice to the other parties, or (c) by the Sub-Adviser at any
time, without the payment of any penalty, on 90 days' written notice to the
other parties. This Agreement shall terminate automatically and immediately in
the event of its assignment. As used in this Section 6, the terms "assignment"
and "vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in the 1940 Act and the rules and regulations
thereunder, subject to such exceptions as may be granted by the Commission under
the 1940 Act.
7. Nothing in this Agreement shall limit or restrict the right of any of
the Sub-Adviser's partners, officers, or employees to engage in any other
business or to devote his or her time and attention in part to the management or
other aspects of any business, whether of a similar or dissimilar nature, nor
limit or restrict the Sub-Adviser's right to engage in any other business or to
render services of any kind to any other corporation, firm, individual or
association other than as set forth in Section 1(a)(6).
8. During the term of this Agreement, the Adviser agrees to furnish the
Sub-Adviser at its principal office all prospectuses, proxy statements, reports
to shareholders, sales literature or other materials prepared for distribution
to shareholders of the Portfolio, the Trust or the public that refer to the
Sub-Adviser or its clients in any way prior to use thereof and not to use
material if the Sub-Adviser reasonably objects in writing within five business
days (or such other period as may be mutually agreed) after receipt thereof. The
Adviser agrees to use its best efforts to ensure that materials prepared by its
employees or agents or its affiliates that refer to the Sub-Adviser or its
clients in any way are consistent with those materials previously approved by
the Sub-Adviser as referenced in the preceding sentence. Sales literature may be
furnished to the Sub-Adviser by first-class or overnight mail, facsimile
transmission equipment or hand delivery.
V-B-3
<PAGE> 149
9. No provisions of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Agreement shall be effective until approved by
the vote of the majority of the outstanding voting securities of the Portfolio.
10. This Agreement shall be governed by the laws of the State of New
Jersey; provided, however, that nothing herein shall be construed as being
inconsistent with the 1940 Act.
11. This Agreement embodies the entire agreement and understanding among
the parties hereto, and supersedes all prior agreements and understandings
relating to this Agreement's subject matter. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an original, but
such counterparts shall, together, constitute only one instrument.
12. Should any part of this Agreement be held invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors.
13. Any notice, advice or report to be given pursuant to this Agreement
shall be delivered or mailed:
To the Adviser at:
PNC Asset Management Group, Inc.
Bellevue Park Corporate Center
400 Bellevue Parkway
Wilmington, Delaware 19809
Attention:
To the Sub-Adviser at:
[Name of Sub-Adviser]
[Address]
Attention:
To the Trust or the Portfolio at:
The Compass Capital Group
2 Oliver Street
Boston, Massachusetts 02109
Attention: Robert Nesher
14. Where the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is altered by a rule, regulation or order of the
Commission, whether of special or general application, such provision shall be
deemed to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first written
above.
[SIGNATURE LINES OMITTED]
V-B-4
<PAGE> 150
APPENDIX V-C
FORM OF INTERIM SUB-ADVISORY AGREEMENT
FOR THE COMPASS SMALL COMPANY FUND,
INTERNATIONAL EQUITY FUND AND INTERNATIONAL FIXED INCOME FUND
AGREEMENT executed as of [date] by and between PNC Asset Management Group,
Inc., a corporation ("PAMG"), and [name of Sub-Adviser], a
corporation and registered investment adviser ("Sub-Adviser").
WHEREAS, PAMG is the investment adviser for certain portfolios of The
Compass Capital Group (the "Trust"), an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, PAMG desires to retain the Sub-Adviser as its agent to furnish
investment advisory services for the [name of Fund], a diversified investment
portfolio of the Trust (the "Fund").
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Appointment. PAMG hereby appoints the Sub-Adviser to provide certain
sub-investment advisory services to the Fund for the period and on the terms set
forth in this Agreement. The Sub-Adviser accepts such appointment and agrees to
furnish the services herein set forth for the compensation herein provided.
2. Delivery of Documents. PAMG has furnished the Sub-Adviser with copies
properly certified or authenticated of each of the following:
(a) The Trust's Amended and Restated Agreement and Declaration of
Trust, as filed with the Secretary of State of The Commonwealth of
Massachusetts on December 31, 1987, and all amendments thereto or
restatements thereof (such Declaration, as presently in effect and as it
shall from time to time be amended or restated, is herein called the
"Declaration of Trust");
(b) The Trust's By-Laws and amendments thereto;
(c) Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Sub-Adviser and approving this Agreement;
(d) The Trust's Notification of Registration on Form N-8A under the
1940 Act as filed with the Securities and Exchange Commission (the "SEC")
on October 31, 1987 and all amendments thereto;
(e) The Trust's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act") (File No. 33-19416) and
under the 1940 Act as filed with the SEC and all amendments thereto insofar
as such Registration Statement and such amendments relate to each Fund; and
(f) The Trust's most recent prospectus and statement of additional
information for the Fund (such prospectus and Statement of Additional
Information, as presently in effect, and all amendments and supplements
thereto are herein collectively called the "Prospectus").
PAMG will furnish the Sub-Adviser from time to time with copies of all
amendments of or supplements to the foregoing.
3. Management. Subject always to the supervision of the Trust's Board of
Trustees and PAMG, the Sub-Adviser will furnish an investment program in respect
of, and make investment decisions for, all assets of the Fund and place all
orders for the purchase and sale of securities, all on behalf of the Fund. In
the performance of its duties, the Sub-Adviser will satisfy its fiduciary duties
to the Fund (as set forth in Section 8, below), and will monitor the Fund's
investments, and will comply with the provisions of the Trust's Declaration of
Trust and By-Laws, as amended from time to time, and the stated investment
objectives, policies and restrictions of the Fund. The Sub-Adviser and PAMG will
each make its officers and employees available to the other from time to time at
reasonable times to review investment policies of the Fund and to
V-C-1
<PAGE> 151
consult with each other regarding the investment affairs of the Fund. The
Sub-Adviser shall also make itself reasonably available to the Board of Trustees
at such times as the Board of Trustees shall request.
The Sub-Adviser represents and warrants that it is in compliance with all
applicable rules and regulations of the SEC pertaining to its investment
advisory activities and agrees that it:
(a) will use the same skill and care in providing such services as it
uses in providing services to fiduciary accounts for which it has
investment responsibilities;
(b) will conform with all applicable rules and regulations of the SEC
pertaining to its investment advisory activities;
(c) will place orders pursuant to its investment determinations for
the Fund either directly with the issuer or with any broker or dealer. In
placing orders with brokers or dealers, the Sub-Adviser will attempt to
obtain the best combination of prompt execution of orders in an effective
manner and at the most favorable price. Consistent with this obligation,
when the execution and price offered by two or more brokers or dealers are
comparable, the Sub-Adviser may, in its discretion, purchase and sell
portfolio securities to and from brokers and dealers who provide the
Sub-Adviser with research advice and other services. In no instance will
portfolio securities be purchased from or sold to PAMG, the Sub-Adviser,
SEI Financial Services Company or any affiliated person of either the
Trust, PAMG, SEI Financial Services Company or the Sub-Adviser, except as
may be permitted under the 1940 Act;
(d) will report regularly to PAMG and will make appropriate persons
available for the purpose of reviewing at reasonable times with
representatives of PAMG and the Board of Trustees the management of the
Fund, including, without limitation, review of the general investment
strategy of the Fund, the performance of the Fund in relation to standard
industry indices, interest rate considerations and general conditions
affecting the marketplace and will provide various other reports from time
to time as reasonably requested by PAMG;
(e) will maintain books and records with respect to the Trust's
securities transactions and will furnish PAMG and the Trust's Board of
Trustees such periodic and special reports as the Board of Trustees or PAMG
may request;
(f) will act upon instructions from PAMG not inconsistent with the
fiduciary duties hereunder; and
(g) will treat confidentially and as proprietary information of the
Trust all such records and other information relative to the Trust
maintained by the Sub-Adviser, and will not use such records and
information for any purpose other than performance of its responsibilities
and duties hereunder, except after prior notification to and approval in
writing by the Trust, which approval shall not be unreasonably withheld and
may not be withheld where the Sub-Adviser may be exposed to civil or
criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so
requested by the Trust.
The Sub-Adviser shall have the right to execute and deliver, or cause its
nominee to execute and deliver, all proxies and notices of meetings and other
notices affecting or relating to the securities of the Fund.
4. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records which it
maintains for the Fund, on behalf of the Trust are the property of the Trust and
further agrees to surrender promptly to the Trust any of such records upon the
Trust's request. The Sub-Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act. With respect to the International
Equity Fund, the Sub-Adviser may delegate its responsibilities under this
Section to affiliates that perform custody and/or fund accounting services for
such Fund, which delegation shall not, however, relieve the Sub-Adviser of its
responsibilities under this paragraph 4.
5. Expenses. During the term of this Agreement, the Sub-Adviser will pay
all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities (including brokerage commissions, if
any) purchased for the Fund.
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<PAGE> 152
6. Compensation. For the services to be provided by the Sub-Adviser
pursuant to this Agreement, the Adviser will pay the Sub-Adviser, and the
Sub-Adviser agrees to accept as full compensation therefor, a sub-advisory fee,
accrued daily and payable quarterly in accordance with Schedule A hereto. With
respect to the International Equity and International Fixed Income Funds, from
time to time, the Sub-Adviser may voluntarily agree to waive or reduce some or
all of the compensation to which it is entitled under this Agreement.
7. Services to Others. PAMG understands, and has advised the Trust's
Board of Trustees, that the Sub-Adviser now acts, and may in the future act, as
an investment adviser to fiduciary and other managed accounts, and as investment
adviser, sub-investment adviser, and/or administrator to other investment
companies, provided, however, that the Sub-Adviser shall not provide advisory or
sub-advisory services to any bank-advised investment company without the express
written consent of PAMG which shall not be unreasonably withheld. With the
exception previously noted, PAMG has no objection to the Sub-Adviser's acts in
such capacities, provided that whenever the Fund and one or more other
investment companies advised by the Sub-Adviser have available funds for
investment, investments suitable and appropriate for each will be allocated in
accordance with a formula believed by the Sub-Adviser to be equitable to each
company. PAMG recognizes, and has advised the Trust's Board of Trustees, that in
some cases this procedure may adversely affect the size of the position that the
Fund may obtain in a particular security. In addition, PAMG understands, and has
advised the Trust's Board of Trustees, that the persons employed by the
Sub-Adviser to assist in the Sub-Adviser's duties under this Agreement will not
devote their full time to such service and nothing contained in this Agreement
will be deemed to limit or restrict the right of the Sub-Adviser or any of its
affiliates to engage in and devote time and attention to other businesses or to
render services of whatever kind or nature.
8. Limitation of Liability. PAMG will not take any action against the
Sub-Adviser to hold the Sub-Adviser liable for any error of judgment or mistake
of law or for any loss suffered by the Fund in connection with the performance
of the Sub-Adviser's duties under this Agreement, except a loss resulting from
the Sub-Adviser's willful misfeasance, bad faith, or gross negligence in the
performance of its duties under this Agreement.
9. Indemnification. PAMG and the Sub-Adviser each agree to indemnify the
other against any claim against, loss or liability to such other party
(including reasonable attorneys' fees) arising out of any action on the part of
the indemnifying party which constitutes willful misfeasance, bad faith or gross
negligence.
10. Duration and Termination. This Agreement will become effective as of
the date hereof provided that it has been approved by vote of a majority of the
outstanding voting securities of the Fund in accordance with the requirements
under the 1940 Act, and, unless sooner terminated as provided herein, will
continue in effect until July 31, 1996.
Thereafter, if not terminated, this Agreement will continue in effect for
the Fund for successive periods of 12 months, each ending on July 31, provided
that such continuation is specifically approved at least annually (a) by the
vote of a majority of those members of the Trust's Board of Trustees who are not
interested persons of the Trust, the Sub-Adviser, or PAMG, cast in person at a
meeting called for the purpose of voting on such approval, and (b) by the vote
of a majority of the Trust's Board of Trustees or by the vote of a majority of
all votes attributable to the outstanding shares of the Fund. Notwithstanding
the foregoing, this Agreement may be terminated as to the Fund at any time,
without the payment of any penalty, on sixty (60) days' written notice by the
Trust by vote of a majority of the Trustees of the Trust or by vote of a
majority of the outstanding voting securities of the Fund, by PAMG or by the
Sub-Adviser. This Agreement will immediately terminate in the event of its
assignment. (As used in this Agreement, the terms "majority of the outstanding
voting securities," "interested persons" and "assignment" have the same meaning
of such terms as in the 1940 Act.)
This Agreement will terminate automatically if the investment advisory
agreement between the Trust and PAMG is terminated.
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<PAGE> 153
11. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
12. Multiple Originals. This Agreement may be executed in two or more
counterparts, each of which when so executed shall be deemed to be an original,
but such counterparts shall together constitute but one and the same document.
13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement is held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement will not be affected
thereby. This Agreement will be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and will be governed by the
laws of the state of New Jersey.
The name "Compass Capital Group" and "Trustees of the Compass Capital
Group" refer respectively to the Trust created by, and the Trustees, as trustees
but not individually or personally, acting from time to time under, the
Declaration of Trust, to which reference is hereby made and a copy of which is
on file at the office of the Secretary of State of the Commonwealth of
Massachusetts and elsewhere as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of the "Compass Capital
Group" entered in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually but only in such capacities
and are not binding upon any of the Trustees, shareholders or representatives of
the Trust personally, but bind only the assets of the Trust. Persons dealing
with the Fund must look solely to the assets of the Trust belonging to such Fund
for the enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
[SIGNATURE LINES OMITTED]
SCHEDULE A TO INTERIM
SUB-ADVISORY AGREEMENT BETWEEN
PNC ASSET MANAGEMENT GROUP, INC.
AND
[NAME OF SUB-ADVISER]
DATED AS OF [DATE]
Compass Capital Small Company Fund.
Compensation will be paid at an annual rate of .50% of the average daily
net assets.
Compass Capital International Equity Fund.
Compensation will be paid at an annual rate of .45% of the first $100
million and .40% thereafter of average annual daily net assets.
Compass Capital International Fixed Income Fund.
Compensation will be paid at an annual rate of .40% of the first $75
million and .35% thereafter of average annual daily net assets.
[SIGNATURE LINES OMITTED]
V-C-4
<PAGE> 154
APPENDIX VI
PNC PORTFOLIO
SIX-MONTH FINANCIAL HIGHLIGHTS
Below is unaudited financial information about certain of the PNC
Portfolios for the six-month period ended March 31, 1995. It is based on a
single share outstanding through such period. The data should be read in
conjunction with the financial statements, related notes and other financial
information incorporated by reference into the Statement of Additional
Information related to this Combined Proxy Statement/Prospectus. Similar
information for the PNC Municipal Money Market Portfolio, Pennsylvania Municipal
Money Market Portfolio, Money Market Portfolio and Government Money Portfolio
for the six-month period ended March 31, 1995 is included in the prospectuses
for these PNC Portfolios. The PNC New Jersey Municipal Money Market Portfolio,
New Jersey Tax-Free Income Portfolio, Core Fixed Income Portfolio, International
Fixed Income Portfolio and Multi-Sector Mortgage Securities Portfolio III did
not conduct investment operations during this period.
VI-1
<PAGE> 155
THE PNCR FUND
FINANCIAL HIGHLIGHTS
FOR THE SIX MONTHS ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
PNC PNC PNC PNC
TAX-FREE PA TAX-FREE VALUE EQUITY GROWTH EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
(SERVICE SHARES) (SERVICE SHARES) (SERVICE SHARES) (SERVICE SHARES)
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net asset value at beginning of
period:.......................... $10.04 $ 9.82 $ 11.62 $ 10.18
------ ------- -------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.............. 0.25 0.25 0.14 0.06
Net gain (loss) on investments
(both realized and unrealized)... 0.37 0.22 0.78 0.73
------ ------- -------- -------
Total from investment operations... 0.62 0.47 0.92 0.79
------ ------- -------- -------
LESS DISTRIBUTIONS
Dividends from net investment
income........................... (0.25) (0.25) (0.15) (0.06)
Distributions from net realized
capital gains.................... (0.02) -- (0.25) --
------ ------- -------- -------
Total distributions................ (0.27) (0.25) (0.40) (0.06)
------ ------- -------- -------
Net asset value at end of period... $10.39 $ 10.04 $ 12.14 $ 10.91
====== ======= ======== =======
Total return....................... 6.40% 4.86% 8.24% 7.84%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period
(000)............................ $3,090 $ 12,915 $125,897 $ 50,177
Ratio of expenses to average net
assets...........................
After advisory/administration fee
waivers.......................... 0.75%(1) 0.75%(1) 0.90%(1) 0.90%(1)
Before advisory/administration fee
waivers.......................... 1.75%(1) 1.10%(1) 1.05%(1) 1.09%(1)
Ratio of net investment income to
average net assets...............
After advisory/administration fee
waivers.......................... 5.13%(1) 5.29%(1) 2.48%(1) 1.20%(1)
Before advisory/administration fee
waivers.......................... 4.13%(1) 4.94%(1) 2.33%(1) 1.00%(1)
Portfolio turnover rate............ 19% 30% 6% 34%
</TABLE>
- ---------------
(1) Annualized
VI-2
<PAGE> 156
<TABLE>
<CAPTION>
PNC PNC
SMALL CAP INTERNATIONAL PNC
GROWTH EQUITY EQUITY BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO
(SERVICE SHARES) (SERVICE SHARES) (SERVICE SHARES)
---------------- ---------------- ----------------
<S> <C> <C> <C>
Net asset value at beginning of period:........ $ 10.14 $ 13.41 $ 11.98
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net investment income.......................... -- (0.03) 0.28
------- ------- -------
Net gain (loss) on investments (both realized
and unrealized).............................. 1.49 (0.62) 0.44
------- ------- -------
Total from investment operations............... 1.49 (0.65) 0.72
------- ------- -------
LESS DISTRIBUTIONS
Dividends from net investment income........... -- -- (0.22)
------- ------- -------
Distributions from net realized capital
gains........................................ -- (0.36) (0.14)
------- ------- -------
Total distributions............................ -- (0.36) (0.36)
------- ------- -------
Net asset value at end of period............... $ 11.63 $ 12.40 $ 12.34
======= ======= =======
Total return................................... 14.70% (4.84)% 6.12%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000).............. $ 31,794 $ 84,041 $ 75,284
Ratio of expenses to average net assets........
After advisory/administration fee waivers...... 0.98%(1) 1.20%(1) 0.90%(1)
Before advisory/administration fee waivers..... 1.12%(1) 1.39%(1) 1.13%(1)
Ratio of net investment income to average net
assets.......................................
After advisory/administration fee waivers...... 0.07%(1) 0.40%(1) 3.70%(1)
Before advisory/administration fee waivers..... (0.08)%(1) 0.21%(1) 3.47%(1)
Portfolio turnover rate........................ 41% 34% 61%
</TABLE>
- ---------------
(1) Annualized
VI-3
<PAGE> 157
THE PNCR FUND
FINANCIAL HIGHLIGHTS
FOR THE SIX MONTHS ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
PNC
SHORT-TERM BOND PNC
PORTFOLIO SHORT-TERM BOND
(SERVICE PORTFOLIO
SHARES) (INSTITUTIONAL SHARES)
--------------- ----------------------
<S> <C> <C>
Net asset value at beginning of period:................. $ 9.58 $ 9.58
INCOME FROM INVESTMENT OPERATIONS
Net investment income................................... 0.25 0.26
Net gain (loss) on investments (both realized and
unrealized)........................................... (0.02) (0.02)
------ ------
Total from investment operations........................ 0.23 0.24
------ ------
LESS DISTRIBUTIONS
Dividends from net investment income.................... (0.25) (0.26)
Distributions from net realized capital gains........... -- --
------ ------
Total distributions..................................... (0.25) (0.26)
------ ------
Net asset value at end of period........................ $ 9.56 $ 9.56
====== ======
Total return............................................ 2.40% 2.53%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000)....................... $ 5,777 $9,972
Ratio of expenses to average net assets.................
After advisory/administration fee waivers............... 0.65%(1) 0.40%(1)
Before advisory/administration fee waivers.............. 1.25%(1) 1.00%(1)
Ratio of net investment income to average net assets....
After advisory/administration fee waivers............... 5.18%(1) 5.39%(1)
Before advisory/administration fee waivers.............. 4.57%(1) 4.79%(1)
Portfolio turnover rate................................. 40% 40%
</TABLE>
- ---------------
(1) Annualized
VI-4
<PAGE> 158
THE COMPASS CAPITAL GROUP (R)
[EQUITY INCOME FUND]
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF THE COMPASS CAPITAL
GROUP (R) ("COMPASS") FOR USE AT A SPECIAL MEETING OF SHAREHOLDERS TO BE HELD AT
THE OFFICES OF SEI FINANCIAL MANAGEMENT CORPORATION, 680 EAST SWEDESFORD ROAD,
WAYNE, PA 19087 ON NOVEMBER 30, 1995 AT 11:00 A.M., EASTERN TIME.
THE UNDERSIGNED HEREBY APPOINTS DAVID G. LEE AND KEVIN P. ROBINS, AND EACH
OF THEM, WITH FULL POWER OF SUBSTITUTION, AS PROXIES OF THE UNDERSIGNED TO VOTE
AT THE ABOVE-STATED MEETING, AND AT ANY ADJOURNMENT THEREOF, ALL SHARES OF THE
COMPASS [EQUITY INCOME] FUND (THE "FUND") HELD OF RECORD BY THE UNDERSIGNED
ON OCTOBER 20, 1995, THE RECORD DATE FOR THE MEETING, UPON THE FOLLOWING MATTER
AND, IN THEIR DISCRETION, UPON ANY OTHER MATTER THAT MAY COME BEFORE THE
MEETING.
EVERY PROPERLY SIGNED PROXY WILL BE VOTED IN THE MANNER SPECIFIED THEREON,
AND IN THE ABSENCE OF SPECIFICATION WILL BE TREATED AS GRANTING AUTHORITY TO
VOTE "FOR" PROPOSAL 1.
- --------------------------------------------------------------------------------
X PLEASE MARK VOTE AS IN THIS EXAMPLE.
1. TO APPROVE THE ASSET PURCHASE AGREEMENT FOR / / AGAINST / / ABSTAIN / /
ATTACHED TO THE COMBINED PROXY STATEMENT/
PROSPECTUS FOR THE SPECIAL MEETING
PROVIDING FOR (A) THE TRANSFER OF THE
ASSETS AND LIABILITIES OF THE FUND TO A
CORRESPONDING PORTFOLIO OF THE PNC(R)
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. OCCURS
BEFORE THE CLOSING OF THE COMPASS TRANSACTION.
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO TRANSACT SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING OR ANY ADJOURNMENT
THEREOF.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
<TABLE>
<S> <C>
PLEASE BE SURE TO SIGN AND DATE THIS PROXY. DATE
- -------------------------------------------- --------------------------------------------
SHAREHOLDER SIGN HERE CO-OWNER SIGN HERE
</TABLE>
RECORD DATE SHARES:
<PAGE> 159
THE COMPASS CAPITAL GROUP (R)
[MUNICIPAL MONEY FUND]
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF THE COMPASS CAPITAL
GROUP (R) ("COMPASS") FOR USE AT A SPECIAL MEETING OF SHAREHOLDERS TO BE HELD AT
THE OFFICES OF SEI FINANCIAL MANAGEMENT CORPORATION, 680 EAST SWEDESFORD ROAD,
WAYNE, PA 19087 ON NOVEMBER 30, 1995 AT 11:00 A.M., EASTERN TIME.
THE UNDERSIGNED HEREBY APPOINTS DAVID G. LEE AND KEVIN P. ROBINS, AND EACH
OF THEM, WITH FULL POWER OF SUBSTITUTION, AS PROXIES OF THE UNDERSIGNED TO VOTE
AT THE ABOVE-STATED MEETING, AND AT ANY ADJOURNMENT THEREOF, ALL SHARES OF THE
COMPASS [MUNICIPAL MONEY] FUND (THE "FUND") HELD OF RECORD BY THE UNDERSIGNED ON
OCTOBER 20, 1995, THE RECORD DATE FOR THE MEETING, UPON THE FOLLOWING MATTER
AND, IN THEIR DISCRETION, UPON ANY OTHER MATTER THAT MAY COME BEFORE THE
MEETING.
EVERY PROPERLY SIGNED PROXY WILL BE VOTED IN THE MANNER SPECIFIED THEREON,
AND IN THE ABSENCE OF SPECIFICATION WILL BE TREATED AS GRANTING AUTHORITY TO
VOTE "FOR" PROPOSAL 1.
[COMPLETE, SIGN AND DATE PROXY ON OTHER SIDE]
- --------------------------------------------------------------------------------
X PLEASE MARK VOTE AS IN THIS EXAMPLE.
1. TO APPROVE THE ASSET PURCHASE AGREEMENT FOR / / AGAINST / / ABSTAIN / /
FOR ATTACHED TO THE COMBINED PROXY
STATEMENT/PROSPECTUS FOR THE SPECIAL
MEETING PROVIDING FOR (A) THE TRANSFER
OF THE ASSETS AND LIABILITIES OF THE
FUND TO A CORRESPONDING PORTFOLIO OF THE
PNC(R) FUND (THE "COMPASS TRANSACTION"),
AND (B) THE APPROVAL OF AN INTERIM
INVESTMENT ADVISORY AGREEMENT FOR THE FUND
IF THE MERGER OF MIDLANTIC CORPORATION AND
PNC BANK CORP. OCCURS BEFORE THE CLOSING
OF THE COMPASS TRANSACTION.
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO TRANSACT SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING OR ANY ADJOURNMENT
THEREOF.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
<TABLE>
<S> <C>
PLEASE BE SURE TO SIGN AND DATE THIS PROXY. DATE
- -------------------------------------------- --------------------------------------------
SHAREHOLDER SIGN HERE CO-OWNER SIGN HERE
</TABLE>
RECORD DATE SHARES:
<PAGE> 160
THE BFM INSTITUTIONAL TRUST INC.
[SHORT DURATION PORTFOLIO]
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE BFM INSTITUTIONAL
TRUST INC. ("BIT") FOR USE AT A SPECIAL MEETING OF SHAREHOLDERS TO BE HELD AT
THE OFFICES OF BLACKROCK FINANCIAL MANAGEMENT INC., 345 PARK AVENUE, NEW YORK,
NEW YORK 10154 ON DECEMBER 30, 1995 AT 11:00 A.M., EASTERN TIME.
THE UNDERSIGNED HEREBY APPOINTS KAREN H. SABATH AND HENRY GABBAY, AND EACH
OF THEM, WITH FULL POWER OF SUBSTITUTION, AS PROXIES OF THE UNDERSIGNED TO VOTE
AT THE ABOVE-STATED MEETING, AND AT ANY ADJOURNMENT THEREOF, ALL SHARES OF THE
BIT [SHORT DURATION] PORTFOLIO (THE "FUND") HELD OF RECORD BY THE UNDERSIGNED ON
OCTOBER 20, 1995, THE RECORD DATE FOR THE MEETING, UPON THE FOLLOWING MATTER
AND, IN THEIR DISCRETION, UPON ANY OTHER MATTER THAT MAY COME BEFORE THE
MEETING.
EVERY PROPERLY SIGNED PROXY WILL BE VOTED IN THE MANNER SPECIFIED THEREON,
AND IN THE ABSENCE OF SPECIFICATION WILL BE TREATED AS GRANTING AUTHORITY TO
VOTE "FOR" PROPOSAL 1.
TO VOTE, MARK AN X IN BLUE OR BLACK INK ON THE PROXY CARD BELOW. KEEP THIS
PORTION FOR YOUR RECORDS.
- --------------------------------------------------------------------------------
(DETACH HERE AND RETURN THIS PORTION ONLY)
BIT [SHORT DURATION PORTFOLIO]
1. TO APPROVE AN ASSET PURCHASE AGREEMENT ATTACHED TO THE COMBINED PROXY
STATEMENT/PROSPECTUS FOR THE SPECIAL MEETING PROVIDING FOR THE TRANSFER OF
THE ASSETS AND LIABILITIES OF THE FUND TO A CORRESPONDING PORTFOLIO OF THE
PNC(R) FUND.
FOR / / AGAINST / / ABSTAIN / /
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO TRANSACT SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING OR ANY ADJOURNMENT
THEREOF.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
SIGNATURE DATE SIGNATURE (JOINT OWNERS) DATE
</TABLE>
<PAGE> 161
THE PNC(R) FUND
BELLEVUE PARK CORPORATE CENTER
400 BELLEVUE PARKWAY
WILMINGTON, DE 19809
STATEMENT OF ADDITIONAL INFORMATION
RELATING TO (A) 1995 SPECIAL SHAREHOLDERS MEETING OF
THE COMPASS CAPITAL GROUP(R) AND
(B) 1995 SPECIAL SHAREHOLDERS MEETING OF
THE BFM INSTITUTIONAL TRUST INC.
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Combined Proxy Statement/Prospectus dated November
3, 1995 for (a) the Special Shareholders Meeting of The Compass Capital Group
("Compass") to be held on November 30, 1995, and (b) the Special Shareholders
Meeting of The BFM Institutional Trust Inc. to be held on December 20, 1995.
Copies of the Combined Proxy Statement/Prospectus may be obtained at no charge
by calling The PNC Fund at 1-800-422-6538.
Unless otherwise indicated, capitalized terms used herein and not otherwise
defined have the same meanings as are given to them in the Combined Proxy
Statement/Prospectus.
Further information about the Service Shares and Institutional Shares of
the PNC Portfolios (other than the PNC New Jersey Tax-Free Income Portfolio, PNC
Core Fixed Income Portfolio and PNC Multi-Sector Mortgage Securities Portfolio
III) is contained in their Statement of Additional Information dated July 24,
1995 as supplemented to the date hereof, which is incorporated herein by
reference and a copy of which is attached hereto. Information contained in said
Statement of Additional Information under the captions "Investment
Policies -- Additional Information on Portfolio Investments," "Trustees and
Officers," "Investment Advisory, Administration, Distribution and Servicing
Arrangements," "Portfolio Transactions," "Purchase and Redemption
Information -- Miscellaneous," "Performance Information," "Additional
Information Concerning Shares" and "Appendix A" is substantially the same with
regard to the PNC New Jersey Tax-Free Income Portfolio, Core Fixed Income
Portfolio and Multi-Sector Mortgage Securities Portfolio III.
The audited financial statements contained in the Annual Reports dated
September 30, 1994, and the unaudited semi-annual financial statements dated
March 31, 1995, for the PNC Portfolios, except the New Jersey Municipal Money
Market Portfolio, New Jersey Tax-Free Income Portfolio, Core Fixed Income
Portfolio, International Fixed Income Portfolio and Multi-Sector Mortgage
Securities Portfolio III, are incorporated herein by reference. No other parts
of the Annual Reports are incorporated by reference herein. The 1994 PNC Annual
Reports accompany this Statement of Additional Information, and the 1995 semi-
annual financial statements are attached hereto. The PNC New Jersey Municipal
Money Market Portfolio, New Jersey Tax-Free Income Portfolio, Core Fixed Income
Portfolio, International Fixed Income Portfolio and Multi-Sector Mortgage
Securities Portfolio III were not operational as of March 31, 1995.
Further information about the Compass Portfolios is contained in their
Statement of Additional Information dated July 1, 1995 as supplemented to the
date hereof, a copy of which may be obtained by calling Compass at
1-800-451-8371. The audited financial statements for the Compass Portfolios
dated February 28, 1995 and their unaudited semi-annual financial statements
dated August 31, 1995 are incorporated herein by reference and are attached
hereto.
Further information about the BIT Portfolios is contained in their
Statement of Additional Information dated October 31, 1995 as supplemented to
the date hereof, a copy of which may be obtained by calling BIT at
1-800-555-3890. The audited financial statements for the BIT Portfolios
contained in their Annual Reports dated June 30, 1995 are incorporated herein by
reference. No other parts of the Annual Reports are incorporated by reference
herein.
The date of this Statement of Additional Information is November 3, 1995.
<PAGE> 162
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information................................................................... 3
Pro Forma Financial Statements........................................................ F-1
Attachments: (1) PNC Statement of Additional Information
(2) PNC 1995 Semi-Annual Financial Statements
(3) Compass 1994 Annual Financial Statements
(4) Compass 1995 Semi-Annual Financial Statements
</TABLE>
2
<PAGE> 163
GENERAL INFORMATION
The shareholders of The Compass Capital Group(R) ("Compass") are being
asked to approve an Asset Purchase Agreement (the "Compass Agreement") dated as
of October 30, 1995 between Compass and The PNC(R) Fund ("PNC") and the
transactions contemplated thereby. The Compass Agreement contemplates that all
of the assets and liabilities of the respective investment portfolios of Compass
(the "Compass Portfolios") will be transferred to corresponding PNC Portfolios
in exchange for full and fractional "Service Shares" of the corresponding PNC
Portfolio as shown in the following table.
<TABLE>
<CAPTION>
COMPASS PORTFOLIO CORRESPONDING PNC PORTFOLIO
- --------------------------------------------- ---------------------------------------------
<S> <C>
Municipal Money Market Fund Municipal Money Market Portfolio
New Jersey Municipal Money Fund New Jersey Municipal Money Market Portfolio
Pennsylvania Municipal Money Fund Pennsylvania Municipal Money Market Portfolio
Cash Reserve Fund Money Market Portfolio
U.S. Treasury Fund Government Money Market Portfolio
Municipal Bond Fund Tax-Free Income Portfolio
New Jersey Municipal Bond Fund New Jersey Tax-Free Income Portfolio
Pennsylvania Municipal Bond Fund Pennsylvania Tax-Free Income Portfolio
Equity Income Fund Value Equity Portfolio
Growth Fund Growth Equity Portfolio
Small Company Fund Small Cap Growth Equity Portfolio
International Equity Fund International Equity Portfolio
Balanced Fund Balanced Portfolio
Short/Intermediate Fund Short-Term Bond Portfolio
Fixed Income Fund Core Fixed Income Portfolio
International Fixed Income Fund International Fixed Income Portfolio
</TABLE>
The shareholders of The BFM Institutional Trust Inc. ("BIT") are being
asked to approve or disapprove an Asset Purchase Agreement (the "BIT Agreement")
dated as of October 30, 1995 between BIT and PNC and the transactions
contemplated thereby. The BIT Agreement contemplates that all of the assets and
liabilities of the respective investment portfolios of BIT (the "BIT
Portfolios") will be transferred to corresponding PNC Portfolios in exchange for
full and fractional "Institutional" Shares of the corresponding PNC Portfolio as
shown in the following table.
<TABLE>
<CAPTION>
BIT PORTFOLIO CORRESPONDING PNC PORTFOLIO
- --------------------------------------------- ---------------------------------------------
<S> <C>
Short Duration Portfolio Short-Term Bond Portfolio
Core Fixed Income Portfolio Core Fixed Income Portfolio
Multi-Sector Mortgage Securities Multi-Sector Mortgage Securities
Portfolio III Portfolio III
</TABLE>
The shares issued by PNC in each Transaction will have an aggregate net
asset value equal to the aggregate net asset value of the shares of the
respective Compass Portfolios and BIT Portfolios that are outstanding
immediately before the Effective Times of the respective Transactions.
After the transfer of their assets and liabilities in exchange for shares
of the corresponding PNC Portfolios, the Compass Portfolios and BIT Portfolios
will distribute the shares of the corresponding PNC Portfolios to their
shareholders in liquidation of the respective Compass Portfolios and BIT
Portfolios. Each shareholder owning shares of a particular Compass Portfolio or
BIT Portfolio at the Effective Time of the particular Transaction will receive
shares of the PNC Portfolio designated in the foregoing table of equal value,
plus the right to receive any unpaid dividends or distributions that were
declared before the Effective Time of the particular Transaction on Compass
Portfolio or BIT Portfolio shares. Upon completion of the respective
Transactions, all outstanding shares of the Compass Portfolios and BIT
Portfolios will be redeemed and cancelled.
3
<PAGE> 164
The Special Shareholders Meeting of Compass to consider the Compass
Agreement and the related transactions will be held at the offices of SEI
Financial Management Corporation, 680 East Swedesford Road, Wayne, Pennsylvania
19087 on November 30, 1995 at 11:00 A.M. Eastern Time.
The Special Shareholders Meeting of BIT to consider the BIT Agreement and
the related transactions will be held at the offices of BlackRock Financial
Management, Inc., 345 Park Avenue, New York, New York 10154 on December 20, 1995
at 11:00 A.M. Eastern Time.
For further information about these transactions, see the Combined Proxy
Statement/Prospectus.
4
<PAGE> 165
PRO-FORMA FINANCIAL STATEMENTS
DATED AS OF MARCH 31, 1995
FOR PNC, COMPASS AND BIT PORTFOLIOS
<PAGE> 166
PNC MUNICIPAL MONEY MARKET PORTFOLIO
COMPASS MUNICIPAL MONEY FUND
PRO-FORMA SCHEDULE OF INVESTMENTS
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PAR (000)
---------------------------------------
PNC
MUNICIPAL COMPASS
MONEY MARKET MUNICIPAL PRO-FORMA
RATE MATURITY PORTFOLIO MONEY FUND COMBINED
---- -------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
APACHE COUNTY IDA....................................... 4.25% 04/07/95 $ 2,600 $ 0 $ 2,600
APACHE COUNTY IDA....................................... 4.20 04/07/95 2,200 0 2,200
ARAPAHOE COUNTY CAPITAL IMPROVEMENT HIGHWAY RB.......... 4.45 08/31/95 5,000 0 5,000
AUSTIN COMBINED UTILITY SYSTEMS......................... 4.25 05/12/95 5,000 0 5,000
BEAVER COUNTY, PA (MB/W)................................ 4.25 04/07/95 0 1,000 1,000
BERKELEY HEIGHTS NJ (BAN)............................... 4.75 11/09/95 0 2,765 2,765
BERKS CNTY, PA (MW/W)................................... 4.20 04/07/95 0 200 200
BIRMINGHAM-BAPTIST MEDICAL CENTERS SPECIAL CARE......... 4.25 04/07/95 7,240 0 7,240
BOARD OF REGENTS UNIVERSITY OF TEXAS.................... 4.00 05/10/95 3,746 0 3,746
BRAZOS RVR, TX AMT (M1/D)............................... 4.75 04/07/95 0 800 800
BURKE COUNTY DEVELOPMENT AUTHORITY...................... 4.25 05/04/95 4,000 0 4,000
BUSINESS FINANCE AUTHORITY OF NEW HAMPSHIRE............. 4.00 04/05/95 3,500 0 3,500
BUSINESS FINANCE AUTHORITY OF NEW HAMPSHIRE............. 4.25 05/10/95 3,000 0 3,000
BUTLER CTY, KS AMT (MB/D)............................... 4.75 04/03/95 0 200 200
CALIFORNIA HIGHER EDUCATION LOAN AUTHORITY.............. 3.60 05/01/95 1,000 0 1,000
CALIFORNIA SERIES 1994-95A RAN.......................... 5.00 06/28/95 3,000 1,000 4,000
CALIFORNIA SERIES 1994-95B RAN.......................... 4.41 04/03/95 5,000 0 5,000
CALLAWAY CNTY, MO....................................... 4.05 04/03/95 0 800 800
CHESTERFIELD COUNTY IDA................................. 4.10 05/08/95 1,000 0 1,000
CHICAGO GAS SUPPLY...................................... 4.95 12/01/95 2,000 0 2,000
CHICAGO GO TENDER NOTES SERIES 1994..................... 4.15 07/19/95 2,000 0 2,000
CHICAGO O'HARE INTERNATIONAL AIRPORT.................... 4.55 04/03/95 1,400 0 1,400
CITY & COUNTY OF DENVER AIRPORT SYSTEM BOND............. 4.35 05/08/95 4,375 0 4,375
CITY & COUNTY OF DENVER AIRPORT SYSTEM BOND............. 4.40 05/08/95 2,700 0 2,700
CLARK COUNTY PCR MUNICIPAL BOND......................... 3.75 04/17/95 2,500 0 2,500
<CAPTION>
VALUE AT MARCH 31, 1995
-----------------------------------------
PNC
MUNICIPAL COMPASS
MONEY MARKET MUNICIPAL PRO-FORMA
PORTFOLIO MONEY FUND COMBINED
------------ ---------- -----------
<S> <C> <C> <C>
APACHE COUNTY IDA....................................... $ 2,600,000 $ 0 $ 2,600,000
APACHE COUNTY IDA....................................... 2,200,000 0 2,200,000
ARAPAHOE COUNTY CAPITAL IMPROVEMENT HIGHWAY RB.......... 5,000,000 0 5,000,000
AUSTIN COMBINED UTILITY SYSTEMS......................... 5,000,000 0 5,000,000
BEAVER COUNTY, PA (MB/W)................................ 0 1,000,000 1,000,000
BERKELEY HEIGHTS NJ (BAN)............................... 0 2,768,784 2,768,784
BERKS CNTY, PA (MW/W)................................... 0 200,000 200,000
BIRMINGHAM-BAPTIST MEDICAL CENTERS SPECIAL CARE......... 7,240,000 0 7,240,000
BOARD OF REGENTS UNIVERSITY OF TEXAS.................... 3,746,000 0 3,746,000
BRAZOS RVR, TX AMT (M1/D)............................... 0 800,000 800,000
BURKE COUNTY DEVELOPMENT AUTHORITY...................... 4,000,000 0 4,000,000
BUSINESS FINANCE AUTHORITY OF NEW HAMPSHIRE............. 3,500,000 0 3,500,000
BUSINESS FINANCE AUTHORITY OF NEW HAMPSHIRE............. 3,000,000 0 3,000,000
BUTLER CTY, KS AMT (MB/D)............................... 0 200,000 200,000
CALIFORNIA HIGHER EDUCATION LOAN AUTHORITY.............. 1,000,000 0 1,000,000
CALIFORNIA SERIES 1994-95A RAN.......................... 3,004,352 1,001,891 4,006,243
CALIFORNIA SERIES 1994-95B RAN.......................... 5,000,000 0 5,000,000
CALLAWAY CNTY, MO....................................... 0 800,000 800,000
CHESTERFIELD COUNTY IDA................................. 1,000,000 0 1,000,000
CHICAGO GAS SUPPLY...................................... 2,000,000 0 2,000,000
CHICAGO GO TENDER NOTES SERIES 1994..................... 2,000,000 0 2,000,000
CHICAGO O'HARE INTERNATIONAL AIRPORT.................... 1,400,000 0 1,400,000
CITY & COUNTY OF DENVER AIRPORT SYSTEM BOND............. 4,375,000 0 4,375,000
CITY & COUNTY OF DENVER AIRPORT SYSTEM BOND............. 2,700,000 0 2,700,000
CLARK COUNTY PCR MUNICIPAL BOND......................... 2,500,000 0 2,500,000
</TABLE>
F-1
<PAGE> 167
<TABLE>
<CAPTION>
PAR (000)
---------------------------------------
PNC
MUNICIPAL COMPASS
MONEY MARKET MUNICIPAL PRO-FORMA
RATE MATURITY PORTFOLIO MONEY FUND COMBINED
---- -------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
COMMONWEALTH OF MASSACHUSETS GO NOTES................... 5.00% 06/15/95 $ 2,500 $ 0 $ 2,500
CONNEAUT PA. (GO)....................................... 9.75 05/01/95 0 400 400
CONNECTICUT HOUSING FINANCE AUTHORITY................... 4.40 11/15/95 2,500 0 2,500
CORPUS CHRISTI PORT AUTHORITY........................... 4.30 05/05/95 5,500 0 5,500
DALLAS-FORT WORTH INTERNATIONAL AIRPORT................. 4.00 04/06/95 6,500 0 6,500
DELAWARE COUNTY IDA PCR................................. 4.20 05/16/95 3,300 0 3,300
DELAWARE CO., PA (M1/D)................................. 4.60 12/01/95 0 1,300 1,300
DELAWARE STATE HSG. (AMT)............................... 4.00 06/01/95 0 330 330
DIST OF COLUMBIA (M1/D)................................. 4.75 04/07/95 0 1,600 1,600
DIST OF COLUMBIA (MB/D)................................. 4.75 04/07/95 0 200 200
DISTRICT OF COLUMBIA HOSPITAL........................... 4.10 04/07/95 1,300 0 1,300
DISTRICT OF COLUMBIA (THE AMERICAN UNIVERSITY
PROJECT).............................................. 4.30 04/07/95 700 0 700
ELIZABETH, NJ (GO)...................................... 4.30 08/15/95 0 535 535
FARMINGTON PCR (ARIZONA PUBLIC SERVICE CO.)............. 4.55 04/03/95 1,500 0 1,500
FLORIDA ST. AMT (MB/TH)................................. 4.25 04/07/95 0 1,000 1,000
FORSYTH PCR (PORTLAND GENERAL ELECTRIC COMPANY
PROJECT).............................................. 4.15 04/07/95 1,200 0 1,200
FORT WAYNE HOSPITAL AUTHORITY........................... 4.25 04/07/95 300 0 300
GRAND RAPIDS (Q1/W)..................................... 4.20 04/07/95 0 1,500 1,500
GRAND RAPIDS, MI. (MB/W)................................ 4.35 04/07/95 0 2,000 2,000
GULF COAST. TX. AMT (MB/D).............................. 4.70 04/07/95 0 500 500
HARRIS COUNTY HEALTH FACILITIES DEVELOPMENT
CORPORATION........................................... 4.20 06/01/95 4,600 0 4,600
HAWAII REFUNDING TOPSTAR CUSTODIAL RECEIPTS............. 4.35 04/07/95 5,400 0 5,400
HAWAII ST BUDGET (MB$).................................. 4.00 04/03/95 0 1,900 1,900
HENRICO CNTY, VA (M1/D)................................. 4.50 04/07/95 0 400 400
HOWARD COUNTY, MD (MB$)................................. 4.05 04/03/95 0 300 300
IDAHO HSG. FIN. AUTH RB................................. 5.00 07/01/95 0 1,500 1,500
ILLINOIS DEVELOPMENT FINANCE AUTHORITY.................. 4.10 05/31/95 2,600 0 2,600
ILLINOIS DEVELOPMENT FINANCE AUTHORITY.................. 4.05 04/07/95 3,410 0 3,410
ILLINOIS EDUCATION FACILITIES AUTHORITY................. 4.25 04/07/95 3,000 0 3,000
ILLINOIS HEALTH FACILITIES AUTHORITY.................... 4.20 04/07/95 1,000 0 1,000
ILLINOIS HEALTH FACILITIES AUTHORITY.................... 4.65 02/15/96 3,000 0 3,000
INDIANA STATE HOUSING FINANCE AUTHORITY................. 4.30 07/03/95 1,290 0 1,290
JEFFERSON, CO (GO)...................................... 8.20 12/15/95 0 440 440
KANSAS CITY IDA......................................... 4.50 04/07/95 1,400 0 1,400
KANSAS CITY, MO......................................... 4.25 04/03/95 0 2,000 2,000
LAWRENCE COUNTY PCR..................................... 4.25 04/07/95 5,700 0 5,700
<CAPTION>
VALUE AT MARCH 31, 1995
-----------------------------------------
PNC
MUNICIPAL COMPASS
MONEY MARKET MUNICIPAL PRO-FORMA
PORTFOLIO MONEY FUND COMBINED
------------ ---------- -----------
<S> <C> <C> <C>
COMMONWEALTH OF MASSACHUSETS GO NOTES................... $ 2,504,006 $ 0 $ 2,504,006
CONNEAUT PA. (GO)....................................... 0 401,762 401,762
CONNECTICUT HOUSING FINANCE AUTHORITY................... 2,500,000 0 2,500,000
CORPUS CHRISTI PORT AUTHORITY........................... 5,500,000 0 5,500,000
DALLAS-FORT WORTH INTERNATIONAL AIRPORT................. 6,500,000 0 6,500,000
DELAWARE COUNTY IDA PCR................................. 3,300,000 0 3,300,000
DELAWARE CO., PA (M1/D)................................. 0 1,300,000 1,300,000
DELAWARE STATE HSG. (AMT)............................... 0 330,000 330,000
DIST OF COLUMBIA (M1/D)................................. 0 1,600,000 1,600,000
DIST OF COLUMBIA (MB/D)................................. 0 200,000 200,000
DISTRICT OF COLUMBIA HOSPITAL........................... 1,300,000 0 1,300,000
DISTRICT OF COLUMBIA (THE AMERICAN UNIVERSITY
PROJECT).............................................. 700,000 0 700,000
ELIZABETH, NJ (GO)...................................... 0 535,000 535,000
FARMINGTON PCR (ARIZONA PUBLIC SERVICE CO.)............. 1,500,000 0 1,500,000
FLORIDA ST. AMT (MB/TH)................................. 0 1,000,000 1,000,000
FORSYTH PCR (PORTLAND GENERAL ELECTRIC COMPANY
PROJECT).............................................. 1,200,000 0 1,200,000
FORT WAYNE HOSPITAL AUTHORITY........................... 300,000 0 300,000
GRAND RAPIDS (Q1/W)..................................... 0 1,500,000 1,500,000
GRAND RAPIDS, MI. (MB/W)................................ 0 2,000,000 2,000,000
GULF COAST. TX. AMT (MB/D).............................. 0 500,000 500,000
HARRIS COUNTY HEALTH FACILITIES DEVELOPMENT
CORPORATION........................................... 4,600,000 0 4,600,000
HAWAII REFUNDING TOPSTAR CUSTODIAL RECEIPTS............. 5,400,000 0 5,400,000
HAWAII ST BUDGET (MB$).................................. 0 1,900,000 1,900,000
HENRICO CNTY, VA (M1/D)................................. 0 400,000 400,000
HOWARD COUNTY, MD (MB$)................................. 0 300,000 300,000
IDAHO HSG. FIN. AUTH RB................................. 0 1,500,000 1,500,000
ILLINOIS DEVELOPMENT FINANCE AUTHORITY.................. 2,600,000 0 2,600,000
ILLINOIS DEVELOPMENT FINANCE AUTHORITY.................. 3,410,000 0 3,410,000
ILLINOIS EDUCATION FACILITIES AUTHORITY................. 3,000,000 0 3,000,000
ILLINOIS HEALTH FACILITIES AUTHORITY.................... 1,000,000 0 1,000,000
ILLINOIS HEALTH FACILITIES AUTHORITY.................... 3,000,000 0 3,000,000
INDIANA STATE HOUSING FINANCE AUTHORITY................. 1,290,000 0 1,290,000
JEFFERSON, CO (GO)...................................... 0 451,709 451,709
KANSAS CITY IDA......................................... 1,400,000 0 1,400,000
KANSAS CITY, MO......................................... 0 2,000,000 2,000,000
LAWRENCE COUNTY PCR..................................... 5,700,000 0 5,700,000
</TABLE>
F-2
<PAGE> 168
<TABLE>
<CAPTION>
PAR (000)
---------------------------------------
PNC
MUNICIPAL COMPASS
MONEY MARKET MUNICIPAL PRO-FORMA
RATE MATURITY PORTFOLIO MONEY FUND COMBINED
---- -------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
LEHIGH, PA (MB$)........................................ 4.00% 04/03/95 $ 0 $ 900 $ 900
LOS ANGELES COUNTY SERIES 1994 TRAN..................... 4.50 06/30/95 4,000 0 4,000
LOS ANGELES COUNTY SERIES 1994 TRAN..................... 4.50 06/30/95 3,000 0 3,000
LOUISIANA GO TOPSTAR CUSTODIAL RECEIPTS................. 4.35 04/07/95 3,000 0 3,000
MARION CNTY (MW/W) (AMT)................................ 4.35 04/07/95 0 1,800 1,800
MARYLAND HLTH. (TECP)................................... 3.90 05/11/95 0 1,000 1,000
MAYSVILLE SOLID WASTE DISPOSAL FACILITIES............... 4.00 04/05/95 1,000 0 1,000
MERCER COUNTY UNITED POWER ASSOCIATION PROJECT.......... 4.35 09/01/95 2,000 0 2,000
MICHIGAN STATE IDA (MW/W)............................... 3.90 04/03/95 0 1,000 1,000
MINNEAPOLIS ST PAUL MN RB............................... 4.60 08/01/95 0 985 985
MISSOURI STATE (RB)..................................... 3.75 06/01/95 0 500 500
MONTANA STATE AMT....................................... 4.63 10/01/95 0 900 900
MONTGOMERY CNTY, OH (BAN)............................... 4.00 04/27/95 0 1,000 1,000
MONTGOMERY COUNTY PUBLIC BUILDING AUTHORITY GO.......... 4.30 04/07/95 3,000 0 3,000
MONT. TWP. NJ (TANS).................................... 5.00 03/01/96 0 1,500 1,500
MUNICIPAL ASSOCIATION POOLED BONDS...................... 4.13 04/07/95 1,020 0 1,020
MUSKOGEE INDUSTRIAL TRUST PCR........................... 4.20 04/07/95 3,000 0 3,000
NASSAU CNTY, NY (BANS).................................. 5.25 11/15/95 0 1,000 1,000
NEW HAMPSHIRE HIGHER EDUCATION & HEALTH FACILITIES...... 4.10 04/07/95 4,900 0 4,900
NEW HAMPSHIRE STATE IDA SOLID WASTE DISPOSAL FACILITY... 4.50 09/01/95 9,700 0 9,700
NEW JERSEY SERIES 1994A TRAN............................ 5.00 06/15/95 2,000 0 2,000
NEW YORK CITY GO SERIES 1995B DN........................ 4.06 04/07/95 8,000 0 8,000
NEW YORK, NY............................................ 4.00 10/01/95 0 500 500
NORTH CAROLINA EASTERN MUNICIPAL POWER AGENCY........... 4.15 04/12/95 1,650 0 1,650
NORTH CAROLINA MEDICAL CARE COMMISSION HOSPITAL......... 4.55 04/03/95 1,700 0 1,700
NORTHVILLE IDA (THRIFTY NORTHVILLE PROJECT)............. 4.33 04/07/95 2,000 0 2,000
OAK CREEK PCRB.......................................... 4.20 04/07/95 2,700 0 2,700
OHIO STATE (GO)......................................... 5.70 05/15/95 0 1,000 1,000
PA HIGHER ED (MB/W) AMT................................. 4.20 04/07/95 0 400 400
PETERSBURG POLUTION CONTROL REVENUE BOND................ 4.30 05/01/95 2,700 0 2,700
PHILADELPHIA HOSP. (RB)................................. 3.75 05/01/95 0 535 535
PHOENIX IDA MULTIFAMILY HOUSING......................... 4.05 04/07/95 75 0 75
PLAQUMINES PORT HARBOR FACILITY......................... 4.00 04/26/95 2,525 0 2,525
PORT CITY MEDICAL CLINIC BOARD OF MOBILE................ 4.10 05/09/95 2,600 0 2,600
<CAPTION>
VALUE AT MARCH 31, 1995
-----------------------------------------
PNC
MUNICIPAL COMPASS
MONEY MARKET MUNICIPAL PRO-FORMA
PORTFOLIO MONEY FUND COMBINED
------------ ---------- -----------
<S> <C> <C> <C>
LEHIGH, PA (MB$)........................................ $ 0 $ 900,000 $ 900,000
LOS ANGELES COUNTY SERIES 1994 TRAN..................... 4,006,171 0 4,006,171
LOS ANGELES COUNTY SERIES 1994 TRAN..................... 3,001,019 0 3,001,019
LOUISIANA GO TOPSTAR CUSTODIAL RECEIPTS................. 3,000,000 0 3,000,000
MARION CNTY (MW/W) (AMT)................................ 0 1,800,000 1,800,000
MARYLAND HLTH. (TECP)................................... 0 1,000,000 1,000,000
MAYSVILLE SOLID WASTE DISPOSAL FACILITIES............... 1,000,000 0 1,000,000
MERCER COUNTY UNITED POWER ASSOCIATION PROJECT.......... 2,000,000 0 2,000,000
MICHIGAN STATE IDA (MW/W)............................... 0 1,000,000 1,000,000
MINNEAPOLIS ST PAUL MN RB............................... 0 985,000 985,000
MISSOURI STATE (RB)..................................... 0 500,000 500,000
MONTANA STATE AMT....................................... 0 900,000 900,000
MONTGOMERY CNTY, OH (BAN)............................... 0 1,000,378 1,000,378
MONTGOMERY COUNTY PUBLIC BUILDING AUTHORITY GO.......... 3,000,000 0 3,000,000
MONT. TWP. NJ (TANS).................................... 0 1,503,937 1,503,937
MUNICIPAL ASSOCIATION POOLED BONDS...................... 1,020,000 0 1,020,000
MUSKOGEE INDUSTRIAL TRUST PCR........................... 3,000,000 0 3,000,000
NASSAU CNTY, NY (BANS).................................. 0 1,006,277 1,006,277
NEW HAMPSHIRE HIGHER EDUCATION & HEALTH FACILITIES...... 4,900,000 0 4,900,000
NEW HAMPSHIRE STATE IDA SOLID WASTE DISPOSAL FACILITY... 9,700,000 0 9,700,000
NEW JERSEY SERIES 1994A TRAN............................ 2,003,789 0 2,003,789
NEW YORK CITY GO SERIES 1995B DN........................ 8,000,000 0 8,000,000
NEW YORK, NY............................................ 0 498,656 498,656
NORTH CAROLINA EASTERN MUNICIPAL POWER AGENCY........... 1,650,000 0 1,650,000
NORTH CAROLINA MEDICAL CARE COMMISSION HOSPITAL......... 1,700,000 0 1,700,000
NORTHVILLE IDA (THRIFTY NORTHVILLE PROJECT)............. 2,000,000 0 2,000,000
OAK CREEK PCRB.......................................... 2,700,000 0 2,700,000
OHIO STATE (GO)......................................... 0 1,002,412 1,002,412
PA HIGHER ED (MB/W) AMT................................. 0 400,000 400,000
PETERSBURG POLUTION CONTROL REVENUE BOND................ 2,700,000 0 2,700,000
PHILADELPHIA HOSP. (RB)................................. 0 535,000 535,000
PHOENIX IDA MULTIFAMILY HOUSING......................... 75,000 0 75,000
PLAQUMINES PORT HARBOR FACILITY......................... 2,525,000 0 2,525,000
PORT CITY MEDICAL CLINIC BOARD OF MOBILE................ 2,600,000 0 2,600,000
</TABLE>
F-3
<PAGE> 169
<TABLE>
<CAPTION>
PAR (000)
---------------------------------------
PNC
MUNICIPAL COMPASS
MONEY MARKET MUNICIPAL PRO-FORMA
RATE MATURITY PORTFOLIO MONEY FUND COMBINED
---- -------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
PORT CITY MEDICAL CLINIC BOARD OF MOBILE................ 4.00% 05/01/95 $ 1,000 $ 0 $ 1,000
PUERTO RICO (TECP)...................................... 3.90 04/07/95 0 1,000 1,000
PUTNAM COUNTY DEVELOPMENT AUTHORITY..................... 4.25 06/15/95 2,000 0 2,000
RICHMOND VA. (RANS)..................................... 5.50 06/30/95 0 1,000 1,000
SALT LAKE CITY POOLED HOSPITAL.......................... 4.15 04/10/95 5,705 0 5,705
SAYRE HEALTH CARE (MB/W)................................ 4.00 04/07/95 0 800 800
SAYRE, PA (MB/W)........................................ 4.00 04/07/95 0 800 800
SCHUYLKILL CO., PA (M1/D)............................... 4.60 04/03/95 0 1,100 1,100
SOUTH DAKOTE HOUSING AUTHORITY.......................... 4.95 12/13/95 2,000 0 2,000
SULIVAN FLOATING FIXED RATE MUNICIPAL BOND.............. 4.15 04/07/95 1,110 0 1,110
TEXAS PUBLIC FINANCE AUTHORITY.......................... 4.40 04/03/95 4,000 0 4,000
TEXAS SERIES 1994 TRAN.................................. 5.00 08/31/95 2,000 0 2,000
TEXAS STATE (TRAN)...................................... 5.00 08/31/95 0 2,000 2,000
TURNER CO., GA (MB$).................................... 4.05 04/03/95 0 200 200
UNIVERSITY OF MINNESOTA................................. 4.50 08/01/95 3,000 0 3,000
UNIVERSITY OF MINNESOTA................................. 4.25 05/15/95 2,000 0 2,000
UTAH HOUSING FINANCE AGENCY............................. 4.25 04/07/95 5,500 0 5,500
UTAH STATE HOUSING AMT RB............................... 4.80 08/01/95 0 1,160 1,160
VALDEZ MARINE TERMINAL REFUNDING BOND................... 4.30 05/01/95 2,125 0 2,125
VALDEZ MARINE TERMINAL REFUNDING BOND................... 4.25 05/05/95 1,000 0 1,000
VILLAGE OF NORTH AURORA IDA............................. 4.30 04/07/95 2,000 0 2,000
VIRGINIA HOUSING AUTHORITY.............................. 4.20 05/11/95 2,500 0 2,500
VIRGINIA STATE TRANS (RB)............................... 5.80 05/15/95 0 1,000 1,000
WASHINGTON PUBLIC POWER SUPPLY SYSTEM................... 4.25 04/07/95 10,400 0 10,400
WISCONSIN ST. (GO)...................................... 6.10 05/01/95 0 1,000 1,000
WIS. HSG. AMT........................................... 4.60 04/03/95 0 1,500 1,500
<CAPTION>
VALUE AT MARCH 31, 1995
-----------------------------------------
PNC
MUNICIPAL COMPASS
MONEY MARKET MUNICIPAL PRO-FORMA
PORTFOLIO MONEY FUND COMBINED
------------ ---------- -----------
<S> <C> <C> <C>
PORT CITY MEDICAL CLINIC BOARD OF MOBILE................ $ 1,000,000 $ 0 $ 1,000,000
PUERTO RICO (TECP)...................................... 0 1,000,000 1,000,000
PUTNAM COUNTY DEVELOPMENT AUTHORITY..................... 2,000,000 0 2,000,000
RICHMOND VA. (RANS)..................................... 0 1,002,614 1,002,614
SALT LAKE CITY POOLED HOSPITAL.......................... 5,705,000 0 5,705,000
SAYRE HEALTH CARE (MB/W)................................ 0 800,000 800,000
SAYRE, PA (MB/W)........................................ 0 800,000 800,000
SCHUYLKILL CO., PA (M1/D)............................... 0 1,100,000 1,100,000
SOUTH DAKOTE HOUSING AUTHORITY.......................... 2,000,000 0 2,000,000
SULIVAN FLOATING FIXED RATE MUNICIPAL BOND.............. 1,110,000 0 1,110,000
TEXAS PUBLIC FINANCE AUTHORITY.......................... 4,000,000 0 4,000,000
TEXAS SERIES 1994 TRAN.................................. 2,002,073 0 2,002,073
TEXAS STATE (TRAN)...................................... 0 2,006,012 2,006,012
TURNER CO., GA (MB$).................................... 0 200,000 200,000
UNIVERSITY OF MINNESOTA................................. 3,000,000 0 3,000,000
UNIVERSITY OF MINNESOTA................................. 2,000,000 0 2,000,000
UTAH HOUSING FINANCE AGENCY............................. 5,500,000 0 5,500,000
UTAH STATE HOUSING AMT RB............................... 0 1,160,000 1,160,000
VALDEZ MARINE TERMINAL REFUNDING BOND................... 2,125,000 0 2,125,000
VALDEZ MARINE TERMINAL REFUNDING BOND................... 1,000,000 0 1,000,000
VILLAGE OF NORTH AURORA IDA............................. 2,000,000 0 2,000,000
VIRGINIA HOUSING AUTHORITY.............................. 2,500,000 0 2,500,000
VIRGINIA STATE TRANS (RB)............................... 0 1,001,513 1,001,513
WASHINGTON PUBLIC POWER SUPPLY SYSTEM................... 10,400,000 0 10,400,000
WISCONSIN ST. (GO)...................................... 0 1,001,369 1,001,369
WIS. HSG. AMT........................................... 0 1,500,000 1,500,000
------------ ----------- -----------
TOTAL INVESTMENTS....................................... $224,892,411 $47,292,316 $272,184,727
============= =========== ============
</TABLE>
See Accompanying Notes to Pro-Forma Financial Statements
F-4
<PAGE> 170
PNC PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
COMPASS PENNSYLVANIA MUNICIPAL MONEY FUND
PRO-FORMA SCHEDULE OF INVESTMENTS
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PAR (000)
-----------------------------------------
PNC COMPASS
PENNSYLVANIA PENNSYLVANIA
MUNICIPAL MUNICIPAL
MONEY MARKET MONEY PRO-FORMA
RATE MATURITY PORTFOLIO FUND COMBINED
---- -------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
ALLEGHENY COUNTY, PA................................. 4.03% 04/07/95 $ 360 $ 0 $ 360
ALLEGHENY COUNTY, PA................................. 3.70 06/01/95 0 1,075 1,075
ALLEGHENY COUNTY, PA................................. 4.10 07/03/95 0 1,000 1,000
ALLEGHENY COUNTY, PA................................. 4.80 10/17/95 2,000 0 2,000
ALLEGHENY COUNTY, PA................................. 4.75 11/30/95 6,000 0 6,000
ALLEGHENY COUNTY, PA................................. 4.40 12/07/95 5,000 0 5,000
BEAVER COUNTY IDA PCRB............................... 4.25 04/07/95 9,600 500 10,100
BEAVER COUNTY IDA PCRB............................... 4.35 04/13/95 1,500 0 1,500
BEAVER COUNTY IDA PCRB............................... 4.20 05/03/95 3,250 0 3,250
BEAVER COUNTY IDA PCRB............................... 4.00 05/12/95 2,500 0 2,500
BEAVER COUNTY IDA PCRB............................... 4.30 05/12/95 2,000 0 2,000
BEAVER COUNTY IDA PCRB............................... 4.45 05/12/95 300 0 300
BEAVER COUNTY IDA PCRB............................... 4.35 08/09/95 4,900 0 4,900
BEDFORD COUNTY IDA IDRB.............................. 4.05 04/07/95 2,000 0 2,000
BERKS CNTY PA........................................ 4.10 04/03/95 0 700 700
BERKS CNTY PA........................................ 4.20 04/07/95 300 0 300
BLACKHAWK, PENN (GO)................................. 6.35 07/15/95 0 495 495
BRADFORD COUNTY IDA.................................. 4.10 04/03/95 2,200 0 2,200
BRAZOS RVR, TX AMT (M1/D)............................ 4.75 04/07/95 0 500 500
BUCKS COUNTY IDA..................................... 4.15 04/07/95 1,300 0 1,300
BUCKS COUNTY IDA..................................... 4.25 04/07/95 1,505 0 1,505
CAMBRIA COUNTY IDA................................... 4.25 04/07/95 6,200 0 6,200
CARBON COUNTY IDA RESOURCE RECOVERY.................. 4.00 05/11/95 0 500 500
CARBON COUNTY IDA RESOURCE RECOVERY.................. 4.15 04/10/95 300 0 300
CARBON COUNTY IDA RESOURCE RECOVERY.................. 4.20 04/12/95 2,000 0 2,000
CARBON COUNTY IDA RESOURCE RECOVERY.................. 4.35 04/13/95 2,000 0 2,000
CARBON COUNTY IDA RESOURCE RECOVERY.................. 4.00 05/09/95 500 0 500
CARBON COUNTY IDA RESOURCE RECOVERY.................. 3.95 05/10/95 750 0 750
CARBON COUNTY IDA RESOURCE RECOVERY.................. 4.45 05/12/95 2,810 0 2,810
CARBON COUNTY IDA RESOURCE RECOVERY.................. 4.30 05/26/95 1,200 0 1,200
CARBON COUNTY IDA RESOURCE RECOVERY.................. 4.15 06/09/95 1,355 0 1,355
<CAPTION>
VALUE AT MARCH 31, 1995
----------------------------------------------
PNC
PENNSYLVANIA COMPASS
MUNICIPAL PENNSYLVANIA
MONEY MARKET MUNICIPAL PRO-FORMA
PORTFOLIO MONEY FUND COMBINED
------------ ------------ ------------
<S> <C> <C> <C>
ALLEGHENY COUNTY, PA................................. $ 360,000 $ 0 $ 360,000
ALLEGHENY COUNTY, PA................................. 0 1,075,000 1,075,000
ALLEGHENY COUNTY, PA................................. 0 999,737 999,737
ALLEGHENY COUNTY, PA................................. 2,000,000 0 2,000,000
ALLEGHENY COUNTY, PA................................. 6,000,000 0 6,000,000
ALLEGHENY COUNTY, PA................................. 5,000,000 0 5,000,000
BEAVER COUNTY IDA PCRB............................... 9,600,000 500,000 10,100,000
BEAVER COUNTY IDA PCRB............................... 1,500,000 0 1,500,000
BEAVER COUNTY IDA PCRB............................... 3,250,000 0 3,250,000
BEAVER COUNTY IDA PCRB............................... 2,500,000 0 2,500,000
BEAVER COUNTY IDA PCRB............................... 2,000,000 0 2,000,000
BEAVER COUNTY IDA PCRB............................... 300,000 0 300,000
BEAVER COUNTY IDA PCRB............................... 4,900,000 0 4,900,000
BEDFORD COUNTY IDA IDRB.............................. 2,000,000 0 2,000,000
BERKS CNTY PA........................................ 0 700,000 700,000
BERKS CNTY PA........................................ 300,000 0 300,000
BLACKHAWK, PENN (GO)................................. 0 497,729 497,729
BRADFORD COUNTY IDA.................................. 2,200,000 0 2,200,000
BRAZOS RVR, TX AMT (M1/D)............................ 0 500,000 500,000
BUCKS COUNTY IDA..................................... 1,300,000 0 1,300,000
BUCKS COUNTY IDA..................................... 1,505,000 0 1,505,000
CAMBRIA COUNTY IDA................................... 6,200,000 0 6,200,000
CARBON COUNTY IDA RESOURCE RECOVERY.................. 0 500,000 500,000
CARBON COUNTY IDA RESOURCE RECOVERY.................. 300,000 0 300,000
CARBON COUNTY IDA RESOURCE RECOVERY.................. 2,000,000 0 2,000,000
CARBON COUNTY IDA RESOURCE RECOVERY.................. 500,000 0 500,000
CARBON COUNTY IDA RESOURCE RECOVERY.................. 750,000 0 750,000
CARBON COUNTY IDA RESOURCE RECOVERY.................. 2,810,000 0 2,810,000
CARBON COUNTY IDA RESOURCE RECOVERY.................. 1,200,000 0 1,200,000
CARBON COUNTY IDA RESOURCE RECOVERY.................. 1,355,000 0 1,355,000
CARBON COUNTY IDA RESOURCE RECOVERY.................. 2,550,000 0 2,550,000
</TABLE>
F-5
<PAGE> 171
<TABLE>
<CAPTION>
PAR (000)
-----------------------------------------
PNC COMPASS
PENNSYLVANIA PENNSYLVANIA
MUNICIPAL MUNICIPAL
MONEY MARKET MONEY PRO-FORMA
RATE MATURITY PORTFOLIO FUND COMBINED
---- -------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
CARBON COUNTY IDA RESOURCE RECOVERY.................. 4.35% 08/08/95 $2,550 $ 0 $ 2,550
CARBON COUNTY IDA RESOURCE RECOVERY.................. 4.35 08/09/95 1,400 0 1,400
CARBON COUNTY IDA RESOURCE RECOVERY.................. 4.40 08/15/95 5,000 0 5,000
CHARTIERS VALLEY, PA................................. 4.00 04/03/95 0 200 200
CHESTER CNTY, PA (M1/W).............................. 4.20 04/07/95 0 1,200 1,200
CITY OF PHILA. (TRAN)................................ 4.75 06/15/95 0 1,000 1,000
COMMONWEALTH PA...................................... 5.50 11/15/95 0 1,000 1,000
CONNEAUT PA. (GO).................................... 9.75 05/01/95 0 600 600
CUMBERLAND COUNTY IDA................................ 4.75 04/07/95 1,000 0 1,000
CUMBERLAND COUNTY MUNI AUTHORITY..................... 4.13 04/07/95 6,000 0 6,000
DELAWARE CNTY PA..................................... 4.45 04/07/95 0 700 700
DELAWARE COUNTY IDA MB............................... 3.75 05/11/95 1,000 0 1,000
DELAWARE COUNTY IDA PCRB............................. 4.25 04/07/95 6,500 0 6,500
DELAWARE COUNTY IDA PCRB............................. 4.30 04/07/95 9,900 1,900 11,800
DELAWARE COUNTY IDA PCRB............................. 4.60 04/07/95 0 600 600
DELAWARE COUNTY IDA PCRB............................. 4.30 04/21/95 2,000 0 2,000
DELAWARE COUNTY IDA PCRB............................. 4.00 05/01/95 900 0 900
DELAWARE COUNTY IDA PCRB............................. 4.20 05/11/95 4,200 0 4,200
DELAWARE COUNTY IDA PCRB............................. 4.00 05/19/95 1,300 0 1,300
DELAWARE CTY (M1/D).................................. 4.45 04/07/95 0 2,000 2,000
EAST HEMPFIELD TOWNSHIP IDA.......................... 4.25 04/07/95 500 0 500
EMMAUS GENERAL AUTHORITY............................. 4.25 04/07/95 15,400 0 15,400
HARRISBURG REDEVELOPMENT AUTHORITY................... 3.95 04/07/95 4,500 0 4,500
LEHIGH COUNTY AUTHORITY.............................. 4.10 04/07/95 6,725 0 6,725
LEHIGH COUNTY IDA PCRB............................... 4.15 04/07/95 100 0 100
LEHIGH, PA........................................... 4.00 04/07/95 0 900 900
LITTLESTOWN IDA...................................... 4.30 04/07/95 2,000 0 2,000
LUZERNE, PA (MW/W) AMT............................... 4.20 04/01/98 0 500 500
MONTGOMERY COUNTY IDA................................ 4.10 04/07/95 4,800 0 4,800
MONTGOMERY COUNTY IDA................................ 3.85 04/27/95 1,000 0 1,000
MONTGOMERY COUNTY IDA................................ 4.13 04/07/95 0 500 500
MONTGOMERY COUNTY IDA................................ 4.20 04/07/95 2,800 0 2,800
MONTGOMERY COUNTY IDA................................ 4.25 05/04/95 0 2,000 2,000
MONTGOMERY COUNTY IDA................................ 3.90 06/01/95 2,000 0 2,000
NORTHAMPTON COUNTY IDA IDRB.......................... 4.00 06/08/95 2,000 0 2,000
NORTHEASTERN, PA (TECP).............................. 4.10 04/07/95 4,000 0 4,000
NORTHEASTERN, PA (TECP).............................. 4.10 04/13/95 0 600 600
NORTHUMBERLAND COUNTY IDA............................ 4.40 04/07/95 4,590 0 4,590
PA HSG. FIN. AGY. AMT RB............................. 3.80 04/03/95 0 500 500
<CAPTION>
VALUE AT MARCH 31, 1995
----------------------------------------------
PNC
PENNSYLVANIA COMPASS
MUNICIPAL PENNSYLVANIA
MONEY MARKET MUNICIPAL PRO-FORMA
PORTFOLIO MONEY FUND COMBINED
------------ ------------ ------------
<S> <C> <C> <C>
CARBON COUNTY IDA RESOURCE RECOVERY.................. $ 1,400,000 $ 0 $ 1,400,000
CARBON COUNTY IDA RESOURCE RECOVERY.................. 5,000,000 0 5,000,000
CARBON COUNTY IDA RESOURCE RECOVERY..................
CHARTIERS VALLEY, PA................................. 0 200,000 200,000
CHESTER CNTY, PA (M1/W).............................. 0 1,200,000 1,200,000
CITY OF PHILA. (TRAN)................................ 0 1,001,784 1,001,784
COMMONWEALTH PA...................................... 0 1,005,940 1,005,940
CONNEAUT PA. (GO).................................... 0 602,641 602,641
CUMBERLAND COUNTY IDA................................ 1,000,000 0 1,000,000
CUMBERLAND COUNTY MUNI AUTHORITY..................... 6,000,000 0 6,000,000
DELAWARE CNTY PA..................................... 0 700,000 700,000
DELAWARE COUNTY IDA MB............................... 1,000,000 0 1,000,000
DELAWARE COUNTY IDA PCRB............................. 6,500,000 0 6,500,000
DELAWARE COUNTY IDA PCRB............................. 9,900,000 1,900,000 11,800,000
DELAWARE COUNTY IDA PCRB............................. 0 600,000 600,000
DELAWARE COUNTY IDA PCRB............................. 2,000,000 0 2,000,000
DELAWARE COUNTY IDA PCRB............................. 900,000 0 900,000
DELAWARE COUNTY IDA PCRB............................. 4,200,000 0 4,200,000
DELAWARE COUNTY IDA PCRB............................. 1,300,000 0 1,300,000
DELAWARE CTY (M1/D).................................. 0 2,000,000 2,000,000
EAST HEMPFIELD TOWNSHIP IDA.......................... 500,000 0 500,000
EMMAUS GENERAL AUTHORITY............................. 15,400,000 0 15,400,000
HARRISBURG REDEVELOPMENT AUTHORITY................... 4,500,000 0 4,500,000
LEHIGH COUNTY AUTHORITY.............................. 6,725,000 0 6,725,000
LEHIGH COUNTY IDA PCRB............................... 100,000 0 100,000
LEHIGH, PA........................................... 0 900,000 900,000
LITTLESTOWN IDA...................................... 2,000,000 0 2,000,000
LUZERNE, PA (MW/W) AMT............................... 0 500,000 500,000
MONTGOMERY COUNTY IDA................................ 4,800,000 0 4,800,000
MONTGOMERY COUNTY IDA................................ 1,000,000 0 1,000,000
MONTGOMERY COUNTY IDA................................ 0 500,000 500,000
MONTGOMERY COUNTY IDA................................ 2,800,000 0 2,800,000
MONTGOMERY COUNTY IDA................................ 0 2,000,000 2,000,000
MONTGOMERY COUNTY IDA................................ 2,000,000 0 2,000,000
NORTHAMPTON COUNTY IDA IDRB.......................... 2,000,000 0 2,000,000
NORTHEASTERN, PA (TECP).............................. 4,000,000 0 4,000,000
NORTHEASTERN, PA (TECP).............................. 0 600,000 600,000
NORTHUMBERLAND COUNTY IDA............................ 4,590,000 0 4,590,000
PA HSG. FIN. AGY. AMT RB............................. 0 500,000 500,000
</TABLE>
F-6
<PAGE> 172
<TABLE>
<CAPTION>
PAR (000)
-----------------------------------------
PNC COMPASS
PENNSYLVANIA PENNSYLVANIA
MUNICIPAL MUNICIPAL
MONEY MARKET MONEY PRO-FORMA
RATE MATURITY PORTFOLIO FUND COMBINED
---- -------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
PA STATE (TANS)...................................... 4.75% 06/30/95 $ 0 $2,000 $ 2,000
PA STATE HIGHER ED (RB).............................. 6.40 05/01/95 0 585 585
PENN STATE HIGHER ED (RB)............................ 6.50 05/01/95 0 250 250
PENN STATE (GO)...................................... 4.80 06/15/95 0 2,000 2,000
PENNSYLVANIA COMMONWEALTH TANS....................... 4.75 06/30/95 15,850 0 15,850
PENNSYLVANIA ENERGY AUTHORITY........................ 4.25 04/05/95 6,550 0 6,550
PENNSYLVANIA ENERGY AUTHORITY........................ 4.25 04/07/95 9,090 710 9,800
PENNSYLVANIA HIGHER EDUCATION........................ 3.24 04/03/95 2,000 0 2,000
PENNSYLVANIA HIGHER EDUCATION........................ 4.20 04/05/95 5,000 0 5,000
PENNSYLVANIA HIGHER EDUCATION........................ 3.85 04/07/95 1,500 0 1,500
PENNSYLVANIA HIGHER EDUCATION........................ 4.20 04/07/95 16,920 1,700 18,620
PENNSYLVANIA STATE (GO).............................. 3.00 05/01/95 0 825 825
PENN. HSG. (AMT)..................................... 4.88 04/01/96 0 2,000 2,000
PENN. STATE (GO)..................................... 5.70 08/01/95 0 375 375
PENN. STATE (GO)..................................... 6.50 05/01/95 0 500 500
PENN. STATE (GO)..................................... 6.50 06/01/95 0 500 500
PENN. STATE. (GO).................................... 5.70 08/01/95 0 625 625
PENN. ST. IDA........................................ 5.00 01/01/96 0 1,250 1,250
PHIL PA. SCH. DIST................................... 3.75 07/01/95 0 1,000 1,000
PHILA PA AUTH IDA (MB/TH)............................ 4.20 04/03/95 0 600 600
PHILADELPHIA AUTHORITY IDRB.......................... 4.15 04/07/95 1,400 0 1,400
PHILADELPHIA GAS WORKS TECP.......................... 3.85 05/09/95 1,800 0 1,800
PHILADELPHIA GAS WORKS TECP.......................... 4.00 08/01/95 6,000 0 6,000
PHILADELPHIA GO...................................... 4.15 04/06/95 5,000 0 5,000
PHILADELPHIA GO...................................... 4.05 06/09/95 1,000 0 1,000
PHILADELPHIA HOSPITAL................................ 4.20 04/07/95 2,400 0 2,400
PHILADELPHIA IDA..................................... 3.50 04/07/95 3,000 0 3,000
PHILADELPHIA TRAN.................................... 4.75 06/15/95 1,000 0 1,000
PHILADELPHIA TRAN.................................... 4.75 06/30/95 0 1,000 1,000
PHILA., PA HOSPITALS................................. 3.75 05/01/95 0 390 390
PITTSBURGH RB........................................ 6.40 10/01/95 0 500 500
PUERTO RICO GOVERNMENT DEV........................... 4.10 04/07/95 500 0 500
PUERTO RICO INDUSTRIAL............................... 4.05 04/07/95 2,800 0 2,800
PUERTO RICO INDUSTRIAL............................... 4.20 04/13/95 1,700 0 1,700
PUERTO RICO INDUSTRIAL............................... 3.85 04/19/95 8,800 0 8,800
PUERTO RICO INDUSTRIAL............................... 3.95 05/01/95 1,000 0 1,000
PUERTO RICO INDUSTRIAL............................... 4.00 09/01/95 600 0 600
QUAKERTOWN, PA (MB).................................. 4.05 04/07/95 2,900 0 2,900
QUAKERTOWN, PA (MB).................................. 4.15 04/07/95 0 300 300
<CAPTION>
VALUE AT MARCH 31, 1995
----------------------------------------------
PNC
PENNSYLVANIA COMPASS
MUNICIPAL PENNSYLVANIA
MONEY MARKET MUNICIPAL PRO-FORMA
PORTFOLIO MONEY FUND COMBINED
------------ ------------ ------------
<S> <C> <C> <C>
PA STATE (TANS)...................................... $ 0 $ 2,003,439 $ 2,003,439
PA STATE HIGHER ED (RB).............................. 0 586,334 586,334
PENN STATE HIGHER ED (RB)............................ 0 250,526 250,526
PENN STATE (GO)...................................... 0 2,001,535 2,001,535
PENNSYLVANIA COMMONWEALTH TANS....................... 15,879,627 0 15,879,627
PENNSYLVANIA ENERGY AUTHORITY........................ 6,550,000 0 6,550,000
PENNSYLVANIA ENERGY AUTHORITY........................ 9,090,000 710,000 9,800,000
PENNSYLVANIA HIGHER EDUCATION........................ 2,000,000 0 2,000,000
PENNSYLVANIA HIGHER EDUCATION........................ 5,000,000 0 5,000,000
PENNSYLVANIA HIGHER EDUCATION........................ 1,500,000 0 1,500,000
PENNSYLVANIA HIGHER EDUCATION........................ 16,920,000 1,700,000 18,620,000
PENNSYLVANIA STATE (GO).............................. 0 824,734 824,734
PENN. HSG. (AMT)..................................... 0 2,000,000 2,000,000
PENN. STATE (GO)..................................... 0 375,679 375,679
PENN. STATE (GO)..................................... 0 500,578 500,578
PENN. STATE (GO)..................................... 0 501,233 501,233
PENN. STATE. (GO).................................... 0 626,132 626,132
PENN. ST. IDA........................................ 0 1,255,277 1,255,277
PHIL PA. SCH. DIST................................... 0 999,129 999,129
PHILA PA AUTH IDA (MB/TH)............................ 0 600,000 600,000
PHILADELPHIA AUTHORITY IDRB.......................... 1,400,000 0 1,400,000
PHILADELPHIA GAS WORKS TECP.......................... 1,800,000 0 1,800,000
PHILADELPHIA GAS WORKS TECP.......................... 6,000,000 0 6,000,000
PHILADELPHIA GO...................................... 5,000,000 0 5,000,000
PHILADELPHIA GO...................................... 1,000,000 0 1,000,000
PHILADELPHIA HOSPITAL................................ 2,400,000 0 2,400,000
PHILADELPHIA IDA..................................... 3,000,000 0 3,000,000
PHILADELPHIA TRAN.................................... 1,001,405 0 1,001,405
PHILADELPHIA TRAN.................................... 0 1,000,417 1,000,417
PHILA., PA HOSPITALS................................. 0 390,000 390,000
PITTSBURGH RB........................................ 0 504,194 504,194
PUERTO RICO GOVERNMENT DEV........................... 500,000 0 500,000
PUERTO RICO INDUSTRIAL............................... 2,800,000 0 2,800,000
PUERTO RICO INDUSTRIAL............................... 1,700,000 0 1,700,000
PUERTO RICO INDUSTRIAL............................... 8,800,000 0 8,800,000
PUERTO RICO INDUSTRIAL............................... 1,000,000 0 1,000,000
PUERTO RICO INDUSTRIAL............................... 600,245 0 600,245
QUAKERTOWN, PA (MB).................................. 2,900,000 0 2,900,000
QUAKERTOWN, PA (MB).................................. 0 300,000 300,000
</TABLE>
F-7
<PAGE> 173
<TABLE>
<CAPTION>
PAR (000)
-----------------------------------------
PNC COMPASS
PENNSYLVANIA PENNSYLVANIA
MUNICIPAL MUNICIPAL
MONEY MARKET MONEY PRO-FORMA
RATE MATURITY PORTFOLIO FUND COMBINED
---- -------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
RADNOR TOWNSHIP GO TRAN.............................. 6.00% 12/29/95 $1,500 $ 0 $ 1,500
SAYRE HEALTH CARE FACILITY........................... 4.00 04/07/95 20,235 1,200 21,435
SCHUYKILL COUNTY IDA................................. 4.60 04/03/95 22,600 2,800 25,400
SCHUYKILL COUNTY IDA................................. 4.25 04/07/95 8,700 0 8,700
ST MARY HOSP AUTH (M1/D)............................. 4.60 04/03/95 900 600 1,500
UNIVERSITY OF PITTSBURGH............................. 3.90 04/07/95 500 0 500
VENANGO IDA RESOURCE RECOVERY........................ 4.15 04/10/95 910 0 910
VENANGO IDA RESOURCE RECOVERY........................ 4.35 04/13/95 3,150 0 3,150
VENANGO IDA RESOURCE RECOVERY........................ 4.00 05/09/95 1,475 0 1,475
VENANGO IDA RESOURCE RECOVERY........................ 4.30 05/12/95 950 0 950
VENANGO IDA RESOURCE RECOVERY........................ 4.45 05/12/95 1,300 0 1,300
VENANGO IDA RESOURCE RECOVERY........................ 4.15 06/09/95 1,300 0 1,300
VENANGO IDA RESOURCE RECOVERY........................ 4.30 08/04/95 2,300 0 2,300
VENANGO IDA RESOURCE RECOVERY........................ 4.35 08/09/95 1,500 0 1,500
WASHINGTON COUNTY AUTHORITY.......................... 4.25 04/05/95 4,400 0 4,400
W. CORNWALL, PA (MW/W)............................... 4.37 04/07/95 0 1,000 1,000
W. WAYNE, PA (GO).................................... 6.65 10/15/95 0 1,000 1,000
YORK COUNTY IDA PCRB................................. 4.15 04/07/95 2,000 0 2,000
<CAPTION>
VALUE AT MARCH 31, 1995
----------------------------------------------
PNC
PENNSYLVANIA COMPASS
MUNICIPAL PENNSYLVANIA
MONEY MARKET MUNICIPAL PRO-FORMA
PORTFOLIO MONEY FUND COMBINED
------------ ------------ ------------
<S> <C> <C> <C>
RADNOR TOWNSHIP GO TRAN.............................. $ 1,510,675 $ 0 $ 1,510,675
SAYRE HEALTH CARE FACILITY........................... 20,235,000 1,200,000 21,435,000
SCHUYKILL COUNTY IDA................................. 22,600,000 2,800,000 25,400,000
SCHUYKILL COUNTY IDA................................. 8,700,000 0 8,700,000
ST MARY HOSP AUTH (M1/D)............................. 900,000 600,000 1,500,000
UNIVERSITY OF PITTSBURGH............................. 500,000 0 500,000
VENANGO IDA RESOURCE RECOVERY........................ 910,000 0 910,000
VENANGO IDA RESOURCE RECOVERY........................ 3,150,000 0 3,150,000
VENANGO IDA RESOURCE RECOVERY........................ 1,475,000 0 1,475,000
VENANGO IDA RESOURCE RECOVERY........................ 950,000 0 950,000
VENANGO IDA RESOURCE RECOVERY........................ 1,300,000 0 1,300,000
VENANGO IDA RESOURCE RECOVERY........................ 1,300,000 0 1,300,000
VENANGO IDA RESOURCE RECOVERY........................ 2,300,000 0 2,300,000
VENANGO IDA RESOURCE RECOVERY........................ 1,500,000 0 1,500,000
WASHINGTON COUNTY AUTHORITY.......................... 4,400,000 0 4,400,000
W. CORNWALL, PA (MW/W)............................... 0 1,000,000 1,000,000
W. WAYNE, PA (GO).................................... 0 1,012,388 1,012,388
YORK COUNTY IDA PCRB................................. 2,000,000 0 2,000,000
------------ ----------- ------------
TOTAL INVESTMENTS.................................... $324,566,952 $42,724,427 $367,291,379
============ =========== ============
</TABLE>
See Accompanying Notes to Pro-Forma Financial Statements
F-8
<PAGE> 174
PNC MONEY MARKET PORTFOLIO
COMPASS CASH RESERVE FUND
PRO-FORMA SCHEDULE OF INVESTMENTS
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PAR (000)
-----------------------------------------
PNC COMPASS
MONEY MARKET CASH RESERVE PRO-FORMA
SECURITY DESCRIPTION RATE MATURITY PORTFOLIO FUND COMBINED
- ------------------------------------------------------ ---- -------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
ABN/AMRO CANADA YCP................................... 6.14% 06/16/95 $ 0 $ 10,000 $10,000
ABN/AMRO CANADA YCP................................... 6.15 06/28/95 0 5,000 5,000
AMEX BK-FR MTN........................................ 6.13 05/23/95 0 10,000 10,000
AMEX BK-FR MTN........................................ 6.13 01/26/96 0 10,000 10,000
AMRO N.A. FINANCE, INC................................ 6.22 08/10/95 30,000 0 30,000
ASSOCIATES CORP NA (MTN).............................. 4.19 05/05/95 0 2,000 2,000
AT&T CAP CORP (CP).................................... 6.37 04/03/95 0 10,000 10,000
AT&T CORPORATION CP................................... 6.08 05/16/95 0 5,000 5,000
BANK OF TOKYO TORONTO TD.............................. 6.13 04/28/95 0 10,000 10,000
BANQUE NATIONAL DE PARIS.............................. 7.03 02/09/96 25,000 0 25,000
BANQUE PARIBAS........................................ 6.14 05/10/95 25,000 0 25,000
BEAR STEARNS TREASURY RATE NOTE....................... 6.03 04/04/95 15,000 0 15,000
BEAR STEARNS & CO. INC................................ 6.04 04/04/95 45,000 0 45,000
BETA FINANCE INC...................................... 5.65 04/04/95 10,000 0 10,000
BETA FN 144A MTN LQ................................... 6.36 04/20/95 0 11,000 11,000
BOWATER PLC CP........................................ 6.15 05/12/95 0 5,000 5,000
BROADWAY CAPITAL (4-2) CP............................. 6.42 04/07/95 0 12,000 12,000
CIBC NY (YCD)......................................... 6.08 04/19/95 0 10,000 10,000
CIESCO L.P............................................ 0.06 05/08/95 20,000 0 20,000
COMERICA BANK -- DETROIT.............................. 5.93 04/04/95 50,000 0 50,000
CORPORATE RECEIVABLES CORP............................ 6.10 05/08/95 15,100 0 15,100
C.I.T. GROUP HOLDINGS, INC............................ 6.10 06/29/95 25,000 0 25,000
DEUTSCHE BANK FINC'L YCP.............................. 5.86 05/01/95 0 5,000 5,000
ELI LILLY & CO........................................ 6.20 06/01/95 20,000 0 20,000
FCC NAT'L BANK, DEL (T)............................... 6.02 01/19/96 0 10,000 10,000
FHLB.................................................. 6.79 02/15/96 0 10,000 10,000
FIRST NATIONAL BANK CHICAGO........................... 6.31 04/03/95 45,000 0 45,000
FIRST NATIONAL BANK OF BOSTON......................... 6.16 06/26/95 25,000 0 25,000
FNMA DISC NOTE........................................ 0.00 07/11/95 0 5,000 5,000
FORD MOTOR CREDIT CORP CP............................. 6.24 04/28/95 0 9,500 9,500
FORD MOTOR CREDIT CORP................................ 6.16 09/11/95 40,000 0 40,000
GE CAPITAL CORP CP.................................... 6.48 04/13/95 0 5,000 5,000
GECC MTN.............................................. 6.55 03/25/96 0 5,000 5,000
<CAPTION>
VALUE AT MARCH 31, 1995
------------------------------------------------
PNC COMPASS
MONEY MARKET CASH RESERVE PRO-FORMA
SECURITY DESCRIPTION PORTFOLIO FUND COMBINED
- ------------------------------------------------------ -------------- ------------ --------------
<S> <C> <C> <C>
ABN/AMRO CANADA YCP................................... $ 0 $ 9,872,278 $ 9,872,278
ABN/AMRO CANADA YCP................................... 0 4,926,056 4,926,056
AMEX BK-FR MTN........................................ 0 10,000,000 10,000,000
AMEX BK-FR MTN........................................ 0 9,998,356 9,998,356
AMRO N.A. FINANCE, INC................................ 29,320,983 0 29,320,983
ASSOCIATES CORP NA (MTN).............................. 0 1,998,240 1,998,240
AT&T CAP CORP (CP).................................... 0 9,996,528 9,996,528
AT&T CORPORATION CP................................... 0 4,962,500 4,962,500
BANK OF TOKYO TORONTO TD.............................. 0 10,000,000 10,000,000
BANQUE NATIONAL DE PARIS.............................. 25,003,147 0 25,003,147
BANQUE PARIBAS........................................ 25,001,574 0 25,001,574
BEAR STEARNS TREASURY RATE NOTE....................... 15,000,000 0 15,000,000
BEAR STEARNS & CO. INC................................ 45,000,000 0 45,000,000
BETA FINANCE INC...................................... 9,995,292 0 9,995,292
BETA FN 144A MTN LQ................................... 0 11,000,000 11,000,000
BOWATER PLC CP........................................ 0 4,965,435 4,965,435
BROADWAY CAPITAL (4-2) CP............................. 0 11,987,400 11,987,400
CIBC NY (YCD)......................................... 0 10,000,000 10,000,000
CIESCO L.P............................................ 19,874,817 0 19,874,817
COMERICA BANK -- DETROIT.............................. 49,973,885 0 49,973,885
CORPORATE RECEIVABLES CORP............................ 15,005,331 0 15,005,331
C.I.T. GROUP HOLDINGS, INC............................ 24,622,986 0 24,622,986
DEUTSCHE BANK FINC'L YCP.............................. 0 4,976,292 4,976,292
ELI LILLY & CO........................................ 19,789,889 0 19,789,889
FCC NAT'L BANK, DEL (T)............................... 0 10,000,000 10,000,000
FHLB.................................................. 0 10,024,096 10,024,096
FIRST NATIONAL BANK CHICAGO........................... 44,996,240 0 44,996,240
FIRST NATIONAL BANK OF BOSTON......................... 25,000,000 0 25,000,000
FNMA DISC NOTE........................................ 0 4,908,679 4,908,679
FORD MOTOR CREDIT CORP CP............................. 0 9,456,324 9,456,324
FORD MOTOR CREDIT CORP................................ 38,884,356 0 38,884,356
GE CAPITAL CORP CP.................................... 0 4,989,417 4,989,417
GECC MTN.............................................. 0 4,997,897 4,997,897
</TABLE>
F-9
<PAGE> 175
<TABLE>
<CAPTION>
PAR (000)
-----------------------------------------
PNC COMPASS
MONEY MARKET CASH RESERVE PRO-FORMA
SECURITY DESCRIPTION RATE MATURITY PORTFOLIO FUND COMBINED
- ------------------------------------------------------ ---- -------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
GECC FR MTN........................................... 6.40% 01/10/96 $ 0 $ 10,000 $10,000
GENERAL MOTORS ACCEPTANCE CORP........................ 6.08 04/07/95 25,000 0 25,000
GENERAL MOTORS ACCEPTANCE CORP........................ 6.10 05/02/95 25,000 0 25,000
GOLDMAN SACHS GROUP L.P............................... 6.44 04/08/95 47,000 0 47,000
GOLDMAN SACHS LIQUID 144A............................. 6.36 04/18/95 0 10,000 10,000
INDUSTRIAL BANK OF JAPAN.............................. 6.28 04/28/95 25,000 0 25,000
INT'L LEASE FINANCE YCP............................... 6.52 06/09/95 0 10,000 10,000
INT'L NEDERLANDEN YCP................................. 6.06 04/24/95 0 5,050 5,050
J. P. MORGAN SECURITIES, INC.......................... 6.18 04/10/95 55,000 0 55,000
LEHMAN BROTHERS HOLDINGS, INC......................... 6.40 06/07/95 50,000 0 50,000
MCA FUNDING 4-2 LIQ CP................................ 6.34 09/12/95 0 8,000 8,000
MCA FUNDING LIQ. 4-2 CP............................... 6.31 08/21/95 0 5,500 5,500
MCA FUNDING LIQ. 4-2 CP............................... 6.61 07/25/95 0 7,300 7,300
MCKENNA TRIANGLE NATIONAL CORP........................ 6.30 08/07/95 10,000 0 10,000
MERRILL LYNCH FR MTN Q/L.............................. 6.31 02/20/96 0 10,000 10,000
MERRILL LYNCH FR MTN (T).............................. 6.11 03/25/96 0 5,000 5,000
MITSUBISHI INT'L CORP YCP............................. 6.15 06/22/95 0 5,000 5,000
MITSUBISHI INT'L YCP.................................. 6.10 05/15/95 0 5,000 5,000
MORGAN STANLEY GROUP.................................. 6.22 08/21/95 15,000 0 15,000
MORGAN STANLEY GROUP.................................. 6.23 07/19/95 15,000 0 15,000
MORGAN STANLEY GROUP MTN C............................ 5.92 04/04/95 30,000 0 30,000
MORGAN STANLEY & CO. REPURCHASE AGREEMENT............. 6.40 04/03/95 95,000 0 95,000
NAT WEST PLC NY YCD................................... 6.08 04/14/95 0 5,000 5,000
NATIONAL CITY CORP.................................... 6.07 06/27/95 20,000 0 20,000
NATIONSBANK NORTH CAROLINA............................ 5.35 06/07/95 5,000 0 5,000
NATIONSBANK N.C....................................... 5.65 07/21/95 0 10,000 10,000
NEW SO WALES TSY CORP YCP............................. 6.16 06/30/95 0 5,000 5,000
NEW SO WALES TSY CORP YCP............................. 6.17 06/07/95 0 10,000 10,000
NEWELL CO............................................. 0.15 04/27/95 25,000 0 25,000
NORTHERN TRUST BANK................................... 5.25 06/16/95 10,000 0 10,000
PEOPLE'S SEC. GIC..................................... 6.26 05/01/69 0 10,000 10,000
PHH CORP.............................................. 6.04 04/04/95 12,000 0 12,000
PNC BANK NA FRN....................................... 5.92 04/21/95 0 10,000 10,000
QUEENSLAND ALUMINA YCP................................ 6.05 04/27/95 0 5,144 5,144
QUEENSLAND ALUMINA YCP................................ 6.23 04/17/95 0 10,000 10,000
ROCKWELL INTERNATIONAL CORP........................... 6.15 09/06/95 25,000 0 25,000
SANWA BANK NY (YCD)................................... 6.09 04/07/95 0 5,000 5,000
SANWA BANK, NY YCD.................................... 6.08 04/28/95 0 5,000 5,000
SANWA BANK, NY (YCD).................................. 6.13 05/15/95 0 10,000 10,000
SANWA BUSINESS CREDIT CORP............................ 6.16 04/27/95 20,000 0 20,000
<CAPTION>
VALUE AT MARCH 31, 1995
------------------------------------------------
PNC COMPASS
MONEY MARKET CASH RESERVE PRO-FORMA
SECURITY DESCRIPTION PORTFOLIO FUND COMBINED
- ------------------------------------------------------ -------------- ------------ --------------
<S> <C> <C> <C>
GECC FR MTN........................................... $ 0 $ 9,998,372 $ 9,998,372
GENERAL MOTORS ACCEPTANCE CORP........................ 24,932,444 0 24,932,444
GENERAL MOTORS ACCEPTANCE CORP........................ 24,868,681 0 24,868,681
GOLDMAN SACHS GROUP L.P............................... 47,000,000 0 47,000,000
GOLDMAN SACHS LIQUID 144A............................. 0 10,000,000 10,000,000
INDUSTRIAL BANK OF JAPAN.............................. 25,000,185 0 25,000,185
INT'L LEASE FINANCE YCP............................... 0 9,878,292 9,878,292
INT'L NEDERLANDEN YCP................................. 0 5,030,642 5,030,642
J. P. MORGAN SECURITIES, INC.......................... 55,000,000 0 55,000,000
LEHMAN BROTHERS HOLDINGS, INC......................... 50,000,000 0 50,000,000
MCA FUNDING 4-2 LIQ CP................................ 0 7,775,867 7,775,867
MCA FUNDING LIQ. 4-2 CP............................... 0 5,367,230 5,367,230
MCA FUNDING LIQ. 4-2 CP............................... 0 7,150,756 7,150,756
MCKENNA TRIANGLE NATIONAL CORP........................ 9,776,000 0 9,776,000
MERRILL LYNCH FR MTN Q/L.............................. 0 10,001,001 10,001,001
MERRILL LYNCH FR MTN (T).............................. 0 5,000,000 5,000,000
MITSUBISHI INT'L CORP YCP............................. 0 4,931,097 4,931,097
MITSUBISHI INT'L YCP.................................. 0 4,963,028 4,963,028
MORGAN STANLEY GROUP.................................. 14,631,983 0 14,631,983
MORGAN STANLEY GROUP.................................. 15,000,000 0 15,000,000
MORGAN STANLEY GROUP MTN C............................ 29,999,663 0 29,999,663
MORGAN STANLEY & CO. REPURCHASE AGREEMENT............. 95,000,000 0 95,000,000
NAT WEST PLC NY YCD................................... 0 5,000,027 5,000,027
NATIONAL CITY CORP.................................... 19,706,617 0 19,706,617
NATIONSBANK NORTH CAROLINA............................ 4,999,958 0 4,999,958
NATIONSBANK N.C....................................... 0 9,987,123 9,987,123
NEW SO WALES TSY CORP YCP............................. 0 4,924,500 4,924,500
NEW SO WALES TSY CORP YCP............................. 0 9,886,844 9,886,844
NEWELL CO............................................. 24,888,958 0 24,888,958
NORTHERN TRUST BANK................................... 9,998,605 0 9,998,605
PEOPLE'S SEC. GIC..................................... 0 10,000,000 10,000,000
PHH CORP.............................................. 12,000,000 0 12,000,000
PNC BANK NA FRN....................................... 0 9,999,738 9,999,738
QUEENSLAND ALUMINA YCP................................ 0 5,121,709 5,121,709
QUEENSLAND ALUMINA YCP................................ 0 9,972,778 9,972,778
ROCKWELL INTERNATIONAL CORP........................... 24,325,208 0 24,325,208
SANWA BANK NY (YCD)................................... 0 5,000,028 5,000,028
SANWA BANK, NY YCD.................................... 0 5,000,075 5,000,075
SANWA BANK, NY (YCD).................................. 0 10,000,217 10,000,217
SANWA BUSINESS CREDIT CORP............................ 19,911,022 0 19,911,022
</TABLE>
F-10
<PAGE> 176
<TABLE>
<CAPTION>
PAR (000)
-----------------------------------------
PNC COMPASS
MONEY MARKET CASH RESERVE PRO-FORMA
SECURITY DESCRIPTION RATE MATURITY PORTFOLIO FUND COMBINED
- ------------------------------------------------------ ---- -------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
SEARS ROEBUCK ACCEPTANCE CORP......................... 6.24% 06/05/95 $ 25,000 $ 0 $25,000
SEARS ROEBUCK ACCEPTANCE CORP......................... 6.27 04/10/95 30,000 0 30,000
SMALL BUS ADMIN ABS (M/P)............................. 7.50 04/01/05 0 7,831 7,831
SOCIETE GENERALE...................................... 6.06 05/01/95 25,000 0 25,000
SOCIETY NATIONAL BANK................................. 6.44 04/04/95 50,000 0 50,000
SOUTH AUSTRALIAN GOV'T CP............................. 6.93 07/03/95 0 11,000 11,000
SOUTHLAND CORP. CP.................................... 6.20 05/10/95 0 5,000 5,000
SOUTHTRUST BK OF AL................................... 6.13 05/03/95 0 10,000 10,000
STEERS................................................ 6.25 11/18/95 0 5,000 5,000
SLMA FLOATING RATE NOTES.............................. 5.48 07/01/96 0 5,000 5,000
SLMA FLOATING RATE NOTES.............................. 5.32 06/30/95 0 5,000 5,000
SLMA FLOATING RATE NOTES.............................. 5.97 04/04/95 25,000 0 25,000
SLMA FLOATING RATE NOTES.............................. 6.01 04/04/95 20,000 0 20,000
SLMA FLOATING RATE NOTES.............................. 6.02 04/04/95 21,000 0 21,000
SLMA FLOATING RATE NOTES.............................. 6.03 04/04/95 15,000 0 15,000
SUMITOMO BANK......................................... 6.27 04/28/95 30,000 0 30,000
SUMITOMO BANK......................................... 6.18 06/30/95 25,000 0 25,000
SVENSKA HANDELSBANKEN INC............................. 6.25 04/28/95 25,000 0 25,000
TASMANIAN PUB FIN YCP................................. 6.15 06/05/95 0 5,000 5,000
TORONTO DOMININ HOLDINGS.............................. 5.73% 05/02/95 $ 15,000 $ 0 $15,000
TOYOTA MOTOR CREDIT YCP............................... 6.23 04/03/95 0 5,000 5,000
WESTDEUTSCHE LANDESBANK............................... 6.12 06/01/95 0 10,000 10,000
WESTDEUTSCHE LANDESBANK............................... 6.63 03/01/96 0 7,000 7,000
TRI PARTY REPO (CHEM)................................. 6.40 0 25,309 25,309
TRI PARTY REPO (CR)................................... 6.56 0 20,000 20,000
INFINITY CASH RESERVE -- PRIME........................ 7,115 0 7,115
<CAPTION>
VALUE AT MARCH 31, 1995
------------------------------------------------
PNC COMPASS
MONEY MARKET CASH RESERVE PRO-FORMA
SECURITY DESCRIPTION PORTFOLIO FUND COMBINED
- ------------------------------------------------------ -------------- ------------ --------------
<S> <C> <C> <C>
SEARS ROEBUCK ACCEPTANCE CORP......................... $ 24,718,333 $ 0 $ 24,718,333
SEARS ROEBUCK ACCEPTANCE CORP......................... 29,952,975 0 29,952,975
SMALL BUS ADMIN ABS (M/P)............................. 0 8,016,697 8,016,697
SOCIETE GENERALE...................................... 25,000,207 0 25,000,207
SOCIETY NATIONAL BANK................................. 50,000,000 0 50,000,000
SOUTH AUSTRALIAN GOV'T CP............................. 0 10,809,608 10,809,608
SOUTHLAND CORP. CP.................................... 0 4,966,958 4,966,958
SOUTHTRUST BK OF AL................................... 0 9,999,800 9,999,800
STEERS................................................ 0 5,000,000 5,000,000
SLMA FLOATING RATE NOTES.............................. 0 5,000,000 5,000,000
SLMA FLOATING RATE NOTES.............................. 0 5,000,000 5,000,000
SLMA FLOATING RATE NOTES.............................. 25,000,000 0 25,000,000
SLMA FLOATING RATE NOTES.............................. 20,000,000 0 20,000,000
SLMA FLOATING RATE NOTES.............................. 20,996,046 0 20,996,046
SLMA FLOATING RATE NOTES.............................. 14,992,363 0 14,992,363
SUMITOMO BANK......................................... 30,000,000 0 30,000,000
SUMITOMO BANK......................................... 25,000,000 0 25,000,000
SVENSKA HANDELSBANKEN INC............................. 25,000,000 0 25,000,000
TASMANIAN PUB FIN YCP................................. 0 4,945,382 4,945,382
TORONTO DOMININ HOLDINGS.............................. $ 14,925,988 $ 0 $ 14,925,988
TOYOTA MOTOR CREDIT YCP............................... 0 4,998,306 4,998,306
WESTDEUTSCHE LANDESBANK............................... 0 10,000,000 10,000,000
WESTDEUTSCHE LANDESBANK............................... 0 7,001,038 7,001,038
TRI PARTY REPO (CHEM)................................. 0 25,309,000 25,309,000
TRI PARTY REPO (CR)................................... 0 20,000,000 20,000,000
INFINITY CASH RESERVE -- PRIME........................ 7,115,490 0 7,115,490
-------------- ------------ --------------
TOTAL INVESTMENTS..................................... $1,207,209,226 $435,095,609 $1,642,304,835
============== ============ ==============
</TABLE>
See Accompanying Notes to Pro-Forma Financial Statements
F-11
<PAGE> 177
PNC GOVERNMENT MONEY MARKET PORTFOLIO
COMPASS U.S. TREASURY FUND
PRO-FORMA SCHEDULE OF INVESTMENTS
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PAR (000)
------------------------------------------
PNC
GOVERNMENT
MONEY MARKET COMPASS U.S. PRO-FORMA
RATE MATURITY PORTFOLIO TREASURY FUND COMBINED
---- -------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C>
FFCB............................................... 5.84% 06/01/95 $ 12,000 $ 0 $12,000
FFCB............................................... 6.20 04/07/95 10,000 0 10,000
FFCB............................................... 6.20 09/18/95 10,000 0 10,000
FHLB............................................... 5.57 04/19/95 13,000 0 13,000
FHLB............................................... 5.97 07/03/95 12,360 0 12,360
FHLB............................................... 6.00 04/28/95 20,000 0 20,000
FHLB............................................... 6.06 04/28/95 15,000 0 15,000
FHLB............................................... 6.79 02/15/96 10,000 0 10,000
FHLB VARIABLE RATE BOND............................ 6.09 06/02/95 10,000 0 10,000
FHLB VARIABLE RATE BOND............................ 6.50 04/03/95 25,000 0 25,000
FHLMC.............................................. 5.90 04/03/95 55,000 0 55,000
FHLMC.............................................. 5.90 04/04/95 50,000 0 50,000
FHLMC.............................................. 6.00 04/03/95 6,090 0 6,090
FNMA............................................... 5.95 06/26/95 20,000 0 20,000
FNMA............................................... 5.97 06/20/95 25,000 0 25,000
FNMA............................................... 6.02 06/12/95 25,000 0 25,000
FNMA............................................... 6.41 06/12/95 28,000 0 28,000
FNMA VARIABLE RATE NOTES........................... 6.07 04/04/95 20,000 0 20,000
FNMA VARIABLE RATE NOTES........................... 6.16 04/03/95 25,000 0 25,000
FIRST BOSTON CORPORATION REPO...................... 6.03 04/10/95 50,000 0 50,000
LEHMAN GOVERNMENT SECURITIES REPO.................. 6.50 04/03/95 36,900 0 36,900
MORGAN STANLEY & CO. REPURCHASE AGREEMENT.......... 6.40 04/03/95 75,000 0 75,000
SLMA VARIABLE RATE NOTES........................... 6.00 04/04/95 5,000 0 5,000
SLMA VARIABLE RATE NOTES........................... 6.01 04/04/95 10,000 0 10,000
SLMA VARIABLE RATE NOTES........................... 6.02 04/04/95 6,000 0 6,000
SLMA VARIABLE RATE NOTES........................... 6.04 04/04/95 5,000 0 5,000
SLMA VARIABLE RATE NOTES........................... 6.12 04/04/95 5,500 0 5,500
SLMA VARIABLE RATE NOTES........................... 6.17 04/04/95 20,600 0 20,600
SLMA VARIABLE RATE NOTES........................... 6.20 04/04/95 4,000 0 4,000
SLMA VARIABLE RATE NOTES........................... 6.25 04/04/95 5,825 0 5,825
TENNESSEE VALLEY AUTHORITY......................... 5.92 04/06/95 25,000 0 25,000
<CAPTION>
VALUE AT MARCH 31, 1995
---------------------------------------------
PNC
GOVERNMENT
MONEY MARKET COMPASS U.S. PRO-FORMA
PORTFOLIO TREASURY FUND COMBINED
------------ ------------- ------------
<S> <C> <C> <C>
FFCB............................................... $11,910,453 $ 0 $ 11,910,453
FFCB............................................... 10,000,000 0 10,000,000
FFCB............................................... 10,000,000 0 10,000,000
FHLB............................................... 12,963,795 0 12,963,795
FHLB............................................... 12,169,378 0 12,169,378
FHLB............................................... 19,910,000 0 19,910,000
FHLB............................................... 14,931,825 0 14,931,825
FHLB............................................... 10,009,104 0 10,009,104
FHLB VARIABLE RATE BOND............................ 9,994,132 0 9,994,132
FHLB VARIABLE RATE BOND............................ 24,995,004 0 24,995,004
FHLMC.............................................. 54,981,972 0 54,981,972
FHLMC.............................................. 49,975,417 0 49,975,417
FHLMC.............................................. 6,087,970 0 6,087,970
FNMA............................................... 19,715,722 0 19,715,722
FNMA............................................... 24,668,333 0 24,668,333
FNMA............................................... 19,759,200 0 19,759,200
FNMA............................................... 16,782,060 0 16,782,060
FNMA VARIABLE RATE NOTES........................... 20,000,000 0 20,000,000
FNMA VARIABLE RATE NOTES........................... 25,000,000 0 25,000,000
FIRST BOSTON CORPORATION REPO...................... 50,000,000 0 50,000,000
LEHMAN GOVERNMENT SECURITIES REPO.................. 36,900,000 0 36,900,000
MORGAN STANLEY & CO. REPURCHASE AGREEMENT.......... 75,000,000 0 75,000,000
SLMA VARIABLE RATE NOTES........................... 5,000,000 0 5,000,000
SLMA VARIABLE RATE NOTES........................... 9,997,551 0 9,997,551
SLMA VARIABLE RATE NOTES........................... 6,000,000 0 6,000,000
SLMA VARIABLE RATE NOTES........................... 5,001,926 0 5,001,926
SLMA VARIABLE RATE NOTES........................... 5,500,950 0 5,500,950
SLMA VARIABLE RATE NOTES........................... 20,654,204 0 20,654,204
SLMA VARIABLE RATE NOTES........................... 4,009,358 0 4,009,358
SLMA VARIABLE RATE NOTES........................... 5,852,449 0 5,852,449
TENNESSEE VALLEY AUTHORITY......................... 24,979,444 0 24,979,444
</TABLE>
F-12
<PAGE> 178
<TABLE>
<CAPTION>
PAR (000)
------------------------------------------
PNC
GOVERNMENT
MONEY MARKET COMPASS U.S. PRO-FORMA
RATE MATURITY PORTFOLIO TREASURY FUND COMBINED
---- -------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C>
TRI PARTY REPO (BONY TSY).......................... 6.30% $ 0 $85,000 $ 0
TRI PARTY REPO (CHEM TSY).......................... 6.05 0 34,573 0
TRI PARTY REPO (TR)................................ 6.56 0 80,000 0
U.S. TREASURY BILL................................. 0.00 04/13/95 0 25,000 0
U.S. TREASURY BILL................................. 0.00 04/20/95 0 15,000 0
U.S. TREASURY BILL................................. 0.00 05/11/95 0 20,000 0
U.S. TREASURY BILL................................. 0.00 08/24/95 0 30,000 0
U.S. TREASURY NOTE................................. 3.88 08/31/95 0 20,000 0
U.S. TREASURY NOTE................................. 4.25 07/31/95 0 15,000 0
U.S. TREASURY NOTE................................. 4.63 08/15/95 0 25,000 0
<CAPTION>
VALUE AT MARCH 31, 1995
-------------------------------------------
PNC
GOVERNMENT
MONEY MARKET COMPASS U.S. PRO-FORMA
PORTFOLIO TREASURY FUND COMBINED
------------ ------------- ------------
<S> <C> <C> <C>
TRI PARTY REPO (BONY TSY).......................... $ 0 $ 85,000,000 $ 85,000,000
TRI PARTY REPO (CHEM TSY).......................... 0 34,573,000 34,573,000
TRI PARTY REPO (TR)................................ 0 80,000,000 80,000,000
U.S. TREASURY BILL................................. 0 24,952,417 24,952,417
U.S. TREASURY BILL................................. 0 14,957,329 14,957,329
U.S. TREASURY BILL................................. 0 19,871,111 19,871,111
U.S. TREASURY BILL................................. 0 29,282,854 29,282,854
U.S. TREASURY NOTE................................. 0 19,814,225 19,814,225
U.S. TREASURY NOTE................................. 0 14,906,433 14,906,433
U.S. TREASURY NOTE................................. 0 24,831,588 24,831,588
------------ ------------ ------------
TOTAL INVESTMENTS.................................. $622,750,248 $348,188,958 $970,939,206
============ ============ ============
</TABLE>
See Accompanying Notes to Pro-Forma Financial Statements
F-13
<PAGE> 179
PNC TAX-FREE INCOME PORTFOLIO
COMPASS MUNICIPAL BOND FUND
PRO-FORMA SCHEDULE OF INVESTMENTS
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PAR (000)
----------------------------------
PNC
TAX-FREE COMPASS
INCOME MUNICIPAL PRO-FORMA
RATE MATURITY PORTFOLIO BOND FUND COMBINED
---- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
ALLEGHENY CNTY HOSP, PA........................................... 7.00% 07/01/06 $ 0 $ 500 $ 500
ATLANTA, GA (GO).................................................. 6.13 12/01/23 0 500 500
AZUSA CA UNI SCH DIST............................................. 5.10 05/01/07 0 830 830
BALTIMORE PORT FACILITY INDUSTRIAL RB............................. 6.50 10/01/11 100 0 100
BURLINGTON, VT (RB)............................................... 6.88 07/01/12 0 1,000 1,000
CENTRAL BUCKS SCH, PA GO.......................................... 5.30 05/15/11 0 200 200
CHICAGO, IL....................................................... 7.60 06/01/02 0 250 250
COLUMBUS OHIO..................................................... 6.63 09/15/01 0 265 265
DIST OF COLUMBIA (PRF)............................................ 7.60 06/01/01 0 450 450
FLORIDA DEPARTMENT OF TRANSPORTATION.............................. 6.25 07/01/07 400 0 400
GEORGIA GENERAL OBLIGATION BONDS SERIES 1992B..................... 6.30 03/01/10 310 0 310
GEORGIA MUNICIPAL ELECTRIC AUTHORITY.............................. 6.13 01/01/14 400 0 400
GWINNETT COUNTY GENERAL OBLIGATION BONDS.......................... 6.00 01/01/10 400 0 400
HAMPTON GENERAL OBLIGATION BONDS SERIES 1995...................... 6.00 01/15/08 400 0 400
HARRIS COUNTY (GO)................................................ 7.00 08/01/09 0 500 500
HAWAII STATE (PRF)................................................ 7.00 06/01/05 0 1,000 1,000
HONOLULU, HI (PRF)................................................ 7.15 06/01/08 0 1,000 1,000
ILL EDUC FAC AUTH................................................. 5.60 07/01/17 0 1,260 1,260
ILL EDUC FAC AUTH (MP)............................................ 8.63 09/01/11 0 560 560
JEFFERSON CNTY, KY................................................ 5.65 08/15/03 0 500 500
JEFFERSON COUNTY SCHOOL DISTRICT.................................. 6.00 12/15/12 300 0 300
JOHNSON COUNTY GENERAL OBLIGATION................................. 6.00 09/01/07 400 0 400
KANE CNTY ILL..................................................... 5.30 12/01/09 0 1,000 1,000
KANSAS DEPARTMENT OF TRANSPORTATION............................... 6.13 09/01/10 500 0 500
KANSAS DEPARTMENT OF TRANSPORTATION............................... 6.00 09/01/12 400 0 400
LOUISIANA HOUSING FINANCE AUTHORITY............................... 9.38 02/01/15 15 0 15
LOUISVILLE KENTUCKY WATER SUPPLY REVENUE BONDS.................... 6.00 11/15/14 400 0 400
MARYLAND HEALTH & HIGHER EDUCATION AUTHORITY...................... 5.60 07/01/09 300 0 300
MICH MUN BD AUTH.................................................. 5.40 10/01/14 0 1,015 1,015
MILWAUKEE, WI (GO)................................................ 6.13 10/01/03 0 250 250
MINNESOTA STATE................................................... 5.00 08/01/05 0 1,000 1,000
NEBRASKA STATE.................................................... 6.00 01/01/08 0 500 500
<CAPTION>
VALUE AT MARCH 31, 1995
------------------------------------------
PNC
TAX-FREE COMPASS
INCOME MUNICIPAL PRO-FORMA
PORTFOLIO BOND FUND COMBINED
---------- ----------- -----------
<S> <C> <C> <C>
ALLEGHENY CNTY HOSP, PA........................................... $ 0 $ 528,125 $ 528,125
ATLANTA, GA (GO).................................................. 0 502,500 502,500
AZUSA CA UNI SCH DIST............................................. 0 790,575 790,575
BALTIMORE PORT FACILITY INDUSTRIAL RB............................. 104,375 0 104,375
BURLINGTON, VT (RB)............................................... 0 1,046,250 1,046,250
CENTRAL BUCKS SCH, PA GO.......................................... 0 189,250 189,250
CHICAGO, IL....................................................... 0 262,500 262,500
COLUMBUS OHIO..................................................... 0 287,194 287,194
DIST OF COLUMBIA (PRF)............................................ 0 492,750 492,750
FLORIDA DEPARTMENT OF TRANSPORTATION.............................. 417,500 0 417,500
GEORGIA GENERAL OBLIGATION BONDS SERIES 1992B..................... 334,025 0 334,025
GEORGIA MUNICIPAL ELECTRIC AUTHORITY.............................. 402,000 0 402,000
GWINNETT COUNTY GENERAL OBLIGATION BONDS.......................... 406,000 0 406,000
HAMPTON GENERAL OBLIGATION BONDS SERIES 1995...................... 414,500 0 414,500
HARRIS COUNTY (GO)................................................ 0 542,500 542,500
HAWAII STATE (PRF)................................................ 0 1,087,500 1,087,500
HONOLULU, HI (PRF)................................................ 0 1,101,250 1,101,250
ILL EDUC FAC AUTH................................................. 0 1,184,400 1,184,400
ILL EDUC FAC AUTH (MP)............................................ 0 605,500 605,500
JEFFERSON CNTY, KY................................................ 0 508,750 508,750
JEFFERSON COUNTY SCHOOL DISTRICT.................................. 302,250 0 302,250
JOHNSON COUNTY GENERAL OBLIGATION................................. 410,000 0 410,000
KANE CNTY ILL..................................................... 0 986,250 986,250
KANSAS DEPARTMENT OF TRANSPORTATION............................... 523,125 0 523,125
KANSAS DEPARTMENT OF TRANSPORTATION............................... 403,500 0 403,500
LOUISIANA HOUSING FINANCE AUTHORITY............................... 15,525 0 15,525
LOUISVILLE KENTUCKY WATER SUPPLY REVENUE BONDS.................... 402,500 0 402,500
MARYLAND HEALTH & HIGHER EDUCATION AUTHORITY...................... 295,125 0 295,125
MICH MUN BD AUTH.................................................. 0 933,800 933,800
MILWAUKEE, WI (GO)................................................ 0 261,250 261,250
MINNESOTA STATE................................................... 0 980,000 980,000
NEBRASKA STATE.................................................... 0 504,375 504,375
</TABLE>
F-14
<PAGE> 180
<TABLE>
<CAPTION>
PAR (000)
----------------------------------
PNC
TAX-FREE COMPASS
INCOME MUNICIPAL PRO-FORMA
RATE MATURITY PORTFOLIO BOND FUND COMBINED
---- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
NEW HAMPSHIRE ST TPKE............................................. 7.00% 11/01/06 $ 0 $ 500 $ 500
NEW JERSEY TURNPIKE AUTHORITY REVENUE BONDS....................... 6.50 01/01/16 100 0 100
NEW MEXICO STATE UNIVERSITY REVENUE BONDS......................... 5.70 04/01/09 500 0 500
NEW YORK CITY GENERAL OBLIGATION BONDS............................ 4.30 10/01/22 500 0 500
NORTH CAROLINA MUNICIPAL POWER AGENCY............................. 6.00 01/01/10 300 0 300
N.J. HEALTH CARE.................................................. 6.25 07/01/16 0 500 500
OCEAN COUNTY, NJ.................................................. 5.13 07/01/06 0 300 300
OHIO ST WTR DEV AUTH.............................................. 6.00 12/01/08 0 1,000 1,000
OHIO STATE UNIVERSITY REVENUE BONDS............................... 5.75 12/01/09 500 0 500
OHIO WATER DEVELOPMENT AUTHORITY.................................. 5.65 12/01/05 300 0 300
OMAHA PUBLIC POWER DISTRICT REVENUE BONDS......................... 5.50 02/01/07 300 0 300
PA ST PUB SCHL BLDG AUTH.......................................... 6.25 01/01/07 0 500 500
PA STATE HIGH EDU FACS RB......................................... 9.10 07/01/01 0 200 200
PA STATE HIGHER EDUC AUTH......................................... 6.80% 12/01/00 0 630 630
PALM BEACH, FL.................................................... 8.63 07/01/04 0 500 500
PHOENIX GENERAL OBLIGATION BONDS SERIES 1992...................... 6.38 07/01/13 200 0 200
PIEDMONT MUN PWR AGY.............................................. 6.25 01/01/09 0 500 500
PIEDMONT MUN PWR AGY.............................................. 6.25 01/01/18 0 500 500
PORT OF SEATTLE, WA............................................... 6.25 11/01/10 0 500 500
PORTLAND SEWER SYSTEM REVENUE BONDS............................... 6.00 10/01/12 300 0 300
PUERTO RICO TEL (RB).............................................. 5.25 11/01/05 0 500 500
RICHMOND GENERAL OBLIGATION BONDS................................. 5.50 01/15/13 400 0 400
SABINE RIVER AUTHORITY POLLUTION CONTROL.......................... 8.20 07/01/14 85 0 85
SALT LAKE CITY HOSPITAL REVENUE BONDS............................. 8.13 05/15/15 100 0 100
SALT LAKE CITY UTAH............................................... 5.40 02/01/03 0 500 500
SALT RIVER PROJECT (RB)........................................... 5.30 01/01/03 0 500 500
SAN ANTONIO GENERAL OBLIGATION BONDS SERIES 1992.................. 5.75 08/01/13 450 0 450
SCHUYLKILL CO, PA (PRF)........................................... 6.95 06/01/04 0 500 500
SCOTTSDALE AZ MN PTY CORP......................................... 6.25 11/01/10 0 500 500
SOLANCO SCH DIST, PA (GO)......................................... 6.30 02/15/14 0 100 100
SOUTH CAROLINA PUBLIC SERVICE AUTHORITY........................... 6.50 07/01/14 100 0 100
SOUTH DAKOTA ST BLDG LSE.......................................... 6.38 09/01/05 0 500 500
SOUTHERN CALIF PWR AUTH........................................... 5.38 01/01/10 0 1,000 1,000
SPARTANBURG WATER WORKS IMPROVEMENT............................... 6.20 06/01/09 300 0 300
TENNESSEE STATE (GO).............................................. 6.85 06/01/10 0 1,000 1,000
UNIVERSITY OF DELAWARE HOUSING BONDS.............................. 5.50 11/01/15 250 0 250
UNIVERSITY OF TEXAS............................................... 7.00 08/15/07 0 500 500
UNIV. OF PUERTO RICO.............................................. 7.75 06/01/07 0 100 100
VERMONT STATE (PRF)............................................... 6.75 02/01/08 0 1,000 1,000
VIRGINIA HSG DEV AUTH AMT......................................... 6.70 07/01/05 0 500 500
<CAPTION>
VALUE AT MARCH 31, 1995
------------------------------------------
PNC
TAX-FREE COMPASS
INCOME MUNICIPAL PRO-FORMA
PORTFOLIO BOND FUND COMBINED
---------- ----------- -----------
<S> <C> <C> <C>
NEW HAMPSHIRE ST TPKE............................................. $ 0 $ 565,000 $ 565,000
NEW JERSEY TURNPIKE AUTHORITY REVENUE BONDS....................... 107,250 0 107,250
NEW MEXICO STATE UNIVERSITY REVENUE BONDS......................... 498,750 0 498,750
NEW YORK CITY GENERAL OBLIGATION BONDS............................ 500,000 0 500,000
NORTH CAROLINA MUNICIPAL POWER AGENCY............................. 306,000 0 306,000
N.J. HEALTH CARE.................................................. 0 511,250 511,250
OCEAN COUNTY, NJ.................................................. 0 289,875 289,875
OHIO ST WTR DEV AUTH.............................................. 0 1,020,000 1,020,000
OHIO STATE UNIVERSITY REVENUE BONDS............................... 490,625 0 490,625
OHIO WATER DEVELOPMENT AUTHORITY.................................. 305,250 0 305,250
OMAHA PUBLIC POWER DISTRICT REVENUE BONDS......................... 294,375 0 294,375
PA ST PUB SCHL BLDG AUTH.......................................... 0 521,250 521,250
PA STATE HIGH EDU FACS RB......................................... 0 208,500 208,500
PA STATE HIGHER EDUC AUTH......................................... 0 661,500 661,500
PALM BEACH, FL.................................................... 0 552,500 552,500
PHOENIX GENERAL OBLIGATION BONDS SERIES 1992...................... 206,250 0 206,250
PIEDMONT MUN PWR AGY.............................................. 0 528,125 528,125
PIEDMONT MUN PWR AGY.............................................. 0 505,625 505,625
PORT OF SEATTLE, WA............................................... 0 513,125 513,125
PORTLAND SEWER SYSTEM REVENUE BONDS............................... 308,625 0 308,625
PUERTO RICO TEL (RB).............................................. 0 496,875 496,875
RICHMOND GENERAL OBLIGATION BONDS................................. 375,500 0 375,500
SABINE RIVER AUTHORITY POLLUTION CONTROL.......................... 89,994 0 89,994
SALT LAKE CITY HOSPITAL REVENUE BONDS............................. 110,750 0 110,750
SALT LAKE CITY UTAH............................................... 0 489,375 489,375
SALT RIVER PROJECT (RB)........................................... 0 503,750 503,750
SAN ANTONIO GENERAL OBLIGATION BONDS SERIES 1992.................. 444,938 0 444,938
SCHUYLKILL CO, PA (PRF)........................................... 0 546,875 546,875
SCOTTSDALE AZ MN PTY CORP......................................... 0 510,000 510,000
SOLANCO SCH DIST, PA (GO)......................................... 0 506,875 506,875
SOUTH CAROLINA PUBLIC SERVICE AUTHORITY........................... 103,500 0 103,500
SOUTH DAKOTA ST BLDG LSE.......................................... 0 531,875 531,875
SOUTHERN CALIF PWR AUTH........................................... 0 951,250 951,250
SPARTANBURG WATER WORKS IMPROVEMENT............................... 307,500 0 307,500
TENNESSEE STATE (GO).............................................. 0 1,076,250 1,076,250
UNIVERSITY OF DELAWARE HOUSING BONDS.............................. 241,875 0 241,875
UNIVERSITY OF TEXAS............................................... 0 547,500 547,500
UNIV. OF PUERTO RICO.............................................. 0 105,125 105,125
VERMONT STATE (PRF)............................................... 0 1,087,500 1,087,500
VIRGINIA HSG DEV AUTH AMT......................................... 0 518,750 518,750
</TABLE>
F-15
<PAGE> 181
<TABLE>
<CAPTION>
PAR (000)
----------------------------------
PNC
TAX-FREE COMPASS
INCOME MUNICIPAL PRO-FORMA
RATE MATURITY PORTFOLIO BOND FUND COMBINED
---- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
VIRGINIA TRANSPORTATION BOARD REVENUE BONDS....................... 5.25% 05/15/12 $400 $ 0 $ 400
WARREN HILLS, NJ (PN)............................................. 4.90 12/15/04 0 710 710
WASHINGTON CTY (GO)............................................... 6.00 06/01/05 0 500 500
WESTMORELAND CO., PA (GO)......................................... 6.05 06/01/97 0 250 250
WINNEBAGO & BOONE CNTY IL......................................... 5.90 02/01/05 0 500 500
SMITH BARNEY TAX-FREE MONEY MARKET FUND........................... 352 0 352
<CAPTION>
VALUE AT MARCH 31, 1995
------------------------------------------
PNC
TAX-FREE COMPASS
INCOME MUNICIPAL PRO-FORMA
PORTFOLIO BOND FUND COMBINED
---------- ----------- -----------
<S> <C> <C> <C>
VIRGINIA TRANSPORTATION BOARD REVENUE BONDS....................... $ 374,000 $ 0 $ 374,000
WARREN HILLS, NJ (PN)............................................. 0 677,163 677,163
WASHINGTON CTY (GO)............................................... 0 526,875 526,875
WESTMORELAND CO., PA (GO)......................................... 0 254,688 254,688
WINNEBAGO & BOONE CNTY IL......................................... 0 513,750 513,750
SMITH BARNEY TAX-FREE MONEY MARKET FUND........................... 351,968 0 351,968
---------- ----------- -----------
TOTAL INVESTMENTS................................................. $9,847,574 $28,515,944 $38,363,518
========== =========== ===========
</TABLE>
See Accompanying Notes to Pro-Forma Financial Statements
F-16
<PAGE> 182
PNC PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
COMPASS PENNSYLVANIA MUNICIPAL BOND FUND
PRO-FORMA SCHEDULE OF INVESTMENTS
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PAR (000)
------------------------------------------
PNC
PENNSYLVANIA COMPASS
TAX-FREE PENNSYLVANIA
INCOME MUNICIPAL PRO-FORMA
RATE MATURITY PORTFOLIO BOND FUND COMBINED
---- -------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
ALLEGHENY COUNTY GENERAL OBLIGATION BONDS.................... 6.20% 09/01/01 $ 250 $ 0 $ 250
ALLEGHENY COUNTY GENERAL OBLIGATION BONDS.................... 5.00 10/01/10 1,000 0 1,000
ALLEGHENY COUNTY HOSPITAL DEVELOPMENT........................ 6.35 04/01/00 300 0 300
ALLEGHENY COUNTY HOSPITAL DEVELOPMENT........................ 7.38 04/01/15 750 0 750
ALLEGHENY COUNTY RESIDENTIAL FINANCE......................... 6.20 05/01/17 400 0 400
ALLEGHENY COUNTY, PA GO...................................... 5.00 10/01/10 0 500 500
ALLEGHENY COUNTY, PA GO...................................... 5.90 05/01/07 0 500 500
BEAVER COUNTY, PA (RB)....................................... 6.60 09/01/10 0 500 500
BERKS COUNTY GENERAL OBLIGATION BONDS........................ 5.75 11/15/12 300 0 300
BERKS COUNTY, PA (GO)........................................ 5.00 05/15/10 0 500 500
BRISTOL TOWNSHIP SCHOOL DISTRICT............................. 5.10 02/15/08 1,000 0 1,000
BRISTOL TWP., PA (GO)........................................ 5.00 02/15/07 0 500 500
CAMBRIA COUNTY UNLIMITED TAX GO.............................. 8.25 06/01/00 600 0 600
CENTRAL BUCKS SCHOOL DISTRICT................................ 5.15 05/15/08 1,015 0 1,015
CENTRAL BUCKS SCH, PA GO..................................... 5.30 05/15/11 0 300 300
CENTRE COUNTY GENERAL OBLIGATION............................. 5.30 07/01/18 530 0 530
CHARLEROI SCHOOL DISTRICT REVENUE BONDS...................... 5.75 11/15/13 300 0 300
CHESTER COUNTY SOLID WASTE AUTHORITY......................... 6.75 01/01/99 250 0 250
CHESTER COUNTY UNLIMITED TAX GO.............................. 6.70 12/15/04 385 0 385
CHESTER UPLAND SCHOOL DISTRICT AUTHORITY..................... 5.60 11/15/14 850 0 850
COATESVILLE SCHOOL DISTRICT UNLIMITED TAX GO................. 6.40 01/15/05 500 0 500
DAUPHIN COUNTY GENERAL AUTHORITY RB.......................... 5.30 06/01/05 535 0 535
DAUPHIN COUNTY GENERAL AUTHORITY RB.......................... 5.40 06/01/06 565 0 565
DAUPHIN COUNTY GENERAL AUTHORITY RB.......................... 5.50 06/01/07 550 0 550
DAUPHIN COUNTY GENERAL AUTHORITY RB.......................... 6.85 06/01/09 800 0 800
DEER LAKES SCHOOL DISTRICT UNLIMITED TAX GO.................. 6.35 01/15/14 1,000 0 1,000
DEER LAKES SCHOOL DISTRICT UNLIMITED TAX GO.................. 6.45 01/15/19 1,300 500 1,800
DELAWARE COUNTY AUTHORITY HEALTH CARE........................ 6.00 11/15/07 2,000 0 2,000
DREXEL UNIV, PA (RB)......................................... 7.25 05/01/10 0 500 500
DUQUESNE SCHOOL DISTRICT GO.................................. 5.75 10/01/18 1,000 0 1,000
ERIE COUNTY PRISON AUTHORITY................................. 6.25 11/01/01 500 0 500
<CAPTION>
VALUE AT MARCH 31, 1995
-------------------------------------------
PNC
PENNSYLVANIA COMPASS
TAX-FREE PENNSYLVANIA
INCOME MUNICIPAL PRO-FORMA
PORTFOLIO BOND FUND COMBINED
------------ ------------ -----------
<S> <C> <C> <C>
ALLEGHENY COUNTY GENERAL OBLIGATION BONDS.................... $ 265,000 $ 0 $ 265,000
ALLEGHENY COUNTY GENERAL OBLIGATION BONDS.................... 902,500 0 902,500
ALLEGHENY COUNTY HOSPITAL DEVELOPMENT........................ 315,375 0 315,375
ALLEGHENY COUNTY HOSPITAL DEVELOPMENT........................ 771,563 0 771,563
ALLEGHENY COUNTY RESIDENTIAL FINANCE......................... 397,500 0 397,500
ALLEGHENY COUNTY, PA GO...................................... 0 450,625 450,625
ALLEGHENY COUNTY, PA GO...................................... 0 511,875 511,875
BEAVER COUNTY, PA (RB)....................................... 0 507,500 507,500
BERKS COUNTY GENERAL OBLIGATION BONDS........................ 295,125 0 295,125
BERKS COUNTY, PA (GO)........................................ 0 459,375 459,375
BRISTOL TOWNSHIP SCHOOL DISTRICT............................. 942,500 0 942,500
BRISTOL TWP., PA (GO)........................................ 0 470,000 470,000
CAMBRIA COUNTY UNLIMITED TAX GO.............................. 658,500 0 658,500
CENTRAL BUCKS SCHOOL DISTRICT................................ 964,250 0 964,250
CENTRAL BUCKS SCH, PA GO..................................... 0 283,875 283,875
CENTRE COUNTY GENERAL OBLIGATION............................. 480,975 0 480,975
CHARLEROI SCHOOL DISTRICT REVENUE BONDS...................... 295,875 0 295,875
CHESTER COUNTY SOLID WASTE AUTHORITY......................... 263,750 0 263,750
CHESTER COUNTY UNLIMITED TAX GO.............................. 410,506 0 410,506
CHESTER UPLAND SCHOOL DISTRICT AUTHORITY..................... 802,188 0 802,188
COATESVILLE SCHOOL DISTRICT UNLIMITED TAX GO................. 534,375 0 534,375
DAUPHIN COUNTY GENERAL AUTHORITY RB.......................... 508,250 0 508,250
DAUPHIN COUNTY GENERAL AUTHORITY RB.......................... 534,631 0 534,631
DAUPHIN COUNTY GENERAL AUTHORITY RB.......................... 519,063 0 519,063
DAUPHIN COUNTY GENERAL AUTHORITY RB.......................... 842,000 0 842,000
DEER LAKES SCHOOL DISTRICT UNLIMITED TAX GO.................. 1,018,750 0 1,018,750
DEER LAKES SCHOOL DISTRICT UNLIMITED TAX GO.................. 1,329,250 510,625 1,839,875
DELAWARE COUNTY AUTHORITY HEALTH CARE........................ 1,855,000 0 1,855,000
DREXEL UNIV, PA (RB)......................................... 0 530,625 530,625
DUQUESNE SCHOOL DISTRICT GO.................................. 926,250 0 926,250
ERIE COUNTY PRISON AUTHORITY................................. 533,125 0 533,125
</TABLE>
F-17
<PAGE> 183
<TABLE>
<CAPTION>
PAR (000)
------------------------------------------
PNC
PENNSYLVANIA COMPASS
TAX-FREE PENNSYLVANIA
INCOME MUNICIPAL PRO-FORMA
RATE MATURITY PORTFOLIO BOND FUND COMBINED
---- -------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
FOX CHAPEL SCHOOL DISTRICT GO................................ 5.50% 08/15/11 $ 575 $ 0 $ 575
HARRISBURG AUTHORITY LEASE REVENUE BOND...................... 6.50 06/01/04 500 0 500
HAZLETON PA., (GO)........................................... 5.88 03/01/10 0 500 500
INDIANA COUNTY HOSPITAL AUTHORITY............................ 7.13 07/01/23 1,500 0 1,500
LACKAWANNA CNTY, PA (GO)..................................... 5.10 12/01/08 0 250 250
LANCASTER COUNTY HOSPITAL AUTHORITY.......................... 5.30 11/15/08 500 0 500
LANCASTER HIGHER EDUCATION AUTHORITY......................... 5.65 04/15/10 500 0 500
LANCASTER, PA................................................ 9.38 01/01/05 0 450 450
LEBANON COUNTY HOSPITAL AUTHORITY............................ 5.55 11/15/04 355 0 355
LEBANON COUNTY HOSPITAL AUTHORITY............................ 6.00 11/15/09 500 0 500
LEBANON COUNTY HOSPITAL AUTHORITY............................ 6.00 11/15/18 750 0 750
LIGONIER VALLEY SCHOOL DISTRICT.............................. 5.65 03/01/14 2,000 0 2,000
LYCOMING COUNTY AUTHORITY HOSPITAL LEASE..................... 7.75 07/01/16 2,000 0 2,000
MANHEIM PA., (GO)............................................ 6.10 05/15/14 0 1,000 1,000
MONTGOMERY COUNTY HIGHER EDUCATION........................... 7.88 01/01/19 500 0 500
MOON TOWNSHIP WATER AND SEWER AUTHORITY...................... 6.70 12/01/19 1,000 0 1,000
NEW GARDEN TOWNSHIP SEWER AUTHORITY.......................... 7.00 03/01/15 420 0 420
NORTH PENN SCH DIST, PA...................................... 5.10 09/01/09 0 500 500
NORTHAMPTON COUNTY HIGHER EDUCATION.......................... 6.10 07/01/12 1,950 0 1,950
OIL CITY SCHOOL DISTRICT GENERAL OBLIGATION.................. 5.30 05/15/11 565 0 565
PA HOUSING FINANCE AGY....................................... 6.40 07/01/12 0 500 500
PA STATE FINANCING AUTH...................................... 6.60 11/01/09 0 500 500
PA STATE TURNPIKE (RB)....................................... 6.00 12/01/09 0 500 500
PA TURNPIKE COMM (RB)........................................ 5.88 12/01/08 0 500 500
PENN INTER-GOVT COOP AUTH.................................... 5.60 06/15/15 0 500 500
PENNSBURY SCHOOL DISTRICT UNLIMITED TAX GO................... 6.65 08/15/09 685 0 685
PENNSYLVANIA CERTIFICATES OF PARTICIPATION................... 5.20 07/01/05 400 0 400
PENNSYLVANIA COMMONWEALTH TURNPIKE........................... 6.50 06/01/04 445 0 445
PENNSYLVANIA FINANCE AUTHORITY REVENUE BONDS................. 6.60 11/01/09 2,760 0 2,760
PENNSYLVANIA HIGHER EDUCATIONAL FACILITIES................... 4.95 02/01/02 255 0 255
PENNSYLVANIA HIGHER EDUCATIONAL FACILITIES................... 5.15 02/01/04 1,230 0 1,230
PENNSYLVANIA HIGHER EDUCATIONAL FACILITIES................... 5.15 11/01/11 500 0 500
PENNSYLVANIA HIGHER EDUCATIONAL FACILITIES................... 5.45 02/01/07 285 0 285
PENNSYLVANIA INFRASTRUCTURE GO............................... 6.80 09/01/10 2,000 0 2,000
PENNSYLVANIA INTERGOVERNMENTAL COOP.......................... 5.25 06/15/06 1,000 0 1,000
PENNSYLVANIA INTERGOVERNMENTAL COOP.......................... 5.75 06/15/15 1,000 0 1,000
PENNSYLVANIA STATE (RB)...................................... 5.50 08/15/16 2,000 0 2,000
PENNSYLVANIA STATE (RB)...................................... 6.63 01/01/17 0 250 250
PENNSYLVANIA UNLIMITED TAX GO................................ 6.50 11/01/05 250 0 250
<CAPTION>
VALUE AT MARCH 31, 1995
-------------------------------------------
PNC
PENNSYLVANIA COMPASS
TAX-FREE PENNSYLVANIA
INCOME MUNICIPAL PRO-FORMA
PORTFOLIO BOND FUND COMBINED
------------ ------------ -----------
<S> <C> <C> <C>
FOX CHAPEL SCHOOL DISTRICT GO................................ $ 543,375 $ 0 $ 543,375
HARRISBURG AUTHORITY LEASE REVENUE BOND...................... 533,125 0 533,125
HAZLETON PA., (GO)........................................... 0 498,750 498,750
INDIANA COUNTY HOSPITAL AUTHORITY............................ 1,490,625 0 1,490,625
LACKAWANNA CNTY, PA (GO)..................................... 0 232,500 232,500
LANCASTER COUNTY HOSPITAL AUTHORITY.......................... 468,750 0 468,750
LANCASTER HIGHER EDUCATION AUTHORITY......................... 489,375 0 489,375
LANCASTER, PA................................................ 0 464,625 464,625
LEBANON COUNTY HOSPITAL AUTHORITY............................ 333,700 0 333,700
LEBANON COUNTY HOSPITAL AUTHORITY............................ 457,500 0 457,500
LEBANON COUNTY HOSPITAL AUTHORITY............................ 660,938 0 660,938
LIGONIER VALLEY SCHOOL DISTRICT.............................. 1,932,500 0 1,932,500
LYCOMING COUNTY AUTHORITY HOSPITAL LEASE..................... 2,155,000 0 2,155,000
MANHEIM PA., (GO)............................................ 0 1,005,000 1,005,000
MONTGOMERY COUNTY HIGHER EDUCATION........................... 513,750 0 513,750
MOON TOWNSHIP WATER AND SEWER AUTHORITY...................... 1,022,500 0 1,022,500
NEW GARDEN TOWNSHIP SEWER AUTHORITY.......................... 447,300 0 447,300
NORTH PENN SCH DIST, PA...................................... 0 464,375 464,375
NORTHAMPTON COUNTY HIGHER EDUCATION.......................... 1,859,813 0 1,859,813
OIL CITY SCHOOL DISTRICT GENERAL OBLIGATION.................. 529,688 0 529,688
PA HOUSING FINANCE AGY....................................... 0 505,625 505,625
PA STATE FINANCING AUTH...................................... 0 518,125 518,125
PA STATE TURNPIKE (RB)....................................... 0 507,500 507,500
PA TURNPIKE COMM (RB)........................................ 0 496,250 496,250
PENN INTER-GOVT COOP AUTH.................................... 0 476,250 476,250
PENNSBURY SCHOOL DISTRICT UNLIMITED TAX GO................... 734,663 0 734,663
PENNSYLVANIA CERTIFICATES OF PARTICIPATION................... 387,500 0 387,500
PENNSYLVANIA COMMONWEALTH TURNPIKE........................... 476,706 0 476,706
PENNSYLVANIA FINANCE AUTHORITY REVENUE BONDS................. 2,863,500 0 2,863,500
PENNSYLVANIA HIGHER EDUCATIONAL FACILITIES................... 243,206 0 243,206
PENNSYLVANIA HIGHER EDUCATIONAL FACILITIES................... 1,154,663 0 1,154,663
PENNSYLVANIA HIGHER EDUCATIONAL FACILITIES................... 453,750 0 453,750
PENNSYLVANIA HIGHER EDUCATIONAL FACILITIES................... 269,681 0 269,681
PENNSYLVANIA INFRASTRUCTURE GO............................... 2,110,000 0 2,110,000
PENNSYLVANIA INTERGOVERNMENTAL COOP.......................... 965,000 0 965,000
PENNSYLVANIA INTERGOVERNMENTAL COOP.......................... 956,250 0 956,250
PENNSYLVANIA STATE (RB)...................................... 1,870,000 0 1,870,000
PENNSYLVANIA STATE (RB)...................................... 0 252,500 252,500
PENNSYLVANIA UNLIMITED TAX GO................................ 266,250 0 266,250
</TABLE>
F-18
<PAGE> 184
<TABLE>
<CAPTION>
PAR (000)
------------------------------------------
PNC
PENNSYLVANIA COMPASS
TAX-FREE PENNSYLVANIA
INCOME MUNICIPAL PRO-FORMA
RATE MATURITY PORTFOLIO BOND FUND COMBINED
---- -------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
PHILADELPHIA HOSPITAL AND HIGHER EDUCATION................... 5.10% 07/01/98 $ 470 $ 0 $ 470
PHILADELPHIA HOSPITAL AND HIGHER EDUCATION................... 5.25 07/01/02 500 0 500
PHILADELPHIA HOSPITAL AND HIGHER EDUCATION................... 5.95 05/01/04 500 0 500
PHILADELPHIA HOSPITAL AND HIGHER EDUCATION................... 6.00 06/01/23 815 0 815
PHILADELPHIA HOSPITAL AND HIGHER EDUCATION................... 6.20 05/01/11 500 0 500
PHILADELPHIA HOSPITAL AND HIGHER EDUCATION................... 7.75 08/15/17 750 0 750
PHILADELPHIA INDUSTRIAL DEVELOPMENT AUTHORITY................ 5.25 07/01/17 1,000 0 1,000
PHILADELPHIA INDUSTRIAL DEVELOPMENT AUTHORITY................ 5.25 07/01/17 810 0 810
PHILADELPHIA MUNICIPAL AUTHORITY............................. 5.63 11/15/14 1,000 0 1,000
PHILADELPHIA MUNICIPAL AUTHORITY............................. 7.10 11/15/11 2,500 0 2,500
PHILADELPHIA SCHOOL DISTRICT UNLIMITED TAX................... 6.70 07/01/99 250 0 250
PHILADELPHIA, PA (RB)........................................ 5.50 07/01/05 0 500 500
PHILA., PA IDR (RB).......................................... 6.75 05/01/12 0 500 500
PITTSBRGH, PA URB REDEV...................................... 5.50 10/01/10 0 500 500
PITTSBURGH WATER AND SEWER AUTHORITY......................... 6.60 09/01/02 250 0 250
PITTSBURGH, PA (GO).......................................... 6.13 09/01/17 0 500 500
POCONO MOUNTAIN, PA.......................................... 5.75 10/01/09 0 500 500
PUERTO RICO ELECTRIC POWER AUTHORITY......................... 6.75 07/01/03 250 0 250
PUERTO RICO PUBLIC BUILDINGS AUTHORITY....................... 6.50 07/01/03 500 0 500
RINGGOLD PA., (GO)........................................... 6.20 02/01/19 0 500 500
SCRANTON-LACKAWANNA HEALTH AND WELFARE....................... 7.40 06/15/00 200 0 200
SE PA TRANS AUTH REV......................................... 5.75 12/01/04 0 500 500
SENECA VY PA SCH DIST GO..................................... 5.75 07/01/10 0 500 500
SOUTHEASTERN PENNSYLVANIA TRANPORTATION...................... 5.88 03/01/09 1,230 0 1,230
STATE PUBLIC SCHOOL BUILDING AUTHORITY....................... 5.38 10/01/17 1,000 0 1,000
SUSQUEHANNA UNIV, PA RB...................................... 6.90 03/01/02 0 750 750
THOM JEFF UNIV, PA (PRF)..................................... 7.55 11/01/10 0 500 500
TRINITY SCHOOL DISTRICT GENERAL OBLIGATION................... 5.50 11/01/11 2,000 0 2,000
WATTSBURG, PA (GO)........................................... 6.35 04/01/15 0 500 500
WAYNE HIGHLANDS, PA (GO)..................................... 6.00 04/01/12 0 500 500
WEST CHESTER, PA (GO)........................................ 6.20 09/01/14 0 1,000 1,000
WEST VIEW, PA (ETM).......................................... 9.00 05/15/99 0 400 400
WESTMORELAND COUNTY INDUSTRIAL DEVELOPMENT................... 6.00 07/01/11 200 0 200
YORK COUNTY HOSPITAL AUTHORITY REVENUE BOND.................. 4.60 12/01/04 605 0 605
YORK COUNTY HOSPITAL AUTHORITY REVENUE BOND.................. 4.70 12/01/05 680 0 680
<CAPTION>
VALUE AT MARCH 31, 1995
-------------------------------------------
PNC
PENNSYLVANIA COMPASS
TAX-FREE PENNSYLVANIA
INCOME MUNICIPAL PRO-FORMA
PORTFOLIO BOND FUND COMBINED
------------ ------------ -----------
<S> <C> <C> <C>
PHILADELPHIA HOSPITAL AND HIGHER EDUCATION................... $ 459,425 $ 0 $ 459,425
PHILADELPHIA HOSPITAL AND HIGHER EDUCATION................... 483,125 0 483,125
PHILADELPHIA HOSPITAL AND HIGHER EDUCATION................... 483,750 0 483,750
PHILADELPHIA HOSPITAL AND HIGHER EDUCATION................... 691,731 0 691,731
PHILADELPHIA HOSPITAL AND HIGHER EDUCATION................... 442,500 0 442,500
PHILADELPHIA HOSPITAL AND HIGHER EDUCATION................... 845,625 0 845,625
PHILADELPHIA INDUSTRIAL DEVELOPMENT AUTHORITY................ 871,250 0 871,250
PHILADELPHIA INDUSTRIAL DEVELOPMENT AUTHORITY................ 705,713 0 705,713
PHILADELPHIA MUNICIPAL AUTHORITY............................. 948,750 0 948,750
PHILADELPHIA MUNICIPAL AUTHORITY............................. 2,821,875 0 2,821,875
PHILADELPHIA SCHOOL DISTRICT UNLIMITED TAX................... 265,938 0 265,938
PHILADELPHIA, PA (RB)........................................ 0 477,500 477,500
PHILA., PA IDR (RB).......................................... 0 518,750 518,750
PITTSBRGH, PA URB REDEV...................................... 0 466,250 466,250
PITTSBURGH WATER AND SEWER AUTHORITY......................... 274,688 0 274,688
PITTSBURGH, PA (GO).......................................... 0 504,375 504,375
POCONO MOUNTAIN, PA.......................................... 0 494,375 494,375
PUERTO RICO ELECTRIC POWER AUTHORITY......................... 270,000 0 270,000
PUERTO RICO PUBLIC BUILDINGS AUTHORITY....................... 533,750 0 533,750
RINGGOLD PA., (GO)........................................... 0 502,500 502,500
SCRANTON-LACKAWANNA HEALTH AND WELFARE....................... 223,750 0 223,750
SE PA TRANS AUTH REV......................................... 0 501,250 501,250
SENECA VY PA SCH DIST GO..................................... 0 496,875 496,875
SOUTHEASTERN PENNSYLVANIA TRANPORTATION...................... 1,243,838 0 1,243,838
STATE PUBLIC SCHOOL BUILDING AUTHORITY....................... 937,500 0 937,500
SUSQUEHANNA UNIV, PA RB...................................... 0 786,563 786,563
THOM JEFF UNIV, PA (PRF)..................................... 0 566,250 566,250
TRINITY SCHOOL DISTRICT GENERAL OBLIGATION................... 1,927,500 0 1,927,500
WATTSBURG, PA (GO)........................................... 0 509,375 509,375
WAYNE HIGHLANDS, PA (GO)..................................... 0 500,000 500,000
WEST CHESTER, PA (GO)........................................ 0 1,011,250 1,011,250
WEST VIEW, PA (ETM).......................................... 0 460,000 460,000
WESTMORELAND COUNTY INDUSTRIAL DEVELOPMENT................... 201,250 0 201,250
YORK COUNTY HOSPITAL AUTHORITY REVENUE BOND.................. 564,919 0 564,919
YORK COUNTY HOSPITAL AUTHORITY REVENUE BOND.................. 631,550 0 631,550
</TABLE>
F-19
<PAGE> 185
<TABLE>
<CAPTION>
PAR (000)
------------------------------------------
PNC
PENNSYLVANIA COMPASS
TAX-FREE PENNSYLVANIA
INCOME MUNICIPAL PRO-FORMA
RATE MATURITY PORTFOLIO BOND FUND COMBINED
---- -------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
YORK COUNTY HOSPITAL AUTHORITY REVENUE BOND.................. 4.80% 12/01/06 $ 635 $ 0 $ 635
SMITH BARNEY TAX FREE MONEY MARKET FUND...................... 1,900,914 0 1,900,914
VANGUARD PENNSYLVANIA TAX-EXEMPT MONEY FUND.................. 1,000,000 0 1,000,000
TOTAL INVESTMENTS............................................
<CAPTION>
VALUE AT MARCH 31, 1995
-------------------------------------------
PNC
PENNSYLVANIA COMPASS
TAX-FREE PENNSYLVANIA
INCOME MUNICIPAL PRO-FORMA
PORTFOLIO BOND FUND COMBINED
------------ ------------ -----------
<S> <C> <C> <C>
YORK COUNTY HOSPITAL AUTHORITY REVENUE BOND.................. $ 587,375 $ 0 $ 587,375
SMITH BARNEY TAX FREE MONEY MARKET FUND...................... 1,900,914 0 1,900,914
VANGUARD PENNSYLVANIA TAX-EXEMPT MONEY FUND.................. 1,000,000 0 1,000,000
----------- ----------- -----------
TOTAL INVESTMENTS............................................ $61,872,120 $16,941,313 $78,813,433
=========== =========== ===========
</TABLE>
See Accompanying Notes to Pro-Forma Financial Statements
F-20
<PAGE> 186
PNC VALUE EQUITY PORTFOLIO
COMPASS EQUITY INCOME FUND
PRO-FORMA SCHEDULE OF INVESTMENTS
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
-------------------------------------
PNC
VALUE COMPASS
EQUITY EQUITY PRO-FORMA
PORTFOLIO INCOME FUND COMBINED
--------- ----------- ---------
<S> <C> <C> <C>
ACE LIMITED....................................................................... 0 234,200 234,200
AETNA LIFE & CASUALTY............................................................. 0 97,400 97,400
ALCAN ALUMINUM LTD................................................................ 0 50,000 50,000
ALCATEL ALSTHOM ADR............................................................... 0 61,500 61,500
ALEXANDER & ALEXANDER............................................................. 0 92,100 92,100
ALEXANDER & BALDWIN............................................................... 0 106,300 106,300
ALLIEDSIGNAL, INC................................................................. 238,400 0 238,400
ALUMINUM COMPANY AMERICA.......................................................... 0 369,400 369,400
AMBAC, INC........................................................................ 176,400 0 176,400
AMERADA HESS CO................................................................... 0 60,000 60,000
AMERICAN GENERAL CORP............................................................. 211,600 0 211,600
AMERICAN HOME PRODUCTS CORP....................................................... 181,800 0 181,800
AMERICAN INTERNATIONAL GROUP, INC................................................. 93,250 0 93,250
AMERICAN PREMIER UNDWR............................................................ 0 40,000 40,000
AMERICAN REAL ESTATE.............................................................. 0 148,700 148,700
AMR CORPORATION................................................................... 0 4,775,000 4,775,000
AMR CORP.......................................................................... 0 8,000 8,000
AON CORP.......................................................................... 220,300 0 220,300
ASTORIA FINANCIAL CORP............................................................ 0 88,000 88,000
ATLANTIC RICHFIELD CO............................................................. 104,800 14,100 118,900
BANCO BILBAO VIZCAYA-ADR.......................................................... 0 4,200 4,200
BANK OF NEW YORK CO., INC......................................................... 197,500 0 197,500
BANKAMERICA CORP.................................................................. 0 216,793 216,793
BCE INC........................................................................... 0 249,900 249,900
BE AEROSPACE INCORPORATED......................................................... 0 239,800 239,800
BECKMAN INSTRUMENTS, INC.......................................................... 279,000 0 279,000
BMC SOFTWARE...................................................................... 0 30,400 30,400
BOEING CO......................................................................... 321,700 52,500 374,200
BOISE CASCADE PFD-CV.............................................................. 0 99,800 99,800
BOISE CASCADE CORP................................................................ 0 50,200 50,200
BRASCAN LIMITED CL A.............................................................. 0 101,700 101,700
BRIERLEY INVEST LTD ADR........................................................... 0 625,000 625,000
<CAPTION>
VALUE AT MARCH 31, 1995
-----------------------------------------
PNC
VALUE COMPASS
EQUITY EQUITY PRO-FORMA
PORTFOLIO INCOME FUND COMBINED
----------- ----------- -----------
<S> <C> <C> <C>
ACE LIMITED....................................................................... $ 0 $5,913,550 $ 5,913,550
AETNA LIFE & CASUALTY............................................................. 0 5,551,800 5,551,800
ALCAN ALUMINUM LTD................................................................ 0 1,331,250 1,331,250
ALCATEL ALSTHOM ADR............................................................... 0 1,114,687 1,114,687
ALEXANDER & ALEXANDER............................................................. 0 2,175,863 2,175,863
ALEXANDER & BALDWIN............................................................... 0 2,391,750 2,391,750
ALLIEDSIGNAL, INC................................................................. 9,357,200 0 9,357,200
ALUMINUM COMPANY AMERICA.......................................................... 0 15,283,925 15,283,925
AMBAC, INC........................................................................ 7,166,250 0 7,166,250
AMERADA HESS CO................................................................... 0 2,962,500 2,962,500
AMERICAN GENERAL CORP............................................................. 6,824,100 0 6,824,100
AMERICAN HOME PRODUCTS CORP....................................................... 12,953,250 0 12,953,250
AMERICAN INTERNATIONAL GROUP, INC................................................. 9,721,313 0 9,721,313
AMERICAN PREMIER UNDWR............................................................ 0 965,000 965,000
AMERICAN REAL ESTATE.............................................................. 0 1,171,013 1,171,013
AMR CORPORATION................................................................... 0 4,464,625 4,464,625
AMR CORP.......................................................................... 0 518,000 518,000
AON CORP.......................................................................... 8,040,950 0 8,040,950
ASTORIA FINANCIAL CORP............................................................ 0 2,706,000 2,706,000
ATLANTIC RICHFIELD CO............................................................. 12,052,000 1,621,500 13,673,500
BANCO BILBAO VIZCAYA-ADR.......................................................... 0 106,050 106,050
BANK OF NEW YORK CO., INC......................................................... 6,492,813 0 6,492,813
BANKAMERICA CORP.................................................................. 0 10,460,262 10,460,262
BCE INC........................................................................... 0 7,715,663 7,715,663
BE AEROSPACE INCORPORATED......................................................... 0 1,558,700 1,558,700
BECKMAN INSTRUMENTS, INC.......................................................... 8,265,375 0 8,265,375
BMC SOFTWARE...................................................................... 0 1,938,000 1,938,000
BOEING CO......................................................................... 17,331,588 2,828,438 20,160,025
BOISE CASCADE PFD-CV.............................................................. 0 2,956,575 2,956,575
BOISE CASCADE CORP................................................................ 0 1,744,450 1,744,450
BRASCAN LIMITED CL A.............................................................. 0 1,372,950 1,372,950
BRIERLEY INVEST LTD ADR........................................................... 0 906,250 906,250
</TABLE>
F-21
<PAGE> 187
<TABLE>
<CAPTION>
SHARES
-------------------------------------
PNC
VALUE COMPASS
EQUITY EQUITY PRO-FORMA
PORTFOLIO INCOME FUND COMBINED
--------- ----------- ---------
<S> <C> <C> <C>
BRISTOL MEYERS SQUIBB CO.......................................................... 175,700 0 175,700
BRITISH AIRWAYS PLC ADR........................................................... 149,100 0 149,100
BURLINGTON RESOURCES.............................................................. 0 87,100 87,100
CALIFORNIA FEDERAL BANK........................................................... 0 143,462 143,462
CANADIAN PAC LTD.................................................................. 0 91,300 91,300
CENTEX CONSTRUCTION............................................................... 0 251,000 251,000
CENTRAL MAINE POWER CO............................................................ 0 139,400 139,400
CENTRAL VERMONT PUBLIC SV......................................................... 0 77,600 77,600
CHEVRON CORP...................................................................... 135,300 0 135,300
CHIQUITTA BRANDS INTL............................................................. 0 123,000 123,000
CHRYSLER CORP..................................................................... 216,100 0 216,100
CHUBB CORP........................................................................ 97,500 89,100 186,600
CIGNA CORP........................................................................ 0 75,000 75,000
CMS ENERGY CORPORATION............................................................ 0 65,300 65,300
COAST SAVINGS FINANCIAL........................................................... 0 63,600 63,600
COMERICA, INC..................................................................... 294,200 0 294,200
COMSAT CORPORATION................................................................ 0 142,500 142,500
CONRAIL CORP...................................................................... 157,500 0 157,500
COOPER INDUSTRIES INC............................................................. 0 59,100 59,100
CORESTATES FINANCIAL CORP......................................................... 348,426 0 348,426
CORNING INCORPORATED.............................................................. 0 13,200 13,200
DEAN WITTER DISCOVER & CO......................................................... 281,936 0 281,936
DIAMOND SHAMROCK, INC............................................................. 229,400 0 229,400
DOW CHEMICAL CO................................................................... 190,000 0 190,000
EASTMAN KODAK COMPANY............................................................. 0 121,000 121,000
ELF AQUITAINE ADR................................................................. 258,100 0 258,100
ELI LILLY & CO.................................................................... 188,200 0 188,200
ENSERCH CORP...................................................................... 0 55,100 55,100
ENTERGY CORP...................................................................... 200,000 72,100 272,100
ESSEX PROPERTY TRUST REIT......................................................... 0 161,000 161,000
EXXON CORP........................................................................ 116,200 0 116,200
E.I. DU PONT DE NEMOURS & CO...................................................... 177,825 0 177,825
FEDERAL PAPER BOARD CO., INC...................................................... 157,600 0 157,600
FINGERHUT COMPANIES, INC.......................................................... 395,400 0 395,400
FIRST BRANDS CORP................................................................. 133,559 0 133,559
FIRST CHICAGO CORP................................................................ 242,800 0 242,800
FORD MOTOR CO..................................................................... 374,900 0 374,900
FRUIT OF THE LOOM, INC............................................................ 285,800 0 285,800
GABLES RESIDTL TR (REIT).......................................................... 0 32,900 32,900
GENERAL ELECTRIC CO............................................................... 221,900 0 221,900
<CAPTION>
VALUE AT MARCH 31, 1995
-----------------------------------------
PNC
VALUE COMPASS
EQUITY EQUITY PRO-FORMA
PORTFOLIO INCOME FUND COMBINED
----------- ----------- -----------
<S> <C> <C> <C>
BRISTOL MEYERS SQUIBB CO.......................................................... $11,069,100 $ 0 $11,069,100
BRITISH AIRWAYS PLC ADR........................................................... 9,803,325 0 9,803,325
BURLINGTON RESOURCES.............................................................. 0 3,549,325 3,549,325
CALIFORNIA FEDERAL BANK........................................................... 0 1,524,284 1,524,284
CANADIAN PAC LTD.................................................................. 0 1,369,500 1,369,500
CENTEX CONSTRUCTION............................................................... 0 3,106,125 3,106,125
CENTRAL MAINE POWER CO............................................................ 0 1,533,400 1,533,400
CENTRAL VERMONT PUBLIC SV......................................................... 0 1,037,900 1,037,900
CHEVRON CORP...................................................................... 6,494,400 0 6,494,400
CHIQUITTA BRANDS INTL............................................................. 0 1,552,875 1,552,875
CHRYSLER CORP..................................................................... 9,049,188 0 9,049,188
CHUBB CORP........................................................................ 7,702,500 7,038,900 14,741,400
CIGNA CORP........................................................................ 0 5,606,250 5,606,250
CMS ENERGY CORPORATION............................................................ 0 1,526,388 1,526,388
COAST SAVINGS FINANCIAL........................................................... 0 1,025,550 1,025,550
COMERICA, INC..................................................................... 8,090,500 0 8,090,500
COMSAT CORPORATION................................................................ 0 2,654,063 2,654,063
CONRAIL CORP...................................................................... 8,839,688 0 8,839,688
COOPER INDUSTRIES INC............................................................. 0 2,290,125 2,290,125
CORESTATES FINANCIAL CORP......................................................... 11,149,632 0 11,149,632
CORNING INCORPORATED.............................................................. 0 475,200 475,200
DEAN WITTER DISCOVER & CO......................................................... 11,488,892 0 11,488,892
DIAMOND SHAMROCK, INC............................................................. 6,050,425 0 6,050,425
DOW CHEMICAL CO................................................................... 13,870,000 0 13,870,000
EASTMAN KODAK COMPANY............................................................. 0 6,428,125 6,428,125
ELF AQUITAINE ADR................................................................. 10,001,375 0 10,001,375
ELI LILLY & CO.................................................................... 13,762,125 0 13,762,125
ENSERCH CORP...................................................................... 0 819,613 819,613
ENTERGY CORP...................................................................... 4,175,000 1,505,088 5,680,088
ESSEX PROPERTY TRUST REIT......................................................... 0 2,555,875 2,555,875
EXXON CORP........................................................................ 7,756,350 0 7,756,350
E.I. DU PONT DE NEMOURS & CO...................................................... 10,758,413 0 10,758,413
FEDERAL PAPER BOARD CO., INC...................................................... 4,491,600 0 4,491,600
FINGERHUT COMPANIES, INC.......................................................... 4,695,375 0 4,695,375
FIRST BRANDS CORP................................................................. 5,025,157 0 5,025,157
FIRST CHICAGO CORP................................................................ 12,170,350 0 12,170,350
FORD MOTOR CO..................................................................... 10,122,300 0 10,122,300
FRUIT OF THE LOOM, INC............................................................ 7,502,250 0 7,502,250
GABLES RESIDTL TR (REIT).......................................................... 0 612,763 612,763
GENERAL ELECTRIC CO............................................................... 12,010,338 0 12,010,338
</TABLE>
F-22
<PAGE> 188
<TABLE>
<CAPTION>
SHARES
-------------------------------------
PNC
VALUE COMPASS
EQUITY EQUITY PRO-FORMA
PORTFOLIO INCOME FUND COMBINED
--------- ----------- ---------
<S> <C> <C> <C>
GENERAL MOTORS CORP............................................................... 182,804 161,800 344,604
GENERAL REINSURANCE CORP.......................................................... 50,600 0 50,600
GEORGIA PAC CORP.................................................................. 0 19,000 19,000
GLENDALE FED BK PFD-CV............................................................ 0 211,450 211,450
GLENDALE FED BNK WARRANT.......................................................... 0 130,480 130,480
GOODYEAR TIRE & RUBBER CO......................................................... 298,000 0 298,000
GP FINANCIAL CORP................................................................. 0 100,000 100,000
HAEMONETICS CORPORATION........................................................... 0 20,000 20,000
HILLS DEPT STORES................................................................. 0 27,251 27,251
IMC GLOBAL, INC................................................................... 264,050 0 264,050
IMPERIAL OIL LIMITED.............................................................. 0 45,500 45,500
INTERNATIONAL PAPER CO............................................................ 100,000 150,800 250,800
INTERSTATE BAKERIES INC........................................................... 0 253,600 253,600
ITT CORP.......................................................................... 66,000 0 66,000
JOHNSTOWN AMERICA INDUS........................................................... 0 10,000 10,000
K MART CORP....................................................................... 723,000 110,700 833,700
KEYCORP........................................................................... 0 122,200 122,200
KIMBERLY CLARK CORP............................................................... 0 15,000 15,000
KOGER EQUITY INC (REIT)........................................................... 0 215,700 215,700
LDDS COMMUNICATIONS INC........................................................... 0 95,614 95,614
LEHMAN BROS HOLDING INC........................................................... 0 213,560 213,560
LOEWS CORPORATION................................................................. 0 10,000 10,000
LONDON & O/S FREITR ADR........................................................... 0 82,400 82,400
LONG ISLAND BANCORP INC........................................................... 0 100,000 100,000
LUBRIZOL CORP..................................................................... 459,200 0 459,200
MBIA, INC......................................................................... 117,500 0 117,500
MERCK & CO., INC.................................................................. 283,350 0 283,350
MERIDIAN BANCORP, INC............................................................. 288,900 0 288,900
MITCHELL ENERGY CL A.............................................................. 0 1,000 1,000
MOBIL CORP........................................................................ 92,500 0 92,500
MONSANTO CO....................................................................... 154,800 0 154,800
MURPHY OIL........................................................................ 0 5,900 5,900
NATIONAL FUEL GAS CORP............................................................ 0 25,000 25,000
NATIONSBANK CORP.................................................................. 148,500 0 148,500
NEW YORK ST ELEC & GAS............................................................ 0 49,100 49,100
NEWHALL LAND & FARM CO............................................................ 0 74,200 74,200
NIAGARA MOHAWK PWR CO............................................................. 0 240,800 240,800
NIPSCO............................................................................ 100,000 0 100,000
NOBLE DRILLING CORP............................................................... 0 236,400 236,400
NORDSK HYDRO A.S. ADR............................................................. 0 66,000 66,000
<CAPTION>
VALUE AT MARCH 31, 1995
-----------------------------------------
PNC
VALUE COMPASS
EQUITY EQUITY PRO-FORMA
PORTFOLIO INCOME FUND COMBINED
----------- ----------- -----------
<S> <C> <C> <C>
GENERAL MOTORS CORP............................................................... $ 8,089,077 $7,159,650 $15,248,727
GENERAL REINSURANCE CORP.......................................................... 6,679,200 0 6,679,200
GEORGIA PAC CORP.................................................................. 0 1,515,250 1,515,250
GLENDALE FED BK PFD-CV............................................................ 0 6,237,775 6,237,775
GLENDALE FED BNK WARRANT.......................................................... 0 391,440 391,440
GOODYEAR TIRE & RUBBER CO......................................................... 10,951,500 0 10,951,500
GP FINANCIAL CORP................................................................. 0 2,312,500 2,312,500
HAEMONETICS CORPORATION........................................................... 0 290,000 290,000
HILLS DEPT STORES................................................................. 0 551,833 551,833
IMC GLOBAL, INC................................................................... 12,905,444 0 12,905,444
IMPERIAL OIL LIMITED.............................................................. 0 1,620,938 1,620,938
INTERNATIONAL PAPER CO............................................................ 7,512,500 11,328,850 18,841,350
INTERSTATE BAKERIES INC........................................................... 0 3,677,200 3,677,200
ITT CORP.......................................................................... 6,773,250 0 6,773,250
JOHNSTOWN AMERICA INDUS........................................................... 0 135,000 135,000
K MART CORP....................................................................... 9,941,250 1,522,125 11,463,375
KEYCORP........................................................................... 0 3,452,150 3,452,150
KIMBERLY CLARK CORP............................................................... 0 780,000 780,000
KOGER EQUITY INC (REIT)........................................................... 0 1,455,975 1,455,975
LDDS COMMUNICATIONS INC........................................................... 0 2,234,977 2,234,977
LEHMAN BROS HOLDING INC........................................................... 0 3,844,080 3,844,080
LOEWS CORPORATION................................................................. 0 987,500 987,500
LONDON & O/S FREITR ADR........................................................... 0 947,600 947,600
LONG ISLAND BANCORP INC........................................................... 0 1,750,000 1,750,000
LUBRIZOL CORP..................................................................... 16,186,800 0 16,186,800
MBIA, INC......................................................................... 7,387,813 0 7,387,813
MERCK & CO., INC.................................................................. 12,077,794 0 12,077,794
MERIDIAN BANCORP, INC............................................................. 8,847,563 0 8,847,563
MITCHELL ENERGY CL A.............................................................. 0 18,000 18,000
MOBIL CORP........................................................................ 8,567,813 0 8,567,813
MONSANTO CO....................................................................... 12,422,700 0 12,422,700
MURPHY OIL........................................................................ 0 254,438 254,438
NATIONAL FUEL GAS CORP............................................................ 0 700,000 700,000
NATIONSBANK CORP.................................................................. 7,536,375 0 7,536,375
NEW YORK ST ELEC & GAS............................................................ 0 1,049,513 1,049,513
NEWHALL LAND & FARM CO............................................................ 0 1,094,450 1,094,450
NIAGARA MOHAWK PWR CO............................................................. 0 3,311,000 3,311,000
NIPSCO............................................................................ 3,112,500 0 3,112,500
NOBLE DRILLING CORP............................................................... 0 1,447,950 1,447,950
NORDSK HYDRO A.S. ADR............................................................. 0 2,458,500 2,458,500
</TABLE>
F-23
<PAGE> 189
<TABLE>
<CAPTION>
SHARES
-------------------------------------
PNC
VALUE COMPASS
EQUITY EQUITY PRO-FORMA
PORTFOLIO INCOME FUND COMBINED
--------- ----------- ---------
<S> <C> <C> <C>
NORFOLK SOUTHERN CORP............................................................. 106,100 0 106,100
NYNEX CORP........................................................................ 286,800 0 286,800
OCCIDENTAL PETRO CORP............................................................. 0 0 0
OHIO EDISON CO.................................................................... 223,900 0 223,900
OLD REPUBLIC INTL CORP............................................................ 0 110,000 110,000
OMI CORP.......................................................................... 0 173,500 173,500
ORYX ENERGY CO.................................................................... 0 268,000 268,000
OVERSEAS SHIPHOLDING.............................................................. 0 6,900 6,900
PECO ENERGY CO.................................................................... 446,900 0 446,900
PETROLEUM HEAT & POWER............................................................ 0 416,700 416,700
PHELPS DODGE CORP................................................................. 179,300 0 179,300
PHILLIPS PETROLEUM CO............................................................. 186,900 116,600 303,500
POLICY MANAGEMENT SYSTEM.......................................................... 0 44,200 44,200
POTASH CORP SASK INC.............................................................. 0 35,800 35,800
RAYCHEM CORP...................................................................... 0 83,700 83,700
RAYONIER INC...................................................................... 0 25,900 25,900
REINSURANCE GROUP OF AMER......................................................... 0 19,200 19,200
RELIASTAR FINANCIAL CORP.......................................................... 90,000 0 90,000
REPUBLIC NEW YORK CORP............................................................ 151,800 0 151,800
REYNLDS MTLS PFD.................................................................. 0 30,600 30,600
RHONE-POULENC S.A. ADR............................................................ 0 30,400 30,400
ROYAL DUTCH PETROLEUM CO.......................................................... 83,400 0 83,400
RYLAND GROUP...................................................................... 0 113,500 113,500
SANTA FE ENERGY RES PFD........................................................... 0 100,000 100,000
SEAGRAM LTD....................................................................... 0 49,000 49,000
SEAGULL ENERGY.................................................................... 0 197,800 197,800
SEARS, ROEBUCK & CO............................................................... 165,500 0 165,500
SEQUA CORP.CL A................................................................... 0 94,900 94,900
SMITH BARNEY MONEY MARKET FUND.................................................... 14,342,831 0 14,342,831
SONAT OFFSHORE DRILLING........................................................... 0 165,100 165,100
SOUTHDOWN INC..................................................................... 0 144,300 144,300
SOUTHERN CO....................................................................... 316,300 0 316,300
STANDARD COMMERCIAL CORP.......................................................... 0 0 0
STORAGE EQUITIES (REIT)........................................................... 0 103,000 103,000
STRATUS COMPUTER, INC............................................................. 182,500 0 182,500
SUN COMMUNTIES INC (REIT)......................................................... 0 104,200 104,200
SUN MICROSYSTEMS, INC............................................................. 304,200 0 304,200
TECHNIP ADS 144A.................................................................. 0 55,700 55,700
TEMPLE INLAND CO.................................................................. 0 102,500 102,500
TENNECO, INC...................................................................... 232,700 0 232,700
<CAPTION>
VALUE AT MARCH 31, 1995
-----------------------------------------
PNC
VALUE COMPASS
EQUITY EQUITY PRO-FORMA
PORTFOLIO INCOME FUND COMBINED
----------- ----------- -----------
<S> <C> <C> <C>
NORFOLK SOUTHERN CORP............................................................. $ 7,095,438 $ 0 $ 7,095,438
NYNEX CORP........................................................................ 11,364,450 0 11,364,450
OCCIDENTAL PETRO CORP............................................................. 0 0 0
OHIO EDISON CO.................................................................... 4,478,000 0 4,478,000
OLD REPUBLIC INTL CORP............................................................ 0 2,640,000 2,640,000
OMI CORP.......................................................................... 0 954,250 954,250
ORYX ENERGY CO.................................................................... 0 3,383,500 3,383,500
OVERSEAS SHIPHOLDING.............................................................. 0 141,450 141,450
PECO ENERGY CO.................................................................... 11,228,363 0 11,228,363
PETROLEUM HEAT & POWER............................................................ 0 3,021,075 3,021,075
PHELPS DODGE CORP................................................................. 10,197,688 0 10,197,688
PHILLIPS PETROLEUM CO............................................................. 6,845,213 4,270,475 11,115,688
POLICY MANAGEMENT SYSTEM.......................................................... 0 1,939,275 1,939,275
POTASH CORP SASK INC.............................................................. 0 1,593,100 1,593,100
RAYCHEM CORP...................................................................... 0 3,400,313 3,400,313
RAYONIER INC...................................................................... 0 806,138 806,138
REINSURANCE GROUP OF AMER......................................................... 0 520,800 520,800
RELIASTAR FINANCIAL CORP.......................................................... 3,060,000 0 3,060,000
REPUBLIC NEW YORK CORP............................................................ 7,457,175 0 7,457,175
REYNLDS MTLS PFD.................................................................. 0 1,457,325 1,457,325
RHONE-POULENC S.A. ADR............................................................ 0 714,400 714,400
ROYAL DUTCH PETROLEUM CO.......................................................... 10,008,000 0 10,008,000
RYLAND GROUP...................................................................... 0 1,631,563 1,631,563
SANTA FE ENERGY RES PFD........................................................... 0 962,500 962,500
SEAGRAM LTD....................................................................... 0 1,555,750 1,555,750
SEAGULL ENERGY.................................................................... 0 3,906,550 3,906,550
SEARS, ROEBUCK & CO............................................................... 8,833,563 0 8,833,563
SEQUA CORP.CL A................................................................... 0 2,775,825 2,775,825
SMITH BARNEY MONEY MARKET FUND.................................................... 14,342,831 0 14,342,831
SONAT OFFSHORE DRILLING........................................................... 0 3,838,575 3,838,575
SOUTHDOWN INC..................................................................... 0 2,453,100 2,453,100
SOUTHERN CO....................................................................... 6,444,613 0 6,444,613
STANDARD COMMERCIAL CORP.......................................................... 0 4 4
STORAGE EQUITIES (REIT)........................................................... 0 1,751,000 1,751,000
STRATUS COMPUTER, INC............................................................. 5,703,125 0 5,703,125
SUN COMMUNTIES INC (REIT)......................................................... 0 2,344,500 2,344,500
SUN MICROSYSTEMS, INC............................................................. 10,570,950 0 10,570,950
TECHNIP ADS 144A.................................................................. 0 1,570,740 1,570,740
TEMPLE INLAND CO.................................................................. 0 4,599,688 4,599,688
TENNECO, INC...................................................................... 10,965,988 0 10,965,988
</TABLE>
F-24
<PAGE> 190
<TABLE>
<CAPTION>
SHARES
-------------------------------------
PNC
VALUE COMPASS
EQUITY EQUITY PRO-FORMA
PORTFOLIO INCOME FUND COMBINED
--------- ----------- ---------
<S> <C> <C> <C>
TEXACO, INC....................................................................... 96,600 0 96,600
TIG HOLDINGS, INC................................................................. 194,100 0 194,100
ULTRAMAR PLC ADR.................................................................. 294,500 0 294,500
UNICOM CORPORATION................................................................ 425,430 171,900 597,330
UNION BANK/SF..................................................................... 0 101,600 101,600
UNITED TECHNOLOGIES CORP.......................................................... 187,050 0 187,050
UNIVERSAL CORP.................................................................... 0 428,600 428,600
UNOCAL CORP....................................................................... 0 153,000 153,000
UST, INC.......................................................................... 267,800 0 267,800
USX-MARATHON GROUP INC............................................................ 0 284,500 284,500
U.S. WEST, INC.................................................................... 268,500 0 268,500
WASHINGTON ENERGY CO.............................................................. 0 25,000 25,000
WILLAMETTE INDUSTRIES INC......................................................... 0 63,200 63,200
WMX TECHNOLOGIES INC.............................................................. 0 118,100 118,100
XEROX CORP........................................................................ 51,200 0 51,200
YORK INTERNATIONAL CORP........................................................... 0 53,200 53,200
REPO (6.25%)...................................................................... 0 14,897,000 14,897,000
<CAPTION>
VALUE AT MARCH 31, 1995
-----------------------------------------
PNC
VALUE COMPASS
EQUITY EQUITY PRO-FORMA
PORTFOLIO INCOME FUND COMBINED
----------- ----------- -----------
<S> <C> <C> <C>
TEXACO, INC....................................................................... $ 6,423,900 $ 0 $ 6,423,900
TIG HOLDINGS, INC................................................................. 4,367,250 0 4,367,250
ULTRAMAR PLC ADR.................................................................. 7,657,000 0 7,657,000
UNICOM CORPORATION................................................................ 10,103,963 4,082,625 14,186,588
UNION BANK/SF..................................................................... 0 3,505,200 3,505,200
UNITED TECHNOLOGIES CORP.......................................................... 12,929,831 0 12,929,831
UNIVERSAL CORP.................................................................... 0 8,947,025 8,947,025
UNOCAL CORP....................................................................... 0 4,398,750 4,398,750
UST, INC.......................................................................... 8,502,650 0 8,502,650
USX-MARATHON GROUP INC............................................................ 0 4,978,750 4,978,750
U.S. WEST, INC.................................................................... 10,740,000 0 10,740,000
WASHINGTON ENERGY CO.............................................................. 0 334,375 334,375
WILLAMETTE INDUSTRIES INC......................................................... 0 3,444,400 3,444,400
WMX TECHNOLOGIES INC.............................................................. 0 3,247,750 3,247,750
XEROX CORP........................................................................ 6,009,600 0 6,009,600
YORK INTERNATIONAL CORP........................................................... 0 2,101,400 2,101,400
REPO (6.25%)...................................................................... 0 14,897,000 14,897,000
------------ ------------ ------------
TOTAL INVESTMENTS................................................................. $638,604,283 $290,668,007 $929,272,290
============ ============ ============
</TABLE>
See Accompanying Notes to Pro-Forma Financial Statements
F-25
<PAGE> 191
PNC GROWTH EQUITY PORTFOLIO
COMPASS GROWTH FUND
PRO-FORMA SCHEDULE OF INVESTMENTS
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES/PAR (000)
-------------------------------------
PNC
GROWTH
EQUITY COMPASS PRO-FORMA
PORTFOLIO GROWTH FUND COMBINED
--------- ----------- ---------
<S> <C> <C> <C>
EQUITY SECURITIES:
ABBOTT LABORATORIES, INC......................................... $70,000 $ 77,000 $147,000
ACE LIMITED...................................................... 0 126,000 126,000
AIR PRODUCTS & CHEMICAL INC...................................... 39,000 26,800 65,800
ALBEMARLE CORP................................................... 0 130,000 130,000
ALBERTSON'S, INC................................................. 60,000 0 60,000
ALLIED-SIGNAL, INC............................................... 67,000 0 67,000
AMERICAN INTERNATIONAL GROUP, INC................................ 27,000 26,500 53,500
AMERICAN RE CORP................................................. 0 70,200 70,200
AMGEN, INC....................................................... 30,000 0 30,000
*AMOCO CORP...................................................... 0 54,000 54,000
AMP, INC......................................................... 30,000 72,000 102,000
ANHEUSER-BUSCH COS.,INC.......................................... 51,000 0 51,000
ATMEL CORP....................................................... 21,200 0 21,200
AT&T CORP........................................................ 32,000 36,500 68,500
AUTOMATIC DATA PROCESSING, INC................................... 42,000 42,000 84,000
*AUTOZONE INC.................................................... 0 90,100 90,100
BANKAMERICA CORP................................................. 45,500 0 45,500
*BEVERLY ENTERPRISES............................................. 0 138,000 138,000
BOATMEN'S BANCSHARES,INC......................................... 50,000 0 50,000
*BURLINGTON RESOURCES............................................ 0 35,000 35,000
CAPITAL CITIES ABC,INC........................................... 24,300 0 24,300
CINTAS CORP...................................................... 46,300 0 46,300
CISCO SYSTEMS, INC............................................... 60,500 0 60,500
CLARK EQUIPMENT CO............................................... 18,700 0 18,700
COCA-COLA CO..................................................... 44,500 0 44,500
COLGATE-PALMOLIVE CO............................................. 20,000 0 20,000
COLUMBIA HCA HEALTHCARE CORP..................................... 50,000 0 50,000
COMCAST SPECIAL A................................................ 0 150,000 150,000
COMPAQ COMPUTER CORP............................................. 46,000 0 46,000
COMPUTER SCIENCES CORP........................................... 29,000 50,000 79,000
CONAGRA, INC..................................................... 46,000 0 46,000
<CAPTION>
VALUE AT MARCH 31, 1995
---------------------------------------------
PNC
GROWTH EQUITY COMPASS PRO-FORMA
PORTFOLIO GROWTH FUND COMBINED
------------- ------------ ------------
<S> <C> <C> <C>
EQUITY SECURITIES:
ABBOTT LABORATORIES, INC......................................... $ 2,493,750 $ 2,743,125 $ 5,236,875
ACE LIMITED...................................................... 0 3,181,500 3,181,500
AIR PRODUCTS & CHEMICAL INC...................................... 2,032,875 1,396,950 3,429,825
ALBEMARLE CORP................................................... 0 1,657,500 1,657,500
ALBERTSON'S, INC................................................. 1,935,000 0 1,935,000
ALLIED-SIGNAL, INC............................................... 2,629,750 0 2,629,750
AMERICAN INTERNATIONAL GROUP, INC................................ 2,814,750 2,762,625 5,577,375
AMERICAN RE CORP................................................. 0 2,457,000 2,457,000
AMGEN, INC....................................................... 2,021,250 0 2,021,250
*AMOCO CORP...................................................... 0 3,435,750 3,435,750
AMP, INC......................................................... 1,080,000 2,592,000 3,672,000
ANHEUSER-BUSCH COS.,INC.......................................... 2,989,875 0 2,989,875
ATMEL CORP....................................................... 818,850 0 818,850
AT&T CORP........................................................ 1,656,000 1,888,875 3,544,875
AUTOMATIC DATA PROCESSING, INC................................... 2,646,000 2,646,000 5,292,000
*AUTOZONE INC.................................................... 0 2,241,238 2,241,238
BANKAMERICA CORP................................................. 2,195,375 0 2,195,375
*BEVERLY ENTERPRISES............................................. 0 2,001,000 2,001,000
BOATMEN'S BANCSHARES,INC......................................... 1,512,500 0 1,512,500
*BURLINGTON RESOURCES............................................ 0 1,426,250 1,426,250
CAPITAL CITIES ABC,INC........................................... 2,144,475 0 2,144,475
CINTAS CORP...................................................... 1,736,250 0 1,736,250
CISCO SYSTEMS, INC............................................... 2,306,563 0 2,306,563
CLARK EQUIPMENT CO............................................... 1,542,750 0 1,542,750
COCA-COLA CO..................................................... 2,514,250 0 2,514,250
COLGATE-PALMOLIVE CO............................................. 1,320,000 0 1,320,000
COLUMBIA HCA HEALTHCARE CORP..................................... 2,150,000 0 2,150,000
COMCAST SPECIAL A................................................ 0 2,343,750 2,343,750
COMPAQ COMPUTER CORP............................................. 1,587,000 0 1,587,000
COMPUTER SCIENCES CORP........................................... 1,431,875 2,468,750 3,900,625
CONAGRA, INC..................................................... 1,523,750 0 1,523,750
</TABLE>
F-26
<PAGE> 192
<TABLE>
<CAPTION>
SHARES/PAR (000)
-------------------------------------
PNC
GROWTH
EQUITY COMPASS PRO-FORMA
PORTFOLIO GROWTH FUND COMBINED
--------- ----------- ---------
<S> <C> <C> <C>
COOPER TIRE & RUBBER CO.......................................... $70,000 $ 0 $ 70,000
CPC INTERNATIONAL, INC........................................... 54,000 0 54,000
DEAN WITTER DISCOVER & CO........................................ 36,000 0 36,000
DIAL CORP........................................................ 86,000 0 86,000
DOW CHEMICAL CO.................................................. 36,000 0 36,000
DSC COMMUNICATIONS CORP.......................................... 37,500 0 37,500
*DUN & BRADSTREET................................................ 0 32,000 32,000
*DURIRON CO...................................................... 0 120,000 120,000
ECHLIN,INC....................................................... 60,000 0 60,000
EMERSON ELECTRIC CO.............................................. 45,000 0 45,000
ENGELHARD CORP................................................... 0 111,000 111,000
EQUIFAX, INC..................................................... 50,000 0 50,000
ERICSSON L M TELEPHONE CO........................................ 0 50,000 50,000
E.I. DU PONT DE NEMOURS & CO..................................... 34,000 0 34,000
FEDERAL HOME LOAN MORTGAGE CORP.................................. 10,000 0 10,000
FEDERAL NATIONAL MORTGAGE ASSOCIATION............................ 10,000 0 10,000
FED. NATL. MTG. ASSOC............................................ 0 40,000 40,000
FIRST DATA CORP.................................................. 27,700 0 27,700
FIRST FINANCIAL MANAGEMENT CORP.................................. 30,000 0 30,000
*FISERV INC...................................................... 0 9,800 9,800
FOREST LABORATORIES, INC......................................... 15,000 0 15,000
FOSTER WHEELER CORP.............................................. 15,000 44,900 59,900
GENERAL ELECTRIC CO.............................................. 84,000 0 84,000
GENERAL INSTRUMENTS CORP......................................... 74,000 68,000 142,000
GENERAL MILLS INC................................................ 0 22,600 22,600
GENERAL RE CORP.................................................. 10,000 0 10,000
*GENETICS INSTITUTE.............................................. 0 54,000 54,000
GILLETTE CO...................................................... 36,000 0 36,000
*HAFSLUND NYCOMED-CL B ADR....................................... 0 90,000 90,000
HBO & CO......................................................... 29,100 0 29,100
HEALTHSOUTH CORP................................................. 75,000 0 75,000
HEWLETT PACKARD CO............................................... 13,400 24,000 37,400
HOME DEPOT, INC.................................................. 25,000 0 25,000
HOSPITALITY FRANCHISE SYSTEM, INC................................ 91,000 0 91,000
HUMANA, INC...................................................... 80,000 0 80,000
ILLINOIS TOOL WORKS, INC......................................... 68,000 70,000 138,000
INTEL CORP....................................................... 25,700 0 25,700
INTERNATIONAL BUSINESS MACHINES CORP............................. 19,700 0 19,700
*INTERNATIONAL GAME TECH......................................... 0 107,000 107,000
*INTERNATIONAL PAPER CO.......................................... 0 21,900 21,900
<CAPTION>
VALUE AT MARCH 31, 1995
---------------------------------------------
PNC
GROWTH EQUITY COMPASS PRO-FORMA
PORTFOLIO GROWTH FUND COMBINED
------------- ------------ ------------
<S> <C> <C> <C>
COOPER TIRE & RUBBER CO.......................................... $ 1,986,250 $ 0 $ 1,986,250
CPC INTERNATIONAL, INC........................................... 2,922,750 0 2,922,750
DEAN WITTER DISCOVER & CO........................................ 1,467,000 0 1,467,000
DIAL CORP........................................................ 2,182,250 0 2,182,250
DOW CHEMICAL CO.................................................. 2,628,000 0 2,628,000
DSC COMMUNICATIONS CORP.......................................... 1,221,093 0 1,221,093
*DUN & BRADSTREET................................................ 0 1,684,000 1,684,000
*DURIRON CO...................................................... 0 2,460,000 2,460,000
ECHLIN,INC....................................................... 2,310,000 0 2,310,000
EMERSON ELECTRIC CO.............................................. 2,992,500 0 2,992,500
ENGELHARD CORP................................................... 0 3,288,375 3,288,375
EQUIFAX, INC..................................................... 1,687,500 0 1,687,500
ERICSSON L M TELEPHONE CO........................................ 0 3,090,625 3,090,625
E.I. DU PONT DE NEMOURS & CO..................................... 2,057,000 0 2,057,000
FEDERAL HOME LOAN MORTGAGE CORP.................................. 605,000 0 605,000
FEDERAL NATIONAL MORTGAGE ASSOCIATION............................ 813,750 0 813,750
FED. NATL. MTG. ASSOC............................................ 0 3,255,000 3,255,000
FIRST DATA CORP.................................................. 1,436,938 0 1,436,938
FIRST FINANCIAL MANAGEMENT CORP.................................. 2,167,500 0 2,167,500
*FISERV INC...................................................... 0 259,700 259,700
FOREST LABORATORIES, INC......................................... 714,375 0 714,375
FOSTER WHEELER CORP.............................................. 508,125 1,520,988 2,029,113
GENERAL ELECTRIC CO.............................................. 4,546,500 0 4,546,500
GENERAL INSTRUMENTS CORP......................................... 2,571,500 2,363,000 4,934,500
GENERAL MILLS INC................................................ 0 1,347,525 1,347,525
GENERAL RE CORP.................................................. 1,320,000 0 1,320,000
*GENETICS INSTITUTE.............................................. 0 2,052,000 2,052,000
GILLETTE CO...................................................... 2,938,500 0 2,938,500
*HAFSLUND NYCOMED-CL B ADR....................................... 0 1,788,750 1,788,750
HBO & CO......................................................... 1,265,850 0 1,265,850
HEALTHSOUTH CORP................................................. 3,046,875 0 3,046,875
HEWLETT PACKARD CO............................................... 1,613,025 2,889,000 4,502,025
HOME DEPOT, INC.................................................. 1,106,250 0 1,106,250
HOSPITALITY FRANCHISE SYSTEM, INC................................ 2,912,000 0 2,912,000
HUMANA, INC...................................................... 2,050,000 0 2,050,000
ILLINOIS TOOL WORKS, INC......................................... 3,323,500 3,421,250 6,744,750
INTEL CORP....................................................... 2,181,288 0 2,181,288
INTERNATIONAL BUSINESS MACHINES CORP............................. 1,612,938 0 1,612,938
*INTERNATIONAL GAME TECH......................................... 0 1,444,500 1,444,500
*INTERNATIONAL PAPER CO.......................................... 0 1,645,238 1,645,238
</TABLE>
F-27
<PAGE> 193
<TABLE>
<CAPTION>
SHARES/PAR (000)
-------------------------------------
PNC
GROWTH
EQUITY COMPASS PRO-FORMA
PORTFOLIO GROWTH FUND COMBINED
--------- ----------- ---------
<S> <C> <C> <C>
INTERPUBLIC GROUP OF COS.,INC.................................... $73,900 $ 0 $ 73,900
JOHNSON & JOHNSON................................................ 42,000 0 42,000
*KERR MCGEE CORP................................................. 0 40,000 40,000
KIMBERLY CLARK CORP.............................................. 0 50,000 50,000
KNIGHT-RIDDER INC................................................ 0 26,800 26,800
KROGER CO........................................................ 77,200 0 77,200
LA QUINTA INNS, INC.............................................. 90,000 0 90,000
LANCASTER COLONY CORP............................................ 43,333 0 43,333
LOWE'S COS., INC................................................. 31,000 0 31,000
LSI LOGIC CORP................................................... 36,000 0 36,000
*LTV CORPORATION................................................. 0 74,000 74,000
MALLINCKRODT GROUP INC........................................... 0 50,700 50,700
MANOR CARE, INC.................................................. 55,000 0 55,000
MARRIOT INTERNATIONAL, INC....................................... 83,000 0 83,000
MATTELL, INC..................................................... 64,062 0 64,062
MAY DEPT STORES.................................................. 0 56,000 56,000
MCDONALDS CORP................................................... 62,000 0 62,000
MCGRAW-HILL, INC................................................. 34,800 0 34,800
MCI COMM CO...................................................... 0 90,000 90,000
MERCK & CO., INC................................................. 50,000 0 50,000
MFS COMMUNICATIONS CO INC........................................ 0 47,400 47,400
MICRON TECHNOLOGY, INC........................................... 13,700 0 13,700
MICROSOFT CORP................................................... 34,000 0 34,000
MICROSOFT INC.................................................... 0 30,000 30,000
MILLIPORE CORP................................................... 40,000 0 40,000
MINNESOTA MINING & MANUFACTURING CO.............................. 45,000 22,500 67,500
MIRAGE RESORTS, INC.............................................. 39,800 0 39,800
MOLEX, INC. CLASS A.............................................. 53,750 0 53,750
MORGAN J P & CO.................................................. 0 34,000 34,000
MOTOROLA, INC.................................................... 37,100 37,000 74,100
*M.S. CARRIERS INC............................................... 0 120,200 120,200
NABISCO HOLDINGS CORP............................................ 36,000 0 36,000
*NALCO CHEMICAL COMPANY.......................................... 0 38,000 38,000
NEWELL CO........................................................ 55,600 0 55,600
*NOBLE AFFILIATES................................................ 0 53,000 53,000
NOKIA ADR CLASS A................................................ 0 16,500 16,500
NOVELL INC....................................................... 0 128,000 128,000
OFFICEMAX, INC................................................... 93,400 0 93,400
OMNICOM GROUP,INC................................................ 40,000 0 40,000
ORACLE SYSTEMS CORP.............................................. 42,000 0 42,000
<CAPTION>
VALUE AT MARCH 31, 1995
---------------------------------------------
PNC
GROWTH EQUITY COMPASS PRO-FORMA
PORTFOLIO GROWTH FUND COMBINED
------------- ------------ ------------
<S> <C> <C> <C>
INTERPUBLIC GROUP OF COS.,INC.................................... $ 2,762,013 $ 0 $ 2,762,013
JOHNSON & JOHNSON................................................ 2,499,000 0 2,499,000
*KERR MCGEE CORP................................................. 0 2,040,000 2,040,000
KIMBERLY CLARK CORP.............................................. 0 2,600,000 2,600,000
KNIGHT-RIDDER INC................................................ 0 1,514,200 1,514,200
KROGER CO........................................................ 2,036,150 0 2,036,150
LA QUINTA INNS, INC.............................................. 2,441,250 0 2,441,250
LANCASTER COLONY CORP............................................ 1,538,322 0 1,538,322
LOWE'S COS., INC................................................. 1,069,500 0 1,069,500
LSI LOGIC CORP................................................... 1,890,000 0 1,890,000
*LTV CORPORATION................................................. 0 1,128,500 1,128,500
MALLINCKRODT GROUP INC........................................... 0 1,711,125 1,711,125
MANOR CARE, INC.................................................. 1,670,625 0 1,670,625
MARRIOT INTERNATIONAL, INC....................................... 2,884,250 0 2,884,250
MATTELL, INC..................................................... 1,577,526 0 1,577,526
MAY DEPT STORES.................................................. 0 2,072,000 2,072,000
MCDONALDS CORP................................................... 2,115,750 0 2,115,750
MCGRAW-HILL, INC................................................. 2,496,900 0 2,496,900
MCI COMM CO...................................................... 0 1,856,250 1,856,250
MERCK & CO., INC................................................. 2,131,250 0 2,131,250
MFS COMMUNICATIONS CO INC........................................ 0 1,659,000 1,659,000
MICRON TECHNOLOGY, INC........................................... 1,041,200 0 1,041,200
MICROSOFT CORP................................................... 2,418,250 0 2,418,250
MICROSOFT INC.................................................... 0 2,133,750 2,133,750
MILLIPORE CORP................................................... 2,230,000 0 2,230,000
MINNESOTA MINING & MANUFACTURING CO.............................. 2,615,625 1,307,813 3,923,438
MIRAGE RESORTS, INC.............................................. 1,114,400 0 1,114,400
MOLEX, INC. CLASS A.............................................. 1,814,062 0 1,814,062
MORGAN J P & CO.................................................. 0 2,074,000 2,074,000
MOTOROLA, INC.................................................... 2,026,588 2,021,125 4,047,713
*M.S. CARRIERS INC............................................... 0 2,704,500 2,704,500
NABISCO HOLDINGS CORP............................................ 1,030,500 0 1,030,500
*NALCO CHEMICAL COMPANY.......................................... 0 1,277,750 1,277,750
NEWELL CO........................................................ 1,417,800 0 1,417,800
*NOBLE AFFILIATES................................................ 0 1,450,875 1,450,875
NOKIA ADR CLASS A................................................ 0 1,212,750 1,212,750
NOVELL INC....................................................... 0 2,432,000 2,432,000
OFFICEMAX, INC................................................... 2,393,374 0 2,393,374
OMNICOM GROUP,INC................................................ 2,190,000 0 2,190,000
ORACLE SYSTEMS CORP.............................................. 1,312,500 0 1,312,500
</TABLE>
F-28
<PAGE> 194
<TABLE>
<CAPTION>
SHARES/PAR (000)
-------------------------------------
PNC
GROWTH
EQUITY COMPASS PRO-FORMA
PORTFOLIO GROWTH FUND COMBINED
--------- ----------- ---------
<S> <C> <C> <C>
PACIFICARE HEALTH SYSTEMS, INC. CLASS B.......................... $45,000 $ 0 $ 45,000
PARKER-HANNIFIN CORP............................................. 40,000 0 40,000
PEPSICO,INC...................................................... 65,300 73,000 138,300
*PERRIGO CO...................................................... 0 100,000 100,000
PETSMART, INC.................................................... 29,000 0 29,000
PFIZER, INC...................................................... 25,000 35,000 60,000
PHILIP MORRIS COS., INC.......................................... 34,500 0 34,500
*POLICY MANAGEMENT SYSTEM........................................ 0 44,000 44,000
PPG INDUSTRIES, INC.............................................. 30,000 0 30,000
PROCTER & GAMBLE CO.............................................. 33,500 0 33,500
PROMUS COS., INC................................................. 14,000 0 14,000
READERS DIGEST ASSOCIATION, INC.................................. 35,400 0 35,400
REPUBLIC NEW YORK CORP........................................... 0 66,000 66,000
REUTERS HOLDINGS PLC ADR......................................... 36,000 0 36,000
RUBBERMAID, INC.................................................. 30,000 46,000 76,000
R.R. DONNELLEY & SONS CO......................................... 40,000 0 40,000
SARA LEE CORP.................................................... 80,000 63,800 143,800
*SCHLUMBERGER LTD................................................ 0 34,500 34,500
SCHOLASTIC CORPORATION........................................... 0 51,700 51,700
SCOTT PAPER CO................................................... 25,000 0 25,000
SERVICE CORP. INTERNATIONAL...................................... 75,000 0 75,000
STAPLES, INC..................................................... 60,000 0 60,000
TEVA PHARMACEUTICAL INDUSTRIES LTD, ADR.......................... 70,000 0 70,000
TEXAS INSTRUMENTS, INC........................................... 12,500 0 12,500
TYSON FOODS, INC................................................. 60,500 0 60,500
* UNOCAL CORP.................................................... 0 99,000 99,000
UST, INC......................................................... 60,000 0 60,000
* VALUE HEALTH INC............................................... 0 38,300 38,300
VARIAN ASSOCIATES, INC........................................... 53,200 0 53,200
VIACOM, INC. CLASS B............................................. 18,000 0 18,000
VODAFONE GRP PLC ADR............................................. 0 75,000 75,000
WAL-MART STORES, INC............................................. 24,000 85,000 109,000
WALT DISNEY CO................................................... 38,000 0 38,000
WARNER-LAMBERT CO................................................ 17,000 0 17,000
WASHINGTON POST CLASS B.......................................... 0 8,000 8,000
XEROX CORP....................................................... 9,200 0 9,200
YORK INTERNATIONAL CORP.......................................... 0 38,700 38,700
<CAPTION>
VALUE AT MARCH 31, 1995
---------------------------------------------
PNC
GROWTH EQUITY COMPASS PRO-FORMA
PORTFOLIO GROWTH FUND COMBINED
------------- ------------ ------------
<S> <C> <C> <C>
PACIFICARE HEALTH SYSTEMS, INC. CLASS B.......................... $ 3,251,250 $ 0 $ 3,251,250
PARKER-HANNIFIN CORP............................................. 1,770,000 0 1,770,000
PEPSICO,INC...................................................... 2,546,700 2,847,000 5,393,700
*PERRIGO CO...................................................... 0 1,162,500 1,162,500
PETSMART, INC.................................................... 1,015,000 0 1,015,000
PFIZER, INC...................................................... 2,143,750 3,001,250 5,145,000
PHILIP MORRIS COS., INC.......................................... 2,251,125 0 2,251,125
*POLICY MANAGEMENT SYSTEM........................................ 0 1,930,500 1,930,500
PPG INDUSTRIES, INC.............................................. 1,132,500 0 1,132,500
PROCTER & GAMBLE CO.............................................. 2,219,375 0 2,219,375
PROMUS COS., INC................................................. 525,000 0 525,000
READERS DIGEST ASSOCIATION, INC.................................. 1,703,625 0 1,703,625
REPUBLIC NEW YORK CORP........................................... 0 3,242,250 3,242,250
REUTERS HOLDINGS PLC ADR......................................... 1,656,000 0 1,656,000
RUBBERMAID, INC.................................................. 990,000 1,518,000 2,508,000
R.R. DONNELLEY & SONS CO......................................... 1,375,000 0 1,375,000
SARA LEE CORP.................................................... 2,090,000 1,666,775 3,756,775
*SCHLUMBERGER LTD................................................ 0 2,057,063 2,057,063
SCHOLASTIC CORPORATION........................................... 0 2,817,650 2,817,650
SCOTT PAPER CO................................................... 2,234,375 0 2,234,375
SERVICE CORP. INTERNATIONAL...................................... 2,100,000 0 2,100,000
STAPLES, INC..................................................... 1,582,500 0 1,582,500
TEVA PHARMACEUTICAL INDUSTRIES LTD, ADR.......................... 2,108,750 0 2,108,750
TEXAS INSTRUMENTS, INC........................................... 1,106,250 0 1,106,250
TYSON FOODS, INC................................................. 1,459,562 0 1,459,562
* UNOCAL CORP.................................................... 0 2,846,250 2,846,250
UST, INC......................................................... 1,905,000 0 1,905,000
* VALUE HEALTH INC............................................... 0 1,464,975 1,464,975
VARIAN ASSOCIATES, INC........................................... 2,241,050 0 2,241,050
VIACOM, INC. CLASS B............................................. 805,500 0 805,500
VODAFONE GRP PLC ADR............................................. 0 2,484,375 2,484,375
WAL-MART STORES, INC............................................. 612,000 2,167,500 2,779,500
WALT DISNEY CO................................................... 2,028,250 0 2,028,250
WARNER-LAMBERT CO................................................ 1,330,250 0 1,330,250
WASHINGTON POST CLASS B.......................................... 0 2,056,000 2,056,000
XEROX CORP....................................................... 1,079,850 0 1,079,850
YORK INTERNATIONAL CORP.......................................... 0 1,528,650 1,528,650
</TABLE>
F-29
<PAGE> 195
<TABLE>
<CAPTION>
SHARES/PAR (000)
-------------------------------------
PNC
GROWTH
EQUITY COMPASS PRO-FORMA
RATE MATURITY PORTFOLIO GROWTH FUND COMBINED
---- -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ZENECA GROUP PLC ADR............................................. $ 0 $ 72,000 $ 72,000
FIXED INCOME SECURITIES:
FEDERAL HOME LOAN BANK DISCOUNT NOTES............................ 6.25% 04/03/95 26,240 0 26,240
REPO (6.25%)..................................................... 6.25 04/03/95 0 7,266 7,266
<CAPTION>
VALUE AT MARCH 31, 1995
---------------------------------------------
PNC
GROWTH EQUITY COMPASS PRO-FORMA
PORTFOLIO GROWTH FUND COMBINED
------------- ------------ ------------
<S> <C> <C> <C>
ZENECA GROUP PLC ADR............................................. $ 0 $ 3,051,000 $ 3,051,000
FIXED INCOME SECURITIES:
FEDERAL HOME LOAN BANK DISCOUNT NOTES............................ 26,230,889 0 26,230,889
REPO (6.25%)..................................................... 0 7,266,000 7,266,000
------------ ------------ ------------
TOTAL INVESTMENTS................................................ $223,481,531 $142,055,638 $365,537,169
============ ============ ============
</TABLE>
- ---------------
* Denotes securities in violation of proposed investment objectives.
See Accompanying Notes to Pro-Forma Financial Statements
F-30
<PAGE> 196
PNC SMALL CAP GROWTH EQUITY PORTFOLIO
COMPASS SMALL COMPANY FUND
PRO-FORMA SCHEDULE OF INVESTMENTS
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES/PAR (000)
-------------------------------------
PNC COMPASS
SMALL CAP SMALL
GROWTH EQUITY COMPANY PRO-FORMA
PORTFOLIO FUND COMBINED
------------- ------- ---------
<S> <C> <C> <C>
EQUITY SECURITIES:
AAR CORP.................................................. $ 0 $31,500 $31,500
ABR INFORMATION SERVICES.................................. 19,200 0 19,200
ACCUSTAFF, INC. .......................................... 27,600 0 27,600
ACT MANUFACTURING, INC. .................................. 11,400 0 11,400
ACXIOM CORP. ............................................. 70,000 0 70,000
ADTRAN, INC. ............................................. 30,000 0 30,000
AFC CABLE SYSTEMS, INC.................................... 29,300 0 29,300
ALASKA AIRGROUP INC....................................... 0 22,600 22,600
ALIAS RESEARCH, INC. ..................................... 40,000 0 40,000
AMCAST INDUSTRIAL CORP. .................................. 0 19,000 19,000
AMERICAN MEDICAL RESPONSE, INC. .......................... 20,000 0 20,000
AMERICAN HOMEPATIENT INC. ................................ 42,000 0 42,000
AMERICAN MANAGEMENT SYSTEMS, INC. ........................ 61,900 0 61,900
AMPHENOL CORP. ........................................... 48,500 0 48,500
APPLIED MAGNETICS......................................... 0 31,500 31,500
APPLIED VOICE TECHNOLOGY, INC. ........................... 32,500 0 32,500
ARROW INTERNATIONAL, INC. ................................ 16,400 0 16,400
ARVIN INDUSTRIES.......................................... 0 15,200 15,200
ASM LITHOGRAPHY HOLDING................................... 33,600 0 33,600
ASPEN TECHNOLOGY, INC. ................................... 35,600 0 35,600
ATRIA SOFTWARE, INC. ..................................... 43,500 0 43,500
BERGEN BRUNSWIG........................................... 0 25,095 25,095
BOOKS-A-MILLION, INC. .................................... 70,000 0 70,000
BOWNE & CO INC............................................ 0 21,300 21,300
BRANDON SYSTEMS CORP. .................................... 20,000 0 20,000
BROWN GROUP INC........................................... 0 8,800 8,800
BUGABOO CREEK STEAK HOUSE, INC. .......................... 16,400 0 16,400
CALDOR CORP............................................... 0 13,900 13,900
CAPSTEAD MORTGAGE CORP.................................... 0 11,400 11,400
CAROLINA FREIGHT CORP..................................... 0 27,300 27,300
CASCADE COMMUNICATIONS CORP. ............................. 15,000 0 15,000
<CAPTION>
VALUE AT MARCH 31, 1995
--------------------------------------------
PNC COMPASS
SMALL CAP SMALL
GROWTH EQUITY COMPANY PRO-FORMA
PORTFOLIO FUND COMBINED
------------- ---------- -----------
<S> <C> <C> <C>
EQUITY SECURITIES:
AAR CORP.................................................. $ 0 $ 381,938 $ 381,938
ABR INFORMATION SERVICES.................................. 475,200 0 475,200
ACCUSTAFF, INC. .......................................... 527,850 0 527,850
ACT MANUFACTURING, INC. .................................. 162,450 0 162,450
ACXIOM CORP. ............................................. 1,172,500 0 1,172,500
ADTRAN, INC. ............................................. 1,672,500 0 1,672,500
AFC CABLE SYSTEMS, INC.................................... 454,150 0 454,150
ALASKA AIRGROUP INC....................................... 0 358,775 358,775
ALIAS RESEARCH, INC. ..................................... 1,220,000 0 1,220,000
AMCAST INDUSTRIAL CORP. .................................. 0 380,000 380,000
AMERICAN MEDICAL RESPONSE, INC. .......................... 502,500 0 502,500
AMERICAN HOMEPATIENT INC. ................................ 1,175,125 0 1,175,125
AMERICAN MANAGEMENT SYSTEMS, INC. ........................ 1,199,313 0 1,199,313
AMPHENOL CORP. ........................................... 1,212,500 0 1,212,500
APPLIED MAGNETICS......................................... 0 82,688 82,688
APPLIED VOICE TECHNOLOGY, INC. ........................... 662,188 0 662,188
ARROW INTERNATIONAL, INC. ................................ 578,100 0 578,100
ARVIN INDUSTRIES.......................................... 0 323,000 323,000
ASM LITHOGRAPHY HOLDING................................... 945,000 0 945,000
ASPEN TECHNOLOGY, INC. ................................... 703,100 0 703,100
ATRIA SOFTWARE, INC. ..................................... 2,066,250 0 2,066,250
BERGEN BRUNSWIG........................................... 0 671,291 671,291
BOOKS-A-MILLION, INC. .................................... 1,023,750 0 1,023,750
BOWNE & CO INC............................................ 0 343,463 343,463
BRANDON SYSTEMS CORP. .................................... 437,500 0 437,500
BROWN GROUP INC........................................... 0 255,200 255,200
BUGABOO CREEK STEAK HOUSE, INC. .......................... 205,000 0 205,000
CALDOR CORP............................................... 0 297,113 297,113
CAPSTEAD MORTGAGE CORP.................................... 0 256,500 256,500
CAROLINA FREIGHT CORP..................................... 0 273,000 273,000
CASCADE COMMUNICATIONS CORP. ............................. 1,035,000 0 1,035,000
</TABLE>
F-31
<PAGE> 197
<TABLE>
<CAPTION>
SHARES/PAR (000)
-------------------------------------
PNC COMPASS
SMALL CAP SMALL
GROWTH EQUITY COMPANY PRO-FORMA
PORTFOLIO FUND COMBINED
------------- ------- ---------
<S> <C> <C> <C>
CHIQUITTA BRANDS INTL..................................... $ 0 $23,100 $23,100
COGNEX CORP. ............................................. 54,500 0 54,500
COHERENT COMMUNICATIONS SYSTEM CORP. ..................... 34,000 0 34,000
COMDISCO INC.............................................. 0 4,600 4,600
CONCENTRA CORP. .......................................... 54,800 0 54,800
CONTINENTAL MEDICAL SYS................................... 0 30,900 30,900
COORS ADOLPH CO. ......................................... 0 15,300 15,300
CPI CORP.................................................. 0 19,000 19,000
CRAY RESEARCH INC. ....................................... 0 20,700 20,700
CRSS INC.................................................. 0 2,200 2,200
CYCARE SYSTEMS, INC. ..................................... 27,000 0 27,000
DAVIDSON & ASSOCIATES, INC. .............................. 12,000 0 12,000
DELTA WOODSIDE IND. INC. ................................. 0 30,600 30,600
DH TECHNOLOGY, INC........................................ 26,500 0 26,500
DIALOGIC CORP............................................. 20,800 0 20,800
DIAMOND SHAMROCK, INC..................................... 0 12,200 12,200
DOUBLETREE CORP........................................... 51,000 0 51,000
DURA PHARMACEUTICALS...................................... 50,000 0 50,000
EGG HEAD INC.............................................. 0 25,000 25,000
EIS INTERNATIONAL, INC.................................... 71,000 0 71,000
ELECTRO SCIENTIFIC INDUSTRIES, INC........................ 25,300 0 25,300
ELECTRONICS FOR IMAGING, INC.............................. 20,400 0 20,400
ENERGEN CORP.............................................. 0 19,000 19,000
ENSERCH CORP.............................................. 0 21,800 21,800
EPIC DESIGN TECHNOLOGY, INC............................... 12,200 0 12,200
FAIR, ISSAC & CO., INC.................................... 17,000 0 17,000
FORE SYSTEMS, INC......................................... 33,000 0 33,000
FRED'S INCORPORATED....................................... 0 30,000 30,000
FSI INTERNATIONAL, INC.................................... 33,100 0 33,100
FTP SOFTWARE, INC......................................... 37,200 0 37,200
FURON CO.................................................. 0 5,100 5,100
GARTNER GROUP INC. NEW CLASS A............................ 40,000 0 40,000
GENERAL HOST CORP......................................... 0 27,563 27,563
GENESCO INC............................................... 0 53,100 53,100
GENEVA STEEL CLASS A...................................... 0 17,700 17,700
GIBSON GREETINGS INC...................................... 0 23,100 23,100
GILAT SATELLITE NETWORKS.................................. 55,000 0 55,000
GOOD GUYS INC............................................. 0 30,100 30,100
GUARANTY NATIONAL CORP.................................... 0 19,500 19,500
GUILFORD MILLS INC........................................ 0 19,000 19,000
<CAPTION>
VALUE AT MARCH 31, 1995
--------------------------------------------
PNC COMPASS
SMALL CAP SMALL
GROWTH EQUITY COMPANY PRO-FORMA
PORTFOLIO FUND COMBINED
------------- ---------- -----------
<S> <C> <C> <C>
CHIQUITTA BRANDS INTL..................................... $ 0 $ 291,638 $ 291,638
COGNEX CORP. ............................................. 1,566,875 0 1,566,875
COHERENT COMMUNICATIONS SYSTEM CORP. ..................... 658,750 0 658,750
COMDISCO INC.............................................. 0 123,050 123,050
CONCENTRA CORP. .......................................... 753,500 0 753,500
CONTINENTAL MEDICAL SYS................................... 0 239,475 239,475
COORS ADOLPH CO. ......................................... 0 250,538 250,538
CPI CORP.................................................. 0 301,625 301,625
CRAY RESEARCH INC. ....................................... 0 380,363 380,363
CRSS INC.................................................. 0 20,075 20,075
CYCARE SYSTEMS, INC. ..................................... 590,625 0 590,625
DAVIDSON & ASSOCIATES, INC. .............................. 402,000 0 402,000
DELTA WOODSIDE IND. INC. ................................. 0 256,275 256,275
DH TECHNOLOGY, INC........................................ 550,438 0 550,438
DIALOGIC CORP............................................. 590,200 0 590,200
DIAMOND SHAMROCK, INC..................................... 0 321,775 321,775
DOUBLETREE CORP........................................... 1,032,750 0 1,032,750
DURA PHARMACEUTICALS...................................... 743,750 0 743,750
EGG HEAD INC.............................................. 0 212,500 212,500
EIS INTERNATIONAL, INC.................................... 1,189,250 0 1,189,250
ELECTRO SCIENTIFIC INDUSTRIES, INC........................ 610,363 0 610,363
ELECTRONICS FOR IMAGING, INC.............................. 1,091,400 0 1,091,400
ENERGEN CORP.............................................. 0 434,625 434,625
ENSERCH CORP.............................................. 0 324,275 324,275
EPIC DESIGN TECHNOLOGY, INC............................... 326,350 0 326,350
FAIR, ISSAC & CO., INC.................................... 816,000 0 816,000
FORE SYSTEMS, INC......................................... 1,303,500 0 1,303,500
FRED'S INCORPORATED....................................... 0 292,500 292,500
FSI INTERNATIONAL, INC.................................... 1,336,413 0 1,336,413
FTP SOFTWARE, INC......................................... 1,181,100 0 1,181,100
FURON CO.................................................. 0 98,175 98,175
GARTNER GROUP INC. NEW CLASS A............................ 1,720,000 0 1,720,000
GENERAL HOST CORP......................................... 0 182,602 182,602
GENESCO INC............................................... 0 139,388 139,388
GENEVA STEEL CLASS A...................................... 0 210,188 210,188
GIBSON GREETINGS INC...................................... 0 205,013 205,013
GILAT SATELLITE NETWORKS.................................. 893,750 0 893,750
GOOD GUYS INC............................................. 0 353,675 353,675
GUARANTY NATIONAL CORP.................................... 0 302,250 302,250
GUILFORD MILLS INC........................................ 0 408,500 408,500
</TABLE>
F-32
<PAGE> 198
<TABLE>
<CAPTION>
SHARES/PAR (000)
-------------------------------------
PNC COMPASS
SMALL CAP SMALL
GROWTH EQUITY COMPANY PRO-FORMA
PORTFOLIO FUND COMBINED
------------- ------- ---------
<S> <C> <C> <C>
GULF SOUTH MEDICAL SUPPLY, INC............................ $30,000 $ 0 $30,000
HANDLEMAN CO DEL.......................................... 0 34,500 34,500
HARMAN INTERNATIONAL INDUSTRIES, INC...................... 34,000 0 34,000
HBO & CO.................................................. 26,000 0 26,000
HCIA, INC................................................. 64,000 0 64,000
HEALTH CARE & RETIREMENT.................................. 38,900 0 38,900
HECHINGER COMPANY CL A.................................... 0 39,000 39,000
HUFFY CORP................................................ 0 23,400 23,400
HYPERION SOFTWARE CORP.................................... 29,000 0 29,000
IDEXX LABORATORIES, INC................................... 35,000 0 35,000
IES INDUSTRIES INC. (ST).................................. 0 10,100 10,100
INFORMATION STORAGE DEVICES, INC.......................... 2,700 0 2,700
INTEGRATED SILICON SOLUTION, INC.......................... 39,000 0 39,000
INTERFACE INC. CL A....................................... 0 30,700 30,700
INTERGRAPH CORP........................................... 0 40,700 40,700
INTERNATIONAL RECTIFIER CORP.............................. 43,300 0 43,300
ISOLYSER COMPANY, INC..................................... 44,400 0 44,400
JOHN ALDEN FIN CORP....................................... 0 10,800 10,800
JUST FOR FEET, INC........................................ 52,600 0 52,600
LAM RESEARCH CORP......................................... 22,400 0 22,400
LANDRY'S SEAFOOD RESTAURANTS, INC......................... 44,500 0 44,500
LANDSTAR SYSTEM, INC...................................... 32,700 0 32,700
LDDS COMMUNICATIONS, INC.................................. 23,400 0 23,400
L.A. GEAR INC............................................. 0 16,700 16,700
MACROMEDIA, INC........................................... 28,600 0 28,600
MAGMA COPPER COMPANY...................................... 0 21,000 21,000
MARSHALL INDUSTRIES....................................... 0 12,400 12,400
MEDAPHIS CORP............................................. 22,300 0 22,300
MEDIC COMPUTER SYSTEMS, INC............................... 35,800 0 35,800
MEDPARTNERS, INC.......................................... 11,100 0 11,100
MICREL, INC............................................... 66,400 0 66,400
MICRO WAREHOUSE, INC...................................... 29,900 0 29,900
MICROCOM INC.............................................. 97,320 0 97,320
MICROTEC RESEARCH, INC.................................... 59,600 0 59,600
MID-AMERICAN WASTE........................................ 0 38,300 38,300
MORGAN KEEGAN INC......................................... 0 29,850 29,850
MORRISON KNUDSEN INC...................................... 0 26,000 26,000
MORRISON RESTAURANTS, INC................................. 43,600 0 43,600
MOVIE GALLERY, INC........................................ 40,000 0 40,000
M.S. CARRIERS, INC........................................ 22,700 0 22,700
<CAPTION>
VALUE AT MARCH 31, 1995
--------------------------------------------
PNC COMPASS
SMALL CAP SMALL
GROWTH EQUITY COMPANY PRO-FORMA
PORTFOLIO FUND COMBINED
------------- ---------- -----------
<S> <C> <C> <C>
GULF SOUTH MEDICAL SUPPLY, INC............................ $ 1,222,500 $ 0 $ 1,222,500
HANDLEMAN CO DEL.......................................... 0 370,875 370,875
HARMAN INTERNATIONAL INDUSTRIES, INC...................... 1,262,250 0 1,262,250
HBO & CO.................................................. 1,131,000 0 1,131,000
HCIA, INC................................................. 1,568,000 0 1,568,000
HEALTH CARE & RETIREMENT.................................. 1,225,350 0 1,225,350
HECHINGER COMPANY CL A.................................... 0 433,875 433,875
HUFFY CORP................................................ 0 353,925 353,925
HYPERION SOFTWARE CORP.................................... 1,355,750 0 1,355,750
IDEXX LABORATORIES, INC................................... 1,452,500 0 1,452,500
IES INDUSTRIES INC. (ST).................................. 0 251,238 251,238
INFORMATION STORAGE DEVICES, INC.......................... 58,050 0 58,050
INTEGRATED SILICON SOLUTION, INC.......................... 1,365,000 0 1,365,000
INTERFACE INC. CL A....................................... 0 429,800 429,800
INTERGRAPH CORP........................................... 0 483,313 483,313
INTERNATIONAL RECTIFIER CORP.............................. 1,039,200 0 1,039,200
ISOLYSER COMPANY, INC..................................... 799,200 0 799,200
JOHN ALDEN FIN CORP....................................... 0 198,450 198,450
JUST FOR FEET, INC........................................ 1,321,575 0 1,321,575
LAM RESEARCH CORP......................................... 1,002,400 0 1,002,400
LANDRY'S SEAFOOD RESTAURANTS, INC......................... 1,362,813 0 1,362,813
LANDSTAR SYSTEM, INC...................................... 1,030,050 0 1,030,050
LDDS COMMUNICATIONS, INC.................................. 546,970 0 546,970
L.A. GEAR INC............................................. 0 56,363 56,363
MACROMEDIA, INC........................................... 965,250 0 965,250
MAGMA COPPER COMPANY...................................... 0 364,875 364,875
MARSHALL INDUSTRIES....................................... 0 322,400 322,400
MEDAPHIS CORP............................................. 1,404,900 0 1,404,900
MEDIC COMPUTER SYSTEMS, INC............................... 1,557,300 0 1,557,300
MEDPARTNERS, INC.......................................... 245,588 0 245,588
MICREL, INC............................................... 1,162,000 0 1,162,000
MICRO WAREHOUSE, INC...................................... 926,900 0 926,900
MICROCOM INC.............................................. 1,103,974 0 1,103,974
MICROTEC RESEARCH, INC.................................... 745,000 0 745,000
MID-AMERICAN WASTE........................................ 0 143,625 143,625
MORGAN KEEGAN INC......................................... 0 444,019 444,019
MORRISON KNUDSEN INC...................................... 0 156,000 156,000
MORRISON RESTAURANTS, INC................................. 959,200 0 959,200
MOVIE GALLERY, INC........................................ 1,075,000 0 1,075,000
M.S. CARRIERS, INC........................................ 510,750 0 510,750
</TABLE>
F-33
<PAGE> 199
<TABLE>
<CAPTION>
SHARES/PAR (000)
-------------------------------------
PNC COMPASS
SMALL CAP SMALL
GROWTH EQUITY COMPANY PRO-FORMA
PORTFOLIO FUND COMBINED
------------- ------- ---------
<S> <C> <C> <C>
M/A COM, INC.............................................. $ 0 $11,900 $11,900
NACCO IND................................................. 0 7,200 7,200
NASHUA CORPORATION........................................ 0 14,500 14,500
NATIONAL COMPUTER SYSTEMS INC............................. 33,800 0 33,800
NATIONAL SERVICES INDUS................................... 0 9,600 9,600
NAUTICA ENTERPRISES....................................... 30,600 0 30,600
NETMANAGE, INC............................................ 36,500 0 36,500
NETWORK GENERAL CORP...................................... 48,700 0 48,700
NORRELL CORP.............................................. 40,900 0 40,900
O'CHARLEY'S, INC.......................................... 18,000 0 18,000
OHIO CASUALTY CORP........................................ 0 11,100 11,100
OMNICARE, INC............................................. 25,000 0 25,000
OPTI, INC................................................. 53,000 0 53,000
ORTHODONTIC CENTERS OF AMERICA, INC....................... 71,300 0 71,300
ORTHOFIX INTERNATIONAL, N.V............................... 75,000 0 75,000
OUTBOARD MARINE CORP...................................... 0 18,800 18,800
PAIRGAIN TECHNOLOGIES, INC................................ 22,700 0 22,700
PAPA JOHN'S INTERNATIONAL, INC............................ 18,500 0 18,500
PAYCHEX, INC.............................................. 9,500 0 9,500
PEAK TECHNOLOGIES GROUP................................... 40,000 0 40,000
PETCO ANIMAL SUPPLIES, INC................................ 32,800 0 32,800
PHH CORP.................................................. 0 7,600 7,600
PHOTRONICS, INC........................................... 67,500 0 67,500
PHYCOR, INC............................................... 46,800 0 46,800
PIERCING PAGODA, INC...................................... 24,300 0 24,300
PINKERTON'S INC........................................... 0 10,700 10,700
PIONEER STANDARD ELECT.................................... 0 24,200 24,200
POOL ENERGY SERVICES...................................... 0 39,700 39,700
POPE & TALBOT INC......................................... 0 21,000 21,000
PRIMARK CORP.............................................. 0 21,900 21,900
PROVIDENT LIFE & ACCIDENT................................. 0 14,800 14,800
PROXIMA CORP.............................................. 31,500 0 31,500
PULTE CORP................................................ 0 18,300 18,300
QUAKER STATE CORP......................................... 0 20,700 20,700
QUALITY DINING, INC....................................... 9,700 0 9,700
QUANEX CORP............................................... 0 16,500 16,500
QUANTUM CORPORATION....................................... 0 22,300 22,300
QUICKSILVER, INC.......................................... 26,500 0 26,500
QUINTILES TRANSNATIONAL CORP.............................. 37,000 0 37,000
REGAL CINEMAS, INC........................................ 41,800 0 41,800
<CAPTION>
VALUE AT MARCH 31, 1995
--------------------------------------------
PNC COMPASS
SMALL CAP SMALL
GROWTH EQUITY COMPANY PRO-FORMA
PORTFOLIO FUND COMBINED
------------- ---------- -----------
<S> <C> <C> <C>
M/A COM, INC.............................................. $ 0 $ 117,513 $ 117,513
NACCO IND................................................. 0 392,400 392,400
NASHUA CORPORATION........................................ 0 280,938 280,938
NATIONAL COMPUTER SYSTEMS INC............................. 566,150 0 566,150
NATIONAL SERVICES INDUS................................... 0 259,200 259,200
NAUTICA ENTERPRISES....................................... 956,250 0 956,250
NETMANAGE, INC............................................ 1,533,000 0 1,533,000
NETWORK GENERAL CORP...................................... 1,387,950 0 1,387,950
NORRELL CORP.............................................. 899,800 0 899,800
O'CHARLEY'S, INC.......................................... 211,500 0 211,500
OHIO CASUALTY CORP........................................ 0 374,625 374,625
OMNICARE, INC............................................. 1,312,500 0 1,312,500
OPTI, INC................................................. 854,625 0 854,625
ORTHODONTIC CENTERS OF AMERICA, INC....................... 1,256,663 0 1,256,663
ORTHOFIX INTERNATIONAL, N.V............................... 1,331,250 0 1,331,250
OUTBOARD MARINE CORP...................................... 0 394,800 394,800
PAIRGAIN TECHNOLOGIES, INC................................ 541,963 0 541,963
PAPA JOHN'S INTERNATIONAL, INC............................ 663,686 0 663,686
PAYCHEX, INC.............................................. 437,000 0 437,000
PEAK TECHNOLOGIES GROUP................................... 800,000 0 800,000
PETCO ANIMAL SUPPLIES, INC................................ 688,800 0 688,800
PHH CORP.................................................. 0 288,800 288,800
PHOTRONICS, INC........................................... 1,535,625 0 1,535,625
PHYCOR, INC............................................... 1,602,900 0 1,602,900
PIERCING PAGODA, INC...................................... 206,550 0 206,550
PINKERTON'S INC........................................... 0 173,875 173,875
PIONEER STANDARD ELECT.................................... 0 441,650 441,650
POOL ENERGY SERVICES...................................... 0 312,638 312,638
POPE & TALBOT INC......................................... 0 336,000 336,000
PRIMARK CORP.............................................. 0 314,813 314,813
PROVIDENT LIFE & ACCIDENT................................. 0 334,850 334,850
PROXIMA CORP.............................................. 815,063 0 815,063
PULTE CORP................................................ 0 430,050 430,050
QUAKER STATE CORP......................................... 0 284,625 284,625
QUALITY DINING, INC....................................... 118,825 0 118,825
QUANEX CORP............................................... 0 375,375 375,375
QUANTUM CORPORATION....................................... 0 331,713 331,713
QUICKSILVER, INC.......................................... 571,253 0 571,253
QUINTILES TRANSNATIONAL CORP.............................. 1,341,250 0 1,341,250
REGAL CINEMAS, INC........................................ 1,034,550 0 1,034,550
</TABLE>
F-34
<PAGE> 200
<TABLE>
<CAPTION>
SHARES/PAR (000)
-------------------------------------
PNC COMPASS
SMALL CAP SMALL
GROWTH EQUITY COMPANY PRO-FORMA
PORTFOLIO FUND COMBINED
------------- ------- ---------
<S> <C> <C> <C>
RELIASTAR FINANCIAL CORP.................................. $ 0 $9,200 $ 9,200
REMEDY CORP............................................... 1,000 0 1,000
ROBERT HALF INTERNATIONAL, INC............................ 52,800 0 52,800
ROCK BOTTOM RESTAURANTS, INC.............................. 60,000 0 60,000
ROSS STORES INCORPORATED.................................. 0 25,600 25,600
RUDDICK CORP.............................................. 0 19,200 19,200
RYKOFF-SEXTON INC......................................... 0 21,625 21,625
SCIENTIFIC GAMES HOLDING CORP., INC....................... 44,000 0 44,000
SHIVA CORP................................................ 30,000 0 30,000
SILICON VALLEY GROUP, INC................................. 40,000 0 40,000
SIZZLER INTERNATIONAL..................................... 0 57,300 57,300
SOFTKEY INTERNATIONAL, INC................................ 53,000 0 53,000
SOFTWARE ARTISTRY, INC.................................... 30,000 0 30,000
SOUTHDOWN INC............................................. 0 11,000 11,000
SPACELABS MEDICAL INC..................................... 0 17,000 17,000
SPEEDWAY MOTORSPORTS, INC................................. 27,600 0 27,600
SPS TRANSACTION CO........................................ 32,000 0 32,000
SPX CORP.................................................. 0 18,600 18,600
STONE CONTAINER CORP...................................... 0 13,000 13,000
STORAGE USA, INC.......................................... 40,000 0 40,000
STRATACOM, INC............................................ 56,000 0 56,000
ST. JOHN KNITS, INC....................................... 30,000 0 30,000
SUN HEALTHCARE GROUP, INC................................. 45,000 0 45,000
SUNGLASS HUT INTERNATIONAL, INC........................... 45,500 0 45,500
SWIFT TRANSPORTATION CO., INC............................. 30,000 0 30,000
SYSTEM SOFTWARE ASSOCIATES, INC........................... 23,000 0 23,000
TECHNOL MEDICAL PRODUCTS, INC............................. 33,600 0 33,600
TENCOR INSTRUMENTS........................................ 11,400 0 11,400
TERRA INDUSTRIES INC...................................... 0 23,600 23,600
TGV SOFTWARE, INC......................................... 14,000 0 14,000
THE LEARNING CO........................................... 50,000 0 50,000
THIOKOL CORP.............................................. 0 15,400 15,400
TIVOLI SYSTEMS, INC....................................... 35,100 0 35,100
TOMMY HILFIGER CORP....................................... 50,000 0 50,000
TORO COMPANY.............................................. 0 14,000 14,000
TOWER SEMICONDUCTOR LTD................................... 32,400 0 32,400
TREND-LINES, INC.......................................... 31,000 0 31,000
TRIMBLE NAVIGATION, LTD................................... 50,000 0 50,000
UGI CORPORATION........................................... 0 14,500 14,500
ULTRATECH STEPPER, INC.................................... 12,000 0 12,000
<CAPTION>
VALUE AT MARCH 31, 1995
--------------------------------------------
PNC COMPASS
SMALL CAP SMALL
GROWTH EQUITY COMPANY PRO-FORMA
PORTFOLIO FUND COMBINED
------------- ---------- -----------
<S> <C> <C> <C>
RELIASTAR FINANCIAL CORP.................................. $ 0 $ 312,800 $ 312,800
REMEDY CORP............................................... 35,875 0 35,875
ROBERT HALF INTERNATIONAL, INC............................ 1,346,400 0 1,346,400
ROCK BOTTOM RESTAURANTS, INC.............................. 1,237,500 0 1,237,500
ROSS STORES INCORPORATED.................................. 0 281,600 281,600
RUDDICK CORP.............................................. 0 384,000 384,000
RYKOFF-SEXTON INC......................................... 0 340,594 340,594
SCIENTIFIC GAMES HOLDING CORP., INC....................... 913,000 0 913,000
SHIVA CORP................................................ 978,750 0 978,750
SILICON VALLEY GROUP, INC................................. 1,125,000 0 1,125,000
SIZZLER INTERNATIONAL..................................... 0 307,988 307,988
SOFTKEY INTERNATIONAL, INC................................ 1,444,250 0 1,444,250
SOFTWARE ARTISTRY, INC.................................... 720,000 0 720,000
SOUTHDOWN INC............................................. 0 187,000 187,000
SPACELABS MEDICAL INC..................................... 0 425,000 425,000
SPEEDWAY MOTORSPORTS, INC................................. 496,800 0 496,800
SPS TRANSACTION CO........................................ 1,120,000 0 1,120,000
SPX CORP.................................................. 0 269,700 269,700
STONE CONTAINER CORP...................................... 0 297,375 297,375
STORAGE USA, INC.......................................... 1,165,000 0 1,165,000
STRATACOM, INC............................................ 2,408,000 0 2,408,000
ST. JOHN KNITS, INC....................................... 1,095,000 0 1,095,000
SUN HEALTHCARE GROUP, INC................................. 1,147,500 0 1,147,500
SUNGLASS HUT INTERNATIONAL, INC........................... 1,347,938 0 1,347,938
SWIFT TRANSPORTATION CO., INC............................. 465,000 0 465,000
SYSTEM SOFTWARE ASSOCIATES, INC........................... 575,000 0 575,000
TECHNOL MEDICAL PRODUCTS, INC............................. 638,400 0 638,400
TENCOR INSTRUMENTS........................................ 675,450 0 675,450
TERRA INDUSTRIES INC...................................... 0 256,650 256,650
TGV SOFTWARE, INC......................................... 315,000 0 315,000
THE LEARNING CO........................................... 1,493,750 0 1,493,750
THIOKOL CORP.............................................. 0 436,975 436,975
TIVOLI SYSTEMS, INC....................................... 1,298,700 0 1,298,700
TOMMY HILFIGER CORP....................................... 1,100,000 0 1,100,000
TORO COMPANY.............................................. 0 400,750 400,750
TOWER SEMICONDUCTOR LTD................................... 639,900 0 639,900
TREND-LINES, INC.......................................... 406,875 0 406,875
TRIMBLE NAVIGATION, LTD................................... 950,000 0 950,000
UGI CORPORATION........................................... 0 277,313 277,313
ULTRATECH STEPPER, INC.................................... 583,500 0 583,500
</TABLE>
F-35
<PAGE> 201
<TABLE>
<CAPTION>
SHARES/PAR (000)
-------------------------------------
PNC COMPASS
SMALL CAP SMALL
GROWTH EQUITY COMPANY PRO-FORMA
RATE MATURITY PORTFOLIO FUND COMBINED
---- -------- ------------- ------- ---------
<S> <C> <C> <C> <C> <C>
UNC INC................................................... $ 0 $71,800 $71,800
UNITED ILLUMINATING....................................... 0 11,000 11,000
UNITED WASTE SYSTEMS, INC................................. 45,500 0 45,500
UNIVERSAL CORP............................................ 0 10,200 10,200
UNIVERSAL HEALTH SERVICES................................. 0 12,600 12,600
U.S. ROBOTICS CORP........................................ 23,000 0 23,000
U.S. SHOE CORPORATION..................................... 0 18,100 18,100
VENCOR, INC............................................... 35,500 0 35,500
VIVRA, INC................................................ 29,300 0 29,300
WACKENHUT CORRECTIONS CORP................................ 61,100 0 61,100
WASHINGTON WATER POWER.................................... 0 17,500 17,500
WATKINS JOHNSON CO........................................ 0 9,300 9,300
WESTERN PUBLISHING........................................ 0 20,500 20,500
FIXED INCOME SECURITIES:
FEDERAL HOME LOAN BANK DISCOUNT NOTES..................... 6.25% 04/03/95 16,350 0 16,350
SHOLODGE, INC............................................. 7.50 05/01/04 1,500 0 1,500
TRI-PARTY REPO (SHEARSON)................................. 0 72,700 72,700
<CAPTION>
VALUE AT MARCH 31, 1995
--------------------------------------------
PNC COMPASS
SMALL CAP SMALL
GROWTH EQUITY COMPANY PRO-FORMA
PORTFOLIO FUND COMBINED
------------- ---------- -----------
<S> <C> <C> <C>
UNC INC................................................... $ 0 $ 394,900 $ 394,900
UNITED ILLUMINATING....................................... 0 352,000 352,000
UNITED WASTE SYSTEMS, INC................................. 1,285,375 0 1,285,375
UNIVERSAL CORP............................................ 0 212,925 212,925
UNIVERSAL HEALTH SERVICES................................. 0 318,150 318,150
U.S. ROBOTICS CORP........................................ 1,437,500 0 1,437,500
U.S. SHOE CORPORATION..................................... 0 477,388 477,388
VENCOR, INC............................................... 1,264,688 0 1,264,688
VIVRA, INC................................................ 944,925 0 944,925
WACKENHUT CORRECTIONS CORP................................ 1,733,713 0 1,733,713
WASHINGTON WATER POWER.................................... 0 262,500 262,500
WATKINS JOHNSON CO........................................ 0 355,725 355,725
WESTERN PUBLISHING........................................ 0 174,250 174,250
FIXED INCOME SECURITIES:
FEDERAL HOME LOAN BANK DISCOUNT NOTES..................... 16,344,323 0 16,344,323
SHOLODGE, INC............................................. 1,297,500 0 1,297,500
TRI-PARTY REPO (SHEARSON)................................. 0 72,700 72,700
------------ ----------- ------------
TOTAL INVESTMENTS......................................... $133,883,225 $25,222,368 $159,105,593
============ =========== ============
</TABLE>
- ---------------
* Denotes securities in violation of proposed investment objectives.
See Accompanying Notes to Pro-Forma Financial Statements
F-36
<PAGE> 202
EXHIBIT TO PROFORMA SCHEDULE OF INVESTMENTS
COMPASS SMALL COMPANY FUND
SCHEDULE OF INVESTMENTS
AUGUST 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
VALUE AT
SHARES/PAR(000) AUGUST 31, 1995
------------------ ------------------
COMPASS COMPASS
SMALL COMPANY FUND SMALL COMPANY FUND
------------------ ------------------
<S> <C> <C>
ABR INFORMATION SERVICES................................................. 2,800 $ 63,000
ACCUSTAFF................................................................ 1,500 42,000
ACT MANUFACTURING........................................................ 1,900 37,000
ACTEL.................................................................... 1,800 30,000
*ALLIANCE SEMICONDUCTOR.................................................. 11,500 450,000
*ALTERA.................................................................. 7,100 445,000
AMERICA RADIO SYSTEMS.................................................... 8,200 234,000
APPLE SOUTH.............................................................. 9,600 235,000
APPLEBEES INTERNATIONAL.................................................. 7,600 228,000
APPLIED DIGITAL ACCESS................................................... 2,000 24,000
APPLIX................................................................... 1,200 34,000
ASHWORTH................................................................. 4,200 29,000
ASPEN TECHNOLOGY......................................................... 2,200 59,000
ATLANTIC................................................................. 7,100 284,000
*ATMEL................................................................... 11,800 373,000
AUSPEX SYSTEMS........................................................... 2,500 39,000
AVECOR CARDIOVASCULAR.................................................... 2,700 36,000
BABY SUPERSTORE.......................................................... 6,000 281,000
BARRETT RESOURCES........................................................ 8,700 188,000
BELDEN & BLAKE........................................................... 2,100 34,000
BORDERS GROUP............................................................ 11,800 239,000
BROOKS AUTOMATION........................................................ 2,400 43,000
BROOKTREE................................................................ 4,000 80,000
CANNONDALE............................................................... 2,100 34,000
CAREER HORIZONS.......................................................... 1,600 40,000
CHICAGO MINIATURE LAMP................................................... 2,600 44,000
CHIPS & TECHNOLOGIES..................................................... 3,200 44,000
CINCINNATI MICROWAVE..................................................... 13,500 243,000
*CIRRUS LOGIC............................................................ 9,800 534,000
COGNEX................................................................... 6,200 309,000
COLONIA DATA TECHNOLOGIES................................................ 9,400 170,000
COMMUNITY HEALTH SYSTEMS................................................. 4,600 177,000
COMPODENT................................................................ 1,600 44,000
</TABLE>
F-37
<PAGE> 203
<TABLE>
<CAPTION>
VALUE AT
SHARES/PAR(000) AUGUST 31, 1995
------------------ ------------------
COMPASS COMPASS
SMALL COMPANY FUND SMALL COMPANY FUND
------------------ ------------------
<S> <C> <C>
COMPUTATIONAL SYSTEMS....................................................... 900 $ 14,000
CORPORATE EXPRESS........................................................... 9,600 224,000
CREDIT ACCEPTANCE........................................................... 1,400 30,000
CYBER COMPUTER PRODUCTS..................................................... 2,800 64,000
DAKA INTERNATIONAL.......................................................... 400 11,000
DALLAS SEMICONDUCTORS....................................................... 3,600 86,000
DAVE AND BUSTER'S........................................................... 1,800 31,000
DIAMOND MULTIMEDIA SYSTEMS.................................................. 2,000 54,000
DIGITAL LINK................................................................ 1,300 31,000
DISCREET LOGIC.............................................................. 3,500 142,000
DOLLAR TREE STORES.......................................................... 2,400 71,000
DOUBLETREE.................................................................. 2,600 50,000
DURACRAFT................................................................... 7,800 311,000
EDELBROCK................................................................... 2,700 42,000
* ELECTRONIC ARTS........................................................... 6,000 228,000
FELCOR SUITES HOTELS........................................................ 2,000 54,000
FRIEDMAN'S CLASS A.......................................................... 11,900 277,000
FSI INTERNATIONAL........................................................... 12,700 448,000
GARDEN RIDGE................................................................ 1,700 53,000
GASONICS INTERNATIONAL...................................................... 3,300 115,000
* GTI....................................................................... 15,400 337,000
GYMBOREE.................................................................... 5,500 164,000
HARMAN INTERNATIONAL........................................................ 5,565 248,000
HEALTHPLAN SERVICES......................................................... 1,600 30,000
* HEALTHSOURCE.............................................................. 6,800 272,000
* HEALTHSOUTH REHABILITATION................................................ 8,400 198,000
HOLLYWOOD ENTERTAINMENT..................................................... 10,100 287,000
HORIZON MENTAL HEALTH MANAGEMENT............................................ 1,400 21,000
HORIZON/CMS HEALTHCARE...................................................... 9,500 209,000
HUTCHINSON TECHNOLOGY....................................................... 5,000 391,000
INPHYNET MEDICAL MANAGEMENT................................................. 1,400 31,000
INTEGRATED HEALTH SERVICES.................................................. 4,500 134,000
INTEGRATED SILICON SYSTEMS.................................................. 8,700 248,000
INTERSOLV................................................................... 2,200 43,000
INTER-TEL................................................................... 1,400 23,000
JUST FOR FEET............................................................... 3,600 105,000
KEY TRONIC.................................................................. 4,800 73,000
KLA INSTRUMENTS............................................................. 5,400 462,000
* KOMAG..................................................................... 9,100 566,000
LAQUITA INNS................................................................ 14,300 429,000
LATTICE SEMICONDUCTOR....................................................... 13,300 437,000
</TABLE>
F-38
<PAGE> 204
<TABLE>
<CAPTION>
VALUE AT
SHARES/PAR(000) AUGUST 31, 1995
------------------ ------------------
COMPASS COMPASS
SMALL COMPANY FUND SMALL COMPANY FUND
------------------ ------------------
<S> <C> <C>
LEVEL ONE COMMUNICATIONS.................................................... 1,600 $ 40,000
* LONE STAR STEAK HOUSE & SALOON............................................ 13,100 524,000
LONGHORN STEAK.............................................................. 1,500 27,000
MACKIE DESIGNS.............................................................. 3,300 50,000
MICRO LINEAR................................................................ 3,700 58,000
* MICROCHIP TECHNOLOGY...................................................... 7,500 284,000
* MID ATLANTIC MEDICAL SERVICES............................................. 8,600 160,000
MINNESOTA EDUCATIONAL COMPUTING............................................. 1,800 52,000
MOBILE TELECOMMUNICATION TECHNOLOGY......................................... 3,300 101,000
MOBILEMEDIA................................................................. 9,000 218,000
MOOVIES..................................................................... 1,900 36,000
MOVIE GALLERY............................................................... 1,600 76,000
NATIONAL INSTRUMENTS........................................................ 2,600 56,000
NATIONAL WIRELESS HOLDINGS.................................................. 2,600 34,000
NAUTICA ENTERPRISES......................................................... 10,400 329,000
NECKLERMEDIA................................................................ 2,600 110,000
NHP......................................................................... 1,200 16,000
NORTHFIELD LABORATORIES..................................................... 2,000 34,000
NOVELLUS SYSTEMS............................................................ 4,300 317,000
NUMBER NINE VISUAL TECHNOLOGY............................................... 2,600 47,000
O'CHARLEYS.................................................................. 3,900 65,000
OAK TECHNOLOGY.............................................................. 10,900 478,000
OPTA FOOD INGREDIENTS....................................................... 1,700 27,000
ORCHARD SUPPLY HARDWARE..................................................... 1,100 17,000
OSTEX INTERNATIONAL......................................................... 1,200 20,000
OUTBACK STEAKHOUSE.......................................................... 8,400 271,000
PAPA JOHN'S INTERNATIONAL................................................... 2,100 84,000
* PARAMETRIC TECHNOLOGY..................................................... 7,200 398,000
PHAMIS...................................................................... 1,600 43,000
PHYSICIANS HEALTH SERVICES.................................................. 2,500 70,000
PINNACLE SYSTEMS............................................................ 1,300 35,000
PLATINUM SOFTWARE........................................................... 13,400 157,000
PLAYERS INTERNATIONAL....................................................... 10,600 223,000
PROFFITTS................................................................... 10,900 287,000
PROJECT SOFTWARE AND DEVELOPMENT............................................ 1,000 29,000
* QUANTUM................................................................... 19,900 478,000
READING & BATES............................................................. 13,800 167,000
* READ-RITE................................................................. 14,900 610,000
RESMED...................................................................... 2,200 33,000
ROCK BOTTOM RESTAURANTS..................................................... 2,300 59,000
S3.......................................................................... 11,700 459,000
</TABLE>
F-39
<PAGE> 205
<TABLE>
<CAPTION>
RATE
------
VALUE AT
SHARES/PAR(000) AUGUST 31, 1995
------------------ ------------------
COMPASS COMPASS
RATE SMALL COMPANY FUND SMALL COMPANY FUND
-------- ------------------ ------------------
<S> <C> <C> <C>
SILICON VALLEY GROUP..................................... 3,500 151,000
SIMULA................................................... 1,300 35,000
SIRROM CAPITAL........................................... 1,700 28,000
SOFTDESK................................................. 2,300 56,000
SPECTRAN................................................. 2,700 125,000
SPORTS & RECREATION...................................... 8,500 101,000
STARBUCKS................................................ 7,700 308,000
STATION CASINOS.......................................... 8,800 171,000
STORMEDIA................................................ 7,200 299,000
SUMMIT MEDICAL SYSTEMS................................... 1,900 29,000
SYMMETRICOM.............................................. 1,700 38,000
* SYNOPSYS............................................... 7,500 435,000
SYSTEM SOFTWARE ASSOCIATES............................... 7,900 249,000
TECHNOL MEDICAL PRODUCTS................................. 10,300 187,000
TENCOR INSTRUMENT........................................ 9,400 407,000
* TERADYNE............................................... 9,600 364,000
THERMEDICS............................................... 2,700 52,000
THERMOLASE............................................... 1,400 28,000
TOMMY HILFIGER........................................... 13,200 443,000
TOWER SEMICONDUCTOR...................................... 2,000 62,000
TRANSACTION SYSTEMS ARCHITECTS........................... 1,300 32,000
TRISM.................................................... 3,700 31,000
TYLAN GENERAL............................................ 1,800 30,000
ULTRATECH STEPPAR........................................ 9,100 359,000
UNITED AMERICAN HEALTHCARE............................... 1,800 20,000
U.S. FILTER.............................................. 2,200 48,000
U.S. OFFICE PRODUCTS..................................... 2,500 43,000
WATSON PHARMACEUTICALS................................... 6,800 282,000
WEATHERFORD INTERNATIONAL................................ 10,600 139,000
WEST MARINE.............................................. 3,300 87,000
*WESTERN DIGITAL......................................... 19,200 396,000
WIND RIVER SYSTEMS....................................... 1,900 35,000
WINSTON HOTELS........................................... 3,000 33,000
*WLSI TECHNOLOGY......................................... 7,300 241,000
LEHMAN MORTGAGE REPO..................................... 5.8% 2,153 2,153,000
-----------
Total Investments........................................ $26,266,000
===========
</TABLE>
- ---------------
* Denotes securities in violation of proposed investment objectives.
See Accompanying Notes to Pro-Forma Financial Statements
F-40
<PAGE> 206
PNC BALANCED PORTFOLIO
COMPASS BALANCED FUND
PRO-FORMA SCHEDULE OF INVESTMENTS
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES/PAR (000)
------------------------------------
PNC COMPASS
BALANCED BALANCED PRO-FORMA
PORTFOLIO FUND COMBINED
--------- -------- ---------
<S> <C> <C> <C>
EQUITY SECURITIES:
AIRTOUCH COM. INC........................................................................ 0 6,500 6,500
ALLIED-SIGNAL, INC....................................................................... 20,400 0 20,400
AMERICAN HOME PRODUCTS CORP.............................................................. 29,300 0 29,300
AMERICAN INTERNATIONAL GROUP, INC........................................................ 22,450 0 22,450
AMOCO CORP............................................................................... 32,300 0 32,300
ANHEUSER BUSCH CO INC.................................................................... 0 2,800 2,800
APPLE COMPUTERS.......................................................................... 0 3,000 3,000
ARCHER DANIELS MIDLAND................................................................... 0 12,000 12,000
ATLANTIC RICHFIELD CO.................................................................... 0 2,000 2,000
AT&T CORP................................................................................ 34,100 6,000 40,100
AVNET, INC............................................................................... 0 5,000 5,000
A.M.P., INC.............................................................................. 27,000 0 27,000
BECKMAN INSTRUMENTS, INC................................................................. 52,500 0 52,500
BELL ATLANTIC CORP....................................................................... 0 4,000 4,000
BOEING CO................................................................................ 40,100 0 40,100
BRISTOL-MYERS SQUIBB CO.................................................................. 18,500 4,000 22,500
BURLINGTON RESOURCES..................................................................... 0 4,500 4,500
BW/IP HOLDING INC CL A................................................................... 0 7,000 7,000
CHEVRON CORP............................................................................. 19,800 3,800 23,600
CHRYSLER CORP............................................................................ 18,500 0 18,500
CHUBB CORP............................................................................... 15,700 0 15,700
CINTAS CORP.............................................................................. 34,200 0 34,200
COCA-COLA CO............................................................................. 24,500 0 24,500
COMERICA, INC............................................................................ 45,800 7,500 53,300
COMPAQ COMPUTER CORP..................................................................... 25,400 0 25,400
COMPUTER SCIENCES CORP................................................................... 29,300 0 29,300
CONRAIL CORP............................................................................. 17,700 0 17,700
CROMPTON AND KNOWLES..................................................................... 0 10,000 10,000
DANA CORP................................................................................ 0 8,000 8,000
DEAN WITTER DISCOVER & CO................................................................ 44,300 0 44,300
DOMINION RESOURCES....................................................................... 0 6,500 6,500
DOW CHEMICAL CO.......................................................................... 27,900 0 27,900
<CAPTION>
VALUE AT MARCH 31, 1995
--------------------------------------
PNC COMPASS
BALANCED BALANCED PRO-FORMA
PORTFOLIO FUND COMBINED
---------- -------- ----------
<S> <C> <C> <C>
EQUITY SECURITIES:
AIRTOUCH COM. INC........................................................................ $ 0 $177,125 $ 177,125
ALLIED-SIGNAL, INC....................................................................... 800,700 0 800,700
AMERICAN HOME PRODUCTS CORP.............................................................. 2,087,625 0 2,087,625
AMERICAN INTERNATIONAL GROUP, INC........................................................ 2,340,413 0 2,340,413
AMOCO CORP............................................................................... 2,055,088 0 2,055,088
ANHEUSER BUSCH CO INC.................................................................... 0 164,150 164,150
APPLE COMPUTERS.......................................................................... 0 105,750 105,750
ARCHER DANIELS MIDLAND................................................................... 0 223,500 223,500
ATLANTIC RICHFIELD CO.................................................................... 0 230,000 230,000
AT&T CORP................................................................................ 1,764,675 310,500 2,075,175
AVNET, INC............................................................................... 0 201,875 201,875
A.M.P., INC.............................................................................. 972,000 0 972,000
BECKMAN INSTRUMENTS, INC................................................................. 1,555,313 0 1,555,313
BELL ATLANTIC CORP....................................................................... 0 211,000 211,000
BOEING CO................................................................................ 2,160,388 0 2,160,388
BRISTOL-MYERS SQUIBB CO.................................................................. 1,165,500 252,000 1,417,500
BURLINGTON RESOURCES..................................................................... 0 183,375 183,375
BW/IP HOLDING INC CL A................................................................... 0 115,500 115,500
CHEVRON CORP............................................................................. 950,400 182,400 1,132,800
CHRYSLER CORP............................................................................ 774,688 0 774,688
CHUBB CORP............................................................................... 1,240,300 0 1,240,300
CINTAS CORP.............................................................................. 1,282,500 0 1,282,500
COCA-COLA CO............................................................................. 1,384,250 0 1,384,250
COMERICA, INC............................................................................ 1,259,500 206,250 1,465,750
COMPAQ COMPUTER CORP..................................................................... 876,300 0 876,300
COMPUTER SCIENCES CORP................................................................... 1,446,688 0 1,446,688
CONRAIL CORP............................................................................. 993,413 0 993,413
CROMPTON AND KNOWLES..................................................................... 0 167,500 167,500
DANA CORP................................................................................ 0 204,000 204,000
DEAN WITTER DISCOVER & CO................................................................ 1,805,225 0 1,805,225
DOMINION RESOURCES....................................................................... 0 234,000 234,000
DOW CHEMICAL CO.......................................................................... 2,036,700 0 2,036,700
</TABLE>
F-41
<PAGE> 207
<TABLE>
<CAPTION>
SHARES/PAR (000)
------------------------------------
PNC COMPASS
BALANCED BALANCED PRO-FORMA
PORTFOLIO FUND COMBINED
--------- -------- ---------
<S> <C> <C> <C>
DUN & BRADSTREET......................................................................... 0 3,800 3,800
DUPONT E I DE NEMOURS.................................................................... 0 5,000 5,000
DURACELL INTL INC........................................................................ 0 4,000 4,000
EASTMAN KODAK COMPANY.................................................................... 0 5,800 5,800
E.I., DUPONT DE NEMOURS & CO............................................................. 32,900 0 32,900
ELF AQUITAINE ADR........................................................................ 39,500 0 39,500
ELI LILLY & CO........................................................................... 25,400 0 25,400
EMERSON ELECTRIC CO...................................................................... 21,400 0 21,400
ENGELHARD CORP........................................................................... 0 7,000 7,000
ENTERGY CORP............................................................................. 49,800 0 49,800
EXXON CORP............................................................................... 18,100 0 18,100
FEDERAL NATIONAL MORTGAGE ASSOCIATION.................................................... 13,800 2,500 16,300
FIRST CHICAGO CORP....................................................................... 26,600 0 26,600
FIRST DATA CORP.......................................................................... 19,500 0 19,500
FLUOR CORP............................................................................... 27,500 0 27,500
FORD MOTOR CO............................................................................ 39,000 9,000 48,000
FOSTER WHEELER CORP...................................................................... 30,300 0 30,300
GENERAL ELECTRIC CO...................................................................... 43,100 6,000 49,100
GENERAL INSTRUMENTS CORP................................................................. 34,500 0 34,500
GENERAL MOTORS CORP...................................................................... 23,500 0 23,500
GENERAL PUBLIC UTILITIES................................................................. 0 4,000 4,000
GENERAL RE CORP.......................................................................... 11,700 0 11,700
GRAINGER (W.W.) INC...................................................................... 0 4,000 4,000
GTE CORP................................................................................. 0 5,800 5,800
HANSON TRUST PLC ADR..................................................................... 0 12,000 12,000
HARRIS CORP DEL.......................................................................... 0 4,000 4,000
H.J. HEINZ CO............................................................................ 19,600 0 19,600
IDAHO POWER CO........................................................................... 3,000 0 3,000
INGERSOLL RAND CO........................................................................ 0 8,000 8,000
INTEL CORP............................................................................... 22,000 0 22,000
INTERNATIONAL PAPER CO................................................................... 20,500 0 20,500
ITT CORP................................................................................. 2,000 0 2,000
I.M.C. GLOBAL, INC....................................................................... 26,000 0 26,000
JOHNSON & JOHNSON........................................................................ 19,800 0 19,800
J.C. PENNEY CO., INC..................................................................... 27,400 0 27,400
K MART CORP.............................................................................. 95,000 0 95,000
KEYCORP.................................................................................. 0 6,400 6,400
KIMBERLY CLARK CORP...................................................................... 0 5,000 5,000
LA QUINTA MOTOR INNS, INC................................................................ 34,500 0 34,500
LINCOLN NATL CORP........................................................................ 0 4,700 4,700
LOEWS CORPORATION........................................................................ 0 1,700 1,700
<CAPTION>
VALUE AT MARCH 31, 1995
--------------------------------------
PNC COMPASS
BALANCED BALANCED PRO-FORMA
PORTFOLIO FUND COMBINED
---------- -------- ----------
<S> <C> <C> <C>
DUN & BRADSTREET......................................................................... $ 0 $199,975 $ 199,975
DUPONT E I DE NEMOURS.................................................................... 0 302,500 302,500
DURACELL INTL INC........................................................................ 0 179,000 179,000
EASTMAN KODAK COMPANY.................................................................... 0 308,125 308,125
E.I., DUPONT DE NEMOURS & CO............................................................. 1,990,450 0 1,990,450
ELF AQUITAINE ADR........................................................................ 1,530,625 0 1,530,625
ELI LILLY & CO........................................................................... 1,857,375 0 1,857,375
EMERSON ELECTRIC CO...................................................................... 1,423,100 0 1,423,100
ENGELHARD CORP........................................................................... 0 207,375 207,375
ENTERGY CORP............................................................................. 1,039,575 0 1,039,575
EXXON CORP............................................................................... 1,208,175 0 1,208,175
FEDERAL NATIONAL MORTGAGE ASSOCIATION.................................................... 1,122,975 203,437 1,326,412
FIRST CHICAGO CORP....................................................................... 1,333,325 0 1,333,325
FIRST DATA CORP.......................................................................... 1,011,563 0 1,011,563
FLUOR CORP............................................................................... 1,326,875 0 1,326,875
FORD MOTOR CO............................................................................ 1,053,000 243,000 1,296,000
FOSTER WHEELER CORP...................................................................... 1,026,413 0 1,026,413
GENERAL ELECTRIC CO...................................................................... 2,332,788 324,750 2,657,538
GENERAL INSTRUMENTS CORP................................................................. 1,198,875 0 1,198,875
GENERAL MOTORS CORP...................................................................... 1,039,875 0 1,039,875
GENERAL PUBLIC UTILITIES................................................................. 0 116,500 116,500
GENERAL RE CORP.......................................................................... 1,544,400 0 1,544,400
GRAINGER (W.W.) INC...................................................................... 0 252,000 252,000
GTE CORP................................................................................. 0 192,850 192,850
HANSON TRUST PLC ADR..................................................................... 0 226,500 226,500
HARRIS CORP DEL.......................................................................... 0 191,500 191,500
H.J. HEINZ CO............................................................................ 754,600 0 754,600
IDAHO POWER CO........................................................................... 3,060,000 0 3,060,000
INGERSOLL RAND CO........................................................................ 0 263,000 263,000
INTEL CORP............................................................................... 1,867,250 0 1,867,250
INTERNATIONAL PAPER CO................................................................... 1,540,063 0 1,540,063
ITT CORP................................................................................. 2,155,000 0 2,155,000
I.M.C. GLOBAL, INC....................................................................... 1,270,750 0 1,270,750
JOHNSON & JOHNSON........................................................................ 1,178,100 0 1,178,100
J.C. PENNEY CO., INC..................................................................... 1,229,575 0 1,229,575
K MART CORP.............................................................................. 1,306,250 0 1,306,250
KEYCORP.................................................................................. 0 180,800 180,800
KIMBERLY CLARK CORP...................................................................... 0 260,000 260,000
LA QUINTA MOTOR INNS, INC................................................................ 935,813 0 935,813
LINCOLN NATL CORP........................................................................ 0 189,175 189,175
LOEWS CORPORATION........................................................................ 0 167,875 167,875
</TABLE>
F-42
<PAGE> 208
<TABLE>
<CAPTION>
SHARES/PAR (000)
------------------------------------
PNC COMPASS
BALANCED BALANCED PRO-FORMA
PORTFOLIO FUND COMBINED
--------- -------- ---------
<S> <C> <C> <C>
LUBRIZOL CORP............................................................................ 36,500 0 36,500
MASCO CORP............................................................................... 0 7,000 7,000
MAY DEPT STORES.......................................................................... 0 6,000 6,000
MELLON BANK.............................................................................. 0 4,000 4,000
MERCK & CO., INC......................................................................... 38,600 4,300 42,900
MERIDIAN BANCORP, INC.................................................................... 44,000 0 44,000
MICROSOFT CORP........................................................................... 18,600 0 18,600
MINNESOTA MINING & MANUFACTURING CO...................................................... 23,300 6,000 29,300
MOBIL CORP............................................................................... 12,700 0 12,700
MONSANTO CO.............................................................................. 15,800 0 15,800
MORGAN J P & CO.......................................................................... 0 3,000 3,000
MOTOROLA, INC............................................................................ 25,000 0 25,000
NATIONSBANK CORP......................................................................... 30,200 0 30,200
NORFOLK SOUTHERN CORP.................................................................... 15,700 3,000 18,700
NOVELL INC............................................................................... 0 9,200 9,200
NYNEX CORP............................................................................... 28,100 0 28,100
PACIFIC GAS & ELECTRIC................................................................... 0 9,000 9,000
PECO ENERGY CO........................................................................... 64,300 0 64,300
PENNEY J C INC........................................................................... 0 4,000 4,000
PEPSICO INC.............................................................................. 0 5,000 5,000
PHELPS DODGE CORP........................................................................ 21,600 0 21,600
PHILIP MORRIS............................................................................ 0 2,000 2,000
PITNEY BOWES, INC........................................................................ 26,100 5,000 31,100
*PNC FINANCE CORP........................................................................ 0 6,000 6,000
RAYTHEON CO.............................................................................. 0 3,500 3,500
ROYAL DUTCH PETROLEUM CO................................................................. 15,800 0 15,800
RYDER SYSTEMS, INC....................................................................... 2,500 0 2,500
SBC COMMUNICATIONS INC................................................................... 25,400 0 25,400
SCHERING PLOUGH CORP..................................................................... 0 1,700 1,700
SCHLUMBERGER LTD......................................................................... 0 3,500 3,500
SCOTT PAPER CO........................................................................... 23,100 0 23,100
SEARS ROEBUCK & CO....................................................................... 23,600 0 23,600
STRATUS COMPUTER, INC.................................................................... 41,300 0 41,300
SUN MICROSYSTEMS, INC.................................................................... 44,000 0 44,000
TENNECO, INC............................................................................. 28,600 0 28,600
TEXACO INC............................................................................... 0 3,000 3,000
TEXAS INDUSTRIES INC..................................................................... 0 1,500 1,500
TOYS R US................................................................................ 0 6,500 6,500
UNION PACIFIC CORP....................................................................... 0 3,500 3,500
UNITED TECHNOLOGIES CORP................................................................. 24,500 4,000 28,500
UNOCAL CORP.............................................................................. 43,000 0 43,000
<CAPTION>
VALUE AT MARCH 31, 1995
--------------------------------------
PNC COMPASS
BALANCED BALANCED PRO-FORMA
PORTFOLIO FUND COMBINED
---------- -------- ----------
<S> <C> <C> <C>
LUBRIZOL CORP............................................................................ $1,286,625 $ 0 $1,286,625
MASCO CORP............................................................................... 0 193,375 193,375
MAY DEPT STORES.......................................................................... 0 222,000 222,000
MELLON BANK.............................................................................. 0 163,000 163,000
MERCK & CO., INC......................................................................... 1,645,325 183,288 1,828,613
MERIDIAN BANCORP, INC.................................................................... 1,347,500 0 1,347,500
MICROSOFT CORP........................................................................... 1,322,925 0 1,322,925
MINNESOTA MINING & MANUFACTURING CO...................................................... 1,354,313 348,750 1,703,063
MOBIL CORP............................................................................... 1,176,338 0 1,176,338
MONSANTO CO.............................................................................. 1,267,950 0 1,267,950
MORGAN J P & CO.......................................................................... 0 183,000 183,000
MOTOROLA, INC............................................................................ 1,365,625 0 1,365,625
NATIONSBANK CORP......................................................................... 1,532,650 0 1,532,650
NORFOLK SOUTHERN CORP.................................................................... 1,049,938 200,625 1,250,563
NOVELL INC............................................................................... 0 174,800 174,800
NYNEX CORP............................................................................... 1,113,463 0 1,113,463
PACIFIC GAS & ELECTRIC................................................................... 0 223,875 223,875
PECO ENERGY CO........................................................................... 1,615,538 0 1,615,538
PENNEY J C INC........................................................................... 0 179,500 179,500
PEPSICO INC.............................................................................. 0 195,000 195,000
PHELPS DODGE CORP........................................................................ 1,228,500 0 1,228,500
PHILIP MORRIS............................................................................ 0 130,500 130,500
PITNEY BOWES, INC........................................................................ 939,600 180,000 1,119,600
*PNC FINANCE CORP........................................................................ 0 146,250 146,250
RAYTHEON CO.............................................................................. 0 255,063 255,063
ROYAL DUTCH PETROLEUM CO................................................................. 1,896,000 0 1,896,000
RYDER SYSTEMS, INC....................................................................... 2,496,875 0 2,496,875
SBC COMMUNICATIONS INC................................................................... 1,069,975 0 1,069,975
SCHERING PLOUGH CORP..................................................................... 0 126,438 126,438
SCHLUMBERGER LTD......................................................................... 0 208,688 208,688
SCOTT PAPER CO........................................................................... 2,064,563 0 2,064,563
SEARS ROEBUCK & CO....................................................................... 1,259,650 0 1,259,650
STRATUS COMPUTER, INC.................................................................... 1,290,625 0 1,290,625
SUN MICROSYSTEMS, INC.................................................................... 1,529,000 0 1,529,000
TENNECO, INC............................................................................. 1,347,775 0 1,347,775
TEXACO INC............................................................................... 0 199,500 199,500
TEXAS INDUSTRIES INC..................................................................... 0 132,750 132,750
TOYS R US................................................................................ 0 166,563 166,563
UNION PACIFIC CORP....................................................................... 0 192,500 192,500
UNITED TECHNOLOGIES CORP................................................................. 1,693,563 276,500 1,970,063
UNOCAL CORP.............................................................................. 1,236,250 0 1,236,250
</TABLE>
F-43
<PAGE> 209
<TABLE>
<CAPTION>
SHARES/PAR (000)
------------------------------------
PNC COMPASS
BALANCED BALANCED PRO-FORMA
PORTFOLIO FUND COMBINED
--------- -------- ---------
<S> <C> <C> <C>
UST, INC................................................................................. 36,100 0 36,100
WAL-MART STORES, INC..................................................................... 48,000 7,200 55,200
WALT DISNEY CO........................................................................... 25,200 0 25,200
WARNER LAMBERT CO........................................................................ 0 3,500 3,500
WEYERHAEUSER CO.......................................................................... 1,000 5,000 6,000
WHEELABRATOR TECH INC.................................................................... 0 10,000 10,000
WITCO CORP............................................................................... 0 5,800 5,800
WMX TECHNOLOGIES INC..................................................................... 0 6,800 6,800
XEROX CORP............................................................................... 13,800 0 13,800
<CAPTION>
VALUE AT MARCH 31, 1995
--------------------------------------
PNC COMPASS
BALANCED BALANCED PRO-FORMA
PORTFOLIO FUND COMBINED
---------- -------- ----------
<S> <C> <C> <C>
UST, INC................................................................................. $1,146,175 $ 0 $1,146,175
WAL-MART STORES, INC..................................................................... 1,224,000 183,600 1,407,600
WALT DISNEY CO........................................................................... 1,345,050 0 1,345,050
WARNER LAMBERT CO........................................................................ 0 273,875 273,875
WEYERHAEUSER CO.......................................................................... 926,250 194,375 1,120,625
WHEELABRATOR TECH INC.................................................................... 0 136,250 136,250
WITCO CORP............................................................................... 0 170,375 170,375
WMX TECHNOLOGIES INC..................................................................... 0 187,000 187,000
XEROX CORP............................................................................... 1,619,775 0 1,619,775
</TABLE>
F-44
<PAGE> 210
PNC BALANCED PORTFOLIO
COMPASS BALANCED FUND
PRO-FORMA SCHEDULE OF INVESTMENTS
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES/PAR (000)
-------------------------------------
PNC COMPASS
BALANCED BALANCED PRO-FORMA
RATE MATURITY PORTFOLIO FUND COMBINED
---- -------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
FIXED INCOME SECURITIES:
AMEX.......................................................... 7.15% 08/15/99 $ 0 $ 250 $ 250
AMERICAN HOME PRODUCTS........................................ 7.70 02/05/02 2,500 0 2,500
ANHEUSER BUSCH MTN............................................ 7.50 12/01/97 0 300 300
ASSOCIATES CORP............................................... 7.25 05/15/98 0 200 200
FEDERAL FARM CREDIT BANK...................................... 6.70 09/09/97 2,000 0 2,000
FEDERAL HOME LOAN BANK........................................ 6.25 04/03/95 12,335 0 12,335
FEDERAL HOME LOAN BANK BONDS.................................. 8.46 12/20/99 1,500 0 1,500
FEDERAL HOME LOAN MORTGAGE CORPORATION........................ 8.53 02/02/05 2,500 0 2,500
FEDERAL HOME LOAN MORTGAGE CORPORATION........................ 7.13 07/21/99 0 300 300
FEDERAL NATIONAL MORTGAGE ASSOCIATION......................... 8.00 02/25/02 1,240 0 1,240
FEDERAL NATIONAL MORTGAGE ASSOCIATION......................... 6.40 03/25/03 1,000 0 1,000
FEDERAL NATIONAL MORTGAGE ASSOCIATION......................... 8.25 10/25/96 750 0 750
FORD MOTOR CREDIT............................................. 7.50 06/15/04 0 250 250
GE CAPITAL CORP............................................... 8.00 01/15/98 0 200 200
GENERAL MOTORS ACCEPTANCE CORP................................ 8.63 06/15/99 2,400 0 2,400
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION...................... 8.00 12/15/06 2,840 0 2,840
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION...................... 7.50 06/15/07 2,906 0 2,906
MERRILL LYNCH ASSET BACKED CORP............................... 5.50 07/15/95 715 0 715
NATIONSBANK CORP.............................................. 7.50 02/15/97 2,000 0 2,000
NISSAN AUTO RECEIVABLES GRANTOR TRUST......................... 6.45 03/15/96 1,201 0 1,201
PEPSICO INC................................................... 6.25 09/01/99 0 200 200
SOUTHERN CALIFORNIA EDISON.................................... 5.88 02/01/98 0 200 200
TENNESSEE VALLEY AUTHORITY.................................... 6.13 07/15/03 2,000 0 2,000
* TIME WARNER INC............................................. 8.75 01/10/15 0 250 250
U.S. TREASURY BOND............................................ 7.25 05/15/16 0 500 500
U.S. TREASURY BOND............................................ 7.50 11/15/16 0 500 500
U.S. TREASURY BOND............................................ 8.13 08/15/19 2,500 0 2,500
U.S. TREASURY BOND............................................ 8.13 08/15/19 0 500 500
U.S. TREASURY NOTE............................................ 6.38 01/15/00 0 250 250
U.S. TREASURY NOTE............................................ 7.50 11/15/01 0 650 650
U.S. TREASURY NOTE............................................ 7.50 05/15/02 0 500 500
<CAPTION>
VALUE AT MARCH 31, 1995
---------------------------------------------
PNC COMPASS
BALANCED BALANCED PRO-FORMA
PORTFOLIO FUND COMBINED
------------ ----------- ------------
<S> <C> <C> <C>
FIXED INCOME SECURITIES:
AMEX.......................................................... $ 0 $ 247,500 $ 247,500
AMERICAN HOME PRODUCTS........................................ 2,521,875 0 2,521,875
ANHEUSER BUSCH MTN............................................ 0 301,875 301,875
ASSOCIATES CORP............................................... 0 199,500 199,500
FEDERAL FARM CREDIT BANK...................................... 1,977,460 0 1,977,460
FEDERAL HOME LOAN BANK........................................ 12,330,717 0 12,330,717
FEDERAL HOME LOAN BANK BONDS.................................. 1,517,220 0 1,517,220
FEDERAL HOME LOAN MORTGAGE CORPORATION........................ 2,590,275 0 2,590,275
FEDERAL HOME LOAN MORTGAGE CORPORATION........................ 0 298,536 298,536
FEDERAL NATIONAL MORTGAGE ASSOCIATION......................... 1,248,830 0 1,248,830
FEDERAL NATIONAL MORTGAGE ASSOCIATION......................... 924,660 0 924,660
FEDERAL NATIONAL MORTGAGE ASSOCIATION......................... 756,996 0 756,996
FORD MOTOR CREDIT............................................. 0 244,063 244,063
GE CAPITAL CORP............................................... 0 203,750 203,750
GENERAL MOTORS ACCEPTANCE CORP................................ 2,469,000 0 2,469,000
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION...................... 2,815,057 0 2,815,057
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION...................... 2,808,976 0 2,808,976
MERRILL LYNCH ASSET BACKED CORP............................... 708,121 0 708,121
NATIONSBANK CORP.............................................. 2,010,000 0 2,010,000
NISSAN AUTO RECEIVABLES GRANTOR TRUST......................... 1,193,006 0 1,193,006
PEPSICO INC................................................... 0 191,250 191,250
SOUTHERN CALIFORNIA EDISON.................................... 0 192,750 192,750
TENNESSEE VALLEY AUTHORITY.................................... 1,820,000 0 1,820,000
* TIME WARNER INC............................................. 0 250,000 250,000
U.S. TREASURY BOND............................................ 0 483,905 483,905
U.S. TREASURY BOND............................................ 0 496,455 496,455
U.S. TREASURY BOND............................................ 2,650,025 0 2,650,025
U.S. TREASURY BOND............................................ 0 529,685 529,685
U.S. TREASURY NOTE............................................ 0 243,053 243,053
U.S. TREASURY NOTE............................................ 0 661,674 661,674
U.S. TREASURY NOTE............................................ 0 509,805 509,805
</TABLE>
F-45
<PAGE> 211
<TABLE>
<CAPTION>
SHARES/PAR (000)
-------------------------------------
PNC COMPASS
BALANCED BALANCED PRO-FORMA
RATE MATURITY PORTFOLIO FUND COMBINED
---- -------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
U.S. TREASURY NOTE............................................ 6.38% 08/15/02 $ 0 $ 250 $ 250
U.S. TREASURY NOTE............................................ 7.25 05/15/04 0 500 500
U.S. TREASURY NOTE............................................ 7.25 08/15/04 6,000 0 6,000
U.S. TREASURY NOTE............................................ 7.88 11/15/04 0 250 250
U.S. TREASURY NOTE............................................ 5.50 04/30/96 0 200 200
U.S. TREASURY NOTE............................................ 6.00 06/30/96 0 200 200
U.S. TREASURY NOTE............................................ 6.13 07/31/96 0 150 150
U.S. TREASURY NOTE............................................ 7.25 08/31/96 0 500 500
U.S. TREASURY NOTE............................................ 7.50 01/31/97 0 300 300
U.S. TREASURY NOTE............................................ 6.75 02/28/97 0 250 250
U.S. TREASURY NOTE............................................ 6.75 05/31/97 0 250 250
U.S. TREASURY NOTE............................................ 7.38 11/15/97 0 500 500
U.S. TREASURY NOTE.............................................. 7.25 02/15/98 0 400 400
U.S. TREASURY NOTE.............................................. 7.50 10/31/99 0 500 500
U.S. TREASURY NOTE.............................................. 7.13 09/30/99 5,000 0 5,000
U.S. TREASURY NOTE.............................................. 5.13 03/31/98 1,000 0 1,000
U.S. TREASURY NOTE.............................................. 7.63 05/31/96 500 0 500
U.S. TREASURY NOTE.............................................. 8.25 07/15/98 2,500 0 2,500
WAL-MART STORES................................................. 8.00 09/15/06 0 300 300
WMX TECHNOLOGIES................................................ 8.25 11/15/99 0 250 250
TEMPORARY INVESTMENT FUND....................................... 0 942,000 942,000
TRI PARTY REPO (BONY TSY)....................................... 0 2,227,000 2,227,000
TOTAL INVESTMENTS.......................................
<CAPTION>
VALUE AT MARCH 31, 1995
---------------------------------------------
PNC COMPASS
BALANCED BALANCED PRO-FORMA
PORTFOLIO FUND COMBINED
------------ ----------- ------------
<S> <C> <C> <C>
U.S. TREASURY NOTE............................................ $ 0 $ 238,320 $ 238,320
U.S. TREASURY NOTE............................................ 0 500,290 500,290
U.S. TREASURY NOTE............................................ 6,007,260 0 6,007,260
U.S. TREASURY NOTE............................................ 0 260,845 260,845
U.S. TREASURY NOTE............................................ 0 197,840 197,840
U.S. TREASURY NOTE............................................ 0 198,494 198,494
U.S. TREASURY NOTE............................................ 0 148,996 148,996
U.S. TREASURY NOTE............................................ 0 503,725 503,725
U.S. TREASURY NOTE............................................ 0 303,558 303,558
U.S. TREASURY NOTE............................................ 0 249,800 249,800
U.S. TREASURY NOTE............................................ 0 249,520 249,520
U.S. TREASURY NOTE............................................ 0 505,060 505,060
U.S. TREASURY NOTE.............................................. 0 403,228 403,228
U.S. TREASURY NOTE.............................................. 0 507,920 507,920
U.S. TREASURY NOTE.............................................. 5,012,250 0 5,012,250
U.S. TREASURY NOTE.............................................. 952,440 0 952,440
U.S. TREASURY NOTE.............................................. 505,845 0 505,845
U.S. TREASURY NOTE.............................................. 2,593,525 0 2,593,525
WAL-MART STORES................................................. 0 309,750 309,750
WMX TECHNOLOGIES................................................ 0 256,250 256,250
TEMPORARY INVESTMENT FUND....................................... 0 942,000 942,000
TRI PARTY REPO (BONY TSY)....................................... 0 2,227,000 2,227,000
------------ ----------- ------------
TOTAL INVESTMENTS....................................... $162,093,798 $25,661,121 $187,754,919
============ =========== ============
</TABLE>
- ---------------
* Denotes securities in violation of proposed investment objectives.
See Accompanying Notes to Pro-Forma Financial Statements
F-46
<PAGE> 212
PNC SHORT-TERM BOND PORTFOLIO
BFM SHORT DURATION PORTFOLIO
COMPASS SHORT/INTERMEDIATE FUND
PRO-FORMA SCHEDULE OF INVESTMENTS
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PAR (000)
------------------------------------------------
PNC BFM COMPASS
SHORT-TERM SHORT SHORT/
BOND DURATION INTERMEDIATE PRO-FORMA
RATE MATURITY PORTFOLIO FUND FUND COMBINED
---- -------- ---------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
ADVANTA MORTGAGE LOAN TRUST................. 5.55% 03/15/97 $ 825 $ 0 $ 0 $ 825
*AMERICAN HOME PRODUCTS...................... 7.70 02/15/00 850 0 0 850
AMEX........................................ 7.15 08/15/99 0 0 4,750 4,750
*ANHEUSER BUSCH MTN,......................... 7.50 12/01/97 0 0 2,500 2,500
*ASSOC CORP N.A.............................. 6.38 04/15/95 0 0 2,000 2,000
*ASSOC CORP OF N. AMERICA.................... 5.30 09/04/95 0 0 1,000 1,000
*ASSOCIATES CORP N.A......................... 7.63 04/15/98 0 0 2,400 2,400
*BASS AMERICA INC............................ 6.75 08/01/99 0 0 5,000 5,000
BETA FN 144A MTN LQ(Q/D).................... 6.36 04/20/95 0 0 2,000 2,000
CHASE MANHATTAN CREDIT CARD................. 8.75 08/15/99 0 1,000 0 1,000
CHASE MSTR TR............................... 8.75 08/15/99 0 0 2,000 2,000
*CHRYSLER FINANCIAL CORP..................... 5.08 01/27/97 1,000 0 0 1,000
*COCA COLA COMPANY........................... 7.88 09/15/98 0 0 6,000 6,000
COLLATERALIZED MORTGAGE SECURITIES
CORPORATION................................ 9.45 05/01/13 0 398 0 398
COLONIAL CREDIT CARD TRUST.................. 6.80 08/15/97 0 1,500 0 1,500
CORESTATES HOME EQUITY TRUST................ 5.10 03/15/96 735 0 0 735
DISCOVER CARD MT............................ 6.23 10/16/04 0 500 0 500
DISCOVER CARD TRUST......................... 8.63 07/16/98 0 600 0 600
*DUKE POWER CO MTN........................... 7.50 04/01/99 0 0 4,000 4,000
*DUPONT EI DE NEMOURS & CO................... 8.45 10/15/96 0 0 3,500 3,500
FEDERAL FARM CREDIT BANK BONDS.............. 6.70 09/30/96 2,000 0 0 2,000
FEDERAL HOME LOAN MORTGAGE CORPORATION...... 7.25 06/01/07 0 797 0 797
FEDERAL HOME LOAN MORTGAGE CORPORATION...... 7.38 03/01/06 0 368 0 368
FEDERAL HOME LOAN MORTGAGE CORPORATION...... 8.00 11/01/03 0 1,061 0 1,061
FEDERAL HOME LOAN MORTGAGE CORPORATION...... 8.25 06/01/03 0 155 0 155
FEDERAL HOME LOAN MORTGAGE CORPORATION...... 8.75 01/04/13 0 396 0 396
<CAPTION>
VALUE AT
MARCH 31,
1995
---------------------------------------------------------
PNC BFM COMPASS
SHORT-TERM SHORT SHORT/
BOND DURATION INTERMEDIATE PRO-FORMA
PORTFOLIO FUND FUND COMBINED
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
ADVANTA MORTGAGE LOAN TRUST................. $ 775,621 $ 0 $ 0 $ 775,621
*AMERICAN HOME PRODUCTS...................... 857,438 0 0 857,438
AMEX........................................ 0 0 4,702,500 4,702,500
*ANHEUSER BUSCH MTN,......................... 0 0 2,515,625 2,515,625
*ASSOC CORP N.A.............................. 0 0 1,999,860 1,999,860
*ASSOC CORP OF N. AMERICA.................... 0 0 995,000 995,000
*ASSOCIATES CORP N.A......................... 0 0 2,415,000 2,415,000
*BASS AMERICA INC............................ 0 0 4,856,250 4,856,250
BETA FN 144A MTN LQ(Q/D).................... 0 0 1,999,400 1,999,400
CHASE MANHATTAN CREDIT CARD................. 0 1,018,120 0 1,018,120
CHASE MSTR TR............................... 0 0 2,040,000 2,040,000
*CHRYSLER FINANCIAL CORP..................... 968,750 0 0 968,750
*COCA COLA COMPANY........................... 0 0 6,135,000 6,135,000
COLLATERALIZED MORTGAGE SECURITIES
CORPORATION................................ 0 403,775 0 403,775
COLONIAL CREDIT CARD TRUST.................. 0 1,499,520 0 1,499,520
CORESTATES HOME EQUITY TRUST................ 677,404 0 0 677,404
DISCOVER CARD MT............................ 0 500,310 0 500,310
DISCOVER CARD TRUST......................... 0 609,372 0 609,372
*DUKE POWER CO MTN........................... 0 0 4,015,000 4,015,000
*DUPONT EI DE NEMOURS & CO................... 0 0 3,570,000 3,570,000
FEDERAL FARM CREDIT BANK BONDS.............. 1,997,180 0 0 1,997,180
FEDERAL HOME LOAN MORTGAGE CORPORATION...... 0 784,421 0 784,421
FEDERAL HOME LOAN MORTGAGE CORPORATION...... 0 361,172 0 361,172
FEDERAL HOME LOAN MORTGAGE CORPORATION...... 0 1,058,572 0 1,058,572
FEDERAL HOME LOAN MORTGAGE CORPORATION...... 0 266,765 0 266,765
FEDERAL HOME LOAN MORTGAGE CORPORATION...... 0 399,778 0 399,778
</TABLE>
F-47
<PAGE> 213
<TABLE>
<CAPTION>
PAR (000)
------------------------------------------------
PNC BFM COMPASS
SHORT-TERM SHORT SHORT/
BOND DURATION INTERMEDIATE PRO-FORMA
RATE MATURITY PORTFOLIO FUND FUND COMBINED
---- -------- ---------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
FEDERAL HOME LOAN MORTGAGE CORPORATION...... 8.80% 06/01/19 $ 0 $ 208 $ 0 $ 208
FEDERAL HOME LOAN MORTGAGE CORPORATION...... 9.25 12/01/08 0 1,400 0 1,400
FEDERAL NATIONAL MORTGAGE ASSOCIATION....... 4.75 09/25/00 0 1,500 0 1,500
FEDERAL NATIONAL MORTGAGE ASSOCIATION....... 9.50 01/25/04 0 1,779 0 1,779
FEDERAL NATIONAL MORTGAGE ASSOCIATION....... 9.00 06/25/17 0 1,215 0 1,215
FEDERAL NATIONAL MORTGAGE ASSOCIATION....... 8.50 11/25/18 0 471 0 471
FEDERAL NATIONAL MORTGAGE ASSOCIATION....... 6.00 11/01/02 0 2,322 0 2,322
FEDERAL NATIONAL MORTGAGE ASSOCIATION....... 6.49 01/01/21 0 1,114 0 1,114
FEDERAL NATIONAL MORTGAGE ASSOCIATION....... 6.89 11/01/02 0 1,111 0 1,111
FEDERAL NATIONAL MORTGAGE ASSOCIATION....... 7.25 04/25/96 792 0 0 792
FEDERAL NATIONAL MORTGAGE ASSOCIATION....... 7.85 05/01/18 0 233 0 233
FHLMC....................................... 7.86 01/21/97 0 0 2,000 2,000
FHLMC CMO................................... 6.75 09/15/16 0 0 4,000 4,000
FIRST USA MASTER TRUST...................... 6.25 08/15/03 0 500 0 500
*FORD CAPITAL BV............................. 9.50 07/01/01 0 0 2,000 2,000
*FORD MOTOR CC............................... 8.00 01/15/99 0 0 1,000 1,000
*FORD MOTOR CREDIT MTN....................... 8.40 03/26/99 0 0 5,000 5,000
*GMAC........................................ 8.60 07/17/95 0 0 2,500 2,500
GMAC........................................ 4.15 03/15/98 0 0 1,092 1,092
GMAC EURO BOND.............................. 9.40 06/07/95 0 0 1,000 1,000
GOLDMAN SACHS 144A.......................... 4.77 10/16/95 0 0 3,000 3,000
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION.... 7.00 01/20/99 0 1,500 0 1,500
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION.... 7.50 03/20/25 0 1,800 0 1,800
*GREAT WESTERN FINANCIAL CORP................ 6.38 07/01/00 1,000 0 0 1,000
*HOUSEHOLD FIN............................... 7.80 11/01/96 0 0 2,000 2,000
*HOUSEHOLD FINANCE CO........................ 8.88 07/05/99 0 0 1,000 1,000
JOHN DEERE OWNER TRUST...................... 4.10 10/15/00 819 0 0 819
<CAPTION>
VALUE AT
MARCH 31,
1995
----------------------------------------------------------
PNC BFM COMPASS
SHORT-TERM SHORT SHORT/
BOND DURATION INTERMEDIATE PRO-FORMA
PORTFOLIO FUND FUND COMBINED
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
FEDERAL HOME LOAN MORTGAGE CORPORATION...... $ 0 $ 212,835 $ 0 $ 212,835
FEDERAL HOME LOAN MORTGAGE CORPORATION...... 0 1,441,883 0 1,441,883
FEDERAL NATIONAL MORTGAGE ASSOCIATION....... 0 1,463,420 0 1,463,420
FEDERAL NATIONAL MORTGAGE ASSOCIATION....... 0 1,828,348 0 1,828,348
FEDERAL NATIONAL MORTGAGE ASSOCIATION....... 0 1,232,715 0 1,232,715
FEDERAL NATIONAL MORTGAGE ASSOCIATION....... 0 474,896 0 474,896
FEDERAL NATIONAL MORTGAGE ASSOCIATION....... 0 2,220,766 0 2,220,766
FEDERAL NATIONAL MORTGAGE ASSOCIATION....... 0 1,094,047 0 1,094,047
FEDERAL NATIONAL MORTGAGE ASSOCIATION....... 0 1,103,861 0 1,103,861
FEDERAL NATIONAL MORTGAGE ASSOCIATION....... 790,495 0 0 790,495
FEDERAL NATIONAL MORTGAGE ASSOCIATION....... 0 236,076 0 236,076
FHLMC....................................... 0 0 2,026,580 2,026,580
FHLMC CMO................................... 0 0 3,883,560 3,883,560
FIRST USA MASTER TRUST...................... 0 500,780 0 500,780
*FORD CAPITAL BV............................. 0 0 2,162,500 2,162,500
*FORD MOTOR CC............................... 0 0 1,013,750 1,013,750
*FORD MOTOR CREDIT MTN....................... 0 0 5,137,500 5,137,500
*GMAC........................................ 0 0 2,512,500 2,512,500
GMAC........................................ 0 0 1,073,007 1,073,007
GMAC EURO BOND.............................. 0 0 1,005,000 1,005,000
GOLDMAN SACHS 144A.......................... 0 0 2,970,000 2,970,000
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION.... 0 1,530,469 0 1,530,469
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION.... 0 1,833,750 0 1,833,750
*GREAT WESTERN FINANCIAL CORP................ 937,188 0 0 937,188
*HOUSEHOLD FIN............................... 0 0 2,015,000 2,015,000
*HOUSEHOLD FINANCE CO........................ 0 0 1,021,250 1,021,250
JOHN DEERE OWNER TRUST...................... 802,180 0 0 802,180
</TABLE>
F-48
<PAGE> 214
<TABLE>
<CAPTION>
PAR (000)
------------------------------------------------
PNC BFM COMPASS
SHORT-TERM SHORT SHORT/
BOND DURATION INTERMEDIATE PRO-FORMA
RATE MATURITY PORTFOLIO FUND FUND COMBINED
---- -------- ---------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
KIDDER PEOBODY MORTGAGE ASSETS TRUST........ 8.50% 09/01/14 $ 0 $ 539 $ 0 $ 539
*LEHMAN BROTHERS INC. SUBORDINATED NOTES..... 7.38 08/15/97 1,000 0 0 1,000
LEMAN BROTHERS REPURCHASE AGREEMENT......... 6.25 04/03/95 0 1,410 0 1,410
MERRILL LYNCH ASSET BACKED CORP............. 5.50 07/15/95 715 0 0 715
MLABC....................................... 5.50 05/15/98 0 0 1,712 1,712
MLABC....................................... 5.13 07/15/98 0 0 1,549 1,549
NOMURA ASSET SECURITIES CORPORATION......... 7.00 07/25/24 0 725 0 725
*PEPSICO INC................................. 5.63 07/01/95 0 0 2,000 2,000
*PEPSICO INC................................. 6.13 01/15/98 0 0 2,000 2,000
*PEPSICO INC................................. 7.00 11/15/96 0 0 3,000 3,000
PREM AUTO TR................................ 4.90 10/15/98 0 0 794 794
PREMIER AUTO TRUST.......................... 4.65 11/02/99 0 0 5,331 5,331
*REPUBLIC NAT BANK NY........................ 6.40 04/15/95 0 0 4,000 4,000
RESOLUTION TRUST CORPORATION................ 8.00 07/25/29 0 1,498 0 1,498
*RYDER SYSTEM, INC........................... 7.66 09/15/99 500 0 0 500
SALOMON BROTHERS MORTGAGE SECURITIES VII
INC........................................ 7.37 10/25/23 0 465 0 465
*SALOMON BROTHERS, INC....................... 5.26 02/10/99 1,000 0 0 1,000
SMALL BUSINESS ADMINISTRATION GUARANTEED
LOAN
(ARM).................................... 6.87 03/25/16 0 750 0 750
SMALL BUSINESS ADMINISTRATION GUARANTEED
LOAN
(ARM).................................... 6.90 07/25/16 0 770 0 770
STANDARD CR CRD............................. 7.88 01/07/00 0 0 4,000 4,000
STANDARD CREDIT CARD ABS.................... 8.88 09/07/99 0 0 5,000 5,000
STANDARD CREDIT CARD MASTER TRUST........... 8.50 08/07/97 0 600 0 600
*STHRN CAL EDISON CO......................... 5.90 01/15/97 0 0 3,000 3,000
TENNESSEE VALLEY AUTH....................... 8.38 10/01/99 0 0 2,000 2,000
*TEXACO CAPITAL INC.......................... 7.88 05/01/95 0 0 3,000 3,000
*TEXACO CAPITAL INC.......................... 9.00 11/15/96 0 0 1,500 1,500
*TEXACO CAPITAL INC.......................... 9.00 12/15/99 0 0 3,000 3,000
*TEXACO CAPITAL (MTN)........................ 8.53 08/15/97 0 0 1,350 1,350
THE MONEY STORE HOME EQUITY TRUST........... 5.08 11/15/95 1,218 0 0 1,218
<CAPTION>
VALUE AT
MARCH 31,
1995
---------------------------------------------------------
PNC BFM COMPASS
SHORT-TERM SHORT SHORT/
BOND DURATION INTERMEDIATE PRO-FORMA
PORTFOLIO FUND FUND COMBINED
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
KIDDER PEOBODY MORTGAGE ASSETS TRUST........ $ 0 $ 545,398 $ 0 $ 545,398
*LEHMAN BROTHERS INC. SUBORDINATED NOTES..... 990,000 0 0 990,000
LEMAN BROTHERS REPURCHASE AGREEMENT......... 0 1,410,000 0 1,410,000
MERRILL LYNCH ASSET BACKED CORP............. 708,121 0 0 708,121
MLABC....................................... 0 0 1,694,069 1,694,069
MLABC....................................... 0 0 1,526,613 1,526,613
NOMURA ASSET SECURITIES CORPORATION......... 0 717,335 0 717,335
*PEPSICO INC................................. 0 0 1,997,500 1,997,500
*PEPSICO INC................................. 0 0 1,952,500 1,952,500
*PEPSICO INC................................. 0 0 3,003,750 3,003,750
PREM AUTO TR................................ 0 0 772,675 772,675
PREMIER AUTO TRUST.......................... 0 0 5,155,413 5,155,413
*REPUBLIC NAT BANK NY........................ 0 0 4,000,000 4,000,000
RESOLUTION TRUST CORPORATION................ 0 1,501,396 0 1,501,396
*RYDER SYSTEM, INC........................... 500,000 0 0 500,000
SALOMON BROTHERS MORTGAGE SECURITIES VII
INC........................................ 0 463,161 0 463,161
*SALOMON BROTHERS, INC....................... 951,250 0 0 951,250
SMALL BUSINESS ADMINISTRATION GUARANTEED
LOAN
(ARM).................................... 0 754,080 0 754,080
SMALL BUSINESS ADMINISTRATION GUARANTEED
LOAN
(ARM).................................... 0 773,704 0 773,704
STANDARD CR CRD............................. 0 0 4,080,000 4,080,000
STANDARD CREDIT CARD ABS.................... 0 0 5,225,000 5,225,000
STANDARD CREDIT CARD MASTER TRUST........... 0 609,750 0 609,750
*STHRN CAL EDISON CO......................... 0 0 2,925,000 2,925,000
TENNESSEE VALLEY AUTH....................... 0 0 2,080,000 2,080,000
*TEXACO CAPITAL INC.......................... 0 0 3,003,750 3,003,750
*TEXACO CAPITAL INC.......................... 0 0 1,548,750 1,548,750
*TEXACO CAPITAL INC.......................... 0 0 3,180,000 3,180,000
*TEXACO CAPITAL (MTN)........................ 0 0 1,385,438 1,385,438
THE MONEY STORE HOME EQUITY TRUST........... 1,166,094 0 0 1,166,094
</TABLE>
F-49
<PAGE> 215
<TABLE>
<CAPTION>
PAR (000)
------------------------------------------------
PNC BFM COMPASS
SHORT-TERM SHORT SHORT/
BOND DURATION INTERMEDIATE PRO-FORMA
RATE MATURITY PORTFOLIO FUND FUND COMBINED
---- -------- ---------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
TOYOTA MOTOR CREDIT AUTO
RECEIVABLE................................. 3.90% 08/17/98 $ 65 $ 0 $ 0 $ 65
UNION FEDERAL MASTER TRUST.................. 4.88 11/15/95 922 0 0 922
*UNITED COMPANIES FINANCIAL CORP............. 6.58 04/10/96 1,747 0 0 1,747
U.S. TREASURY NOTE.......................... 4.25 05/15/96 0 0 3,000 3,000
U.S. TREASURY NOTE.......................... 4.63 02/15/96 0 0 5,000 5,000
U.S. TREASURY NOTE.......................... 5.13 03/31/96 0 0 3,000 3,000
U.S. TREASURY NOTE.......................... 5.13 02/28/98 0 0 1,000 1,000
U.S. TREASURY NOTE.......................... 5.63 08/31/97 0 0 8,000 8,000
U.S. TREASURY NOTE.......................... 5.75 10/31/97 0 0 3,000 3,000
U.S. TREASURY NOTE.......................... 6.00 06/30/96 0 16,270 0 16,270
U.S. TREASURY NOTE.......................... 6.00 11/30/97 0 0 5,000 5,000
U.S. TREASURY NOTE.......................... 6.25 01/31/97 0 0 3,000 3,000
U.S. TREASURY NOTE.......................... 6.50 11/30/96 0 0 1,000 1,000
U.S. TREASURY NOTE.......................... 6.50 05/15/97 0 0 5,000 5,000
U.S. TREASURY NOTE.......................... 6.75 02/28/97 0 0 2,000 2,000
U.S. TREASURY NOTE.......................... 6.75 05/31/97 0 0 8,000 8,000
U.S. TREASURY NOTE.......................... 6.88 10/31/96 0 0 2,000 2,000
U.S. TREASURY NOTE.......................... 6.88 02/28/97 1,000 0 0 1,000
U.S. TREASURY NOTE.......................... 6.88 02/28/97 0 4,000 0 4,000
U.S. TREASURY NOTE.......................... 6.88 04/30/97 0 0 10,000 10,000
U.S. TREASURY NOTE.......................... 7.25 01/30/96 0 240 0 240
U.S. TREASURY NOTE.......................... 7.25 08/31/96 0 0 1,000 1,000
U.S. TREASURY NOTE.......................... 7.25 11/30/96 0 0 2,000 2,000
U.S. TREASURY NOTE.......................... 7.25 02/15/98 0 0 4,000 4,000
U.S. TREASURY NOTE.......................... 7.38 05/15/96 0 0 2,000 2,000
U.S. TREASURY NOTE.......................... 7.50 01/31/96 0 0 8,000 8,000
U.S. TREASURY NOTE.......................... 7.50 01/31/97 0 2,935 0 2,935
U.S. TREASURY NOTE.......................... 7.88 01/15/98 0 0 4,000 4,000
U.S. TREASURY NOTE.......................... 8.00 08/15/99 0 0 3,000 3,000
U.S. TREASURY NOTE.......................... 8.50 11/15/95 0 0 2,000 2,000
*WAL-MART.................................... 8.00 05/01/96 0 0 3,000 3,000
SHEARSON TEMP FUND.......................... 0 0 7,168 7,168
SMITH BARNEY MONEY MARKET FUND.............. 173,187 0 0 173,187
TOTAL INVESTMENTS....................
<CAPTION>
VALUE AT
MARCH 31,
1995
-----------------------------------------------------------
PNC BFM COMPASS
SHORT- TERM SHORT SHORT/
BOND DURATION INTERMEDIATE PRO-FORMA
PORTFOLIO FUND FUND COMBINED
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
TOYOTA MOTOR CREDIT AUTO
RECEIVABLE................................. $ 63,113 $ 0 $ 0 $ 63,113
UNION FEDERAL MASTER TRUST.................. 906,312 0 0 906,312
*UNITED COMPANIES FINANCIAL CORP............. 1,730,722 0 0 1,730,722
U.S. TREASURY NOTE.......................... 0 0 2,925,690 2,925,690
U.S. TREASURY NOTE.......................... 0 0 4,921,850 4,921,850
U.S. TREASURY NOTE.......................... 0 0 2,960,310 2,960,310
U.S. TREASURY NOTE.......................... 0 0 952,440 952,440
U.S. TREASURY NOTE.......................... 0 0 7,778,080 7,778,080
U.S. TREASURY NOTE.......................... 0 0 2,917,500 2,917,500
U.S. TREASURY NOTE.......................... 0 16,150,578 0 16,150,578
U.S. TREASURY NOTE.......................... 0 0 4,885,900 4,885,900
U.S. TREASURY NOTE.......................... 0 0 2,974,230 2,974,230
U.S. TREASURY NOTE.......................... 0 0 996,160 996,160
U.S. TREASURY NOTE.......................... 0 0 4,964,500 4,964,500
U.S. TREASURY NOTE.......................... 0 0 1,998,400 1,998,400
U.S. TREASURY NOTE.......................... 0 0 7,984,640 7,984,640
U.S. TREASURY NOTE.......................... 0 0 2,003,820 2,003,820
U.S. TREASURY NOTE.......................... 1,001,750 0 0 1,001,750
U.S. TREASURY NOTE.......................... 0 4,005,641 0 4,005,641
U.S. TREASURY NOTE.......................... 0 0 10,009,600 10,009,600
U.S. TREASURY NOTE.......................... 0 241,874 0 241,874
U.S. TREASURY NOTE.......................... 0 0 1,007,450 1,007,450
U.S. TREASURY NOTE.......................... 0 0 2,015,800 2,015,800
U.S. TREASURY NOTE.......................... 0 0 4,032,280 4,032,280
U.S. TREASURY NOTE.......................... 0 0 2,016,600 2,016,600
U.S. TREASURY NOTE.......................... 0 0 8,065,440 8,065,440
U.S. TREASURY NOTE.......................... 0 2,971,218 0 2,971,218
U.S. TREASURY NOTE.......................... 0 0 4,092,480 4,092,480
U.S. TREASURY NOTE.......................... 0 0 3,105,480 3,105,480
U.S. TREASURY NOTE.......................... 0 0 2,025,600 2,025,600
*WAL-MART.................................... 0 0 3,033,750 3,033,750
SHEARSON TEMP FUND.......................... 0 0 7,168,028 7,168,028
SMITH BARNEY MONEY MARKET FUND.............. 173,187 0 0 173,187
----------- ----------- ------------ ------------
TOTAL INVESTMENTS.................... $15,996,804 $52,219,786 $198,430,767 $266,647,357
=========== =========== ============ ============
</TABLE>
- ---------------
* Denotes securities in violation of proposed investment objectives.
See Accompanying Notes to Pro-Forma Financial Statements
F-50
<PAGE> 216
BFM CORE FIXED INCOME PORTFOLIO
COMPASS FIXED INCOME FUND
PRO-FORMA SCHEDULE OF INVESTMENTS
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PAR (000)
-----------------------------------
BFM
CORE COMPASS
FIXED FIXED
INCOME INCOME PRO-FORMA
RATE MATURITY PORTFOLIO FUND COMBINED
----- -------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
AFRICAN DEVELOPMENT BANK...................................... 9.50% 12/15/95 $ 100 $ 0 $ 100
ALBERTSONS INC. (MTN)......................................... 4.82 03/25/96 0 5,000 5,000
AMERICAN GENERAL FINANCE CORPORATION.......................... 8.50 08/15/98 100 0 100
AMERICAN HOME PRODUCTS CORPORATION............................ 7.90 02/15/05 150 0 150
AMEX.......................................................... 7.15 08/15/99 0 2,000 2,000
ANHEUSER BUSCH COS, INC....................................... 9.00 12/01/09 0 4,500 4,500
ARCHER DANIELS MIDLAND CO..................................... 7.13 03/01/13 0 3,000 3,000
ASSOCIATES CORP N.A........................................... 7.63 04/15/98 0 1,000 1,000
ASSOCIATES CORP N.A........................................... 8.63 06/15/97 0 3,000 3,000
ASSOCIATES CORP. OF NORTH AMERICA............................. 6.25 03/15/99 100 0 100
ASSOCIATES CORP. OF NORTH AMERICA............................. 6.75 07/15/97 60 0 60
BANC ONE CREDIT CARD MASTER TRUST............................. 7.55 12/15/99 250 0 250
BANQUE NATIONALE/PARIS YB..................................... 9.88 05/25/98 0 1,000 1,000
BASS AMERICA INC.............................................. 6.63 03/01/03 0 1,000 1,000
BASS AMERICA INC.............................................. 6.75 08/01/99 0 4,000 4,000
BETA FN 144A MTN LQ(Q/D)...................................... 6.36 04/20/95 0 3,500 3,500
BRITISH COLUMBIA HYDRO AND POWER.............................. 15.50 11/15/11 100 0 100
CATTERPILLAR FINANCIAL SERVICES............................... 8.72 07/21/97 100 0 100
CENTRAL POWER AND LIGHT COMPANY............................... 6.00 04/01/00 100 0 100
CHASE MSTR TR................................................. 8.75 08/15/99 0 3,000 3,000
CHRYSLER FINANCIAL CORPORATION................................ 7.08 04/04/97 150 0 150
COCA COLA COMPANY............................................. 7.88 09/15/98 0 1,955 1,955
CSX CORPORATION............................................... 8.63 05/15/22 60 0 60
DONNELLEY & SONS.............................................. 8.88 04/15/21 0 7,000 7,000
DONNELLEY & SONS.............................................. 7.00 01/01/03 0 2,000 2,000
DU PONT E I DE NEMOURS AND COMPANY............................ 7.50 03/01/33 105 0 105
FHLMC CMO..................................................... 6.75 09/15/16 0 6,000 6,000
FHLMC......................................................... 7.13 07/21/99 0 3,000 3,000
FHLMC CMO..................................................... 8.00 03/15/05 0 1,699 1,699
FEDERAL HOME LOAN MORTGAGE CORPORATION........................ 8.00 11/01/15 184 0 184
FEDERAL HOUSING ADMINISTRATION................................ 8.93 06/01/20 221 0 221
<CAPTION>
VALUE AT MARCH 31, 1995
---------------------------------------------
BFM COMPASS
CORE FIXED FIXED
INCOME INCOME PRO-FORMA
PORTFOLIO FUND COMBINED
----------- ------------ ------------
<S> <C> <C> <C>
AFRICAN DEVELOPMENT BANK...................................... $ 101,979 $ 0 $ 101,979
ALBERTSONS INC. (MTN)......................................... 0 4,906,250 4,906,250
AMERICAN GENERAL FINANCE CORPORATION.......................... 102,842 0 102,842
AMERICAN HOME PRODUCTS CORPORATION............................ 151,603 0 151,603
AMEX.......................................................... 0 1,980,000 1,980,000
ANHEUSER BUSCH COS, INC....................................... 0 4,989,375 4,989,375
ARCHER DANIELS MIDLAND CO..................................... 0 2,748,750 2,748,750
ASSOCIATES CORP N.A........................................... 0 1,006,250 1,006,250
ASSOCIATES CORP N.A........................................... 0 3,086,250 3,086,250
ASSOCIATES CORP. OF NORTH AMERICA............................. 95,758 0 95,758
ASSOCIATES CORP. OF NORTH AMERICA............................. 59,364 0 59,364
BANC ONE CREDIT CARD MASTER TRUST............................. 252,656 0 252,656
BANQUE NATIONALE/PARIS YB..................................... 0 1,071,250 1,071,250
BASS AMERICA INC.............................................. 0 930,000 930,000
BASS AMERICA INC.............................................. 0 3,885,000 3,885,000
BETA FN 144A MTN LQ(Q/D)...................................... 0 3,498,950 3,498,950
BRITISH COLUMBIA HYDRO AND POWER.............................. 118,105 0 118,105
CATTERPILLAR FINANCIAL SERVICES............................... 103,037 0 103,037
CENTRAL POWER AND LIGHT COMPANY............................... 93,434 0 93,434
CHASE MSTR TR................................................. 0 3,060,000 3,060,000
CHRYSLER FINANCIAL CORPORATION................................ 150,000 0 150,000
COCA COLA COMPANY............................................. 0 1,998,988 1,998,988
CSX CORPORATION............................................... 51,827 0 51,827
DONNELLEY & SONS.............................................. 0 7,665,000 7,665,000
DONNELLEY & SONS.............................................. 0 1,937,500 1,937,500
DU PONT E I DE NEMOURS AND COMPANY............................ 96,305 0 96,305
FHLMC CMO..................................................... 0 5,825,340 5,825,340
FHLMC......................................................... 0 2,985,360 2,985,360
FHLMC CMO..................................................... 0 1,712,185 1,712,185
FEDERAL HOME LOAN MORTGAGE CORPORATION........................ 184,206 0 184,206
FEDERAL HOUSING ADMINISTRATION................................ 223,393 0 223,393
</TABLE>
F-51
<PAGE> 217
<TABLE>
<CAPTION>
PAR (000)
-----------------------------------
BFM
CORE COMPASS
FIXED FIXED
INCOME INCOME PRO-FORMA
RATE MATURITY PORTFOLIO FUND COMBINED
----- -------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
FEDERAL HOUSING ADMINISTRATION................................ 10.23% 05/01/33 $ 99 $ 0 $ 99
FEDERAL NATIONAL MORTGAGE ASSOCIATION......................... 6.50 10/25/03 100 0 100
FEDERAL NATIONAL MORTGAGE ASSOCIATION......................... 7.50 02/01/09 347 0 347
FEDERAL NATIONAL MORTGAGE ASSOCIATION......................... 8.00 08/25/16 33 0 33
FEDERAL NATIONAL MORTGAGE ASSOCIATION......................... 8.00 01/01/99 1,007 0 1,007
FEDERAL NATIONAL MORTGAGE ASSOCIATION......................... 8.50 02/01/05 100 0 100
FNMA.......................................................... 9.50 09/25/18 0 756 756
FIRST BOSTON COMPANY MORTGAGE SECURITIES TRUST................ 9.45 08/20/17 98 0 98
FIRST BOSTON MORTGAGE SECURITIES
CORPORATION................................................. 6.75 09/25/06 119 0 119
FIRST UNION CORPORATION....................................... 8.00 11/15/02 100 0 100
FIRST USA CREDIT CARD MASTER TRUST............................ 6.25 08/15/03 300 0 300
FORD CAPITAL BV............................................... 9.13 04/08/96 100 0 100
FORD CAPITAL BV............................................... 9.50 07/01/01 0 1,000 1,000
FORD MOTOR CC................................................. 6.75 08/15/08 0 5,000 5,000
FORD MOTOR CC................................................. 8.00 01/15/99 0 2,000 2,000
GMAC.......................................................... 4.15 03/15/98 0 655 655
GMAC.......................................................... 5.70 12/22/97 150 0 150
GNMA.......................................................... 6.50 01/20/99 300 0 300
GNMA.......................................................... 7.00 02/20/25 245 0 245
GNMA.......................................................... 8.50 01/15/10 649 0 649
GNMA.......................................................... 8.50 03/15/20 0 208 208
GNMA.......................................................... 8.50 04/15/20 0 381 381
GNMA.......................................................... 8.50 04/15/20 0 210 210
GNMA.......................................................... 8.50 04/15/20 0 663 663
GNMA.......................................................... 9.00 09/15/16 0 539 539
GNMA.......................................................... 9.00 10/15/19 0 333 333
GNMA.......................................................... 9.00 11/15/19 0 216 216
GNMA.......................................................... 9.00 11/15/19 0 327 327
GNMA.......................................................... 9.00 12/15/19 0 272 272
GNMA.......................................................... 9.00 01/15/99 637 0 637
GNMA.......................................................... 9.50 11/15/26 622 0 622
GNMA.......................................................... 10.50 01/15/16 44 0 44
GNMA.......................................................... 11.00 05/15/16 25 0 25
GNMA.......................................................... 11.50 05/15/16 10 0 10
GNMA.......................................................... 12.00 05/15/16 12 0 12
GNMA.......................................................... 12.50 04/15/13 2 0 2
GRAND MET INV CORP............................................ 7.13 09/15/04 0 5,000 5,000
GTE SOUTHWEST INC............................................. 5.82 12/01/99 100 0 100
<CAPTION>
VALUE AT MARCH 31, 1995
---------------------------------------------
BFM COMPASS
CORE FIXED FIXED
INCOME INCOME PRO-FORMA
PORTFOLIO FUND COMBINED
----------- ------------ ------------
<S> <C> <C> <C>
FEDERAL HOUSING ADMINISTRATION................................ $ 103,640 $ 0 $ 103,640
FEDERAL NATIONAL MORTGAGE ASSOCIATION......................... 92,578 0 92,578
FEDERAL NATIONAL MORTGAGE ASSOCIATION......................... 344,655 0 344,655
FEDERAL NATIONAL MORTGAGE ASSOCIATION......................... 33,325 0 33,325
FEDERAL NATIONAL MORTGAGE ASSOCIATION......................... 1,000,097 0 1,000,097
FEDERAL NATIONAL MORTGAGE ASSOCIATION......................... 102,531 0 102,531
FNMA.......................................................... 0 769,088 769,088
FIRST BOSTON COMPANY MORTGAGE SECURITIES TRUST................ 100,027 0 100,027
FIRST BOSTON MORTGAGE SECURITIES
CORPORATION................................................. 110,057 0 110,057
FIRST UNION CORPORATION....................................... 100,093 0 100,093
FIRST USA CREDIT CARD MASTER TRUST............................ 300,468 0 300,468
FORD CAPITAL BV............................................... 101,907 0 101,907
FORD CAPITAL BV............................................... 0 1,081,250 1,081,250
FORD MOTOR CC................................................. 0 4,512,500 4,512,500
FORD MOTOR CC................................................. 0 2,027,500 2,027,500
GMAC.......................................................... 0 643,804 643,804
GMAC.......................................................... 143,355 0 143,355
GNMA.......................................................... 297,281 0 297,281
GNMA.......................................................... 246,749 0 246,749
GNMA.......................................................... 661,496 0 661,496
GNMA.......................................................... 0 210,511 210,511
GNMA.......................................................... 0 386,140 386,140
GNMA.......................................................... 0 212,689 212,689
GNMA.......................................................... 0 672,451 672,451
GNMA.......................................................... 0 556,069 556,069
GNMA.......................................................... 0 344,153 344,153
GNMA.......................................................... 0 222,574 222,574
GNMA.......................................................... 0 338,100 338,100
GNMA.......................................................... 0 281,114 281,114
GNMA.......................................................... 650,983 0 650,983
GNMA.......................................................... 646,326 0 646,326
GNMA.......................................................... 47,775 0 47,775
GNMA.......................................................... 26,745 0 26,745
GNMA.......................................................... 11,171 0 11,171
GNMA.......................................................... 13,900 0 13,900
GNMA.......................................................... 1,713 0 1,713
GRAND MET INV CORP............................................ 0 4,800,000 4,800,000
GTE SOUTHWEST INC............................................. 93,187 0 93,187
</TABLE>
F-52
<PAGE> 218
<TABLE>
<CAPTION>
PAR (000)
-----------------------------------
BFM
CORE COMPASS
FIXED FIXED
INCOME INCOME PRO-FORMA
RATE MATURITY PORTFOLIO FUND COMBINED
----- -------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
HYDRO QUEBEC.................................................. 8.05% 07/07/24 $ 100 $ 0 $ 100
HYDRO-QUEBEC.................................................. 9.40 02/01/21 0 3,000 0
ITT FINANCIAL CORPORATION..................................... 8.85 07/15/05 100 0 100
J.C. PENNEY & CO.............................................. 9.45 07/15/02 0 3,000 3,000
KIDDER PEOBODY ACCEPTANCE CORPORATION......................... 6.65 02/01/06 100 0 100
KIMBERLY CLARK................................................ 7.88 02/01/23 0 3,750 3,750
LEHMAN BROTHERS INC. REPURCHASE AGREEMENT..................... 6.25 04/03/95 300 0 300
MCDONALD'S CORP............................................... 7.38 07/15/02 0 2,000 2,000
MERRILL LYNCH................................................. 7.00 04/27/08 0 3,000 3,000
MERRILL LYNCH................................................. 7.05 04/15/03 0 2,000 2,000
MERRILL LYNCH................................................. 8.30 11/01/02 0 2,000 2,000
MLABC......................................................... 5.50 05/15/98 0 1,027 1,027
MLABC......................................................... 5.13 07/15/98 0 1,549 1,549
MOBIL CORPORATION............................................. 7.63 02/23/33 100 0 100
NATIONAL WESTMINSTER BK....................................... 9.45 05/01/01 0 4,000 4,000
NORFOLK OF SOUTHERN CORP...................................... 9.00 03/01/21 0 4,000 4,000
PACIFIC GAS AND ELECTRIC COMPANY.............................. 7.25 08/01/26 50 0 50
PEPSICO INC................................................... 6.13 01/15/98 0 2,000 2,000
PREM AUTO TR.................................................. 4.90 10/15/98 0 3,176 3,176
PROCTOR & GAMBLE CO........................................... 7.38 03/01/23 0 2,000 2,000
PROVINCE OF ONTARIO YB........................................ 8.00 10/17/01 0 5,000 5,000
QUEBEC PROVENCE, CDA.......................................... 7.50 07/15/23 100 0 100
REPUBLIC OF ITALY............................................. 6.88 09/27/23 50 0 50
SALOMON BROTHERS MORTGAGE SECURITIES VII INC.................. 7.00 07/25/24 104 0 104
SALOMON BROTHERS MORTGAGE TRUST (PRINCIPAL ONLY).............. 10/23/17 183 0 183
SHAWMUT BANK OF CONNECTICUT NA................................ 8.63 02/15/05 100 0 100
SMITH BARNEY HOLDINGS INC..................................... 5.38 06/01/96 100 0 100
SMITH BARNEY HOLDINGS INC..................................... 5.50 01/15/99 50 0 50
STANDARD CREDIT CARD MASTER TRUST............................. 8.25 01/08/07 150 0 150
STHRN CAL EDISON CO........................................... 5.90 01/15/97 0 2,000 2,000
TECO ENERGY INC MTN........................................... 9.25 06/19/97 0 1,000 1,000
TEXACO CAPITAL INC............................................ 8.50 02/15/03 0 5,000 5,000
TEXACO CAPITAL INC............................................ 9.00 11/15/96 0 1,000 1,000
TEXAS UTILITIES ELECTRIC COMPANY.............................. 7.38 10/01/25 50 0 50
TORONTO-DOMINION BANK......................................... 7.88 08/15/04 0 2,000 2,000
UNITED PARCEL SERVICE......................................... 8.38 04/01/20 0 7,000 7,000
U.S. TREASURY BOND............................................ 6.25 08/15/23 0 5,000 5,000
U.S. TREASURY BOND............................................ 7.25 05/15/16 315 0 315
<CAPTION>
VALUE AT MARCH 31, 1995
---------------------------------------------
BFM COMPASS
CORE FIXED FIXED
INCOME INCOME PRO-FORMA
PORTFOLIO FUND COMBINED
----------- ------------ ------------
<S> <C> <C> <C>
HYDRO QUEBEC.................................................. $ 100,270 $ 0 $ 100,270
HYDRO-QUEBEC.................................................. 3,251,250 3,251,250
ITT FINANCIAL CORPORATION..................................... 104,924 0 104,924
J.C. PENNEY & CO.............................................. 0 3,217,500 3,217,500
KIDDER PEOBODY ACCEPTANCE CORPORATION......................... 94,078 0 94,078
KIMBERLY CLARK................................................ 0 3,689,063 3,689,063
LEHMAN BROTHERS INC. REPURCHASE AGREEMENT..................... 300,000 0 300,000
MCDONALD'S CORP............................................... 0 2,002,500 2,002,500
MERRILL LYNCH................................................. 0 2,707,500 2,707,500
MERRILL LYNCH................................................. 0 1,867,500 1,867,500
MERRILL LYNCH................................................. 0 2,030,000 2,030,000
MLABC......................................................... 0 1,016,441 1,016,441
MLABC......................................................... 0 1,526,613 1,526,613
MOBIL CORPORATION............................................. 93,386 0 93,386
NATIONAL WESTMINSTER BK....................................... 0 4,325,000 4,325,000
NORFOLK OF SOUTHERN CORP...................................... 0 4,370,000 4,370,000
PACIFIC GAS AND ELECTRIC COMPANY.............................. 43,947 0 43,947
PEPSICO INC................................................... 0 1,952,500 1,952,500
PREM AUTO TR.................................................. 0 3,090,700 3,090,700
PROCTOR & GAMBLE CO........................................... 0 1,837,500 1,837,500
PROVINCE OF ONTARIO YB........................................ 0 5,081,250 5,081,250
QUEBEC PROVENCE, CDA.......................................... 88,627 0 88,627
REPUBLIC OF ITALY............................................. 40,249 0 40,249
SALOMON BROTHERS MORTGAGE SECURITIES VII INC.................. 89,325 0 89,325
SALOMON BROTHERS MORTGAGE TRUST (PRINCIPAL ONLY).............. 125,933 0 125,933
SHAWMUT BANK OF CONNECTICUT NA................................ 103,267 0 103,267
SMITH BARNEY HOLDINGS INC..................................... 97,935 0 97,935
SMITH BARNEY HOLDINGS INC..................................... 46,228 0 46,228
STANDARD CREDIT CARD MASTER TRUST............................. 154,313 0 154,313
STHRN CAL EDISON CO........................................... 0 1,950,000 1,950,000
TECO ENERGY INC MTN........................................... 0 1,042,500 1,042,500
TEXACO CAPITAL INC............................................ 0 5,237,500 5,237,500
TEXACO CAPITAL INC............................................ 0 1,032,500 1,032,500
TEXAS UTILITIES ELECTRIC COMPANY.............................. 43,841 0 43,841
TORONTO-DOMINION BANK......................................... 0 1,977,500 1,977,500
UNITED PARCEL SERVICE......................................... 0 7,332,500 7,332,500
U.S. TREASURY BOND............................................ 0 4,260,950 4,260,950
U.S. TREASURY BOND............................................ 304,564 0 304,564
</TABLE>
F-53
<PAGE> 219
<TABLE>
<CAPTION>
PAR (000)
-----------------------------------
BFM
CORE COMPASS
FIXED FIXED
INCOME INCOME PRO-FORMA
RATE MATURITY PORTFOLIO FUND COMBINED
----- -------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
U.S. TREASURY BOND............................................ 7.25% 05/15/16 $ 0 $10,000 $10,000
U.S. TREASURY BOND............................................ 7.50 11/15/24 650 0 650
U.S. TREASURY BOND............................................ 7.63 02/15/07 0 2,000 2,000
U.S. TREASURY BOND............................................ 7.88 02/15/21 0 1,000 1,000
U.S. TREASURY BOND............................................ 8.13 08/15/19 0 6,000 6,000
U.S. TREASURY BOND............................................ 8.75 05/15/17 0 2,000 2,000
U.S. TREASURY BOND............................................ 8.75 08/15/20 683 0 683
U.S. TREASURY BOND............................................ 10.38 11/15/12 590 0 590
U.S. TREASURY NOTE............................................ 4.25 12/31/95 0 5,000 5,000
U.S. TREASURY NOTE............................................ 4.38 11/15/96 0 3,000 3,000
U.S. TREASURY NOTE............................................ 4.63 02/15/96 0 7,500 7,500
U.S. TREASURY NOTE............................................ 5.13 11/15/95 0 3,000 3,000
U.S. TREASURY NOTE............................................ 5.13 03/31/96 0 2,000 2,000
U.S. TREASURY NOTE............................................ 5.13 02/28/98 0 2,000 2,000
U.S. TREASURY NOTE............................................ 5.13 03/31/98 0 7,000 7,000
U.S. TREASURY NOTE............................................ 5.13 11/30/98 0 2,000 2,000
U.S. TREASURY NOTE............................................ 5.63 08/31/97 0 2,000 2,000
U.S. TREASURY NOTE............................................ 5.75 10/31/97 0 2,000 2,000
U.S. TREASURY NOTE............................................ 6.00 11/30/97 0 3,000 3,000
U.S. TREASURY NOTE............................................ 6.25 02/15/03 655 0 655
U.S. TREASURY NOTE............................................ 6.38 01/15/99 0 2,000 2,000
U.S. TREASURY NOTE............................................ 6.50 11/30/96 0 2,000 2,000
U.S. TREASURY NOTE............................................ 6.50 05/15/97 0 2,000 2,000
U.S. TREASURY NOTE............................................ 6.50 08/15/97 0 1,000 1,000
U.S. TREASURY NOTE............................................ 6.75 05/31/97 0 3,000 3,000
U.S. TREASURY NOTE............................................ 7.00 04/15/99 0 2,000 2,000
U.S. TREASURY NOTE............................................ 7.13 10/15/98 0 2,000 2,000
U.S. TREASURY NOTE............................................ 7.25 08/15/04 0 1,850 1,850
U.S. TREASURY NOTE............................................ 7.25 08/15/04 500 0 500
U.S. TREASURY NOTE............................................ 7.25 11/30/96 425 0 425
U.S. TREASURY NOTE............................................ 7.25 02/15/98 0 4,000 4,000
U.S. TREASURY NOTE............................................ 7.25 02/15/98 1,355 0 1,355
U.S. TREASURY NOTE............................................ 7.38 05/15/96 0 1,000 1,000
U.S. TREASURY NOTE............................................ 7.50 11/15/01 635 0 635
U.S. TREASURY NOTE............................................ 7.50 02/15/05 510 0 510
U.S. TREASURY NOTE............................................ 7.50 01/31/97 2,000 0 2,000
U.S. TREASURY NOTE............................................ 7.75 02/15/01 0 2,000 2,000
U.S. TREASURY NOTE............................................ 7.75 11/30/99 1,780 0 1,780
U.S. TREASURY NOTE............................................ 8.25 07/15/98 0 2,000 2,000
<CAPTION>
VALUE AT MARCH 31, 1995
---------------------------------------------
BFM COMPASS
CORE FIXED FIXED
INCOME INCOME PRO-FORMA
PORTFOLIO FUND COMBINED
----------- ------------ ------------
<S> <C> <C> <C>
U.S. TREASURY BOND............................................ $ 0 $ 9,678,100 $ 9,678,100
U.S. TREASURY BOND............................................ 551,029 0 551,029
U.S. TREASURY BOND............................................ 0 2,022,560 2,022,560
U.S. TREASURY BOND............................................ 0 1,032,450 1,032,450
U.S. TREASURY BOND............................................ 0 6,356,220 6,356,220
U.S. TREASURY BOND............................................ 0 2,247,560 2,247,560
U.S. TREASURY BOND............................................ 771,046 0 771,046
U.S. TREASURY BOND............................................ 726,898 0 726,898
U.S. TREASURY NOTE............................................ 0 4,922,600 4,922,600
U.S. TREASURY NOTE............................................ 0 2,893,260 2,893,260
U.S. TREASURY NOTE............................................ 0 7,382,775 7,382,775
U.S. TREASURY NOTE............................................ 0 2,978,430 2,978,430
U.S. TREASURY NOTE............................................ 0 1,973,540 1,973,540
U.S. TREASURY NOTE............................................ 0 1,904,880 1,904,880
U.S. TREASURY NOTE............................................ 0 6,657,980 6,657,980
U.S. TREASURY NOTE............................................ 0 1,878,140 1,878,140
U.S. TREASURY NOTE............................................ 0 1,944,520 1,944,520
U.S. TREASURY NOTE............................................ 0 1,945,000 1,945,000
U.S. TREASURY NOTE............................................ 0 2,931,540 2,931,540
U.S. TREASURY NOTE............................................ 616,827 0 616,827
U.S. TREASURY NOTE............................................ 0 1,956,180 1,956,180
U.S. TREASURY NOTE............................................ 0 1,992,320 1,992,320
U.S. TREASURY NOTE............................................ 0 1,985,800 1,985,800
U.S. TREASURY NOTE............................................ 0 991,490 991,490
U.S. TREASURY NOTE............................................ 0 2,994,240 2,994,240
U.S. TREASURY NOTE............................................ 0 1,999,360 1,999,360
U.S. TREASURY NOTE............................................ 0 2,012,580 2,012,580
U.S. TREASURY NOTE............................................ 0 1,851,055 1,851,055
U.S. TREASURY NOTE............................................ 500,080 0 500,080
U.S. TREASURY NOTE............................................ 428,319 0 428,319
U.S. TREASURY NOTE............................................ 0 4,032,280 4,032,280
U.S. TREASURY NOTE............................................ 1,366,645 0 1,366,645
U.S. TREASURY NOTE............................................ 0 1,008,300 1,008,300
U.S. TREASURY NOTE............................................ 646,113 0 646,113
U.S. TREASURY NOTE............................................ 520,358 0 520,358
U.S. TREASURY NOTE............................................ 2,024,680 0 2,024,680
U.S. TREASURY NOTE............................................ 0 2,058,980 2,058,980
U.S. TREASURY NOTE............................................ 1,825,604 0 1,825,604
U.S. TREASURY NOTE............................................ 0 2,071,860 2,071,860
</TABLE>
F-54
<PAGE> 220
<TABLE>
<CAPTION>
PAR (000)
-----------------------------------
BFM
CORE COMPASS
FIXED FIXED
INCOME INCOME PRO-FORMA
RATE MATURITY PORTFOLIO FUND COMBINED
----- -------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
U.S. TREASURY NOTE............................................ 8.50% 11/15/00 $ 0 $6,000 $ 6,000
WAL-MART...................................................... 8.00 05/01/96 0 2,000 2,000
WEYERHAUSER CO MTN............................................ 8.84 04/12/99 0 4,000 4,000
SHEARSON TEMP FUND............................................ 0 8,657 8,657
TOTAL INVESTMENTS.....................................
<CAPTION>
VALUE AT MARCH 31, 1995
---------------------------------------------
BFM COMPASS
CORE FIXED FIXED
INCOME INCOME PRO-FORMA
PORTFOLIO FUND COMBINED
----------- ------------ ------------
<S> <C> <C> <C>
U.S. TREASURY NOTE............................................ $ 0 $ 6,381,720 $ 6,381,720
WAL-MART...................................................... 0 2,022,500 2,022,500
WEYERHAUSER CO MTN............................................ 0 4,190,000 4,190,000
SHEARSON TEMP FUND............................................ 0 8,657,069 8,657,069
----------- ------------ ------------
TOTAL INVESTMENTS..................................... $18,823,054 $240,098,446 $258,921,500
=========== ============ ============
</TABLE>
See Accompanying Notes to Pro-Forma Financial Statements
F-55
<PAGE> 221
PNC MUNICIPAL MONEY MARKET PORTFOLIO
COMPASS MUNICIPAL MONEY FUND
PRO-FORMA COMBINED STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
MUNICIPAL MUNICIPAL
MONEY MARKET MONEY PRO FORMA
PORTFOLIO FUND COMBINED
------------ ---------- -----------
<S> <C> <C> <C>
ASSETS
Investments, @ value (Cost $224,892,411 and $47,292,316
respectively)..................................................... $224,892,411 $47,292,316 $272,184,727
Cash................................................................ (13,795) 44,248 30,453
Dividends and Interest receivable................................... 1,527,894 452,292 1,980,186
Capital shares sold receivable...................................... 0 0 0
Prepaid expenses.................................................... 19,755 67,586 87,341
------------ ---------- -----------
TOTAL ASSETS.................................................. 226,426,265 47,856,442 274,282,707
------------ ---------- -----------
LIABILITIES
Capital shares redeemed payable..................................... 0 0 0
Securities purchased payable........................................ 0 900,000 900,000
Dividends payable................................................... 743,373 8,682 752,055
Accrued expenses payable............................................ 118,294 118,607 236,901
------------ ---------- -----------
TOTAL LIABILITIES............................................. 861,667 1,027,289 1,888,956
------------ ---------- -----------
TOTAL NET ASSETS.............................................. $225,564,598 $46,829,153 $272,393,751
============ =========== ============
TOTAL NET ASSETS BY CLASS OF SHARES
Institutional Class................................................... $34,746,526 N/A $34,746,526
Service Class......................................................... 190,789,264 46,829,153 237,618,417
Series A Investor Class............................................... 28,808 N/A 28,808
------------ ---------- -----------
$225,564,598 $46,829,153 $272,393,751
============ =========== ============
SHARES OUTSTANDING
Institutional Class................................................... 34,751,840 N/A 34,751,840
Service Class
Pre-combination..................................................... 190,819,260 46,868,954 N/A
Post-combination.................................................... 190,819,260 46,868,954 237,688,214
Series A Investor Class............................................... 28,814 N/A 28,814
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE
Institutional Class................................................... $1.00 N/A $1.00
Service Class
Pre-combination..................................................... $1.00 $1.00 N/A
Post-combination.................................................... $1.00 $1.00 $1.00
Series A Investor Class (Net Asset Value)............................. $1.00 N/A $1.00
Maximum offering price per Series A Investor Class.................. $1.00 N/A $1.00
</TABLE>
- ---------------
Note: Series B and Series C Investor Class shares will be available for
shareholders in a future period.
See Accompanying Notes to Pro-Forma Financial Statements
F-56
<PAGE> 222
PNC PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
COMPASS PENNSYLVANIA MUNICIPAL MONEY FUND
PRO-FORMA COMBINED STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
PENNSYLVANIA PENNSYLVANIA
MUNICIPAL MUNICIPAL
MONEY MARKET MONEY PRO-FORMA
PORTFOLIO FUND COMBINED
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Investments, @ value (Cost $324,566,952 and $42,724,427
respectively)...................................................... $324,566,952 $42,724,427 $367,291,379
Cash................................................................. 60,223 13,127 73,350
Dividends and Interest receivable.................................... 1,711,919 456,315 2,168,234
Capital shares sold receivable....................................... 0 0 0
Prepaid expenses..................................................... 28,484 38,224 66,708
----------- ----------- ------------
TOTAL ASSETS................................................... 326,367,578 43,232,093 369,599,671
----------- ----------- ------------
LIABILITIES
Capital shares redeemed payable...................................... 0 0 0
Securities purchased payable......................................... 2,000,000 2,000,000
Dividends payable.................................................... 1,028,089 7,761 1,035,850
Accrued expenses payable............................................. 79,334 42,503 121,837
----------- ----------- ------------
TOTAL LIABILITIES.............................................. 1,107,423 2,050,264 3,157,687
----------- ----------- ------------
TOTAL NET ASSETS............................................... $325,260,155 $41,181,829 $366,441,984
============ =========== ============
TOTAL NET ASSETS BY CLASS OF SHARES
Institutional Class.................................................... $187,857,999 N/A $187,857,999
Service Class.......................................................... 137,296,807 41,181,829 178,478,636
Series A Investor Class................................................ 105,349 N/A 105,349
----------- ----------- ------------
$325,260,155 $41,181,829 $366,441,984
============ =========== ============
SHARES OUTSTANDING
Institutional Class.................................................... 187,857,855 N/A 187,857,855
Service Class
Pre-combination...................................................... 137,296,821 41,184,251 N/A
Post-combination..................................................... 137,296,821 41,184,251 178,481,072
Series A Investor Class................................................ 105,349 N/A 105,349
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
Institutional Class.................................................... $1.00 N/A $1.00
Service Class
Pre-combination...................................................... $1.00 $1.00 N/A
Post-combination..................................................... $1.00 $1.00 $1.00
Series A Investor Class (Net Asset Value).............................. $1.00 N/A $1.00
Maximum offering price per Series A Investor Class................... $1.00 N/A $1.00
</TABLE>
- ---------------
Note: Series B and Series C Investor Class shares will be available for
shareholders in a future period.
See Accompanying Notes to Pro-Forma Financial Statements
F-57
<PAGE> 223
PNC MONEY MARKET PORTFOLIO
COMPASS CASH RESERVE FUND
PRO-FORMA COMBINED STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
MONEY CASH
MARKET RESERVE PRO-FORMA
PORTFOLIO FUND COMBINED
-------------- ------------ --------------
<S> <C> <C> <C>
ASSETS
Investments, @ value (Cost $1,207,209,226 and $435,095,609
respectively)................................................. $1,207,209,226 $435,095,609 $1,642,304,835
Cash............................................................ 0 764 764
Dividends and Interest receivable............................... 5,474,595 1,952,626 7,427,221
Capital shares sold receivable.................................. 1,590 0 1,590
Prepaid expenses................................................ 264,518 46,582 311,100
-------------- ------------ --------------
TOTAL ASSETS.............................................. 1,212,949,929 437,095,581 1,650,045,510
-------------- ------------ --------------
LIABILITIES
Capital shares redeemed payable................................. 0 0 0
Dividends payable............................................... 6,130,246 135,167 6,265,413
Accrued expenses payable........................................ 349,880 387,170 737,050
-------------- ------------ --------------
TOTAL LIABILITIES......................................... 6,480,126 522,337 7,002,463
-------------- ------------ --------------
TOTAL NET ASSETS.......................................... $1,206,469,803 $436,573,244 $1,643,043,047
============== ============ ==============
TOTAL NET ASSETS BY CLASS OF SHARES
Institutional Class............................................... $ 593,948,095 N/A $ 593,948,095
Service Class..................................................... 605,219,878 436,573,244 1,041,793,122
Series A Investor Class........................................... 7,301,830 N/A 7,301,830
-------------- ------------ --------------
$1,206,469,803 $436,573,244 $1,643,043,047
============== ============ ==============
SHARES OUTSTANDING
Institutional Class............................................... 593,927,411 N/A 593,927,411
Service Class
Pre-combination................................................. 605,221,765 436,721,161 N/A
Post-combination................................................ 605,221,765 436,721,161 1,041,942,926
Series A Investor Class........................................... 7,301,881 N/A 7,301,881
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
Institutional Class............................................... $1.00 N/A $1.00
Service Class
Pre-combination................................................. $1.00 $1.00 N/A
Post-combination................................................ $1.00 $1.00 $1.00
Series A Investor Class (Net Asset Value)......................... $1.00 N/A $1.00
Maximum offering price per Series A Investor Class.............. $1.00 N/A $1.00
</TABLE>
- ---------------
Note: Series B and Series C Investor Class shares will be available for
shareholders in a future period.
See Accompanying Notes to Pro-Forma Financial Statements
F-58
<PAGE> 224
PNC GOVERNMENT MONEY MARKET PORTFOLIO
COMPASS U.S. TREASURY FUND
PRO-FORMA COMBINED STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
GOVERNMENT U.S.
MONEY MARKET TREASURY PRO-FORMA
PORTFOLIO FUND COMBINED
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Investments, @ value (Cost $622,750,248 and $348,188,958
respectively).................................................... $622,750,248 $348,188,958 $970,939,206
Cash............................................................... 64,173 208 64,381
Dividends and Interest receivable.................................. 1,746,487 352,056 2,098,543
Capital shares sold receivable..................................... 0 0 0
Prepaid expenses................................................... 20,562 93,195 113,757
----------- ----------- -----------
Total Assets................................................. 624,581,470 348,634,417 973,215,887
----------- ----------- -----------
LIABILITIES
Capital shares redeemed payable.................................... 0 251,890 251,890
Dividends payable.................................................. 2,885,397 105,481 2,990,878
Accrued expenses payable........................................... 232,985 0 232,985
----------- ----------- -----------
TOTAL LIABILITIES............................................ 3,118,382 357,371 3,475,753
----------- ----------- -----------
TOTAL NET ASSETS............................................. $621,463,088 $348,277,046 $969,740,134
============ =========== ===========
TOTAL NET ASSETS BY CLASS OF SHARES
Institutional Class.................................................. $113,706,910 N/A $113,706,910
Service Class........................................................ 505,356,292 348,277,046 853,633,338
Series A Investor Class.............................................. 2,399,886 N/A 2,399,886
----------- ----------- -----------
$621,463,088 $348,277,046 $969,740,134
=========== =========== ===========
SHARES OUTSTANDING
Institutional Class.................................................. 113,704,861 N/A 113,704,861
Service Class
Pre-combination.................................................... 505,347,225 348,271,759 N/A
Post-combination................................................... 505,347,225 348,271,759 853,618,984
Series A Investor Class.............................................. 2,399,857 N/A 2,399,857
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
Institutional Class.................................................. $1.00 N/A $1.00
Service Class
Pre-combination.................................................... $1.00 $1.00 N/A
Post-combination................................................... $1.00 $1.00 $1.00
Series A Investor Class (Net Asset Value)............................ $1.00 N/A $1.00
Maximum offering price per Series A Investor Class................. $1.00 N/A $1.00
</TABLE>
- ---------------
Note: Series B and Series C Investor Class shares will be available for
shareholders in a future period.
See Accompanying Notes to Pro-Forma Financial Statements
F-59
<PAGE> 225
PNC TAX-FREE INCOME PORTFOLIO
COMPASS MUNICIPAL BOND FUND
PRO-FORMA COMBINED STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
TAX-FREE MUNICIPAL
INCOME BOND PRO-FORMA
PORTFOLIO FUND COMBINED
---------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Investments, @ value (Cost $9,789,950 and $28,656,897 respectively)...... $9,847,574 $28,515,944 $38,363,518
Cash..................................................................... 0 (52,913) (52,913)
Dividends and Interest receivable........................................ 141,815 485,269 627,084
Receivable from Advisor.................................................. 33,536 0 33,536
Prepaid expenses......................................................... 12,814 10,938 23,752
---------- ----------- -----------
TOTAL ASSETS....................................................... 10,035,739 28,959,238 38,994,977
---------- ----------- -----------
LIABILITIES
Capital shares redeemed payable.......................................... 5,797 7 5,804
Dividends payable........................................................ 0 0 0
Accrued expenses payable................................................. 47,950 70,136 118,086
---------- ----------- -----------
TOTAL LIABILITIES.................................................. 53,747 70,143 123,890
---------- ----------- -----------
TOTAL NET ASSETS................................................... $9,981,992 $28,889,095 $38,871,087
========== =========== ===========
TOTAL NET ASSETS BY CLASS OF SHARES
Institutional Class........................................................ $ 11,770 N/A $ 11,770
Service Class.............................................................. 3,089,624 28,889,095 31,978,719
Series A Investor Class.................................................... 6,880,598 N/A 6,880,598
---------- ----------- -----------
$9,981,992 $28,889,095 $38,871,087
========== =========== ===========
SHARES OUTSTANDING
Institutional Class........................................................ 1,133 N/A 1,133
Service Class
Pre-combination.......................................................... 297,405 2,793,612 N/A
Post-combination......................................................... 297,405 2,780,471 3,077,876
Series A Investor Class.................................................... 662,291 N/A 662,291
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
Institutional Class........................................................ $10.39 N/A $10.39
Service Class
Pre-combination.......................................................... $10.39 $10.34 N/A
Post-combination......................................................... $10.39 $10.39 $10.39
Series A Investor Class (Net Asset Value).................................. $10.39 N/A $10.39
Maximum offering price per Series A Investor Class....................... $10.88 N/A $10.88
</TABLE>
- ---------------
Note: Series B and Series C Investor Class shares will be available for
shareholders in a future period.
See Accompanying Notes to Pro-Forma Financial Statements
F-60
<PAGE> 226
PNC PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
COMPASS PENNSYLVANIA MUNICIPAL BOND FUND
PRO-FORMA COMBINED STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
PENNSYLVANIA PENNSYLVANIA
TAX-FREE MUNICIPAL
INCOME BOND PRO-FORMA
PORTFOLIO FUND COMBINED
------------ ------------ -----------
<S> <C> <C> <C>
ASSETS
Investments, @ value (Cost $63,023,846 and $17,282,563
respectively)....................................................... $61,872,120 $16,941,313 $78,813,433
Cash.................................................................. 0 488 488
Dividends and Interest receivable..................................... 1,073,210 305,821 1,379,031
Capital shares sold receivable........................................ 148,800 0 148,800
Prepaid expenses...................................................... 16,144 6,907 23,051
----------- ----------- -----------
TOTAL ASSETS.................................................... 63,110,274 17,254,529 80,364,803
----------- ----------- -----------
LIABILITIES
Capital shares redeemed payable....................................... 226,984 0 226,984
Investment purchased payable.......................................... 1,830,104 500,000 2,330,104
Dividends payable..................................................... 88,588 0 88,588
Other payables........................................................ 0 2,153 2,153
Accrued expenses payable.............................................. 93,499 32,153 125,652
----------- ----------- -----------
TOTAL LIABILITIES............................................... 2,239,175 534,306 2,773,481
----------- ----------- -----------
TOTAL NET ASSETS................................................ $60,871,099 $16,720,223 $77,591,322
=========== =========== ===========
TOTAL NET ASSETS BY CLASS OF SHARES
Institutional Class..................................................... $ 1,157,106 N/A $ 1,157,106
Service Class........................................................... 12,914,730 16,720,223 29,634,953
Series A Investor Class................................................. 44,458,184 N/A 44,458,184
Series B Investor Class................................................. 2,341,079 N/A 2,341,079
----------- ----------- -----------
$60,871,099 $16,720,223 $77,591,322
=========== =========== ===========
SHARES OUTSTANDING
Institutional Class..................................................... 115,231 N/A 115,231
Service Class
Pre-combination....................................................... 1,286,171 1,729,936 N/A
Post-combination...................................................... 1,286,171 1,665,361 2,951,532
Series A Investor Class................................................. 4,427,574 N/A 4,427,574
Series B Investor Class................................................. 233,149 N/A 233,149
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
Institutional Class..................................................... $10.04 N/A $10.04
Service Class
Pre-combination....................................................... $10.04 $9.67 N/A
Post-combination...................................................... $10.04 $10.04 $10.04
Series A Investor Class (Net Asset Value)............................... $10.04 N/A $10.04
Maximum offering price per Series A Investor Class.................... $10.51 N/A $10.51
Series B Investor Class (Net Asset Value)............................... $10.04
Redemption Price...................................................... $9.59 N/A $9.59
</TABLE>
- ---------------
Note: Series C Investor Class shares will be available for shareholders in a
future period.
See Accompanying Notes to Pro-Forma Financial Statements
F-61
<PAGE> 227
PNC VALUE EQUITY PORTFOLIO
COMPASS EQUITY INCOME FUND
PRO-FORMA COMBINED STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
VALUE EQUITY
EQUITY INCOME PRO FORMA
PORTFOLIO FUND COMBINED
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Investments, @ value (Cost $570,413,430 and $273,321,119
respectively)...................................................... $638,604,283 $290,668,007 $929,272,290
Cash................................................................. 0 1,062,247 1,062,247
Dividends and Interest receivable.................................... 1,527,617 971,856 2,499,473
Investment sold receivable........................................... 2,623,913 7,480,135 10,104,048
Capital shares sold receivable....................................... 224,665 82,407 307,072
Prepaid expenses..................................................... 31,091 62,580 93,671
------------ ------------ -----------
TOTAL ASSETS................................................... 643,011,569 300,327,232 943,338,801
------------ ------------ -----------
LIABILITIES
Capital shares redeemed payable...................................... 180,638 4,205,459 4,386,097
Investments purchased payable........................................ 6,549,535 2,416,049 8,965,584
Dividends payable.................................................... 0 0 0
Accrued expenses payable............................................. 393,502 302,116 695,618
------------ ------------ -----------
TOTAL LIABILITIES.............................................. 7,123,675 6,923,624 14,047,299
------------ ------------ -----------
TOTAL NET ASSETS............................................... $635,887,894 $293,403,608 $929,291,502
============ ============ ============
TOTAL NET ASSETS BY CLASS OF SHARES
Institutional Class.................................................... $497,417,569 N/A $497,417,569
Service Class.......................................................... 125,896,641 293,403,608 419,300,249
Series A Investor Class................................................ 12,573,684 N/A 12,573,684
------------ ------------ -----------
$635,887,894 $293,403,608 $929,291,502
============ ============ ============
SHARES OUTSTANDING
Institutional Class.................................................... 40,984,991 N/A 40,984,991
Service Class
Pre-combination...................................................... 10,371,904 24,066,169 N/A
Post-combination..................................................... 10,371,904 24,168,337 34,540,241
Series A Investor Class................................................ 1,035,874 N/A 1,035,874
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE
Institutional Class.................................................... $12.14 N/A $12.14
Service Class
Pre-combination...................................................... $12.14 $12.19 N/A
Post-combination..................................................... $12.14 $12.14 $12.14
Series A Investor Class (Net Asset Value).............................. $12.14 N/A $12.14
Maximum offering price per Series A Investor Class................... $12.71 N/A $12.71
</TABLE>
- ---------------
Note: Series B and Series C Investor Class shares will be available for
shareholders in a future period.
See Accompanying Notes to Pro-Forma Financial Statements
F-62
<PAGE> 228
PNC GROWTH EQUITY PORTFOLIO
COMPASS GROWTH FUND
PRO-FORMA COMBINED STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
GROWTH EQUITY GROWTH PRO-FORMA
PORTFOLIO FUND COMBINED
------------- ------------ ------------
<S> <C> <C> <C>
ASSETS
Investments, @ value (Cost $204,119,070 and $130,132,604
respectively)................................................... $223,481,531 $142,055,638 $365,537,169
Cash.............................................................. 14,455 38,614 53,069
Dividends and Interest receivable................................. 315,792 264,376 580,168
Investments sold receivable....................................... 2,522,378 886,214 3,408,592
Capital shares sold receivable.................................... 676,343 195,399 871,742
Prepaid expenses.................................................. 13,878 27,902 41,780
------------ ------------ ------------
TOTAL ASSETS................................................ 227,024,377 143,468,143 370,492,520
------------ ------------ ------------
LIABILITIES
Capital shares redeemed payable................................... 36,258 23,038 59,296
Investment purchased payable...................................... 3,298,985 1,303,169 4,602,154
Dividends payable................................................. 0 0 0
Accrued expenses payable.......................................... 153,484 163,153 316,637
------------ ------------ ------------
TOTAL LIABILITIES........................................... 3,488,727 1,489,360 4,978,087
------------ ------------ ------------
TOTAL NET ASSETS............................................ $223,535,650 $141,978,783 $365,514,433
============ ============ ============
TOTAL NET ASSETS BY CLASS OF SHARES
Institutional Class................................................. $166,209,725 N/A $166,209,725
Service Class....................................................... 50,177,330 141,978,783 192,156,113
Series A Investor Class............................................. 7,148,595 N/A 7,148,595
------------ ------------ ------------
$223,535,650 $141,978,783 $365,514,433
============ ============ ============
SHARES OUTSTANDING
Institutional Class................................................. 15,220,512 N/A 15,220,512
Service Class
Pre-combination................................................... 4,599,623 12,353,389 N/A
Post-combination.................................................. 4,599,623 13,013,637 17,613,260
Series A Investor Class............................................. 655,763 N/A 655,763
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE
Institutional Class................................................. $10.92 N/A $10.92
Service Class
Pre-combination................................................... $10.91 $11.49 N/A
Post-combination.................................................. $10.91 $10.91 $10.91
Series A Investor Class (Net Asset Value)........................... $10.90 N/A $10.90
Maximum offering price per Series A Investor Class.................. $11.41 N/A $11.41
</TABLE>
- ---------------
Note: Series B and Series C Investor Class shares will be available for
shareholders in a future period.
See Accompanying Notes to Pro-Forma Financial Statements
F-63
<PAGE> 229
PNC SMALL CAP GROWTH EQUITY PORTFOLIO
COMPASS SMALL COMPANY FUND
PRO-FORMA COMBINED STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
SMALL CAP SMALL
GROWTH EQUITY COMPANY PRO-FORMA
PORTFOLIO FUND COMBINED
------------- ----------- ------------
<S> <C> <C> <C>
ASSETS
Investments, @ value (Cost $108,414,011 and $25,608,718
respectively)...................................................... $133,883,225 $25,222,368 $159,105,593
Cash................................................................. 8,774 12,889 21,663
Dividends and Interest receivable.................................... 71,267 44,275 115,542
Investments sold receivable.......................................... 1,207,979 0 1,207,979
Capital shares sold receivable....................................... 107,061 0 107,061
Prepaid expenses..................................................... 25,638 21,968 47,606
------------ ----------- ------------
TOTAL ASSETS................................................... 135,303,944 25,301,500 160,605,444
------------ ----------- ------------
LIABILITIES
Capital shares redeemed payable...................................... 64,160 6,000 64,160
Investments purchased payable........................................ 3,516,053 0 3,516,053
Accrued expenses payable............................................. 89,079 50,750 139,829
------------ ----------- ------------
TOTAL LIABILITIES.............................................. 3,669,292 56,750 3,720,042
------------ ----------- ------------
TOTAL NET ASSETS............................................... $131,634,652 $25,244,750 $156,885,402
============ =========== ============
TOTAL NET ASSETS BY CLASS OF SHARES
Institutional Class.................................................... $ 96,600,862 N/A $ 96,600,862
Service Class.......................................................... 31,794,267 25,244,750 57,039,017
Series A Investor Class................................................ 3,239,523 N/A 3,239,523
------------ ----------- ------------
$131,634,652 $25,244,750 $156,879,402
============ =========== ============
SHARES OUTSTANDING
Institutional Class.................................................... 8,295,570 N/A 8,295,570
Service Class
Pre-combination...................................................... 2,733,726 2,326,617 N/A
Post-combination..................................................... 2,733,726 2,170,587 4,904,313
Series A Investor Class................................................ 279,175 N/A 279,175
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
Institutional Class.................................................... $11.64 N/A $11.64
Service Class
Pre-combination...................................................... $11.63 $10.85 N/A
Post-combination..................................................... $11.63 $11.63 $11.63
Series A Investor Class (Net Asset Value).............................. $11.60 N/A $11.60
Maximum offering price per Series A Investor Class................... $12.15 N/A $12.15
</TABLE>
- ---------------
Note: Series B and Series C Investor Class shares will be available for
shareholders in a future period.
See Accompanying Notes to Pro-Forma Financial Statements
F-64
<PAGE> 230
PNC BALANCED PORTFOLIO
COMPASS BALANCED FUND
PRO-FORMA COMBINED STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
BALANCED BALANCED PRO-FORMA
PORTFOLIO FUND COMBINED
------------ ----------- ------------
<S> <C> <C> <C>
ASSETS
Investments, @ value (Cost $153,236,446 and $24,874,957
respectively)....................................................... $162,093,798 $25,661,121 $187,754,919
Cash.................................................................. 218,965 1,889 220,854
Dividends and Interest receivable..................................... 701,516 223,201 924,717
Securities sold receivable............................................ 0 265,522 265,522
Capital shares sold receivable........................................ 419,367 2,390 421,757
Prepaid expenses...................................................... 22,733 420 23,153
------------ ----------- ------------
TOTAL ASSETS.................................................... 163,456,379 26,154,543 189,610,922
------------ ----------- ------------
LIABILITIES
Capital shares redeemed payable....................................... 450,365 0 450,365
Investment purchased payable.......................................... 609,236 101,368 710,604
Accrued expenses payable.............................................. 148,005 24,879 172,884
------------ ----------- ------------
TOTAL LIABILITIES............................................... 1,207,606 126,247 1,333,853
------------ ----------- ------------
TOTAL NET ASSETS................................................ $162,248,773 $26,028,296 $188,277,069
============ =========== ============
TOTAL NET ASSETS BY CLASS OF SHARES
Institutional Class..................................................... $ 22,547,858 N/A $ 22,547,858
Service Class........................................................... 75,284,207 26,028,296 101,312,503
Series A Investor Class................................................. 62,628,492 N/A 62,628,492
Series B Investor Class................................................. 1,788,216 N/A 1,788,216
------------ ----------- ------------
$162,248,773 $26,028,296 $188,277,069
============ =========== ============
SHARES OUTSTANDING
Institutional Class..................................................... 1,826,709 N/A 1,826,709
Service Class
Pre-combination....................................................... 6,101,013 2,498,607 N/A
Post-combination...................................................... 6,101,013 2,109,262 8,210,275
Series A Investor Class................................................. 5,074,659 N/A 5,074,659
Series B Investor Class................................................. 145,053 N/A 145,053
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
Institutional Class..................................................... $12.34 N/A $12.34
Service Class
Pre-combination....................................................... $12.34 $10.42 N/A
Post-combination...................................................... $12.34 $12.34 $12.34
Series A Investor Class (Net Asset Value)............................... $12.34 N/A $12.34
Maximum offering price per Series A Investor Class.................... $12.92 N/A $12.92
Series B Investor Class (Net Asset Value)............................... $12.33 N/A $12.33
Redemption Price...................................................... $11.77 N/A $11.77
</TABLE>
- ---------------
Note: Series C Investor Class shares will be available for shareholders in a
future period.
See Accompanying Notes to Pro-Forma Financial Statements
F-65
<PAGE> 231
PNC SHORT-TERM BOND PORTFOLIO
BFM SHORT DURATION
COMPASS SHORT/INTERMEDIATE FUND
PRO-FORMA COMBINED STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
SHORT-TERM BFM SHORT SHORT/
BOND DURATION INTERMEDIATE PRO-FORMA
PORTFOLIO PORTFOLIO FUND COMBINED
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Investments, @ value (Cost $16,354,281 and $52,183,653
$201,180,524 respectively).................................. $15,996,804 $52,219,786 $198,430,767 $266,647,357
Cash.......................................................... 0 6,246 0 6,246
Dividends and Interest receivable............................. 92,087 586,723 3,430,781 4,109,591
Investments sold receivable................................... 0 3,407,912 0 3,407,912
Capital shares sold receivable................................ 11,095 0 10,001 21,096
Receivable from Advisor....................................... 2,426 126,197 2,187 130,810
Prepaid expenses.............................................. 27,684 54,319 41,823 123,826
----------- ----------- ------------ ------------
TOTAL ASSETS............................................ 16,130,096 56,401,183 201,915,559 274,446,838
----------- ----------- ------------ ------------
LIABILITIES
Capital shares redeemed payable............................... 27,662 0 587,320 614,982
Investment purchased payable.................................. 0 5,939,417 0 5,939,417
Dividends payable............................................. 64,035 0 0 64,035
Accrued expenses payable...................................... 30,296 141,395 239,015 410,706
----------- ----------- ------------ ------------
TOTAL LIABILITIES....................................... 121,993 6,080,812 826,335 7,029,140
----------- ----------- ------------ ------------
TOTAL NET ASSETS........................................ $16,008,103 $50,320,371 $201,089,224 $267,417,698
=========== =========== ============ ============
TOTAL NET ASSETS BY CLASS OF SHARES
Institutional Class............................................. $ 9,972,122 $50,320,371 N/A $ 60,292,493
Service Class................................................... 5,776,529 N/A 201,089,224 206,865,753
Series A Investor Class......................................... 259,452 N/A N/A 259,452
----------- ----------- ------------ ------------
$16,008,103 $50,320,371 $201,089,224 $267,417,698
=========== =========== ============ ============
SHARES OUTSTANDING
Institutional Class
Pre-combination............................................... 1,043,327 5,179,742 N/A N/A
Post-combination.............................................. 1,276,995(1) 5,179,742 N/A 6,206,737
Service Class
Pre-combination............................................... 604,373 N/A 19,856,597 N/A
Post-combination.............................................. 594,905(1) N/A 20,709,498 21,304,403
Series A Investor Class
Pre-combination............................................... 27,166 N/A N/A
Post-combination.............................................. 26,720(3) N/A 26,720
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE
Institutional Class
Pre-combination............................................... $ 9.56 $ 9.71 N/A N/A
Post-combination.............................................. $ 9.71 $ 9.71 N/A $ 9.71
Service Class
Pre-combination............................................... $ 9.56 N/A $10.13 N/A
Post-combination.............................................. $ 9.71 N/A $ 9.71 $ 9.71
Series A Investor Class (Net Asset Value)
Pre-combination............................................... $ 9.56 N/A N/A N/A
Post-combination.............................................. $ 9.71 N/A N/A $ 9.71
Maximum offering price per Series A Investor Class............ $10.17 N/A N/A $10.17
</TABLE>
- ---------------
Note: Series B and Series C Investor Class shares will be available for
shareholders in a future period.
(1) Reduction in shares due to a 98.43 reverse stock split.
(2) Increase in shares due to a 104.3% stock split.
(3) Reduction in shares due to a 98.36% reverse stock split.
See Accompanying Notes to Pro-Forma Financial Statements
F-66
<PAGE> 232
BFM CORE FIXED INCOME PORTFOLIO
COMPASS FIXED INCOME FUND
PRO-FORMA COMBINED STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
BFM COMPASS
CORE FIXED FIXED
INCOME INCOME PRO-FORMA
PORTFOLIO FUND COMBINED
----------- ------------ ------------
<S> <C> <C> <C>
ASSETS
Investments, @ value (Cost $18,900,772 and $245,029,866
respectively)....................................................... $18,823,054 $240,098,446 $258,921,500
Cash.................................................................. 13,594 21,717 35,311
Dividends and Interest receivable..................................... 269,795 3,948,761 4,218,556
Investments sold receivable........................................... 2,521,275 0 2,521,275
Capital shares sold receivable........................................ 0 128,026 128,026
Receivable from Advisor............................................... 138,516 0 138,516
Prepaid expenses...................................................... 31,462 60,810 92,272
----------- ------------ ------------
TOTAL ASSETS.................................................... 21,797,696 244,257,760 266,055,456
----------- ------------ ------------
LIABILITIES
Capital shares redeemed payable....................................... 0 168,635 168,635
Investment purchased payable.......................................... 1,855,860 0 1,855,860
Reverse repurchase agreements......................................... 509,375 0 509,375
Dividends payable..................................................... 0 0 0
Accrued expenses payable.............................................. 78,221 260,584 338,805
----------- ------------ ------------
TOTAL LIABILITIES............................................... 2,443,456 429,219 2,872,675
----------- ------------ ------------
TOTAL NET ASSETS................................................ $19,354,240 $243,828,541 $263,182,781
=========== ============ ============
TOTAL NET ASSETS BY CLASS OF SHARES
Institutional Class..................................................... $19,354,240 N/A $ 19,354,240
Service Class........................................................... N/A 243,828,541 243,828,541
----------- ------------ ------------
$19,354,240 $243,828,541 $263,182,781
=========== ============ ============
SHARES OUTSTANDING
Institutional Class
Pre-combination....................................................... 2,045,312 N/A 2,045,312
Post-combination...................................................... 2,045,312 N/A 2,045,312
Service Class
Pre-combination....................................................... N/A 24,209,382 24,209,382
Post-combination...................................................... N/A 25,774,687 25,774,687
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
Institutional Class
Pre-combination....................................................... $9.46 N/A N/A
Post-combination...................................................... $9.46 N/A $9.46
Service Class
Pre-combination....................................................... N/A $10.07 N/A
Post-combination...................................................... N/A $9.46 $9.46
</TABLE>
- ---------------
Note: Series A, Series B and Series C Investor Class shares will be available
for shareholders in a future period.
See Accompanying Notes to Pro-Forma Financial Statements
F-67
<PAGE> 233
PNC MUNICIPAL MONEY MARKET PORTFOLIO
COMPASS MUNICIPAL MONEY FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC
MUNICIPAL COMPASS
MONEY MARKET MUNICIPAL PRO-FORMA PRO-FORMA
PORTFOLIO MONEY FUND ADJUSTMENTS COMBINED
------------ ---------- ----------- ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest.............................................. $3,959,375 $851,704 $4,811,079
Dividends............................................. -- -- --
---------- -------- -------- ----------
TOTAL INVESTMENT INCOME......................... 3,959,375 851,704 4,811,079
---------- -------- -------- ----------
EXPENSES
Investment Advisory Fees.............................. 469,233 91,356 12,985(1) 573,574
Administration Fees................................... 156,411 41,110 (6,330)(1) 191,191
Custodian Fees........................................ 30,200 3,359 33,559
Transfer Agent Fees................................... 18,712 6,903 25,615
Service Fees.......................................... 260,837 -- 69,418(1) 330,255
Distribution Fees..................................... 84 -- 84
Legal and Audit....................................... 9,888 1,427 (1,427)(2) 9,888
Printing.............................................. 6,409 (819) 819(2) 6,409
Registration Fees..................................... 22,483 6,774 29,257
Trustees' Fees and Officers' Salaries................. 2,011 1,092 (1,092)(2) 2,011
Organization and Other................................ 3,161 20,213 23,374
---------- -------- -------- ----------
979,429 171,415 74,373 1,225,217
Less: Fees waived and Expenses Reimbursed............. (457,824) -- (80,152)(3) (537,976)
---------- -------- -------- ----------
TOTAL EXPENSES.................................. 521,605 171,415 (5,779) 687,241
---------- -------- -------- ----------
NET INVESTMENT INCOME................................... 3,437,770 680,289 5,779 4,123,838
---------- -------- -------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
TRANSACTIONS
Net realized gain (loss) on investment transactions... (12,356) (817) (13,173)
Change in unrealized appreciation (depreciation)...... -- -- --
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS.......................................... (12,356) (817) (13,173)
---------- -------- -------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................ $3,425,414 $679,472 $ 5,779 $4,110,665
========== ======== ======== ==========
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-68
<PAGE> 234
PNC MUNICIPAL MONEY MARKET PORTFOLIO
COMPASS MUNICIPAL MONEY FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
PNC
MUNICIPAL COMPASS
MONEY MARKET MUNICIPAL PRO-FORMA PRO-FORMA
PORTFOLIO MONEY FUND ADJUSTMENTS COMBINED
------------ ---------- ----------- ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest.............................................. $4,632,663 $1,299,013 $5,931,676
Dividends............................................. -- -- --
---------- ---------- -------- ----------
TOTAL INVESTMENT INCOME......................... 4,632,663 1,299,013 5,931,676
---------- ---------- -------- ----------
EXPENSES
Investment Advisory Fees.............................. 771,325 189,847 23,717 (1) 984,889
Administration Fees................................... 257,109 85,431 (14,244)(1) 328,296
Custodian Fees........................................ 49,117 4,795 53,912
Transfer Agent Fees................................... 47,827 13,426 61,253
Service Fees.......................................... 368,547 -- 194,446 (1) 562,993
Distribution Fees..................................... 165 -- 165
Legal and Audit....................................... 23,621 9,686 (9,686)(2) 23,621
Printing.............................................. 27,724 9,614 (9,614)(2) 27,724
Registration Fees..................................... 50,195 10,104 60,299
Trustees' Fees and Officers' Salaries................. 3,597 801 (801)(2) 3,597
Organization and Other................................ 12,096 (39,806) (27,710)
---------- ---------- -------- ----------
1,611,323 283,898 183,818 2,079,039
Less: Fees waived and Expenses Reimbursed............. (814,098) -- (88,940)(3) (903,038)
---------- ---------- -------- ----------
TOTAL EXPENSES.................................. 797,225 283,898 94,878 1,176,001
---------- ---------- -------- ----------
NET INVESTMENT INCOME................................... 3,835,438 1,015,115 (94,878) 4,755,675
---------- ---------- -------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
TRANSACTIONS
Net realized gain (loss) on investment transactions... (19,387) 17,746 (1,641)
Change in unrealized appreciation (depreciation)...... -- -- --
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS.......................................... (19,387) 17,746 (1,641)
---------- ---------- -------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................ $3,816,051 $1,032,861 $(94,878) $4,754,034
========== ========== ======== ==========
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-69
<PAGE> 235
PNC PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
COMPASS PENNSYLVANIA MUNICIPAL MONEY FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
PENNSYLVANIA PENNSYLVANIA
MUNICIPAL MONEY MUNICIPAL PRO-FORMA PRO-FORMA
MARKET PORTFOLIO MONEY FUND ADJUSTMENTS COMBINED
---------------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest............................................. $6,315,344 $733,582 $ $7,048,926
Dividends............................................ -- -- --
---------- -------- -------- ----------
TOTAL INVESTMENT INCOME........................ 6,315,344 733,582 7,048,926
---------- -------- -------- ----------
EXPENSES
Investment Advisory Fees............................. 772,434 80,126 12,381 (1) 864,941
Administration Fees.................................. 257,478 36,057 (5,221)(1) 288,314
Custodian Fees....................................... 37,701 7,232 44,933
Transfer Agent Fees.................................. 10,686 13,143 23,829
Service Fees......................................... 170,233 -- 60,724 (1) 230,957
Distribution Fees.................................... 316 -- 316
Legal and Audit...................................... 15,394 4,391 (4,391)(2) 15,394
Printing............................................. 13,560 1,475 (1,475)(2) 13,560
Registration Fees.................................... 13,828 (2,958) 10,870
Trustees' Fees and Officers' Salaries................ 2,706 1,066 (1,066)(2) 2,706
Organization and Other............................... 5,842 (474) 5,368
---------- -------- -------- ----------
1,300,178 140,058 60,952 1,501,188
Less: Fees waived & Expenses Reimbursed.............. (700,499) (19,468) (11,716)(3) (731,683)
---------- -------- -------- ----------
TOTAL EXPENSES................................. 599,679 120,590 49,236 769,505
---------- -------- -------- ----------
NET INVESTMENT INCOME.................................. 5,715,665 612,992 (49,236) 6,279,421
---------- -------- -------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS TRANSACTIONS
Net realized gain (loss) on investment
transactions....................................... -- 2 2
Change in unrealized appreciation (depreciation)..... -- -- --
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS......................................... -- 2 2
---------- -------- -------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS........................................... $5,715,665 $612,994 $(49,236) $6,279,423
---------- -------- -------- ----------
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-70
<PAGE> 236
PNC PENNSYLVANIA MUNICIPAL MONEY MARKET PORTFOLIO
COMPASS PENNSYLVANIA MUNICIPAL MONEY FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
PENNSYLVANIA PENNSYLVANIA
MUNICIPAL MONEY MUNICIPAL PRO-FORMA PRO-FORMA
MARKET PORTFOLIO MONEY FUND ADJUSTMENTS COMBINED
---------------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest............................................. $2,345,552 $882,759 $3,228,311
Dividends............................................ -- -- --
---------- -------- ------- ----------
TOTAL INVESTMENT INCOME............................ 2,345,552 882,759 3,228,311
---------- -------- ------- ----------
EXPENSES
Investment Advisory Fees............................. 378,994 128,027 16,359 (1) 523,380
Administration Fees.................................. 126,331 57,612 (9,483)(1) 174,460
Custodian Fees....................................... 29,877 71 29,948
Transfer Agent Fees.................................. 20,043 12,072 32,115
Service Fees......................................... 56,294 -- 101,958 (1) 158,252
Distribution Fees.................................... 193 -- 193
Legal and Audit...................................... 9,232 421 (421)(2) 9,232
Printing............................................. 12,220 139 (139)(2) 12,220
Registration Fees.................................... 25,542 7,079 32,621
Trustees' Fees and Officers' Salaries................ 1,700 12 (12)(2) 1,700
Organization and Other............................... 6,674 16,601 23,275
---------- -------- ------- ----------
667,100 222,034 108,262 997,396
Less: Fees waived & Expenses Reimbursed.............. (476,317) (116,679) 79,731 (3) (513,265)
---------- -------- ------- ----------
TOTAL EXPENSES................................. 190,783 105,355 187,993 484,131
---------- -------- ------- ----------
NET INVESTMENT INCOME.................................. 2,154,769 777,404 (187,993) 2,744,180
---------- -------- ------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain (loss) on investment
transactions....................................... 130 (2,459) (2,329)
Change in unrealized appreciation (depreciation)..... -- -- --
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS......................................... 130 (2,459) (2,329)
---------- -------- ------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS........................................... $2,154,899 $774,945 $(187,993) $2,741,851
========== ======== ========= ==========
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-71
<PAGE> 237
PNC MONEY MARKET PORTFOLIO
COMPASS CASH RESERVE FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
MONEY MARKET CASH RESERVE PRO-FORMA PRO-FORMA
PORTFOLIO FUND ADJUSTMENTS COMBINED
------------ ------------ ----------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest............................................. $36,312,611 $11,944,013 $48,256,624
Dividends............................................ -- -- --
----------- ----------- --------- -----------
TOTAL INVESTMENT INCOME........................ 36,312,611 11,944,013 48,256,624
----------- ----------- --------- -----------
EXPENSES
Investment Advisory Fees............................. 2,775,647 733,142 114,608 (1) 3,623,297
Administration Fees.................................. 844,302 377,045 (143,690)(1) 1,077,657
Custodian Fees....................................... 107,268 7,145 114,413
Transfer Agent Fees.................................. 21,219 53,530 74,749
Service Fees......................................... 924,049 -- 632,632 (1) 1,556,681
Distribution Fees.................................... 11,985 -- 11,985
Legal and Audit...................................... 63,302 34,640 (34,640)(2) 63,302
Printing............................................. 44,741 14,014 (14,014)(2) 44,741
Registration Fees.................................... 49,196 22,867 72,063
Trustees' Fees and Officers' Salaries................ 9,963 10,979 (10,979)(2) 9,963
Organization and Other............................... 24,438 (36,915) (12,477)
----------- ----------- --------- -----------
4,876,010 1,216,447 543,917 6,636,374
Less: Fees waived & Expenses Reimbursed.............. (2,361,082) -- (343,602)(3) (2,704,684)
----------- ----------- --------- -----------
TOTAL EXPENSES................................. 2,514,928 1,216,447 200,315 3,931,690
----------- ----------- --------- -----------
NET INVESTMENT INCOME.................................. 33,797,683 10,727,566 (200,315) 44,324,934
----------- ----------- --------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain (loss) on investment
transactions....................................... 19,382 (831,734) (812,352)
Change in unrealized appreciation (depreciation)..... -- -- --
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS......................................... 19,382 (831,734) (812,352)
----------- ----------- --------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS........................................... $33,817,065 $ 9,895,832 $(200,315) $43,512,582
----------- ----------- --------- -----------
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-72
<PAGE> 238
PNC MONEY MARKET PORTFOLIO
COMPASS CASH RESERVE FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
MONEY MARKET CASH RESERVE PRO-FORMA PRO-FORMA
PORTFOLIO FUND ADJUSTMENTS COMBINED
------------ ------------ ----------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest............................................. $37,214,883 $17,024,578 $54,239,461
Dividends............................................ -- -- --
----------- ----------- ---------- -----------
TOTAL INVESTMENT INCOME........................ 37,214,883 17,024,578 54,239,461
----------- ----------- ---------- -----------
EXPENSES
Investment Advisory Fees............................. 4,311,077 1,545,338 249,439 (1) 6,105,854
Administration Fees.................................. 1,344,415 794,746 (297,551)(1) 1,841,610
Custodian Fees....................................... 177,983 35,519 213,502
Transfer Agent Fees.................................. 67,179 21,595 88,774
Service Fees......................................... 1,382,350 -- 1,515,538 (1) 2,897,888
Distribution Fees.................................... 10,092 -- 10,092
Legal and Audit...................................... 127,847 66,568 (66,568)(2) 127,847
Printing............................................. 125,866 66,029 (66,029)(2) 125,866
Registration Fees.................................... 48,658 208 48,866
Trustees' Fees and Officers' Salaries................ 30,138 5,597 (5,597)(2) 30,138
Organization and Other............................... 67,641 110,344 177,985
----------- ----------- ---------- -----------
7,693,246 2,645,944 1,329,232 11,668,422
Less: Fees waived & Expenses Reimbursed.............. (3,900,913) -- (934,009)(3) (4,834,922)
----------- ----------- ---------- -----------
TOTAL EXPENSES................................. 3,792,333 2,645,944 395,223 6,833,500
----------- ----------- ---------- -----------
NET INVESTMENT INCOME.................................. 33,422,550 14,378,634 (395,223) 47,405,961
----------- ----------- ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
TRANSACTIONS
Net realized gain (loss) on investment
transactions....................................... (16,921) (205,218) (222,139)
Change in unrealized appreciation (depreciation)..... -- -- --
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS......................................... (16,921) (205,218) (222,139)
----------- ----------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS........................................... $33,405,629 $14,173,416 $ (395,223) $47,183,822
=========== =========== ========== ===========
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-73
<PAGE> 239
PNC GOVERNMENT MONEY MARKET PORTFOLIO
COMPASS U.S. TREASURY FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC
GOVERNMENT COMPASS
MONEY MARKET U.S. TREASURY PRO-FORMA PRO-FORMA
PORTFOLIO FUND ADJUSTMENTS COMBINED
------------ ------------- ----------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest............................................. $16,188,882 $9,318,717 $25,507,599
Dividends............................................ -- -- --
----------- ---------- --------- -----------
TOTAL INVESTMENT INCOME........................ 16,188,882 9,318,717 25,507,599
----------- ---------- --------- -----------
EXPENSES
Investment Advisory Fees............................. 1,278,894 597,256 176,155 (1) 2,052,305
Administration Fees.................................. 417,822 307,161 (82,095)(1) 642,888
Custodian Fees....................................... 51,225 5,887 57,112
Transfer Agent Fees.................................. 24,932 41,235 66,167
Service Fees......................................... 761,644 -- 515,358 (1) 1,277,002
Distribution Fees.................................... 4,673 -- 4,673
Legal and Audit...................................... 26,706 26,308 (26,308)(2) 26,706
Printing............................................. 17,241 11,055 (11,055)(2) 17,241
Registration Fees.................................... 51,719 2,854 54,573
Trustees' Fees and Officers' Salaries................ 4,151 10,646 (10,646)(2) 4,151
Organization and Other............................... 10,612 46,621 57,233
----------- ---------- --------- -----------
2,649,619 1,049,023 561,409 4,260,051
Less: Fees waived & Expenses Reimbursed.............. (1,172,805) -- (527,912)(3) (1,700,717)
----------- ---------- --------- -----------
TOTAL EXPENSES................................. 1,476,814 1,049,023 33,497 2,559,334
----------- ---------- --------- -----------
NET INVESTMENT INCOME.................................. 14,712,068 8,269,694 (33,497) 22,948,265
----------- ---------- --------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
TRANSACTIONS
Net realized gain (loss) on investment
transactions....................................... 6,023 -- 6,023
Change in unrealized appreciation (depreciation)..... -- -- --
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS......................................... 6,023 -- 6,023
----------- ---------- --------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS........................................... $14,718,091 $8,269,694 $ (33,497) $22,954,288
=========== ========== ========= ===========
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-74
<PAGE> 240
PNC GOVERNMENT MONEY MARKET PORTFOLIO
COMPASS U.S. TREASURY FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
PNC
GOVERNMENT COMPASS
MONEY MARKET U.S. TREASURY PRO-FORMA PRO-FORMA
PORTFOLIO FUND ADJUSTMENTS COMBINED
------------ ------------- ----------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest............................................. $11,105,336 $13,756,120 $24,861,456
Dividends............................................ -- -- --
----------- ----------- ----------- -----------
TOTAL INVESTMENT INCOME........................ 11,105,336 13,756,120 24,861,456
----------- ----------- ----------- -----------
EXPENSES
Investment Advisory Fees............................. 1,267,972 1,314,577 375,489 (1) 2,958,038
Administration Fees.................................. 422,657 676,069 (144,182)(1) 954,544
Custodian Fees....................................... 64,479 26,446 90,925
Transfer Agent Fees.................................. 75,877 19,610 95,487
Service Fees......................................... 677,020 -- 1,212,037 (1) 1,889,057
Distribution Fees.................................... 427 -- 427
Legal and Audit...................................... 38,606 53,428 (53,428)(2) 38,606
Printing............................................. 35,755 52,994 (52,994)(2) 35,755
Registration Fees.................................... 50,116 15,780 65,896
Trustees' Fees and Officers' Salaries................ 5,864 4,416 (4,416)(2) 5,864
Organization and Other............................... 19,060 (15,249) 3,811
----------- ----------- ----------- -----------
2,657,833 2,148,071 1,332,506 6,138,410
Less: Fees waived & Expenses Reimbursed.............. (1,275,957) -- (1,132,352)(3) (2,408,309)
----------- ----------- ----------- -----------
TOTAL EXPENSES................................. 1,381,876 2,148,071 200,154 3,730,101
----------- ----------- ----------- -----------
NET INVESTMENT INCOME.................................. 9,723,460 11,608,049 (200,154) 21,131,355
----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
TRANSACTIONS
Net realized gain (loss) on investment
transactions....................................... 13,624 5,285 18,909
Change in unrealized appreciation (depreciation)..... -- -- --
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS......................................... 13,624 5,285 18,909
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS........................................... $ 9,737,084 $11,613,334 $ (200,154) $21,150,264
=========== =========== =========== ===========
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-75
<PAGE> 241
PNC TAX-FREE INCOME PORTFOLIO
COMPASS MUNICIPAL BOND FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
TAX-FREE MUNICIPAL BOND PRO-FORMA PRO-FORMA
INCOME PORTFOLIO FUND ADJUSTMENTS COMBINED
---------------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest.......................................... $276,312 $ 825,422 $1,101,734
Dividends......................................... -- -- --
-------- ---------- -------- ----------
TOTAL INVESTMENT INCOME..................... 276,312 825,422 1,101,734
-------- ---------- -------- ----------
EXPENSES
Investment Advisory Fees.......................... 23,479 88,588 (14,169)(1) 97,898
Administration Fees............................... 9,391 26,716 3,053 (1) 39,160
Custodian Fees.................................... 6,090 4,771 10,861
Transfer Agent Fees............................... 10,645 22,799 33,444
Service Fees...................................... 3,308 -- 50,288 (1) 53,596
Distribution Fees................................. 14,965 -- (6,628)(1) 8,337
Legal and Audit................................... 464 2,969 (2,969)(2) 464
Printing.......................................... 308 988 (988)(2) 308
Registration Fees................................. 12,465 (2,862) 9,603
Trustees' Fees and Officers' Salaries............. 75 904 (904)(2) 75
Organization and Other............................ 7,650 2,857 10,507
-------- ---------- -------- ----------
88,840 147,730 27,683 264,253
Less: Fees waived & Expenses Reimbursed........... (47,089) (19,754) (25,454)(3) (92,297)
-------- ---------- -------- ----------
TOTAL EXPENSES.............................. 41,751 127,976 2,229 171,956
-------- ---------- -------- ----------
NET INVESTMENT INCOME............................... 234,561 697,446 (2,229) 929,778
-------- ---------- -------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
TRANSACTIONS
Net realized gain (loss) on investment
transactions.................................... 11,979 (339,113) (327,134)
Change in unrealized appreciation
(depreciation).................................. 325,886 858,207 1,184,093
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS........................... 337,865 519,094 856,959
-------- ---------- -------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS........................................ $572,426 $1,216,540 $ (2,229) $1,786,737
======== ========== ======== ==========
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-76
<PAGE> 242
PNC TAX-FREE INCOME PORTFOLIO
COMPASS MUNICIPAL BOND FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
TAX-FREE MUNICIPAL BOND PRO-FORMA PRO-FORMA
INCOME PORTFOLIO FUND ADJUSTMENTS COMBINED
---------------- -------------- ----------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest......................................... $ 522,665 $ 1,871,898 $ 2,394,563
Dividends........................................ --
--------- ----------- --------- -----------
TOTAL INVESTMENT INCOME.................... 522,665 1,871,898 2,394,563
--------- ----------- --------- -----------
EXPENSES
Investment Advisory Fees......................... 47,655 209,230 (35,307)(1) 221,578
Administration Fees.............................. 19,062 62,629 6,940 (1) 88,631
Custodian Fees................................... 12,380 2,269 14,649
Transfer Agent Fees.............................. 47,988 12,656 60,644
Service Fees..................................... 3,523 -- 116,354 (1) 119,877
Distribution Fees................................ 33,891 -- (15,062)(1) 18,829
Legal and Audit.................................. 1,367 4,583 (4,583)(2) 1,367
Printing......................................... 1,788 4,547 (4,547)(2) 1,788
Registration Fees................................ 15,055 7,843 22,898
Trustees' Fees and Officers' Salaries............ 191 379 (379)(2) 191
Organization and Other........................... 19,143 242 19,385
--------- ----------- --------- -----------
202,043 304,378 63,416 569,837
Less: Fees waived & Expenses Reimbursed.......... (116,974) (77,072) 11,923 (3) (182,123)
--------- ----------- --------- -----------
TOTAL EXPENSES............................. 85,069 227,306 75,339 387,714
--------- ----------- --------- -----------
NET INVESTMENT INCOME.............................. 437,596 1,644,592 (75,339) 2,006,849
--------- ----------- --------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
TRANSACTIONS
Net realized gain (loss) on investment
transactions................................... 21,842 (373,828) (351,986)
Change in unrealized appreciation
(depreciation)................................. (924,036) (2,387,922) (3,311,958)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS.......................... (902,194) (2,761,750) (3,663,944)
--------- ----------- --------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.................................. $(464,598) $(1,117,158) $ (75,339) $(1,657,095)
========= =========== ========= ===========
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-77
<PAGE> 243
PNC PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
COMPASS PENNSYLVANIA MUNICIPAL BOND FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
PENNSYLVANIA PENNSYLVANIA
TAX-FREE MUNICIPAL BOND PRO-FORMA PRO-FORMA
INCOME PORTFOLIO FUND ADJUSTMENTS COMBINED
---------------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest.......................................... $1,714,147 $ 488,756 $2,202,903
Dividends......................................... -- -- --
---------- --------- -------- -----------
TOTAL INVESTMENT INCOME..................... 1,714,147 488,756 2,202,903
---------- --------- -------- -----------
EXPENSE
Investment Advisory Fees.......................... 141,528 55,338 (11,138)(1) 185,728
Administration Fees............................... 56,611 15,744 1,936 (1) 74,291
Custodian Fees.................................... 7,520 1,767 9,287
Transfer Agent Fees............................... 19,548 17,226 36,774
Service Fees...................................... 15,293 -- 61,474 (1) 76,767
Distribution Fees................................. 101,583 -- (45,774)(1) 55,809
Legal and Audit................................... 3,058 1,953 (1,953)(2) 3,058
Printing.......................................... 2,416 1,122 (1,122)(2) 2,416
Registration Fees................................. 2,493 (1,900) 593
Trustees' Fees and Officers' Salaries............. 601 673 (673)(2) 601
Organization and Other............................ 6,946 2,704 9,650
---------- --------- -------- -----------
357,597 94,627 2,750 454,974
Less: Fees waived & Expenses Reimbursed........... (99,195) (17,839) 18,084 (3) (98,950)
---------- --------- -------- -----------
TOTAL EXPENSES.............................. 258,402 76,788 20,834 356,024
---------- --------- -------- -----------
NET INVESTMENT INCOME............................... 1,455,745 411,968 (20,834) 1,846,879
---------- --------- -------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
TRANSACTIONS
Net realized gain (loss) on investment
transactions.................................... (1,076,333) (473,487) (1,549,820)
Change in unrealized appreciation
(depreciation).................................. 2,252,735 790,543 3,043,278
Net Realized and Unrealized GAIN (LOSS) ON
INVESTMENT TRANSACTIONS........................... 1,176,402 317,056 1,493,458
---------- --------- -------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS........................................ $2,632,147 $ 729,024 $(20,834) $ 3,340,337
========== ========= ======== ===========
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-78
<PAGE> 244
PNC PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
COMPASS PENNSYLVANIA MUNICIPAL BOND FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
PENNSYLVANIA PENNSYLVANIA
TAX-FREE MUNICIPAL BOND PRO-FORMA PRO-FORMA
INCOME PORTFOLIO FUND ADJUSTMENTS COMBINED
---------------- -------------- ----------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest......................................... $3,032,628 $ 912,969 $3,945,597
Dividends........................................ -- -- --
----------- ---------- -------- -----------
TOTAL INVESTMENT INCOME.................... 3,032,628 912,969 3,945,597
----------- ---------- -------- -----------
EXPENSES
Investment Advisory Fees......................... 276,649 109,844 (17,084)(1) 369,409
Administration Fees.............................. 109,878 31,234 6,652 (1) 147,764
Custodian Fees................................... 14,992 742 15,734
Transfer Agent Fees.............................. 40,804 15,738 56,542
Service Fees..................................... 24,652 -- 128,333 (1) 152,985
Distribution Fees................................ 53,423 -- 59,495 (1) 112,918
Legal and Audit.................................. 7,498 1,541 (1,541)(2) 7,498
Printing......................................... 7,393 1,151 (1,151)(2) 7,393
Registration Fees................................ 16,808 7,758 24,566
Trustees' Fees and Officers' Salaries............ 1,128 95 (95)(2) 1,128
Organization and Other........................... 17,191 2,492 19,683
----------- ---------- -------- -----------
570,416 170,595 174,609 915,620
Less: Fees waived & Expenses Reimbursed.......... (330,526) (94,769) 213,545 (3) (211,750)
----------- ---------- -------- -----------
TOTAL EXPENSES............................. 239,890 75,826 388,154 703,870
----------- ---------- -------- -----------
NET INVESTMENT INCOME.............................. 2,792,738 837,143 (388,154) 3,241,727
----------- ---------- -------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
TRANSACTIONS
Net realized gain (loss) on investment
transactions................................... (285,131) (69,366) (354,497)
Change in unrealized appreciation
(depreciation)................................. (4,507,643) (1,166,394) (5,674,037)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS.......................... (4,792,774) (1,235,760) (6,028,534)
----------- ---------- -------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.................................. $(2,000,036) $ (398,617) $(388,154) $(2,786,807)
----------- ---------- -------- -----------
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-79
<PAGE> 245
PNC VALUE EQUITY PORTFOLIO
COMPASS EQUITY/INCOME FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
VALUE EQUITY EQUITY/INCOME PRO-FORMA PRO-FORMA
PORTFOLIO FUND ADJUSTMENTS COMBINED
------------ ------------- ----------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest.............................................. $ 287,963 $ 633,462 $ 921,425
Dividends............................................. 10,499,938 4,227,725 14,727,663
----------- ----------- ---------- -----------
TOTAL INVESTMENT INCOME......................... 10,787,901 4,861,187 15,649,088
----------- ----------- ---------- -----------
EXPENSES
Investment Advisory Fees.............................. 1,759,164 994,379 (206,221)(1) 2,547,322
Administration Fees................................... 625,594 255,697 2,378 (1) 883,669
Custodian Fees........................................ 54,399 27,619 82,018
Transfer Agent Fees................................... 14,714 44,349 59,063
Service Fees.......................................... 137,771 -- 463,868 (1) 601,639
Distribution Fees..................................... 22,847 -- (8,528)(1) 14,319
Legal and Audit....................................... 33,374 24,644 (24,644)(2) 33,374
Printing.............................................. 21,667 5,459 (5,459)(2) 21,667
Registration Fees..................................... 12,465 (2,098) 10,367
Trustees' Fees and Officers' Salaries................. 5,320 7,151 (7,151)(2) 5,320
Organization and Other................................ 18,147 34,920 53,067
----------- ----------- ---------- -----------
2,705,462 1,392,120 214,243 4,311,825
Less: Fees waived & Expenses Reimbursed............... (465,831) -- 247,594 (3) (218,237)
----------- ----------- ---------- -----------
TOTAL EXPENSES.................................. 2,239,631 1,392,120 461,837 4,093,588
----------- ----------- ---------- -----------
NET INVESTMENT INCOME................................... 8,548,270 3,469,067 (461,837) 11,555,500
----------- ----------- ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
TRANSACTIONS
Net realized gain (loss) on investment transactions... 15,118,074 440,194 15,558,268
Change in unrealized appreciation (depreciation)...... 24,669,433 3,299,842 27,969,275
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS.......................................... 39,787,507 3,740,036 43,527,543
----------- ----------- ---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................ $48,335,777 $ 7,209,103 $ (461,837) $55,083,043
=========== =========== ========== ===========
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-80
<PAGE> 246
PNC VALUE EQUITY PORTFOLIO
COMPASS EQUITY/INCOME FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
VALUE EQUITY EQUITY/INCOME PRO-FORMA PRO-FORMA
PORTFOLIO FUND ADJUSTMENTS COMBINED
------------ ------------- ----------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest.............................................. $ 1,180,667 $ 2,730,992 $3,911,659
Dividends............................................. 16,692,818 7,484,385 24,177,203
----------- ----------- --------- -----------
TOTAL INVESTMENT INCOME......................... 17,873,485 10,215,377 28,088,862
----------- ----------- --------- -----------
EXPENSES
Investment Advisory Fees.............................. 3,171,674 1,946,120 (416,614)(1) 4,701,180
Administration Fees................................... 1,137,117 500,430 1,021 (1) 1,638,568
Custodian Fees........................................ 99,231 18,236 117,467
Transfer Agent Fees................................... 37,911 23,262 61,173
Service Fees.......................................... 177,459 -- 881,384 (1) 1,058,843
Distribution Fees..................................... 31,135 -- (11,675)(1) 19,460
Legal and Audit....................................... 77,839 36,842 (36,842)(2) 77,839
Printing.............................................. 61,094 36,540 (36,540)(2) 61,094
Registration Fees..................................... 32,504 24,187 56,691
Trustees' Fees and Officers' Salaries................. 11,904 3,046 (3,046)(2) 11,904
Organization and Other................................ 45,979 (15,030) 30,949
----------- ----------- --------- -----------
4,883,847 2,573,633 377,688 7,835,168
Less: Fees waived & Expenses Reimbursed............... (926,910) -- 586,043 (3) (340,867)
----------- ----------- --------- -----------
TOTAL EXPENSES.................................. 3,856,937 2,573,633 963,731 7,494,301
----------- ----------- --------- -----------
NET INVESTMENT INCOME................................... 13,916,548 7,641,744 (963,731) 20,594,561
----------- ----------- --------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
TRANSACTIONS
Net realized gain (loss) on investment transactions... 15,933,683 24,080,833 40,014,516
Change in unrealized appreciation (depreciation)...... (8,855,288) (374,450) (9,229,738)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS.......................................... 7,078,395 23,706,383 30,784,778
----------- ----------- --------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................ $20,994,943 $31,348,127 $(963,731) $51,379,339
=========== =========== ========= ===========
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-81
<PAGE> 247
PNC GROWTH EQUITY PORTFOLIO
COMPASS GROWTH FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
GROWTH EQUITY GROWTH PRO-FORMA PRO-FORMA
PORTFOLIO FUND ADJUSTMENTS COMBINED
------------- --------- ----------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest................................................ $ 586,644 $ 162,905 $ 749,549
Dividends............................................... 1,207,746 967,261 2,175,007
----------- ---------- --------- -----------
TOTAL INVESTMENT INCOME........................... 1,794,390 1,130,166 2,924,556
----------- ---------- --------- -----------
EXPENSES
Investment Advisory Fees................................ 469,375 472,518 (98,870)(1) 843,023
Administration Fees..................................... 170,682 121,504 14,367 (1) 306,553
Custodian Fees.......................................... 23,033 14,067 37,100
Transfer Agent Fees..................................... 12,282 25,174 37,456
Service Fees............................................ 51,412 -- 218,116 (1) 269,528
Distribution Fees....................................... 12,125 -- (4,526)(1) 7,599
Legal and Audit......................................... 8,497 8,711 (8,711)(2) 8,497
Printing................................................ 10,008 (807) 807 (2) 10,008
Registration Fees....................................... 17,106 1,951 19,057
Trustees' Fees and Officers' Salaries................... 1,326 1,214 (1,214)(2) 1,326
Organization and Other.................................. 8,500 2,387 10,887
----------- ---------- --------- -----------
784,346 646,719 119,969 1,551,034
Less: Fees waived & Expenses Reimbursed................. (166,241) -- 44,037 (122,204)
----------- ---------- --------- -----------
TOTAL EXPENSES.................................... 618,105 646,719 164,006 1,428,830
----------- ---------- --------- -----------
NET INVESTMENT INCOME..................................... 1,176,285 483,447 (164,006) 1,495,726
----------- ---------- --------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
TRANSACTIONS
Net realized gain (loss) on investment transactions..... 1,227,325 650,554 1,877,879
Change in unrealized appreciation (depreciation)........ 13,986,348 6,524,122 20,510,470
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS............................................ 15,213,673 7,174,676 22,388,349
----------- ---------- --------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.............................................. $16,389,958 $7,658,123 $(164,006) $23,884,075
=========== ========== ========= ===========
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-82
<PAGE> 248
PNC GROWTH EQUITY PORTFOLIO
COMPASS GROWTH FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
GROWTH EQUITY GROWTH PRO-FORMA PRO-FORMA
PORTFOLIO FUND ADJUSTMENTS COMBINED
------------- --------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest............................................... $ 421,145 $ 102,124 $ 523,269
Dividends.............................................. 1,101,071 1,904,823 3,005,894
----------- ---------- --------- ------------
TOTAL INVESTMENT INCOME.......................... 1,522,216 2,006,947 3,529,163
----------- ---------- --------- ------------
EXPENSES
Investment Advisory Fees............................... 643,001 996,016 (213,649)(1) 1,425,368
Administration Fees.................................... 233,819 256,119 28,378 (1) 518,316
Custodian Fees......................................... 42,216 12,965 55,181
Transfer Agent Fees.................................... 42,454 21,311 63,765
Service Fees........................................... 58,828 -- 444,576 (1) 503,404
Distribution Fees...................................... 16,155 -- (6,058)(1) 10,097
Legal and Audit........................................ 16,348 23,060 (23,060)(2) 16,348
Printing............................................... 20,250 22,877 (22,877)(2) 20,250
Registration Fees...................................... 26,041 3,024 29,065
Trustees' Fees and Officers' Salaries.................. 2,476 1,906 (1,906)(2) 2,476
Organization and Other................................. 14,227 20,653 0 34,880
----------- --------- --------- ------------
1,115,815 1,357,931 205,404 2,679,150
Less: Fees waived & Expenses Reimbursed................ (280,921) -- 61,784(3) (219,137)
----------- ---------- --------- ------------
TOTAL EXPENSES................................... 834,894 1,357,931 267,188 2,460,013
----------- ---------- --------- ------------
NET INVESTMENT INCOME.................................... 687,322 649,016 (267,188) 1,069,150
----------- ---------- --------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
TRANSACTIONS
Net realized gain (loss) on investment transactions.... 3,202,620 4,345,299 7,547,919
Change in unrealized appreciation (depreciation)....... (16,170,202) (1,396,905) (17,567,107)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS........................................... (12,967,582) 2,948,394 (10,019,188)
------------ ---------- --------- ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................. $(12,280,260) $3,597,410 $(267,188) $ (8,950,038)
============ ========== ========= ============
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-83
<PAGE> 249
PNC SMALL CAP GROWTH EQUITY PORTFOLIO
COMPASS SMALL COMPANY FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC
SMALL CAP COMPASS
GROWTH EQUITY SMALL COMPANY PRO-FORMA PRO-FORMA
PORTFOLIO FUND ADJUSTMENTS COMBINED
------------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest........................................... $ 472,519 $ 21,370 $ 493,889
Dividends.......................................... 80,651 273,448 354,099
-------- ----------- --------- -----------
TOTAL INVESTMENT INCOME...................... 553,170 294,818 847,988
-------- ----------- --------- -----------
EXPENSES
Investment Advisory Fees........................... 289,259 118,610 (45,155)(1) 362,714
Administration Fees................................ 105,185 23,722 2,989 (1) 131,896
Custodian Fees..................................... 23,150 14,447 37,597
Transfer Agent Fees................................ 12,001 18,382 30,383
Service Fees....................................... 31,520 -- 125,301 (1) 156,821
Distribution Fees.................................. 4,524 -- (1,689)(1) 2,835
Legal and Audit.................................... 5,123 1,750 (1,750)(2) 5,123
Printing........................................... 3,326 452 (452)(2) 3,326
Registration Fees.................................. 15,944 (3,141) 12,803
Trustees' Fees and Officers' Salaries.............. 802 715 (715)(2) 802
Organization and Other............................. 5,099 4,804 9,903
-------- ----------- --------- -----------
495,933 179,741 78,529 754,203
Less: Fees waived & Expenses Reimbursed............ (15,592) -- (161,111)(3) (176,703)
-------- ----------- --------- -----------
TOTAL EXPENSES............................... 480,341 179,741 (82,582) 577,500
-------- ----------- --------- -----------
NET INVESTMENT INCOME................................ 72,829 115,077 82,582 270,488
-------- ----------- --------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
TRANSACTIONS
Net realized gain (loss) on investment
transactions..................................... (1,407,028) 658,347 (748,681)
Change in unrealized appreciation (depreciation)... 16,205,644 (1,658,000) 14,547,644
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS....................................... 14,798,616 (999,653) 13,798,963
----------- ----------- --------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS......................................... $14,871,445 $ (884,576) $ 82,582 $14,069,451
=========== =========== ========= ===========
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-84
<PAGE> 250
PNC SMALL CAP GROWTH EQUITY PORTFOLIO
COMPASS SMALL COMPANY FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
SMALL CAP SMALL
GROWTH EQUITY COMPANY PRO-FORMA PRO-FORMA
PORTFOLIO FUND ADJUSTMENTS COMBINED
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest.......................................... $ 260,147 $ 29,128 $ $ 289,275
Dividends......................................... 107,364 411,514 518,878
------------ ---------- -------- ------------
TOTAL INVESTMENT INCOME..................... 367,511 440,642 808,153
------------ ---------- -------- ------------
EXPENSES
Investment Advisory Fees.......................... 216,145 198,934 (77,295)(1) 337,784
Administration Fees............................... 78,598 39,787 4,446 (1) 122,831
Custodian Fees.................................... 39,042 1,529 40,571
Transfer Agent Fees............................... 26,039 18,444 44,483
Service Fees...................................... 28,347 -- 120,646 (1) 148,993
Distribution Fees................................. 3,297 -- (1,236)(1) 2,061
Legal and Audit................................... 4,605 3,086 (3,086)(2) 4,605
Printing.......................................... 8,930 3,061 (3,061)(2) 8,930
Registration Fees................................. 23,905 8,314 32,219
Trustees' Fees and Officers' Salaries............. 800 255 (255)(2) 800
Organization and Other............................ 8,344 155 8,499
------------ ---------- -------- ------------
438,052 273,565 40,159 751,776
Less: Fees waived & Expenses Reimbursed........... (75,964) -- (63,566)(3) (139,530)
------------ ---------- -------- ------------
TOTAL EXPENSES.............................. 362,088 273,565 (23,407) 612,246
------------ ---------- -------- ------------
NET INVESTMENT INCOME............................... 5,423 167,077 23,407 195,907
------------ ---------- -------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
TRANSACTIONS
Net realized gain (loss) on investment
transactions.................................... 3,202,620 1,542,906 4,745,526
Change in unrealized appreciation
(depreciation).................................. (16,170,202) (657,540) (16,827,742)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS........................... (12,967,582) 885,366 (12,082,216)
------------ ---------- -------- ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS........................................ $(12,962,159) $1,052,443 $ 23,407 $(11,886,309)
============ ========== ======== ============
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-85
<PAGE> 251
PNC BALANCED PORTFOLIO
COMPASS BALANCED FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
BALANCED BALANCED PRO-FORMA PRO-FORMA
PORTFOLIO FUND ADJUSTMENTS COMBINED
----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest................................................... $ 2,299,628 $ 310,514 $ 2,610,142
Dividends.................................................. 1,126,053 151,894 1,277,947
----------- ---------- --------- -----------
TOTAL INVESTMENT INCOME.............................. 3,425,681 462,408 3,888,089
----------- ---------- --------- -----------
EXPENSES
Investment Advisory Fees................................... 409,649 65,188 (12,508)(1) 462,329
Administration Fees........................................ 148,963 16,763 2,394 (1) 168,120
Custodian Fees............................................. 21,533 7,865 29,398
Transfer Agent Fees........................................ 39,458 11,215 50,673
Service Fees............................................... 84,823 -- 220,683 (1) 305,506
Distribution Fees.......................................... 127,340 -- (45,926)(1) 81,414
Legal and Audit............................................ 7,343 1,846 (1,846)(2) 7,343
Printing................................................... 4,868 1,458 (1,458)(2) 4,868
Registration Fees.......................................... 13,211 2,575 15,786
Trustees' Fees and Officers' Salaries...................... 1,193 227 (227)(2) 1,193
Organization and Other..................................... 9,242 1,508 10,750
----------- ---------- --------- -----------
867,623 108,645 161,112 1,137,380
Less: Fees waived & Expenses Reimbursed.................... (171,330) (25,752) 1,071 (3) (196,011)
----------- ---------- --------- -----------
TOTAL EXPENSES....................................... 696,293 82,893 162,183 941,369
----------- ---------- --------- -----------
NET INVESTMENT INCOME........................................ 2,729,388 379,515 (162,183) 2,946,720
----------- ---------- --------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
TRANSACTIONS
Net realized gain (loss) on investment transactions........ (5,399,745) 188,165 (5,211,580)
Change in unrealized appreciation (depreciation)........... 11,766,008 871,185 12,637,193
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS............................................... 6,366,263 1,059,350 7,425,613
----------- ---------- --------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................. $ 9,095,651 $1,438,865 $(162,183) $10,372,333
=========== ========== ========= ===========
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-86
<PAGE> 252
PNC BALANCED PORTFOLIO
COMPASS BALANCED FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
BALANCED BALANCED PRO-FORMA PRO-FORMA
PORTFOLIO FUND ADJUSTMENTS COMBINED
---------------- -------------- ----------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest......................................... $ 2,893,951 $ 95,698 $ 2,989,649
Dividends........................................ 1,800,352 48,229 1,848,581
----------- -------- --------- -----------
TOTAL INVESTMENT INCOME.................... 4,694,303 143,927 4,838,230
----------- -------- --------- -----------
EXPENSES
Investment Advisory Fees......................... 672,745 22,117 (4,546)(1) 690,316
Administration Fees.............................. 244,634 5,687 704 (1) 251,025
Custodian Fees................................... 33,978 2,246 36,224
Transfer Agent Fees.............................. 74,659 1,390 76,049
Service Fees..................................... 123,661 -- 118,463 (1) 242,124
Distribution Fees................................ 222,954 -- (83,607)(1) 139,347
Legal and Audit.................................. 16,533 411 (411)(2) 16,533
Printing......................................... 9,767 411 (411)(2) 9,767
Registration Fees................................ 43,773 1,430 45,203
Trustees' Fees and Officers' Salaries............ 2,557 63 (63)(2) 2,557
Organization and Other........................... 18,551 700 19,251
----------- -------- --------- -----------
1,463,812 34,455 30,129 1,528,396
Less: Fees waived & Expenses Reimbursed.......... (321,688) (21,180) 239,057 (3) (103,811)
----------- -------- --------- -----------
TOTAL EXPENSES............................. 1,142,124 13,275 269,186 1,424,585
----------- -------- --------- -----------
NET INVESTMENT INCOME.............................. 3,552,179 130,652 (269,186) 3,413,645
----------- -------- --------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
TRANSACTIONS
Net realized gain (loss) on investment
transactions................................... 1,771,608 27,498 1,799,106
Change in unrealized appreciation
(depreciation)................................. (7,289,079) (85,020) (7,374,099)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS.......................... (5,517,471) (57,522) (5,574,993)
----------- -------- --------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.................................. $(1,965,292) $ 73,130 $(269,186) $(2,161,348)
=========== ======== ========= ===========
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-87
<PAGE> 253
PNC SHORT-TERM BOND PORTFOLIO
BMF SHORT DURATION FUND
COMPASS SHORT/INTERMEDIATE FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC BFM COMPASS
SHORT-TERM SHORT SHORT/
BOND DURATION INTERMEDIATE PRO-FORMA PRO-FORMA
PORTFOLIO FUND FUND ADJUSTMENTS COMBINED
---------- ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest...................................... $611,287 $1,005,855 $6,824,747 $ 8,441,889
Dividends..................................... -- -- -- --
-------- ---------- ---------- --------- -----------
TOTAL INVESTMENT INCOME................. 611,287 1,005,855 6,824,747 8,441,889
-------- ---------- ---------- --------- -----------
EXPENSES
Investment Advisory Fees...................... 52,691 45,649 616,897 (70,863)(1) 644,374
Administration Fees........................... 21,076 31,914 185,068 19,691 (1) 257,749
Custodian Fees................................ 8,083 29,952 2,919 40,954
Transfer Agent Fees........................... 8,097 17,012 37,604 62,713
Service Fees.................................. 6,298 -- -- 310,642 (1) 316,940
Distribution Fees............................. 354 -- -- 356 (1) 710
Legal and Audit............................... 1,460 12,384 16,966 (18,426)(2) 12,384
Printing...................................... 1,143 -- 2,279 3,422
Registration Fees............................. 11,628 14,062 (8,844) 16,846
Trustees' Fees and Officers' Salaries......... 294 3,028 6,863 (7,157)(2) 3,028
Organization and Other........................ 3,784 19,694 10,099 33,577
-------- ---------- ---------- --------- ----------
114,908 173,695 869,851 234,243 1,392,697
Less: Fees waived & Expenses Reimbursed....... (66,103) (86,960) -- (213,429)(3) (366,492)
-------- ---------- ---------- --------- -----------
TOTAL EXPENSES.......................... 48,805 86,735 869,851 20,814 1,026,205
-------- ---------- ---------- --------- -----------
NET INVESTMENT INCOME........................... 562,482 919,120 5,954,896 (20,814) 7,415,684
-------- ---------- ---------- --------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS TRANSACTIONS
Net realized gain (loss) on investment
transactions................................ (273,282) (141,008) (1,156,902) (1,571,192)
Change in unrealized appreciation
(depreciation).............................. 203,056 587,673 1,543,020 2,333,749
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS....................... (70,226) 446,665 386,118 762,557
-------- ---------- ---------- --------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS............................... $492,256 $1,365,785 $6,341,014 $ (20,814) $ 8,178,241
======== ========== ========== ========= ===========
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-88
<PAGE> 254
PNC SHORT-TERM BOND PORTFOLIO
BMF SHORT DURATION FUND
COMPASS SHORT/INTERMEDIATE FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
PNC BFM COMPASS
SHORT-TERM SHORT SHORT/
BOND DURATION INTERMEDIATE PRO-FORMA PRO-FORMA
PORTFOLIO FUND FUND ADJUSTMENTS COMBINED
----------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest.................................... $1,634,723 $ 1,845,377 $ 14,600,807 $ 18,080,907
Dividends................................... -- -- -- --
---------- ----------- ------------ --------- ------------
TOTAL INVESTMENT INCOME............... 1,634,723 1,845,377 14,600,807 18,080,907
---------- ----------- ------------ --------- ------------
EXPENSES
Investment Advisory Fees.................... 174,589 100,349 1,516,089 (186,800)(1) 1,604,227
Administration Fees......................... 69,836 64,818 454,826 52,211 (1) 641,691
Custodian Fees.............................. 17,095 40,694 19,366 77,155
Transfer Agent Fees......................... 27,286 31,265 23,420 81,971
Service Fees................................ 13,458 -- -- 760,151 (1) 773,609
Distribution Fees........................... 316 -- -- 316
Legal and Audit............................. 4,893 38,048 37,809 (42,702)(2) 38,048
Printing.................................... 5,759 37,597 43,356
Registration Fees........................... 25,996 28,982 23,210 78,188
Trustees' Fees and Officers' Salaries....... 715 5,810 3,124 (3,839)(2) 5,810
Organization and Other...................... 6,277 40,003 23,768 70,048
---------- ----------- ------------ --------- ------------
346,220 349,969 2,139,209 579,021 3,414,419
Less: Fees waived & Expenses Reimbursed..... (192,774) (159,363) -- (523,618)(3) (875,755)
---------- ----------- ------------ --------- ------------
TOTAL EXPENSES........................ 153,446 190,606 2,139,209 55,403 2,538,664
---------- ----------- ------------ --------- ------------
NET INVESTMENT INCOME......................... 1,481,277 1,654,771 12,461,598 (55,403) 15,542,243
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS TRANSACTIONS
Net realized gain (loss) on investment
transactions.............................. (1,064,511) (410,499) (1,501,590) (2,976,600)
Change in unrealized appreciation
(depreciation)............................ (557,603) (590,015) (12,267,631) (13,415,249)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS..................... (1,622,114) (1,000,514) (13,769,221) (16,391,849)
---------- ----------- ------------ --------- ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................... $ (140,837) $ 654,257 $ (1,307,623) $ (55,403) $ (849,606)
========== =========== ============ ========= ============
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-89
<PAGE> 255
BFM CORE FIXED INCOME PORTFOLIO
COMPASS FIXED INCOME FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
BFM
CORE FIXED COMPASS
INCOME FIXED INCOME PRO-FORMA PRO-FORMA
PORTFOLIO FUND ADJUSTMENTS COMBINED
---------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest.................................................. $511,349 $ 8,576,940 $ 9,088,289
Dividends................................................. -- -- --
-------- ----------- --------- -----------
TOTAL INVESTMENT INCOME............................. 511,349 8,576,940 9,088,289
-------- ----------- --------- -----------
EXPENSES
Investment Advisory Fees.................................. 23,911 725,554 (108,388)(1) 641,077
Administration Fees....................................... 25,648 217,665 13,118 (1) 256,431
Custodian Fees............................................ 36,337 11,047 47,384
Transfer Agent Fees....................................... 18,346 34,512 52,858
Service Fees.............................................. -- -- 384,646(1) 384,646
Distribution Fees......................................... -- -- 0
Legal and Audit........................................... 5,710 25,591 (25,591)(2) 5,710
Printing.................................................. -- 4,412 (4,412)(2) 0
Registration Fees......................................... 14,061 (4,275) 9,786
Trustees' Fees and Officers' Salaries..................... 1,210 0 1,210
Organization and Other.................................... 9,825 (9,636) 189
-------- ----------- --------- -----------
135,048 1,004,870 259,373 1,399,291
Less: Fees waived & Expenses Reimbursed................... (97,530) -- (193,992)(3) (291,522)
-------- ----------- --------- -----------
TOTAL EXPENSES...................................... 37,518 1,004,870 65,381 1,107,769
-------- ----------- --------- -----------
NET INVESTMENT INCOME....................................... 473,831 7,572,070 (65,381) 7,980,520
-------- ----------- --------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
TRANSACTIONS
Net realized gain (loss) on investment transactions....... (87,921) (1,098,532) (1,186,453)
Change in unrealized appreciation (depreciation).......... 350,690 5,050,394 5,401,084
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS.............................................. 262,769 3,951,862 4,214,631
-------- ----------- --------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $736,600 $11,523,932 $ (65,381) $12,195,151
======== =========== ========= ===========
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-90
<PAGE> 256
BFM CORE FIXED INCOME PORTFOLIO
COMPASS FIXED INCOME FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
BFM
CORE FIXED COMPASS
INCOME FIXED INCOME PRO-FORMA PRO-FORMA
PORTFOLIO FUND ADJUSTMENTS COMBINED
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest................................................ $ 700,743 $ 17,236,014 $ 17,936,757
Dividends............................................... -- -- --
----------- ------------ --------- ------------
TOTAL INVESTMENT INCOME........................... 700,743 17,236,014 17,936,757
----------- ------------ --------- ------------
EXPENSES
Investment Advisory Fees................................ 38,435 1,581,531 (247,646)(1) 1,372,320
Administration Fees..................................... 78,265 474,452 (3,789)(1) 548,928
Custodian Fees.......................................... 51,615 19,381 70,996
Transfer Agent Fees..................................... 38,807 23,417 62,224
Service Fees............................................ -- -- 823,392 (1) 823,392
Distribution Fees....................................... -- --
Legal and Audit......................................... 11,621 37,840 (37,840)(2) 11,621
Printing................................................ -- 37,531 (37,531)(2)
Registration Fees....................................... 28,182 20,761 48,943
Trustees' Fees and Officers' Salaries................... 1,995 3,126 (3,126)(2) 1,995
Organization and Other.................................. 17,809 54,415 72,224
----------- ------------ --------- ------------
266,729 2,252,454 493,460 3,012,643
Less: Fees waived and Expenses Reimbursed............... (206,424) -- (424,145)(3) (630,569)
----------- ------------ --------- ------------
TOTAL EXPENSES.................................... 60,305 2,252,454 69,315 2,382,074
----------- ------------ --------- ------------
NET INVESTMENT INCOME..................................... 640,438 14,983,560 (69,315) 15,554,683
----------- ------------ --------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
TRANSACTIONS
Net realized gain (loss) on investment transactions..... (539,866) (736,958) (1,276,824)
Change in unrealized appreciation (depreciation)........ (499,395) (26,464,814) (26,964,209)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS............................................ (1,039,261) (27,201,772) (28,241,033)
----------- ------------ --------- ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS.............................................. $ (398,823) $(12,218,212) $ (69,315) $(12,686,350)
=========== ============ ========= ============
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-91
<PAGE> 257
NOTES TO PRO-FORMA FINANCIAL STATEMENTS OF THE PNC FUND,
THE COMPASS CAPITAL GROUP AND
THE BFM INSTITUTIONAL TRUST INC.
MARCH 31, 1995
(UNAUDITED)
1. BASIS OF COMBINATION
The pro forma combined portfolio of investments and pro forma combined
statement of assets and liabilities reflect the accounts of The PNC Fund, The
Compass Capital Group (the "Compass Fund") and The BFM Institutional Trust Inc.
(the "BFM Fund") at March 31, 1995. The pro forma combined statements of
operations reflect the accounts of the PNC Fund, the Compass Fund and the BFM
Fund for the twelve months ended September 30, 1994, and the six months ended
March 31, 1995. These pro forma financial statements have been derived from the
annual and semi-annual financial statements of the PNC Fund as of September 30,
1994 and March 31, 1995, respectively, and from the books and records of the
Compass Fund and the BFM Fund utilized in calculating daily net asset values for
the respective periods ended September 30, 1994 and March 31, 1995.
The pro forma statements give effect to the proposed transfer of the assets
and liabilities of the Compass Fund in exchange for Service Shares of the PNC
Fund and the BFM Fund in exchange for Institutional Shares of the PNC Fund. The
historical cost of investment securities will be carried forward to the
surviving portfolios and the results of operations of the surviving portfolios
for pre-combining periods will not be restated. The Pro Forma Statements do not
reflect the expenses of the PNC Fund, the Compass Fund and the BFM Fund in
carrying out their obligations under the Asset Purchase Agreements as these
expenses are immaterial to the pro forma financial statements. The actual fiscal
year end of the combined fund will be September 30, the fiscal year end of the
PNC Fund.
The accompanying pro forma financial statements should be read in
conjunction with the historical financial statements of the PNC Fund, the
Compass Fund and the BFM Fund included or incorporated by reference in the
Statement of Additional Information.
The portfolios affected by the proposed business combination are as
follows:
<TABLE>
<CAPTION>
THE BFM INSTITUTIONAL THE COMPASS CAPITAL
PNC FUND TRUST INC. GROUP
----------------------------------- --------------------------------- -----------------------------------
<S> <C> <C>
Small Cap Growth Equity Portfolio n/a Small Company Fund
Growth Equity Portfolio n/a Growth Fund
Value Equity Portfolio n/a Equity Income Fund
Balanced Portfolio n/a Balanced Fund
International Equity Portfolio n/a International Equity Fund (1)
shell The Core Fixed Income Portfolio Fixed Income Fund
Short-Term Bond Portfolio The Short Duration Portfolio Short/Intermediate Fund
shell The Multi-Sector Mortgage n/a
Securities Portfolio III(2)
Tax-Free Income Portfolio n/a Municipal Bond Fund
shell n/a New Jersey Municipal Bond Fund (2)
Pennsylvania Tax-Free Income n/a Pennsylvania Municipal Bond Fund
Portfolio
shell n/a International Fixed Income Fund (2)
Money Market Portfolio n/a Cash Reserve Fund
Government Money Market Portfolio n/a U.S. Treasury Fund
Municipal Money Market Portfolio n/a Municipal Money Fund
shell n/a New Jersey Municipal Money Fund (2)
Pennsylvania Municipal Money Market n/a Pennsylvania Municipal Money Fund
Portfolio
</TABLE>
- ---------------
(1) Pro forma financial statements not presented because acquired funds' net
assets do not exceed 10% of the registrant's net assets as of September 19,
1995.
(2) Pro forma financial statements not presented because acquired fund is being
combined into an inactive portfolio of the registrant.
F-92
<PAGE> 258
NOTES TO PRO-FORMA FINANCIAL STATEMENTS OF THE PNC FUND,
THE COMPASS CAPITAL GROUP AND
THE BFM INSTITUTIONAL TRUST INC. -- (CONTINUED)
2. SHARES OF BENEFICIAL INTEREST
The pro forma net asset value per share assumes the issuance at March 31,
1995 of additional shares of Service Shares and Institutional Shares of the PNC
Fund to the holders of the Compass Fund and the BFM Fund, respectively, in
conjunction with the proposed Transactions.
3. PRO-FORMA OPERATIONS
The pro forma statement of operations assumes historical rates of gross
investment income for the investments of the PNC Fund, the Compass Fund and the
BFM Fund. Accordingly, the combined gross investment income is equal to the sum
of each such funds' gross investment income. Certain expenses have been adjusted
to reflect the expected expenses of the combined fund. Pro forma operating
expenses include the actual expenses of the PNC Fund, the Compass Fund and the
BFM Fund and of the combined fund adjusted for certain items.
4. SURVIVING ENTITY
The Small Cap Growth Equity, Growth Equity, Value Equity, Balanced,
Tax-Free Income, Pennsylvania Tax-Free Income, Money Market, Government Money
Market, Municipal Money Market and Pennsylvania Municipal Money Market
portfolios of the PNC Fund will be the surviving entity. This determination was
based on the following:
- The current adviser and investment objectives of the above PNC Fund
portfolios will be the same for the surviving funds. The advisers of the
other portfolios will be terminated with the business combination.
- The composition of the surviving portfolio will more closely resemble the
composition of the above PNC Fund portfolios.
- The surviving funds multiple class and fee structures are consistent with
the multiple class and fee structures of the above PNC Fund portfolios.
The Core Fixed Income Portfolio and The Short Duration Portfolio of the BFM
Fund will be the surviving entity based on the following:
- The current adviser and investment objectives of the above BFM Funds will
be the same for the surviving funds. The advisers of the other portfolios
will be terminated with the business combination.
- The composition of the surviving portfolios will more closely resemble
the composition of the above BFM Funds.
5. EXHIBIT TO PRO-FORMA SCHEDULE OF INVESTMENTS
The pro forma combined schedule of investments for Small Cap Growth Equity
Portfolio and Compass Small Company Fund is accompanied by the August 31, 1995
schedule of investments for the Compass Small Company Fund. Due to change in the
sub-adviser on July 1, 1995, the structure and composition of the portfolio
changed substantially from a value oriented approach to a growth oriented
approach.
6. EXHIBITS TO PRO-FORMA FINANCIAL STATEMENTS
The pro forma combined portfolio of investments and pro forma combined
statement of assets and liabilities in Exhibit I reflect the accounts of the PNC
Short-Term Bond Portfolio and the BFM Short Duration Portfolio at March 31,
1995. The pro forma combined statement of operations in Exhibit I reflect the
accounts of the PNC Short-Term Bond Portfolio and the BFM Short Duration
Portfolio for the twelve months ended September 30, 1994, and the six months
ended March 31, 1995.
The pro forma combined portfolio of investments and pro-forma combined
statement of assets and liabilities in Exhibit II reflect the accounts of the
PNC Short-Term Bond Portfolio and the Compass Short/Intermediate Fund at March
31, 1995. The pro forma combined statement of operations in Exhibit II reflect
the accounts of the PNC Short-Term Bond Portfolio and the Compass
Short/Intermediate Fund for the twelve months ended September 30, 1994, and the
six months ended March 31, 1995.
F-93
<PAGE> 259
PRO-FORMA FINANCIAL STATEMENTS
DATED AS OF MARCH 31, 1995
FOR PNC, COMPASS AND BIT PORTFOLIOS
EXHIBIT I
F-94
<PAGE> 260
PNC SHORT-TERM BOND PORTFOLIO
BFM SHORT DURATION PORTFOLIO
PRO-FORMA SCHEDULE OF INVESTMENTS
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PAR (000)
-------------------------------------
PNC BFM
SHORT-TERM SHORT
BOND DURATION PRO-FORMA
RATE MATURITY PORTFOLIO FUND COMBINED
---- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
ADVANTA MORTGAGE LOAN TRUST..................................... 5.55% 03/15/97 $ 825 $ 0 $ 825
*AMERICAN HOME PRODUCTS.......................................... 7.70 02/15/00 850 0 850
CHASE MANHATTAN CREDIT CARD..................................... 8.75 08/15/99 0 1,000 1,000
*CHRYSLER FINANCIAL CORP......................................... 5.08 01/27/97 1,000 0 1,000
COLLATERALIZED MORTGAGE SECURITIES
CORPORATION.................................................... 9.45 05/01/13 0 398 398
COLONIAL CREDIT CARD TRUST...................................... 6.80 08/15/97 0 1,500 1,500
CORESTATES HOME EQUITY TRUST.................................... 5.10 03/15/96 735 0 735
DISCOVER CARD MT................................................ 6.23 10/16/04 0 500 500
DISCOVER CARD TRUST............................................. 8.63 07/16/98 0 600 600
FEDERAL FARM CREDIT BANK BONDS.................................. 6.70 09/30/96 2,000 0 2,000
FEDERAL HOME LOAN MORTGAGE CORPORATION.......................... 7.25 06/01/07 0 797 797
FEDERAL HOME LOAN MORTGAGE CORPORATION.......................... 7.38 03/01/06 0 368 368
FEDERAL HOME LOAN MORTGAGE CORPORATION.......................... 8.00 11/01/03 0 1,061 1,061
FEDERAL HOME LOAN MORTGAGE CORPORATION.......................... 8.25 06/01/03 0 155 155
FEDERAL HOME LOAN MORTGAGE CORPORATION.......................... 8.75 01/04/13 0 396 396
FEDERAL HOME LOAN MORTGAGE CORPORATION.......................... 8.80 06/01/19 0 208 208
FEDERAL HOME LOAN MORTGAGE CORPORATION.......................... 9.25 12/01/08 0 1,400 1,400
FEDERAL NATIONAL MORTGAGE ASSOCIATION........................... 4.75 09/25/00 0 1,500 1,500
FEDERAL NATIONAL MORTGAGE ASSOCIATION........................... 9.50 01/25/04 0 1,779 1,779
FEDERAL NATIONAL MORTGAGE ASSOCIATION........................... 9.00 06/25/17 0 1,215 1,215
FEDERAL NATIONAL MORTGAGE ASSOCIATION........................... 8.50 11/25/18 0 471 471
FEDERAL NATIONAL MORTGAGE ASSOCIATION........................... 6.00 11/01/02 0 2,322 2,322
FEDERAL NATIONAL MORTGAGE ASSOCIATION........................... 6.49 01/01/21 0 1,114 1,114
FEDERAL NATIONAL MORTGAGE ASSOCIATION........................... 6.89 11/01/02 0 1,111 1,111
FEDERAL NATIONAL MORTGAGE ASSOCIATION........................... 7.25 04/25/96 792 0 792
FEDERAL NATIONAL MORTGAGE ASSOCIATION........................... 7.85 05/01/18 0 233 233
FIRST USA MASTER TRUST.......................................... 6.25 08/15/03 0 500 500
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION........................ 7.00 01/20/99 0 1,500 1,500
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION........................ 7.50 03/20/25 0 1,800 1,800
*GREAT WESTERN FINANCIAL CORP.................................... 6.38 07/01/00 1,000 0 1,000
JOHN DEERE OWNER TRUST.......................................... 4.10 10/15/00 819 0 819
KIDDER PEOBODY MORTGAGE ASSETS TRUST............................ 8.50 09/01/14 0 539 539
*LEHMAN BROTHERS INC. SUBORDINATED NOTES......................... 7.38 08/15/97 1,000 0 1,000
LEMAN BROTHERS REPURCHASE AGREEMENT............................. 6.25 04/03/95 0 1,410 1,410
MERRILL LYNCH ASSET BACKED CORP................................. 5.50 07/15/95 715 0 715
NOMURA ASSET SECURITIES CORPORATION............................. 7.00 07/25/24 0 725 725
<CAPTION>
VALUE AT MARCH 31, 1995
-----------------------------------------
PNC BFM
SHORT-TERM SHORT
BOND DURATION PRO-FORMA
PORTFOLIO FUND COMBINED
----------- ----------- -----------
<S> <C> <C> <C>
ADVANTA MORTGAGE LOAN TRUST..................................... $ 775,621 $ 0 $ 775,621
*AMERICAN HOME PRODUCTS.......................................... 857,438 0 857,438
CHASE MANHATTAN CREDIT CARD..................................... 0 1,018,120 1,018,120
*CHRYSLER FINANCIAL CORP......................................... 968,750 0 968,750
COLLATERALIZED MORTGAGE SECURITIES
CORPORATION.................................................... 0 403,775 403,775
COLONIAL CREDIT CARD TRUST...................................... 0 1,499,520 1,499,520
CORESTATES HOME EQUITY TRUST.................................... 677,404 0 677,404
DISCOVER CARD MT................................................ 0 500,310 500,310
DISCOVER CARD TRUST............................................. 0 609,372 609,372
FEDERAL FARM CREDIT BANK BONDS.................................. 1,997,180 0 1,997,180
FEDERAL HOME LOAN MORTGAGE CORPORATION.......................... 0 784,421 784,421
FEDERAL HOME LOAN MORTGAGE CORPORATION.......................... 0 361,172 361,172
FEDERAL HOME LOAN MORTGAGE CORPORATION.......................... 0 1,058,572 1,058,572
FEDERAL HOME LOAN MORTGAGE CORPORATION.......................... 0 266,765 266,765
FEDERAL HOME LOAN MORTGAGE CORPORATION.......................... 0 399,778 399,778
FEDERAL HOME LOAN MORTGAGE CORPORATION.......................... 0 212,835 212,835
FEDERAL HOME LOAN MORTGAGE CORPORATION.......................... 0 1,441,883 1,441,883
FEDERAL NATIONAL MORTGAGE ASSOCIATION........................... 0 1,463,420 1,463,420
FEDERAL NATIONAL MORTGAGE ASSOCIATION........................... 0 1,828,348 1,828,348
FEDERAL NATIONAL MORTGAGE ASSOCIATION........................... 0 1,232,715 1,232,715
FEDERAL NATIONAL MORTGAGE ASSOCIATION........................... 0 474,896 474,896
FEDERAL NATIONAL MORTGAGE ASSOCIATION........................... 0 2,220,766 2,220,766
FEDERAL NATIONAL MORTGAGE ASSOCIATION........................... 0 1,094,047 1,094,047
FEDERAL NATIONAL MORTGAGE ASSOCIATION........................... 0 1,103,861 1,103,861
FEDERAL NATIONAL MORTGAGE ASSOCIATION........................... 790,495 0 790,495
FEDERAL NATIONAL MORTGAGE ASSOCIATION........................... 0 236,076 236,076
FIRST USA MASTER TRUST.......................................... 0 500,780 500,780
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION........................ 0 1,530,469 1,530,469
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION........................ 0 1,833,750 1,833,750
*GREAT WESTERN FINANCIAL CORP.................................... 937,188 0 937,188
JOHN DEERE OWNER TRUST.......................................... 802,180 0 802,180
KIDDER PEOBODY MORTGAGE ASSETS TRUST............................ 0 545,398 545,398
*LEHMAN BROTHERS INC. SUBORDINATED NOTES......................... 990,000 0 990,000
LEMAN BROTHERS REPURCHASE AGREEMENT............................. 0 1,410,000 1,410,000
MERRILL LYNCH ASSET BACKED CORP................................. 708,121 0 708,121
NOMURA ASSET SECURITIES CORPORATION............................. 0 717,335 717,335
</TABLE>
F-95
<PAGE> 261
<TABLE>
<CAPTION>
PAR (000)
-------------------------------------
PNC BFM
SHORT-TERM SHORT
BOND DURATION PRO-FORMA
RATE MATURITY PORTFOLIO FUND COMBINED
---- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
RESOLUTION TRUST CORPORATION.................................... 8.00% 07/25/29 $ 0 $ 1,498 $ 1,498
*RYDER SYSTEM, INC............................................... 7.66 09/15/99 500 0 500
SALOMON BROTHERS MORTGAGE SECURITIES VII INC.................... 7.37 10/25/23 0 465 465
*SALOMON BROTHERS, INC........................................... 5.26 02/10/99 1,000 0 1,000
SMALL BUSINESS ADMINISTRATION GUARANTEED LOAN
(ARM)........................................................ 6.87 03/25/16 0 750 750
SMALL BUSINESS ADMINISTRATION GUARANTEED LOAN
(ARM)........................................................ 6.90 07/25/16 0 770 770
STANDARD CREDIT CARD MASTER TRUST............................... 8.50 08/07/97 0 600 600
THE MONEY STORE HOME EQUITY TRUST............................... 5.08 11/15/95 1,218 0 1,218
TOYOTA MOTOR CREDIT AUTO RECEIVABLE............................. 3.90 08/17/98 65 0 65
UNION FEDERAL MASTER TRUST...................................... 4.88 11/15/95 922 0 922
*UNITED COMPANIES FINANCIAL CORP................................. 6.58 04/10/96 1,747 0 1,747
U.S. TREASURY NOTE.............................................. 6.00 06/30/96 0 16,270 16,270
U.S. TREASURY NOTE.............................................. 6.88 02/28/97 1,000 0 1,000
U.S. TREASURY NOTE.............................................. 6.88 02/28/97 0 4,000 4,000
U.S. TREASURY NOTE.............................................. 7.25 01/30/96 0 240 240
U.S. TREASURY NOTE.............................................. 7.50 01/31/97 0 2,935 2,935
SMITH BARNEY MONEY MARKET FUND.................................. 173,187 0 173,187
TOTAL INVESTMENTS........................................
<CAPTION>
VALUE AT MARCH 31, 1995
-----------------------------------------
PNC BFM
SHORT-TERM SHORT
BOND DURATION PRO-FORMA
PORTFOLIO FUND COMBINED
----------- ----------- -----------
<S> <C> <C> <C>
RESOLUTION TRUST CORPORATION.................................... $ 0 $ 1,501,396 $ 1,501,396
*RYDER SYSTEM, INC............................................... 500,000 0 500,000
SALOMON BROTHERS MORTGAGE SECURITIES VII INC.................... 0 463,161 463,161
*SALOMON BROTHERS, INC........................................... 951,250 0 951,250
SMALL BUSINESS ADMINISTRATION GUARANTEED LOAN
(ARM)........................................................ 0 754,080 754,080
SMALL BUSINESS ADMINISTRATION GUARANTEED LOAN
(ARM)........................................................ 0 773,704 773,704
STANDARD CREDIT CARD MASTER TRUST............................... 0 609,750 609,750
THE MONEY STORE HOME EQUITY TRUST............................... 1,166,094 0 1,166,094
TOYOTA MOTOR CREDIT AUTO RECEIVABLE............................. 63,113 0 63,113
UNION FEDERAL MASTER TRUST...................................... 906,312 0 906,312
*UNITED COMPANIES FINANCIAL CORP................................. 1,730,722 0 1,730,722
U.S. TREASURY NOTE.............................................. 0 16,150,578 16,150,578
U.S. TREASURY NOTE.............................................. 1,001,750 0 1,001,750
U.S. TREASURY NOTE.............................................. 0 4,005,641 4,005,641
U.S. TREASURY NOTE.............................................. 0 241,874 241,874
U.S. TREASURY NOTE.............................................. 0 2,971,218 2,971,218
SMITH BARNEY MONEY MARKET FUND.................................. 173,187 0 173,187
----------- ----------- -----------
TOTAL INVESTMENTS........................................ $15,996,804 $52,219,786 $68,216,590
=========== =========== ===========
</TABLE>
- ---------------
* Denotes securities in violation of proposed investment objectives.
See Accompanying Notes to Pro-Forma Financial Statements
F-96
<PAGE> 262
PNC SHORT-TERM BOND PORTFOLIO
BFM SHORT DURATION
PRO-FORMA COMBINED STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC
SHORT-TERM BFM SHORT
BOND DURATION PRO-FORMA
PORTFOLIO PORTFOLIO COMBINED
---------- ---------- -----------
<S> <C> <C> <C>
ASSETS
Investments, @ value (Cost $16,354,281 and $52,183,653 respectively)....... $15,996,804 $52,219,786 $68,216,590
Cash....................................................................... 0 6,246 6,246
Dividends and Interest receivable.......................................... 92,087 586,723 678,810
Investments sold receivable................................................ 0 3,407,912 3,407,912
Capital shares sold receivable............................................. 11,095 0 11,095
Receivable from Advisor.................................................... 2,426 126,197 128,623
Prepaid expenses........................................................... 27,684 54,319 82,003
----------- ----------- -----------
TOTAL ASSETS......................................................... 16,130,096 56,401,183 72,531,279
----------- ----------- -----------
LIABILITIES
Capital shares redeemed payable............................................ 27,662 0 27,662
Investment purchased payable............................................... 0 5,939,417 5,939,417
Dividends payable.......................................................... 64,035 0 64,035
Accrued expenses payable................................................... 30,296 141,395 171,691
----------- ----------- -----------
TOTAL LIABILITIES.................................................... 121,993 6,080,812 6,202,805
----------- ----------- -----------
TOTAL NET ASSETS..................................................... $16,008,103 $50,320,371 $
=========== =========== ===========
TOTAL NET ASSETS BY CLASS OF SHARES
Institutional Class.......................................................... $ 9,972,122 $50,320,371 $60,292,493
Service Class................................................................ 5,776,529 N/A 5,776,529
Series A Investor Class...................................................... 259,452 N/A 259,452
----------- ----------- -----------
$16,008,103 $50,320,371 $66,328,474
=========== =========== ===========
SHARES OUTSTANDING
Institutional Class
Pre-combination............................................................ 1,043,327 5,179,742 N/A
Post-combination(1)........................................................ 1,026,995 5,179,742 6,206,737
Service Class
Pre-combination............................................................ 604,373 N/A N/A
Post-combination(1)........................................................ 594,905 N/A 594,905
Series A Investor Class
Pre-combination............................................................ 27,166 N/A N/A
Post-combination(2)........................................................ 26,720 N/A 26,720
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
Institutional Class
Pre-combination............................................................ $ 9.56 $ 9.71 N/A
Post-combination........................................................... $ 9.71 $ 9.71 $ 9.71
Service Class
Pre-combination............................................................ $ 9.56 N/A N/A
Post-combination........................................................... $ 9.71 N/A $ 9.71
Series A Investor Class (Net Asset Value)
Pre-combination............................................................ $ 9.56 N/A N/A
Post-combination........................................................... $ 9.71 N/A $ 9.71
Maximum offering price per Series A Investor Class......................... $10.17 N/A $10.17
</TABLE>
- ---------------
Note: Series B and Series C Investor Class shares will be available for
shareholders in a future period.
(1) Reduction in shares due to a 98.43% reverse stock split.
(2) Reduction in shares due to a 98.36% reverse stock split.
See Accompanying Notes to Pro-Forma Financial Statements
F-97
<PAGE> 263
PNC SHORT-TERM BOND PORTFOLIO
BMF SHORT DURATION FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC BFM
SHORT-TERM SHORT
BOND DURATION PRO-FORMA PRO-FORMA
PORTFOLIO FUND ADJUSTMENTS COMBINED
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest................................................... $611,287 $1,005,855 $1,617,142
Dividends.................................................. -- -- --
-------- ---------- -------- ----------
TOTAL INVESTMENT INCOME.............................. 611,287 1,005,855 1,617,142
-------- ---------- -------- ----------
EXPENSES
Investment Advisory Fees................................... 52,691 45,649 (30,787)(1) 129,127
Administration Fees........................................ 21,076 31,914 (1,339)(1) 51,651
Custodian Fees............................................. 8,083 29,952 38,035
Transfer Agent Fees........................................ 8,097 17,012 25,109
Service Fees............................................... 6,298 -- 6,298
Distribution Fees.......................................... 354 -- 354
Legal and Audit............................................ 1,460 12,384 (12,384)(2) 1,460
Printing................................................... 1,143 -- 1,143
Registration Fees.......................................... 11,628 14,062 25,690
Trustees' Fees and Officers' Salaries...................... 294 3,028 (3,028)(2) 294
Organization and Other..................................... 3,784 19,694 23,478
-------- ---------- -------- ----------
114,908 173,695 14,036 302,639
Less: Fees waived & Expenses Reimbursed.................... (66,103) (86,960) 42 (3) (153,021)
-------- ---------- -------- ----------
TOTAL EXPENSES....................................... 48,805 86,735 14,078 149,618
-------- ---------- -------- ----------
NET INVESTMENT INCOME........................................ 562,482 919,120 (14,078) 1,467,524
-------- ---------- -------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
TRANSACTIONS
Net realized gain (loss) on investment transactions........ (273,282) (141,008) (414,290)
Change in unrealized appreciation (depreciation)........... 203,056 587,673 790,729
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS............................................... (70,226) 446,665 376,439
-------- ---------- -------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................. $492,256 $1,365,785 $(14,078) $1,843,963
======== ========== ======== ==========
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-98
<PAGE> 264
PNC SHORT-TERM BOND PORTFOLIO
BFM SHORT DURATION FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
PNC BFM
SHORT-TERM SHORT
BOND DURATION PRO-FORMA PRO-FORMA
PORTFOLIO FUND ADJUSTMENTS COMBINED
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest................................................... $ 1,634,723 $ 1,845,377 $ 3,480,100
Dividends.................................................. -- -- --
----------- ----------- ---------- -----------
TOTAL INVESTMENT INCOME.............................. 1,634,723 1,845,377 3,480,100
----------- ----------- ---------- -----------
EXPENSES
Investment Advisory Fees................................... 174,589 100,349 67,174 (1) 342,112
Administration Fees........................................ 69,836 64,818 2,191 (1) 136,845
Custodian Fees............................................. 17,095 40,694 57,789
Transfer Agent Fees........................................ 27,286 31,265 58,551
Service Fees............................................... 13,458 -- 13,458
Distribution Fees.......................................... 316 -- 316
Legal and Audit............................................ 4,893 38,048 (38,048)(2) 4,893
Printing................................................... 5,759 5,759
Registration Fees.......................................... 25,996 28,982 54,978
Trustees' Fees and Officers' Salaries...................... 715 5,810 (5,810)(2) 715
Organization and Other..................................... 6,277 40,003 46,280
----------- ----------- -------- -----------
346,220 349,969 25,507 721,696
Less: Fees waived & Expenses Reimbursed.................... (192,774) (159,363) 22,915 (3) (329,222)
----------- ----------- -------- -----------
TOTAL EXPENSES....................................... 153,446 190,606 48,422 392,474
----------- ----------- -------- -----------
NET INVESTMENT INCOME........................................ 1,481,277 1,654,771 (48,422) 3,087,626
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
TRANSACTIONS
Net realized gain (loss) on investment transactions........ (1,064,511) (410,499) (1,475,010)
Change in unrealized appreciation (depreciation)........... (557,603) (590,015) (1,147,618)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS............................................... (1,622,114) (1,000,514) (2,622,628)
----------- ----------- -------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................. $ (140,837) $ 654,257 $(48,422) $ 464,998
=========== =========== ======== ===========
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-99
<PAGE> 265
PRO-FORMA FINANCIAL STATEMENTS
DATED AS OF MARCH 31, 1995
FOR PNC, COMPASS AND BIT PORTFOLIOS
EXHIBIT II
F-100
<PAGE> 266
PNC SHORT-TERM BOND PORTFOLIO
COMPASS SHORT/INTERMEDIATE FUND
PRO-FORMA SCHEDULE OF INVESTMENTS
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PAR (000)
-------------------------------------
PNC COMPASS
SHORT-TERM SHORT/
BOND INTERMEDIATE PRO-FORMA
RATE MATURITY PORTFOLIO FUND COMBINED
---- -------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C>
ADVANTA MORTGAGE LOAN TRUST..................................... 5.55% 03/15/97 $ 825 $ 0 $ 825
*AMERICAN HOME PRODUCTS.......................................... 7.70 02/15/00 850 0 850
AMEX............................................................ 7.15 08/15/99 0 4,750 4,750
*ANHEUSER BUSCH MTN,............................................. 7.50 12/01/97 0 2,500 2,500
*ASSOC CORP N.A.................................................. 6.38 04/15/95 0 2,000 2,000
*ASSOC CORP OF N. AMERICA........................................ 5.30 09/04/95 0 1,000 1,000
*ASSOCIATES CORP N.A............................................. 7.63 04/15/98 0 2,400 2,400
*BASS AMERICA INC................................................ 6.75 08/01/99 0 5,000 5,000
BETA FN 144A MTN LQ(Q/D)........................................ 6.36 04/20/95 0 2,000 2,000
CHASE MSTR TR................................................... 8.75 08/15/99 0 2,000 2,000
*CHRYSLER FINANCIAL CORP......................................... 5.08 01/27/97 1,000 0 1,000
*COCA COLA COMPANY............................................... 7.88 09/15/98 0 6,000 6,000
CORESTATES HOME EQUITY TRUST.................................... 5.10 03/15/96 735 0 735
*DUKE POWER CO MTN............................................... 7.50 04/01/99 0 4,000 4,000
*DUPONT EI DE NEMOURS & CO....................................... 8.45 10/15/96 0 3,500 3,500
FEDERAL FARM CREDIT BANK BONDS.................................. 6.70 09/30/96 2,000 0 2,000
FEDERAL NATIONAL MORTGAGE ASSOCIATION........................... 7.25 04/25/96 792 0 792
FHLMC........................................................... 7.86 01/21/97 0 2,000 2,000
FHLMC CMO....................................................... 6.75 09/15/16 0 4,000 4,000
*FORD CAPITAL BV................................................. 9.50 07/01/01 0 2,000 2,000
*FORD MOTOR CC................................................... 8.00 01/15/99 0 1,000 1,000
*FORD MOTOR CREDIT MTN........................................... 8.40 03/26/99 0 5,000 5,000
*GMAC............................................................ 8.60 07/17/95 0 2,500 2,500
GMAC............................................................ 4.15 03/15/98 0 1,092 1,092
GMAC EURO BOND.................................................. 9.40 06/07/95 0 1,000 1,000
GOLDMAN SACHS 144A.............................................. 4.77 10/16/95 0 3,000 3,000
*GREAT WESTERN FINANCIAL CORP.................................... 6.38 07/01/00 1,000 0 1,000
*HOUSEHOLD FIN................................................... 7.80 11/01/96 0 2,000 2,000
*HOUSEHOLD FINANCE CO............................................ 8.88 07/05/99 0 1,000 1,000
JOHN DEERE OWNER TRUST.......................................... 4.10 10/15/00 819 0 819
*LEHMAN BROTHERS INC. SUBORDINATED NOTES......................... 7.38 08/15/97 1,000 0 1,000
MERRILL LYNCH ASSET BACKED CORP................................. 5.50 07/15/95 715 0 715
MLABC........................................................... 5.50 05/15/98 0 1,712 1,712
MLABC........................................................... 5.13 07/15/98 0 1,549 1,549
*PEPSICO INC..................................................... 5.63 07/01/95 0 2,000 2,000
*PEPSICO INC..................................................... 6.13 01/15/98 0 2,000 2,000
*PEPSICO INC..................................................... 7.00 11/15/96 0 3,000 3,000
<CAPTION>
VALUE AT MARCH 31, 1995
-------------------------------------------
PNC COMPASS
SHORT-TERM SHORT/
BOND INTERMEDIATE PRO-FORMA
PORTFOLIO FUND COMBINED
----------- ------------ ------------
<S> <C> <C> <C>
ADVANTA MORTGAGE LOAN TRUST..................................... $ 775,621 $ 0 $ 775,621
*AMERICAN HOME PRODUCTS.......................................... 857,438 0 857,438
AMEX............................................................ 0 4,702,500 4,702,500
*ANHEUSER BUSCH MTN,............................................. 0 2,515,625 2,515,625
*ASSOC CORP N.A.................................................. 0 1,999,860 1,999,860
*ASSOC CORP OF N. AMERICA........................................ 0 995,000 995,000
*ASSOCIATES CORP N.A............................................. 0 2,415,000 2,415,000
*BASS AMERICA INC................................................ 0 4,856,250 4,856,250
BETA FN 144A MTN LQ(Q/D)........................................ 0 1,999,400 1,999,400
CHASE MSTR TR................................................... 0 2,040,000 2,040,000
*CHRYSLER FINANCIAL CORP......................................... 968,750 0 968,750
*COCA COLA COMPANY............................................... 0 6,135,000 6,135,000
CORESTATES HOME EQUITY TRUST.................................... 677,404 0 677,404
*DUKE POWER CO MTN............................................... 0 4,015,000 4,015,000
*DUPONT EI DE NEMOURS & CO....................................... 0 3,570,000 3,570,000
FEDERAL FARM CREDIT BANK BONDS.................................. 1,997,180 0 1,997,180
FEDERAL NATIONAL MORTGAGE ASSOCIATION........................... 790,495 0 790,495
FHLMC........................................................... 0 2,026,580 2,026,580
FHLMC CMO....................................................... 0 3,883,560 3,883,560
*FORD CAPITAL BV................................................. 0 2,162,500 2,162,500
*FORD MOTOR CC................................................... 0 1,013,750 1,013,750
*FORD MOTOR CREDIT MTN........................................... 0 5,137,500 5,137,500
*GMAC............................................................ 0 2,512,500 2,512,500
GMAC............................................................ 0 1,073,007 1,073,007
GMAC EURO BOND.................................................. 0 1,005,000 1,005,000
GOLDMAN SACHS 144A.............................................. 0 2,970,000 2,970,000
*GREAT WESTERN FINANCIAL CORP.................................... 937,188 0 937,188
*HOUSEHOLD FIN................................................... 0 2,015,000 2,015,000
*HOUSEHOLD FINANCE CO............................................ 0 1,021,250 1,021,250
JOHN DEERE OWNER TRUST.......................................... 802,180 0 802,180
*LEHMAN BROTHERS INC. SUBORDINATED NOTES......................... 990,000 0 990,000
MERRILL LYNCH ASSET BACKED CORP................................. 708,121 0 708,121
MLABC........................................................... 0 1,694,069 1,694,069
MLABC........................................................... 0 1,526,613 1,526,613
*PEPSICO INC..................................................... 0 1,997,500 1,997,500
*PEPSICO INC..................................................... 0 1,952,500 1,952,500
*PEPSICO INC..................................................... 0 3,003,750 3,003,750
</TABLE>
F-101
<PAGE> 267
<TABLE>
<CAPTION>
PAR (000)
-------------------------------------
PNC COMPASS
SHORT-TERM SHORT/
BOND INTERMEDIATE PRO-FORMA
RATE MATURITY PORTFOLIO FUND COMBINED
---- -------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C>
PREM AUTO TR.................................................... 4.90% 10/15/98 $ 0 $ 794 $ 794
PREMIER AUTO TRUST.............................................. 4.65 11/02/99 0 5,331 5,331
*REPUBLIC NAT BANK NY............................................ 6.40 04/15/95 0 4,000 4,000
*RYDER SYSTEM, INC............................................... 7.66 09/15/99 500 0 500
*SALOMON BROTHERS, INC........................................... 5.26 02/10/99 1,000 0 1,000
STANDARD CR CRD................................................. 7.88 01/07/00 0 4,000 4,000
STANDARD CREDIT CARD ABS........................................ 8.88 09/07/99 0 5,000 5,000
*STHRN CAL EDISON CO............................................. 5.90 01/15/97 0 3,000 3,000
TENNESSEE VALLEY AUTH........................................... 8.38 10/01/99 0 2,000 2,000
*TEXACO CAPITAL INC.............................................. 7.88 05/01/95 0 3,000 3,000
*TEXACO CAPITAL INC.............................................. 9.00 11/15/96 0 1,500 1,500
*TEXACO CAPITAL INC.............................................. 9.00 12/15/99 0 3,000 3,000
*TEXACO CAPITAL (MTN)............................................ 8.53 08/15/97 0 1,350 1,350
THE MONEY STORE HOME EQUITY TRUST............................... 5.08 11/15/95 1,218 0 1,218
TOYOTA MOTOR CREDIT AUTO RECEIVABLE............................. 3.90 08/17/98 65 0 65
UNION FEDERAL MASTER TRUST...................................... 4.88 11/15/95 922 0 922
*UNITED COMPANIES FINANCIAL CORP................................. 6.58 04/10/96 1,747 0 1,747
U.S. TREASURY NOTE.............................................. 4.25 05/15/96 0 3,000 3,000
U.S. TREASURY NOTE.............................................. 4.63 02/15/96 0 5,000 5,000
U.S. TREASURY NOTE.............................................. 5.13 03/31/96 0 3,000 3,000
U.S. TREASURY NOTE.............................................. 5.13 02/28/98 0 1,000 1,000
U.S. TREASURY NOTE.............................................. 5.63 08/31/97 0 8,000 8,000
U.S. TREASURY NOTE.............................................. 5.75 10/31/97 0 3,000 3,000
U.S. TREASURY NOTE.............................................. 6.00 11/30/97 0 5,000 5,000
U.S. TREASURY NOTE.............................................. 6.25 01/31/97 0 3,000 3,000
U.S. TREASURY NOTE.............................................. 6.50 11/30/96 0 1,000 1,000
U.S. TREASURY NOTE.............................................. 6.50 05/15/97 0 5,000 5,000
U.S. TREASURY NOTE.............................................. 6.75 02/28/97 0 2,000 2,000
U.S. TREASURY NOTE.............................................. 6.75 05/31/97 0 8,000 8,000
U.S. TREASURY NOTE.............................................. 6.88 10/31/96 0 2,000 2,000
U.S. TREASURY NOTE.............................................. 6.88 02/28/97 1,000 0 1,000
U.S. TREASURY NOTE.............................................. 6.88 02/28/97 0 0 4,000
U.S. TREASURY NOTE.............................................. 6.88 04/30/97 0 10,000 10,000
U.S. TREASURY NOTE.............................................. 7.25 01/30/96 0 0 240
U.S. TREASURY NOTE.............................................. 7.25 08/31/96 0 1,000 1,000
U.S. TREASURY NOTE.............................................. 7.25 11/30/96 0 2,000 2,000
U.S. TREASURY NOTE.............................................. 7.25 02/15/98 0 4,000 4,000
U.S. TREASURY NOTE.............................................. 7.38 05/15/96 0 2,000 2,000
U.S. TREASURY NOTE.............................................. 7.50 01/31/96 0 8,000 8,000
U.S. TREASURY NOTE.............................................. 7.88 01/15/98 0 4,000 4,000
U.S. TREASURY NOTE.............................................. 8.00 08/15/99 0 3,000 3,000
U.S. TREASURY NOTE.............................................. 8.50 11/15/95 0 2,000 2,000
<CAPTION>
VALUE AT MARCH 31, 1995
-------------------------------------------
PNC COMPASS
SHORT-TERM SHORT/
BOND INTERMEDIATE PRO-FORMA
PORTFOLIO FUND COMBINED
----------- ------------ ------------
<S> <C> <C> <C>
PREM AUTO TR.................................................... $ 0 $ 772,675 $ 772,675
PREMIER AUTO TRUST.............................................. 0 5,155,413 5,155,413
*REPUBLIC NAT BANK NY............................................ 0 4,000,000 4,000,000
*RYDER SYSTEM, INC............................................... 500,000 0 500,000
*SALOMON BROTHERS, INC........................................... 951,250 0 951,250
STANDARD CR CRD................................................. 0 4,080,000 4,080,000
STANDARD CREDIT CARD ABS........................................ 0 5,225,000 5,225,000
*STHRN CAL EDISON CO............................................. 0 2,925,000 2,925,000
TENNESSEE VALLEY AUTH........................................... 0 2,080,000 2,080,000
*TEXACO CAPITAL INC.............................................. 0 3,003,750 3,003,750
*TEXACO CAPITAL INC.............................................. 0 1,548,750 1,548,750
*TEXACO CAPITAL INC.............................................. 0 3,180,000 3,180,000
*TEXACO CAPITAL (MTN)............................................ 0 1,385,438 1,385,438
THE MONEY STORE HOME EQUITY TRUST............................... 1,166,094 0 1,166,094
TOYOTA MOTOR CREDIT AUTO RECEIVABLE............................. 63,113 0 63,113
UNION FEDERAL MASTER TRUST...................................... 906,312 0 906,312
*UNITED COMPANIES FINANCIAL CORP................................. 1,730,722 0 1,730,722
U.S. TREASURY NOTE.............................................. 0 2,925,690 2,925,690
U.S. TREASURY NOTE.............................................. 0 4,921,850 4,921,850
U.S. TREASURY NOTE.............................................. 0 2,960,310 2,960,310
U.S. TREASURY NOTE.............................................. 0 952,440 952,440
U.S. TREASURY NOTE.............................................. 0 7,778,080 7,778,080
U.S. TREASURY NOTE.............................................. 0 2,917,500 2,917,500
U.S. TREASURY NOTE.............................................. 0 4,885,900 4,885,900
U.S. TREASURY NOTE.............................................. 0 2,974,230 2,974,230
U.S. TREASURY NOTE.............................................. 0 996,160 996,160
U.S. TREASURY NOTE.............................................. 0 4,964,500 4,964,500
U.S. TREASURY NOTE.............................................. 0 1,998,400 1,998,400
U.S. TREASURY NOTE.............................................. 0 7,984,640 7,984,640
U.S. TREASURY NOTE.............................................. 0 2,003,820 2,003,820
U.S. TREASURY NOTE.............................................. 1,001,750 0 1,001,750
U.S. TREASURY NOTE..............................................
U.S. TREASURY NOTE.............................................. 0 10,009,600 10,009,600
U.S. TREASURY NOTE..............................................
U.S. TREASURY NOTE.............................................. 0 1,007,450 1,007,450
U.S. TREASURY NOTE.............................................. 0 2,015,800 2,015,800
U.S. TREASURY NOTE.............................................. 0 4,032,280 4,032,280
U.S. TREASURY NOTE.............................................. 0 2,016,600 2,016,600
U.S. TREASURY NOTE.............................................. 0 8,065,440 8,065,440
U.S. TREASURY NOTE.............................................. 0 4,092,480 4,092,480
U.S. TREASURY NOTE.............................................. 0 3,105,480 3,105,480
U.S. TREASURY NOTE.............................................. 0 2,025,600 2,025,600
</TABLE>
F-102
<PAGE> 268
<TABLE>
<CAPTION>
PAR (000)
-------------------------------------
PNC COMPASS
SHORT-TERM SHORT/
BOND INTERMEDIATE PRO-FORMA
RATE MATURITY PORTFOLIO FUND COMBINED
---- -------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C>
*WAL-MART........................................................ 8.00% 05/01/96 $ 0 $3,000 $ 3,000
SHEARSON TEMP FUND.............................................. 0 7,168 7,168
SMITH BARNEY MONEY MARKET FUND.................................. 173,187 0 173,187
TOTAL INVESTMENTS........................................
<CAPTION>
VALUE AT MARCH 31, 1995
-------------------------------------------
PNC COMPASS
SHORT-TERM SHORT/
BOND INTERMEDIATE PRO-FORMA
PORTFOLIO FUND COMBINED
----------- ------------ ------------
<S> <C> <C> <C>
*WAL-MART........................................................ $ 0 $ 3,033,750 $ 3,033,750
SHEARSON TEMP FUND.............................................. 0 7,168,028 7,168,028
SMITH BARNEY MONEY MARKET FUND.................................. 173,187 0 173,187
----------- ------------ ------------
TOTAL INVESTMENTS........................................ $15,996,804 $198,430,767 $214,427,571
=========== ============ ============
</TABLE>
- ---------------
* Denotes securities in violation of proposed investment objectives.
See Accompanying Notes to Pro-Forma Financial Statements
F-103
<PAGE> 269
PNC SHORT-TERM BOND PORTFOLIO
COMPASS SHORT/INTERMEDIATE FUND
PRO-FORMA COMBINED STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
SHORT-TERM SHORT/
BOND INTERMEDIATE PRO-FORMA
PORTFOLIO FUND COMBINED
---------- ------------ -----------
<S> <C> <C> <C>
ASSETS
Investments, @ value (Cost $16,354,281 and $201,180,524 respectively)..... $15,996,804 $198,430,767 $214,427,571
Cash...................................................................... 0 0 0
Dividends and Interest receivable......................................... 92,087 3,430,781 3,522,868
Investments sold receivable............................................... 0 0 0
Capital shares sold receivable............................................ 11,095 10,001 21,096
Receivable from Advisor................................................... 2,426 2,187 4,613
Prepaid expenses.......................................................... 27,684 41,823 69,507
----------- ------------ ------------
TOTAL ASSETS........................................................ 16,130,096 201,915,559 218,045,655
----------- ------------ ------------
LIABILITIES
Capital shares redeemed payable........................................... 27,662 587,320 614,982
Investment purchased payable.............................................. 0 0 0
Dividends payable......................................................... 64,035 0 64,035
Accrued expenses payable.................................................. 30,296 239,015 269,311
----------- ------------ ------------
TOTAL LIABILITIES................................................... 121,993 826,335 948,328
----------- ------------ ------------
TOTAL NET ASSETS.................................................... $16,008,103 $201,089,224 $217,097,327
=========== ============ ============
TOTAL NET ASSETS BY CLASS OF SHARES
Institutional Class......................................................... $ 9,972,122 N/A $ 9,972,122
Service Class............................................................... 5,776,529 201,089,224 206,865,753
Series A Investor Class..................................................... 259,452 N/A 259,452
----------- ------------ ------------
$16,008,103 $201,089,224 $217,097,327
=========== ============ ============
SHARES OUTSTANDING
Institutional Class
Pre-combination........................................................... 1,043,327 N/A 1,043,327
Post-combination.......................................................... 1,043,327 N/A 1,043,327
Service Class
Pre-combination........................................................... 604,373 19,856,597 20,460,970
Post-combination.......................................................... 604,373 21,034,438 21,638,811
Series A Investor Class..................................................... 27,166 N/A 27,166
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE
Institutional Class
Pre-combination........................................................... $ 9.56 N/A N/A
Post-combination.......................................................... $ 9.56 N/A $ 9.56
Service Class
Pre-combination........................................................... $ 9.56 $10.13 N/A
Post-combination.......................................................... $ 9.56 $ 9.56 $ 9.56
Series A Investor Class (Net Asset Value)................................... $ 9.56 N/A $ 9.56
Maximum offering price per Series A Investor Class........................ $10.01 N/A $10.01
</TABLE>
- ---------------
Note: Series B and Series C Investor Class shares will be available for
shareholders in a future period.
See Accompanying Notes to Pro-Forma Financial Statements
F-104
<PAGE> 270
PNC SHORT-TERM BOND PORTFOLIO
COMPASS SHORT/INTERMEDIATE FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
SHORT-TERM SHORT/
BOND INTERMEDIATE PRO-FORMA PRO-FORMA
PORTFOLIO FUND ADJUSTMENTS COMBINED
---------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest.................................................. $611,287 $6,824,747 $ 7,436,034
Dividends................................................. -- -- --
-------- ---------- --------- -----------
TOTAL INVESTMENT INCOME............................. 611,287 6,824,747 7,436,034
-------- ---------- --------- -----------
EXPENSES
Investment Advisory Fees.................................. 52,691 616,897 (101,505)(1) 568,083
Administration Fees....................................... 21,076 185,068 21,089 (1) 227,233
Custodian Fees............................................ 8,083 2,919 11,002
Transfer Agent Fees....................................... 8,097 37,604 45,701
Service Fees.............................................. 6,298 -- 310,642 (1) 316,940
Distribution Fees......................................... 354 -- 354
Legal and Audit........................................... 1,460 16,966 (16,966)(2) 1,460
Printing.................................................. 1,143 2,279 3,422
Registration Fees......................................... 11,628 (8,844) 2,784
Trustees' Fees and Officers' Salaries..................... 294 6,863 (6,863)(2) 294
Organization and Other.................................... 3,784 10,099 13,883
-------- ---------- --------- -----------
114,908 869,851 206,397 1,191,156
Less: Fees waived & Expenses Reimbursed................... (66,103) -- (183,435)(3) (249,538)
-------- ---------- --------- -----------
TOTAL EXPENSES...................................... 48,805 869,851 22,962 941,618
-------- ---------- --------- -----------
NET INVESTMENT INCOME....................................... 562,482 5,954,896 (22,962) 6,494,416
-------- ---------- --------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
TRANSACTIONS
Net realized gain (loss) on investment transactions....... (273,282) (1,156,902) (1,430,184)
Change in unrealized appreciation (depreciation).......... 203,056 1,543,020 1,746,076
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS.............................................. (70,226) 386,118 315,892
-------- ---------- --------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $492,256 $6,341,014 $ (22,962) $ 6,810,308
======== ========== ========= ===========
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-105
<PAGE> 271
PNC SHORT-TERM BOND PORTFOLIO
COMPASS SHORT/INTERMEDIATE FUND
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
PNC COMPASS
SHORT-TERM SHORT/
BOND INTERMEDIATE PRO-FORMA PRO-FORMA
PORTFOLIO FUND ADJUSTMENTS COMBINED
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest................................................. $ 1,634,723 $ 14,600,807 $ 16,235,530
Dividends................................................ -- -- --
----------- ------------ --------- ------------
TOTAL INVESTMENT INCOME............................ 1,634,723 14,600,807 16,235,530
----------- ------------ --------- ------------
EXPENSES
Investment Advisory Fees................................. 174,589 1,516,089 (235,974)(1) 1,436,704
Administration Fees...................................... 69,836 454,826 50,020 (1) 574,682
Custodian Fees........................................... 17,095 19,366 36,461
Transfer Agent Fees...................................... 27,286 23,420 50,706
Service Fees............................................. 13,458 -- 760,151 (1) 773,609
Distribution Fees........................................ 316 -- 316
Legal and Audit.......................................... 4,893 37,809 (37,809)(2) 4,893
Printing................................................. 5,759 37,597 43,356
Registration Fees........................................ 25,996 23,210 49,206
Trustees' Fees and Officers' Salaries.................... 715 3,124 (3,124)(2) 715
Organization and Other................................... 6,277 23,768 30,045
----------- ------------ --------- ------------
346,220 2,139,209 515,264 3,000,693
Less: Fees waived & Expenses Reimbursed.................. (192,774) -- (454,125)(3) (646,899)
----------- ------------ --------- ------------
TOTAL EXPENSES..................................... 153,446 2,139,209 61,139 2,353,794
----------- ------------ --------- ------------
NET INVESTMENT INCOME...................................... 1,481,277 12,461,598 (61,139) 13,881,736
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
TRANSACTIONS
Net realized gain (loss) on investment transactions...... (1,064,511) (1,501,590) (2,566,101)
Change in unrealized appreciation (depreciation)......... (557,603) (12,825,234) (12,825,234)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS............................................. (1,622,114) (13,769,221) (15,391,335)
----------- ------------ --------- ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................... $ (140,837) $ (1,307,623) $ (61,139) $ (1,509,599)
=========== ============ ========= ============
</TABLE>
- ---------------
(1) Based on fee structure of new registrant and the total assets of the
combined funds.
(2) Adjustments reflect expected savings when the two funds combine.
(3) Reflects the anticipated change in the waiver of the investment advisory and
administration fees based on expense ratios of new registrant and combined
assets of the combined funds.
See Accompanying Notes to Pro-Forma Financial Statements.
F-106
<PAGE> 272
THE PNC(R) FUND
STATEMENT OF ADDITIONAL INFORMATION
DATED JULY 24, 1995 (AS REVISED ON NOVEMBER 6, 1995)
<PAGE> 273
THE PNC(R) FUND
STATEMENT OF ADDITIONAL INFORMATION
(INSTITUTIONAL AND SERVICE SHARES)
This Statement of Additional Information provides supplementary information
pertaining to Institutional and Service Shares ("Shares") representing interests
in the Money Market, Municipal Money Market, Government Money Market,
Pennsylvania Municipal Money Market, New Jersey Municipal Money Market, Value
Equity, Growth Equity, International Equity, Balanced, Small Cap Growth Equity,
Tax-Free Income, Pennsylvania Tax-Free Income, Short-Term Bond and International
Fixed Income Portfolios of The PNC Fund (the "Fund"). The Money Market,
Municipal Money Market, Government Money Market, Pennsylvania Municipal Money
Market and New Jersey Municipal Money Market Portfolios are hereinafter
collectively called "Money Market Portfolios," and the other Portfolios are
hereinafter collectively called "Non-Money Market Portfolios." This Statement of
Additional Information is not a prospectus, and should be read only in
conjunction with the Prospectuses of the Fund relating to the Non-Money Market
Portfolios dated January 30, 1995, and the Prospectuses relating to the Money
Market Portfolios dated July 24, 1995, as amended from time to time (the
"Prospectuses"). Prospectuses may be obtained from the Fund's distributor by
calling toll-free (800) 441-7379. This Statement of Additional Information is
dated July 24, 1995 (as revised on November 6, 1995). Capitalized terms used
herein and not otherwise defined have the same meanings as are given to them in
the Prospectuses.
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INVESTMENT POLICIES.................................................................... 2
TRUSTEES AND OFFICERS.................................................................. 14
INVESTMENT ADVISORY, ADMINISTRATION, DISTRIBUTION AND SERVICING ARRANGEMENTS........... 18
PORTFOLIO TRANSACTIONS................................................................. 22
REDEMPTION AND PURCHASE INFORMATION.................................................... 24
VALUATION OF PORTFOLIO SECURITIES...................................................... 25
PERFORMANCE INFORMATION................................................................ 26
TAXES.................................................................................. 30
ADDITIONAL INFORMATION CONCERNING SHARES............................................... 35
MISCELLANEOUS.......................................................................... 35
FINANCIAL STATEMENTS................................................................... 37
APPENDIX A............................................................................. A-1
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS STATEMENT OF ADDITIONAL INFORMATION OR THE
PROSPECTUSES IN CONNECTION WITH THE OFFERING MADE BY THE PROSPECTUSES AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE FUND OR ITS DISTRIBUTOR. THE PROSPECTUSES DO NOT
CONSTITUTE AN OFFERING BY THE FUND OR BY THE FUND'S DISTRIBUTOR IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
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INVESTMENT POLICIES
The following supplements information contained in the Prospectus
concerning the Portfolios' investment policies. A description of applicable
credit ratings is set forth in Appendix A hereto. Except as indicated, the
information below relates only to those Portfolios that are authorized to invest
in the instruments or securities described below.
ADDITIONAL INFORMATION ON PORTFOLIO INVESTMENTS.
REVERSE REPURCHASE AGREEMENTS. Each Portfolio other than the Municipal
Money Market, Pennsylvania Municipal Money Market and New Jersey Municipal Money
Market Portfolios (the "Municipal Portfolios") may invest in reverse repurchase
agreements. Reverse repurchase agreements involve the sale of securities held by
a Portfolio pursuant to a Portfolio's agreement to repurchase the securities at
an agreed upon price, date and interest rate. Such agreements are considered to
be borrowings under the Investment Company Act of 1940 (the "1940 Act"), and may
be entered into only for temporary or emergency purposes. While reverse
repurchase transactions are outstanding, a Portfolio will maintain in a
segregated account cash, U.S. Government securities or other liquid, high-grade
debt securities in an amount at least equal to the market value of the
securities, plus accrued interest, subject to the agreement.
VARIABLE AND FLOATING RATE INSTRUMENTS. With respect to purchasable
variable and floating rate instruments, the adviser or sub-adviser will consider
the earning power, cash flows and liquidity ratios of the issuers and guarantors
of such instruments and, if the instruments are subject to a demand feature,
will monitor their financial status to meet payment on demand. Such instruments
may include variable amount master demand notes that permit the indebtedness
thereunder to vary in addition to providing for periodic adjustments in the
interest rate. The absence of an active secondary market with respect to
particular variable and floating rate instruments could make it difficult for a
Portfolio to dispose of a variable or floating rate note if the issuer defaulted
on its payment obligation or during periods that the Portfolio is not entitled
to exercise its demand rights, and the Portfolio could, for these or other
reasons, suffer a loss with respect to such instruments. In determining
average-weighted portfolio maturity, an instrument will usually be deemed to
have a maturity equal to the longer of the period remaining until the next
interest rate adjustment or the time the Portfolio involved can recover payment
of principal as specified in the instrument. Variable rate U.S. Government
obligations held by the Portfolios, however, will be deemed to have maturities
equal to the period remaining until the next interest rate adjustment.
MONEY MARKET OBLIGATIONS OF DOMESTIC BANKS, FOREIGN BANKS AND FOREIGN
BRANCHES OF U.S. BANKS. Each Non-Money Market Portfolio may purchase bank
obligations, such as certificates of deposit, bankers' acceptances and time
deposits, including instruments issued or supported by the credit of U.S. or
foreign banks or savings institutions having total assets at the time of
purchase in excess of $1 billion. The assets of a bank or savings institution
will be deemed to include the assets of its domestic and foreign branches for
purposes of each Portfolio's investment policies. Investments in short-term bank
obligations may include obligations of foreign banks and domestic branches of
foreign banks, and also foreign branches of domestic banks.
MORTGAGE-RELATED SECURITIES. There are a number of important differences
among the agencies and instrumentalities of the U.S. Government that issue
mortgage-related securities and among the securities that they issue.
Mortgage-related securities guaranteed by the Government National Mortgage
Association ("GNMA") include GNMA Mortgage Pass-Through Certificates (also known
as "Ginnie Maes") which are guaranteed as to the timely payment of principal and
interest by GNMA and such guarantee is backed by the full faith and credit of
the United States. GNMA is a wholly-owned U.S. Government corporation within the
Department of Housing and Urban Development. GNMA certificates also are
supported by the authority of GNMA to borrow funds from the U.S. Treasury to
make payments under its guarantee. Mortgage-related securities issued by the
Federal National Mortgage Association ("FNMA") include FNMA guaranteed Mortgage
Pass-Through Certificates (also known as "Fannie Maes") which are solely the
obligations of the FNMA, are not backed by or entitled to the full faith and
credit of the United States and are supported by the right of the issuer to
borrow from the Treasury. FNMA is a government-sponsored organization owned
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entirely by private stockholders. Fannie Maes are guaranteed as to timely
payment of principal and interest by FNMA. Mortgage-related securities issued by
the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage
Participation Certificates (also known as "Freddie Macs" or "Pcs"). FHLMC is a
corporate instrumentality of the United States, created pursuant to an Act of
Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are
not guaranteed by the United States or by any Federal Home Loan Banks and do not
constitute a debt or obligation of the United States or of any Federal Home Loan
Bank. Freddie Macs entitle the holder to timely payment of interest, which is
guaranteed by the FHLMC. FHLMC guarantees either ultimate collection or timely
payment of all principal payments on the underlying mortgage loans. When FHLMC
does not guarantee timely payment of principal, FHLMC may remit the amount due
on account of its guarantee of ultimate payment of principal at any time after
default on an underlying mortgage, but in no event later than one year after it
becomes payable.
The Short-Term Bond and International Fixed Income Portfolios may invest in
multiple class pass-through securities, including collateralized mortgage
obligations ("CMOs") and real estate mortgage investment conduit ("REMIC")
pass-through or participation certificates ("REMIC Certificates"). These
multiple class securities may be issued by U.S. Government agencies or
instrumentalities, including FNMA and FHLMC, or by trusts formed by private
originators of, or investors in, mortgage loans. In general, CMOs and REMICs are
debt obligations of a legal entity that are collateralized by, and multiple
class pass-through securities represent direct ownership interests in, a pool of
residential mortgage loans or mortgage pass-through securities (the "Mortgage
Assets"), the payments on which are used to make payments on the CMOs or
multiple pass-through securities. Investors may purchase beneficial interests in
REMICs, which are known as "regular" interests or "residual" interests. The
Portfolios do not intend to purchase residual interests.
Each class of CMOs or REMIC Certificates, often referred to as a "tranche,"
is issued at a specific adjustable or fixed interest rate and must be fully
retired no later than its final distribution date. Principal prepayments on the
Mortgage Assets underlying the CMOs or REMIC Certificates may cause some or all
of the classes of CMOs or REMIC Certificates to be retired substantially earlier
than their final distribution dates. Generally, interest is paid or accrues on
all classes of CMOs or REMIC Certificates on a monthly basis.
The principal of and interest on the Mortgage Assets may be allocated among
the several classes of CMOs or REMIC Certificates in various ways. In certain
structures (known as "sequential pay" CMOs or REMIC Certificates), payments of
principal, including any principal prepayments, on the Mortgage Assets generally
are applied to the classes of CMOs or REMIC Certificates in the order of their
respective final distribution dates. Thus no payment of principal will be made
on any class of sequential pay CMOs or REMIC Certificates until all other
classes having an earlier final distribution date have been paid in full.
Additional structures of CMOs or REMIC Certificates include, among others,
"parallel pay" CMOs and REMIC Certificates. Parallel pay CMOs or REMIC
Certificates are those which are structured to apply principal payments and
prepayments of the Mortgage Assets to two or more classes concurrently on a
proportionate or disproportionate basis. These simultaneous payments are taken
into account in calculating the final distribution date of each class.
A wide variety of REMIC Certificates may be issued in the parallel pay or
sequential pay structures. These securities include accrual certificates (also
known as "Z-Bonds"), which only accrue interest at a specified rate until all
other certificates having an earlier final distribution date have been retired
and are converted thereafter to an interest-paying security, and planned
amortization class ("PAC") certificates, which are parallel pay REMIC
Certificates which generally require that specified amounts of principal be
applied on each payment date to one or more classes of REMIC Certificates (the
"PAC Certificates"), even though all other principal payments and prepayments of
the Mortgage Assets are then required to be applied to one or more other classes
of the Certificates. The scheduled principal payments for the PAC Certificates
generally have the highest priority on each payment date after interest due has
been paid to all classes entitled to receive interest currently. Shortfalls, if
any, are added to the amount payable on the next payment date. The PAC
Certificate payment schedule is taken into account in calculating the final
distribution date of each class of PAC. In order to create PAC tranches, one or
more tranches generally must be created that absorb most of
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the volatility in the underlying Mortgage Assets. These tranches tend to have
market prices and yields that are much more volatile than the PAC classes.
FNMA REMIC Certificates are issued and guaranteed as to timely distribution
of principal and interest by FNMA. In addition, FNMA will be obligated to
distribute on a timely basis to holders of FNMA REMIC Certificates required
installments of principal and interest and to distribute the principal balance
of each class of REMIC Certificates in full, whether or not sufficient funds are
otherwise available.
For FHLMC REMIC Certificates, FHLMC guarantees the timely payment of
interest, and also guarantees the ultimate payment of principal as payments are
required to be made on the underlying mortgage participation certificates
("Pcs"). Pcs represent undivided interests in specified level payment,
residential mortgages or participations therein purchased by FHLMC and placed in
a PC pool. With respect to principal payments on Pcs, FHLMC generally guarantees
ultimate collection of all principal of the related mortgage loans without
offset or deduction. FHLMC also guarantees timely payment of principal on
certain Pcs, referred to as "Gold Pcs."
ASSET-BACKED SECURITIES. Asset-backed securities are generally issued as
pass-through certificates, which represent undivided fractional ownership
interests in an underlying pool of assets, or as debt instruments, which are
also known as collateralized obligations, and are generally issued as the debt
of a special purpose entity organized solely for the purpose of owning such
assets and issuing such debt. Asset-backed securities are often backed by a pool
of assets representing the obligations of a number of different parties.
The yield characteristics of asset-backed securities differ from
traditional debt securities. A major difference is that the principal amount of
the obligations may be prepaid at any time because the underlying assets (i.e.,
loans) generally may be prepaid at any time. As a result, if an asset-backed
security is purchased at a premium, a prepayment rate that is faster than
expected may reduce yield to maturity, while a prepayment rate that is slower
than expected may have the opposite effect of increasing yield to maturity.
Conversely, if an asset-backed security is purchased at a discount, faster than
expected prepayments may increase, while slower than expected prepayments may
decrease, yield to maturity.
In general, the collateral supporting asset-backed securities is of shorter
maturity than mortgage-related securities. Like other fixed-income securities,
when interest rates rise the value of an asset-backed security generally will
decline; however, when interest rates decline, the value of an asset-backed
security with prepayment features may not increase as much as that of other
fixed-income securities.
U.S. GOVERNMENT OBLIGATIONS. Examples of the types of U.S. Government
obligations which the Portfolios may hold include U.S. Treasury bills, Treasury
instruments and Treasury bonds and the obligations of Federal Home Loan Banks,
Federal Farm Credit Banks, Federal Land Banks, the Federal Housing
Administration, the Farmers Home Administration, the Export-Import Bank of the
United States, the Small Business Administration, the Federal National Mortgage
Association, the Government National Mortgage Association, the General Services
Administration, the Student Loan Marketing Association, the Central Bank for
Cooperatives, the Federal Home Loan Mortgage Corporation, the Federal
Intermediate Credit Banks, the Maritime Administration, the International Bank
for Reconstruction and Development (the "World Bank"), the Asian-American
Development Bank and the Inter-American Development Bank.
LEASE OBLIGATIONS. The Municipal Money Market, Pennsylvania Municipal
Money Market, New Jersey Municipal Money Market, Tax-Free Income, Pennsylvania
Tax-Free Income, Short-Term Bond and International Fixed Income Portfolios may
hold participation certificates in a lease, an installment purchase contract, or
a conditional sales contract ("lease obligations").
The Adviser will monitor the credit standing of each municipal borrower and
each entity providing credit support and/or a put option. In determining whether
a lease obligation is liquid, the Adviser will consider, among other factors,
the following: (i) whether the lease can be cancelled; (ii) the degree of
assurance that assets represented by the lease could be sold; (iii) the strength
of the lessee's general credit (e.g., its debt, administrative, economic, and
financial characteristics); (iv) the likelihood that the municipality would
discontinue appropriating funding for the leased property because the property
is no longer deemed essential to
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the operations of the municipality (e.g., the potential for an "event of
nonappropriation"); (v) legal recourse in the event of failure to appropriate;
(vi) whether the security is backed by a credit enhancement such as insurance;
and (vii) any limitations which are imposed on the lease obligor's ability to
utilize substitute property or services other than those covered by the lease
obligation.
The Municipal Money Market, Pennsylvania Municipal Money Market and New
Jersey Municipal Money Market Portfolios will only invest in lease obligations
with puts that (i) may be exercised at par on not more than seven days notice,
and (ii) are issued by institutions deemed by the adviser to present minimal
credit risks. Such obligations will be considered liquid. However, a number of
puts are not exercisable at the time the put would otherwise be exercised if the
municipal borrower is not contractually obligated to make payments (e.g., an
event of nonappropriation with a "nonappropriation" lease obligation). Under
such circumstances, the lease obligation while previously considered liquid
would become illiquid, and a Portfolio might lose its entire investment in such
obligation.
Municipal leases, like other municipal debt obligations, are subject to the
risk of non-payment. The ability of issuers of municipal leases to make timely
lease payments may be adversely impacted in general economic downturns and as
relative governmental cost burdens are allocated and reallocated among federal,
state and local governmental units. Such non-payment would result in a reduction
of income to the Fund, and could result in a reduction in the value of the
municipal lease experiencing non-payment and a potential decrease in the net
asset value of the Fund. Issuers of municipal securities might seek protection
under the bankruptcy laws. In the event of bankruptcy of such an issuer, the
Fund could experience delays and limitations with respect to the collection of
principal and interest on such municipal leases and the Fund may not, in all
circumstances, be able to collect all principal and interest to which it is
entitled. To enforce its rights in the event of a default in lease payments, the
Fund may take possession of and manage the assets securing the issuer's
obligations on such securities, which may increase the Fund's operating expenses
and adversely affect the net asset value of the Fund. When the lease contains a
non-appropriation clause, however, the failure to pay would not be a default and
the Fund would not have the right to take possession of the assets. Any income
derived from the Fund's ownership or operation of such assets may not be
tax-exempt. In addition, the Fund's intention to qualify as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended, may
limit the extent to which the Fund may exercise its rights by taking possession
of such assets, because as a regulated investment company the Fund is subject to
certain limitations on its investments and on the nature of its income.
COMMERCIAL PAPER. The Money Market Portfolios may purchase commercial
paper rated in one of the two highest rating categories of a nationally
recognized statistical rating organization ("NRSRO"). The Non-Money Market
Portfolios may purchase commercial paper rated (at the time of purchase) "A-1"
by S&P or "Prime-1" by Moody's or, when deemed advisable by a Portfolio's
adviser or sub-adviser, "high quality" issues rated "A-2" or "Prime-2" by S&P or
Moody's, respectively. These ratings symbols are described in Appendix A.
Commercial paper purchasable by each Portfolio includes "Section 4(2) paper," a
term that includes debt obligations issued in reliance on the "private
placement" exemption from registration afforded by Section 4(2) of the
Securities Act of 1933. Section 4(2) paper is restricted as to disposition under
the Federal securities laws, and is frequently sold (and resold) to
institutional investors such as the Fund through or with the assistance of
investment dealers who make a market in the Section 4(2) paper, thereby
providing liquidity. Certain transactions in Section 4(2) paper may qualify for
the registration exemption provided in Rule 144A under the Securities Act of
1933.
REPURCHASE AGREEMENTS. Each Portfolio other than the Municipal Portfolios
may invest in repurchase agreements. The repurchase price under the repurchase
agreements described in the Prospectuses generally equals the price paid by a
Portfolio involved plus interest negotiated on the basis of current short-term
rates (which may be more or less than the rate on securities underlying the
repurchase agreement). The financial institutions with whom a Portfolio may
enter into repurchase agreements will be banks and non-bank dealers of U.S.
Government securities that are listed on the Federal Reserve Bank of New York's
list of reporting dealers, if such banks and non-bank dealers are deemed
creditworthy by the Portfolio's adviser or sub-adviser. A Portfolio's adviser or
sub-adviser will continue to monitor creditworthiness of the seller under a
repurchase agreement, and will require the seller to maintain during the term of
the agreement the value of the securities
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subject to the agreement at not less than the repurchase price (including
accrued interest). In addition, the Portfolio's adviser or sub-adviser will
mark-to-market daily the value of the securities, and will, if necessary,
require the seller to maintain additional securities to ensure that the value is
not less than the repurchase price. Securities subject to repurchase agreements
will be held by the Fund's custodian (or sub-custodian) in the Federal
Reserve/Treasury book-entry system or by another authorized securities
depository. Repurchase agreements are considered to be loans by the Portfolios
under the 1940 Act.
INVESTMENT GRADE DEBT OBLIGATIONS. Each of the Money Market Portfolios may
invest in securities in the two highest rating categories of NRSROs. The
Non-Money Market Portfolios invest in "investment grade securities," which are
securities rated in the four highest rating categories of an NRSRO. It should be
noted that debt obligations rated in the lowest of the top four ratings (i.e.,
"Baa" by Moody's or "BBB" by S&P) are considered to have some speculative
characteristics and are more sensitive to economic change than higher rated
securities.
WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS. When a Portfolio agrees to
purchase securities on a when-issued or forward commitment basis, the custodian
will set aside cash or liquid portfolio securities equal to the amount of the
commitment in a separate account. Normally, the custodian will set aside
portfolio securities to satisfy a purchase commitment, and in such a case the
Portfolio may be required subsequently to place additional assets in the
separate account in order to ensure that the value of the account remains equal
to the amount of the Portfolio commitments. It may be expected that the market
value of the Portfolios' net assets will fluctuate to a greater degree when it
sets aside portfolio securities to cover such purchase commitments than when it
sets aside cash. Because a Portfolio's liquidity and ability to manage its
portfolio might be affected when it sets aside cash or portfolio securities to
cover such purchase commitments, each Portfolio expects that its commitments to
purchase when-issued securities and forward commitments will not exceed 25% of
the value of its total assets absent unusual market conditions.
A Portfolio will purchase securities on a when-issued or forward commitment
basis only with the intention of completing the transaction and actually
purchasing the securities. If deemed advisable as a matter of investment
strategy, however, a Portfolio may dispose of or renegotiate a commitment after
it has been entered into, and may sell securities it has committed to purchase
before those securities are delivered to the Portfolio on the settlement date.
In these cases the Portfolio may realize a taxable capital gain or loss.
When a Portfolio engages in when-issued and forward commitment
transactions, it relies on the other party to consummate the trade. Failure of
such party to do so may result in the Portfolio's incurring a loss or missing an
opportunity to obtain a price considered to be advantageous.
The market value of the securities underlying a when-issued purchase or a
forward commitment to purchase securities, and any subsequent fluctuations in
their market value, is taken into account when determining the market value of a
Portfolio starting on the day the Portfolio agrees to purchase the securities.
The Portfolio does not earn interest on the securities it has committed to
purchase until they are paid for and delivered on the settlement date.
RIGHTS OFFERINGS AND WARRANTS TO PURCHASE. As stated in their Prospectus,
the Value Equity, Growth Equity, Small Cap Growth Equity, International Equity
and Balanced Portfolios may participate in rights offerings and may purchase
warrants, which are privileges issued by corporations enabling the owners to
subscribe to and purchase a specified number of shares of the corporation at a
specified price during a specified period of time. Subscription rights normally
have a short life span to expiration. The purchase of rights or warrants
involves the risk that the Portfolios could lose the purchase value of a right
or warrant if the right to subscribe to additional shares is not exercised prior
to the rights' and warrants' expiration. Also, the purchase of rights and/or
warrants involves the risk that the effective price paid for the right and/or
warrant added to the subscription price of the related security may exceed the
value of the subscribed security's market price such as when there is no
movement in the level of the underlying security. A Portfolio will not invest
more than 5% of its net assets, taken at market value, in warrants, or more than
2% of its net assets, taken at market value, in warrants not listed on the New
York or American Stock Exchanges. Warrants acquired by a Portfolio in units or
attached to other securities are not subject to this restriction.
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FOREIGN CURRENCY TRANSACTIONS. Forward foreign currency exchange contracts
involve an obligation to purchase or sell a specified currency at a future date
at a price set at the time of the contract. Forward currency contracts do not
eliminate fluctuations in the values of portfolio securities but rather allow a
Portfolio to establish a rate of exchange for a future point in time. A
Portfolio may enter into forward foreign currency exchange contracts when deemed
advisable by its adviser or sub-adviser under two circumstances. First, when
entering into a contract for the purchase or sale of a security, the Portfolio
may enter into a forward foreign currency exchange contract for the amount of
the purchase or sale price to protect against variations, between the date the
security is purchased or sold and the date on which payment is made or received,
in the value of the foreign currency relative to the U.S. dollar or other
foreign currency.
Second, when the Portfolio's adviser or sub-adviser anticipates that a
particular foreign currency may decline substantially relative to the U.S.
dollar or other leading currencies, in order to reduce risk, the Portfolio may
enter into a forward contract to sell, for a fixed amount, the amount of foreign
currency approximating the value of some or all of the Portfolio's securities
denominated in such foreign currency. No Portfolio intends to enter into forward
contracts under this second circumstance on a regular or continuing basis and
will not do so if, as a result, it will have more than 15% of the value of its
total assets committed to such contracts. With respect to any forward foreign
currency contract, it will not generally be possible to match precisely the
amount covered by that contract and the value of the securities involved due to
the changes in the values of such securities resulting from market movements
between the date the forward contract is entered into and the date it matures.
In addition, while forward contracts may offer protection from losses resulting
from declines in the value of a particular foreign currency, they also limit
potential gains which might result from increases in the value of such currency.
A Portfolio will also incur costs in connection with forward foreign currency
exchange contracts and conversions of foreign currencies and U.S. dollars.
A separate account of a Portfolio consisting of cash or liquid securities
equal to the amount of the Portfolio's assets that could be required to
consummate forward contracts entered into under the second circumstance, as set
forth above, will be established with the Fund's custodian. For the purpose of
determining the adequacy of the securities in the account, the deposited
securities will be valued at market or fair value. If the market or fair value
of such securities declines, additional cash or securities will be placed in the
account daily so that the value of the account will equal the amount of such
commitments by the Portfolio.
OPTIONS. Options trading is a highly specialized activity which entails
greater than ordinary investment risks. Options on particular securities may be
more volatile than the underlying securities, and therefore, on a percentage
basis, an investment in the underlying securities themselves. A Portfolio will
write call options only if they are "covered." In the case of a call option on a
security, the option is "covered" if a Portfolio owns the security underlying
the call or has an absolute and immediate right to acquire that security without
additional cash consideration (or, if additional cash consideration is required,
cash or cash equivalents in such amount as are held in a segregated account by
its custodian) upon conversion or exchange of other securities held by it. For a
call option on an index, the option is covered if a Portfolio maintains with its
custodian cash or cash equivalents equal to the contract value. A call option is
also covered if a Portfolio holds a call on the same security or index as the
call written where the exercise price of the call held is (i) equal to or less
than the exercise price of the call written, or (ii) greater than the exercise
price of the call written provided the difference is maintained by the Portfolio
in cash or cash equivalents in a segregated account with its custodian.
When a Portfolio purchases a put option, the premium paid by it is recorded
as an asset of the Portfolio. When a Portfolio writes an option, an amount equal
to the net premium (the premium less the commission) received by the Portfolio
is included in the liability section of the Portfolio's statement of assets and
liabilities as a deferred credit. The amount of this asset or deferred credit
will be subsequently marked-to-market to reflect the current value of the option
purchased or written. The current value of the traded option is the last sale
price or, in the absence of a sale, the mean between the last bid and asked
prices. If an option purchased by a Portfolio expires unexercised the Portfolio
realizes a loss equal to the premium paid. If the Portfolio enters into a
closing sale transaction on an option purchased by it, the Portfolio will
realize a gain if the premium received by the Portfolio on the closing
transaction is more than the premium paid to purchase the option, or a loss if
it is less. If an option written by a Portfolio expires on the stipulated
expiration date or if the Portfolio enters into a closing purchase transaction,
it will realize a gain (or loss if the cost of a closing
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purchase transaction exceeds the net premium received when the option is sold)
and the deferred credit related to such option will be eliminated. If an option
written by a Portfolio is exercised, the proceeds of the sale will be increased
by the net premium originally received and the Portfolio will realize a gain or
loss.
There are several risks associated with transactions in options on
securities and indexes. For example, there are significant differences between
the securities and options markets that could result in an imperfect correlation
between these markets, causing a given transaction not to achieve its
objectives. In addition, a liquid secondary market for particular options,
whether traded over-the-counter or on a national securities exchange
("Exchange") may be absent for reasons which include the following: there may be
insufficient trading interest in certain options; restrictions may be imposed by
an Exchange on opening transactions or closing transactions or both; trading
halts, suspensions or other restrictions may be imposed with respect to
particular classes or series of options or underlying securities; unusual or
unforeseen circumstances may interrupt normal operations on an Exchange; the
facilities of an Exchange or the Options Clearing Corporation may not at all
times be adequate to handle current trading volume; or one or more Exchanges
could, for economic or other reasons, decide or be compelled at some future date
to discontinue the trading of options (or a particular class or series of
options), in which event the secondary market on that Exchange (or in that class
or series of options) would cease to exist, although outstanding options that
had been issued by the Options Clearing Corporation as a result of trades on
that Exchange would continue to be exercisable in accordance with their terms.
FUTURES CONTRACTS AND RELATED OPTIONS. Each Non-Money Market Portfolio may
invest in futures contracts and options thereon (interest rate futures contracts
or index futures contracts, as applicable). Positions in futures contracts may
be closed out only on an exchange which provides a secondary market for such
futures. However, there can be no assurance that a liquid secondary market will
exist for any particular futures contract at any specific time. Thus, it may not
be possible to close a futures position. In the event of adverse price
movements, a Portfolio would continue to be required to make daily cash payments
to maintain its required margin. In such situations, if a Portfolio has
insufficient cash, it may have to sell portfolio securities to meet daily margin
requirements at a time when it may be disadvantageous to do so. In addition, a
Portfolio may be required to make delivery of the instruments underlying futures
contracts it holds. The inability to close options and futures positions also
could have an adverse impact on a Portfolio's ability to effectively hedge.
Successful use of futures by a Portfolio is also subject to the adviser's
ability to correctly predict movements in the direction of the market. For
example, if a Portfolio has hedged against the possibility of a decline in the
market adversely affecting securities held by it and securities prices increase
instead, the Portfolio will lose part or all of the benefit to the increased
value of its securities which it has hedged because it will have approximately
equal offsetting losses in its futures positions. In addition, in some
situations, if a Portfolio has insufficient cash, it may have to sell securities
to meet daily variation margin requirements. Such sales of securities may be,
but will not necessarily be, at increased prices which reflect the rising
market. A Portfolio may have to sell securities at a time when it may be
disadvantageous to do so.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and
substantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit, before any deduction for the
transaction costs, if the contract were closed out. Thus, a purchase or sale of
a futures contract may result in losses in excess of the amount invested in the
contract.
Utilization of futures transactions by a Portfolio involves the risk of
loss by a Portfolio of margin deposits in the event of bankruptcy of a broker
with whom the Portfolio has an open position in a futures contract or related
option.
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Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses, because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting some futures
traders to substantial losses.
The trading of futures contracts is also subject to the risk of trading
halts, suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal trading activity, which could at times make it difficult
or impossible to liquidate existing positions or to recover excess variation
margin payments.
STAND-BY COMMITMENTS. Under a stand-by commitment for a Municipal
Obligation, a dealer agrees to purchase at the Portfolio's option a specified
Municipal Obligation at a specified price. Stand-by commitments for Municipal
Obligations may be exercisable by a Portfolio at any time before the maturity of
the underlying Municipal Obligations and may be sold, transferred or assigned
only with the instruments involved. It is expected that such stand-by
commitments will generally be available without the payment of any direct or
indirect consideration. However, if necessary or advisable, a Portfolio may pay
for such a stand-by commitment either separately in cash or by paying a higher
price for Municipal Obligations which are acquired subject to the commitment for
Municipal Obligations (thus reducing the yield to maturity otherwise available
for the same securities). The total amount paid in either manner for outstanding
stand-by commitments for Municipal Obligations held by a Portfolio will not
exceed 1/2 of 1% of the value of such Portfolio's total assets calculated
immediately after each stand-by commitment is acquired.
Stand-by commitments will only be entered into with dealers, banks and
broker-dealers which, in the adviser's or sub-adviser's opinion, present minimal
credit risks. A Portfolio will acquire stand-by commitments solely to facilitate
portfolio liquidity and not to exercise its rights thereunder for trading
purposes. Stand-by commitments will be valued at zero in determining net asset
value. Accordingly, where a Portfolio pays directly or indirectly for a stand-by
commitment, its cost will be reflected as an unrealized loss for the period
during which the commitment is held by such Portfolio and will be reflected in
realized gain or loss when the commitment is exercised or expires.
TAX-EXEMPT DERIVATIVES. The Municipal Portfolios and the Tax-Free Income
and Pennsylvania Tax-Free Income Portfolios (collectively, the "Money and
Non-Money Market Municipal Portfolios") may hold tax-exempt derivatives which
may be in the form of tender option bonds, participations, beneficial interests
in a trust, partnership interests or other forms. A number of different
structures have been used. For example, interests in long-term fixed-rate
municipal obligations, held by a bank as trustee or custodian, are coupled with
tender option, demand and other features when the tax-exempt derivatives are
created. Together, these features entitle the holder of the interest to tender
(or put), the underlying municipal obligation to a third party at periodic
intervals and to receive the principal amount thereof. In some cases, municipal
obligations are represented by custodial receipts evidencing rights to receive
specific future interest payments, principal payments, or both, on the
underlying municipal securities held by the custodian. Under such arrangements,
the holder of the custodial receipt has the option to tender the underlying
municipal securities at its face value to the sponsor (usually a bank or broker
dealer or other financial institution), which is paid periodic fees equal to the
difference between the bond's fixed coupon rate and the rate that would cause
the bond, coupled with the tender option, to trade at par on the date of a rate
adjustment. The Money and Non-Money Market Municipal Portfolios may hold
tax-exempt derivatives, such as participation interests and custodial receipts,
for municipal obligations which give the holder the right to receive payment of
principal subject to the conditions described above. The Internal Revenue
Service has not ruled on whether the interest received on tax-exempt derivatives
in the form of participation interests or custodial receipts is tax-exempt, and
accordingly, purchases of any such interests or receipts are based on the
opinion of counsel to the sponsors of
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such derivative securities. Neither the Fund nor its investment adviser will
review the proceedings related to the creation of any tax-exempt derivatives or
the basis for such opinions.
SECURITIES LENDING. A Portfolio would continue to accrue interest on
loaned securities and would also earn income on investment collateral for such
loans. Any cash collateral received by a Portfolio in connection with such loans
would be invested in short-term U.S. Government obligations.
YIELDS AND RATINGS. The yields on certain obligations are dependent on a
variety of factors, including general market conditions, conditions in the
particular market for the obligation, the financial condition of the issuer, the
size of the offering, the maturity of the obligation and the ratings of the
issue. The ratings of Moody's and S&P represent their respective opinions as to
the quality of the obligations they undertake to rate. Ratings, however, are
general and are not absolute standards of quality. Consequently, obligations
with the same rating, maturity and interest rate may have different market
prices. Subsequent to its purchase by a Portfolio, a rated security may cease to
be rated. The adviser or sub-adviser will consider such an event in determining
whether the Portfolio should continue to hold the security.
SECURITIES OF SMALL CAP ISSUERS. Securities of small cap issues purchased
by the Small Cap Growth Equity Portfolio may be exchange-listed or purchased
"over-the-counter."
SPECIAL CONSIDERATIONS REGARDING INVESTMENT IN PENNSYLVANIA MUNICIPAL
OBLIGATIONS. The concentration of investments in Pennsylvania Municipal
Obligations by the Pennsylvania Municipal Money Market and Pennsylvania Tax-Free
Income Portfolios raises special investment considerations. In particular,
changes in the economic condition and governmental policies of the Commonwealth
of Pennsylvania and its municipalities could adversely affect the value of those
Portfolios and their portfolio securities. This section briefly describes
current economic trends in Pennsylvania.
Pennsylvania has historically been dependent on heavy industry although
recent declines in the coal, steel and railroad industries have led to
diversification of the Commonwealth's economy. Recent sources of economic growth
in Pennsylvania are in the service sector, including trade, medical and health
services, education and financial institutions. Agriculture continues to be an
important component of the Commonwealth's economic structure, with nearly
one-third of the Commonwealth's total land area devoted to cropland, pasture and
farm woodlands.
The population of Pennsylvania experienced a slight increase in the period
1980 through 1990 and has a high proportion of persons 65 or older. The
Commonwealth is highly urbanized, with almost 85% of the 1980 census population
residing in metropolitan statistical areas. The two largest metropolitan
statistical areas, those containing the Cities of Philadelphia and Pittsburgh,
together comprise approximately 50% of the Commonwealth's total population.
The Commonwealth utilizes the fund method of accounting and over 120 funds
have been established for purposes of recording receipts and disbursements of
the Commonwealth, of which the General Fund is the largest. Most of the
Commonwealth's operating and administrative expenses are payable from the
General Fund. The major tax sources for the General Fund are the sales tax, the
personal income tax and the corporate net income tax. Major expenditures of the
Commonwealth include funding for education, public health and welfare,
transportation, and economic development.
The constitution of the Commonwealth provides that operating budget
appropriations of the Commonwealth may not exceed the estimated revenues and
available surplus in the fiscal year for which funds are appropriated. Annual
budgets are enacted for the General Fund (the principal operating fund of the
Commonwealth) and for certain special revenue funds which together represent the
majority of expenditures of the Commonwealth. Although a negative balance was
experienced applying generally accepted accounting principles ("GAAP") in the
General Fund for fiscal 1990 and 1991, tax increases and spending decreases
helped return the General Fund balance to a surplus at June 30, 1992 of $87.5
million and at June 30, 1993 of $698.9 million. The deficit in the
Commonwealth's unreserved/undesignated funds of prior years also was reversed to
a surplus of $64.4 million as of June 30, 1993.
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Current constitutional provisions permit the Commonwealth to issue the
following types of debt: (i) electorate approved debt, (ii) debt for capital
projects subject to an aggregate debt limit of 1.75 times the annual average tax
revenues of the preceding five fiscal years, (iii) tax anticipation notes
payable in the fiscal year of issuance and (iv) debt to suppress insurrection or
rehabilitate areas affected by disaster. Certain state-created agencies issue
debt supported by assets of, or revenues derived from, the various projects
financed and the debt of such agencies is not an obligation of the Commonwealth,
although some of the agencies are indirectly dependent on Commonwealth
appropriations.
Certain litigation is pending against the Commonwealth that could adversely
affect the ability of the Commonwealth to pay debt service on its obligations
including suits relating to the following matters: (a) the ACLU has filed suit
in Federal court demanding additional funding for child welfare services; the
Commonwealth settled a similar suit in the Commonwealth Court of Pennsylvania
and is seeking the dismissal of the federal suit, inter alia, because of that
settlement. The district court has denied class certification to the ACLU, and
the parties have stipulated to a judgment against the plaintiffs to allow
plaintiffs to appeal the denial of class certification (no available estimates
of potential liability); (b) in 1987, the Supreme Court of Pennsylvania held the
statutory scheme for county funding of the judicial system to be in conflict
with the constitution of the Commonwealth, but stayed judgment pending enactment
by the legislature of funding consistent with the opinion, and the legislature
has yet to consider legislation implementing the judgment. In 1992, a new action
in mandamus was filed seeking to compel the Commonwealth to comply with the
original decision; (c) several banks have filed suit against the Commonwealth
contesting the constitutionality of a law enacted in 1989 imposing a bank shares
tax; in July 1994, the Commonwealth Court en banc upheld the constitutionality
of the 1989 bank shares tax law, but struck down a companion law to provide
credits against the bank shares tax for new banks; cross-appeals from that
decision to the Pennsylvania Supreme Court have been filed; (d) litigation has
been filed in both state and Federal court by an association of rural and small
schools and several individual school districts and parents challenging the
constitutionality of the Commonwealth's system for funding local school
districts -- the Federal case has been stayed pending resolution of the state
case and the state case is in the pre-trial stage (no available estimate of
potential liability); (e) the ACLU has brought a class action on behalf of
inmates challenging the conditions of confinement in thirteen of the
Commonwealth correctional institutions; a proposed settlement agreement has been
submitted to the court and members of the class for their review (no available
estimate of potential cost of complying with the injunction sought, but capital
and personnel costs might cost millions of dollars); (f) a consortium of public
interest law firms has filed a class action suit alleging that the Commonwealth
has not complied with a Federal mandate to provide screening, diagnostic and
treatment services for all Medicaid-eligible children under 21; the district
court denied class certification and the parties have submitted a tentative
settlement agreement to the court for approval; and (g) litigation has been
filed in federal court by the Pennsylvania Medical Society seeking payment of
the full co-pay and deductible in excess of the maximum fees set under the
Commonwealth's medical assistance program for outpatient services provided to
medical assistance patients who also were eligible for Medicare; the
Commonwealth received a favorable decision in the federal district court, but
the Pennsylvania Medical Society won a reversal in the federal circuit court
(potential liability estimated at $50 million per year).
Local government units in the Commonwealth of Pennsylvania (which include,
among other things, counties, cities, boroughs, towns, townships, school
districts and other municipally created units such as industrial development
authorities and municipality authorities, including water and sewer authorities)
are permitted to issue debt for capital projects: (i) in any amount so long as
the debt has been approved by the voters of the local government unit; or (ii)
without electoral approval if the aggregate outstanding principal amount of debt
of the local government unit is not in excess of 100% of its borrowing base (in
the case of a school district of the first class), 300% of its borrowing base
(in the case of a county) or 250% of its borrowing base (in the case of all
other local government units); or (iii) without electoral approval and without
regard to the limit described in (ii) in any amount in the case of certain
subsidized debt and qualifying self-liquidating debt. Lease rental debt may also
be issued, in which case the total debt limits described in section (ii) (taking
into account all existing lease rental debt in addition to all other debt) are
increased. The borrowing base for a local government unit is the average of
total revenues for the three fiscal years preceding the borrowing. The risk of
investing in debt issued by any particular local government unit depends, in the
case of general
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obligation bonds secured by tax revenues, on the creditworthiness of that issuer
or, in the case of revenue bonds, on the revenue producing ability of the
project being financed, and not directly on the creditworthiness of the
Commonwealth of Pennsylvania as a whole.
The City of Philadelphia (the "City") has been experiencing severe
financial difficulties which has impaired its access to public credit markets
and a long-term solution to the City's financial crisis is still being sought.
The City experienced a series of General Fund deficits for fiscal years 1988
through 1992. The City has no legal authority to issue deficit reduction bonds
on its own behalf, but state legislation has been enacted to create an
Intergovernmental Cooperation Authority (the "Authority") to provide fiscal
oversight for Pennsylvania cities (primarily Philadelphia) suffering recurring
financial difficulties. The Authority is broadly empowered to assist cities in
avoiding defaults and eliminating deficits by encouraging the adoption of sound
budgetary practices and issuing bonds. In order for the Authority to issue bonds
on behalf of the City, the City and the Authority entered into an
intergovernmental cooperative agreement providing the Authority with certain
oversight powers with respect to the fiscal affairs of the City, and the
Authority originally approved a five-year financial plan prepared by the City on
April 6, 1992. The Authority approved the latest update of the five year
financial plan on May 2, 1994. The City has reported a surplus of approximately
$15 million for the fiscal year ending June 30, 1994. In June 1992, the
Authority issued $474,555,000 in bonds to liquidate the City's deficit balance
in its general fund. The Authority issued $643,430,000 of bonds in July 1993 and
$178,675,000 of bonds in August 1993 to refund certain general obligation bonds
of the City and to fund additional capital projects.
SPECIAL CONSIDERATIONS REGARDING INVESTMENT IN NEW JERSEY MUNICIPAL
OBLIGATIONS. The State of New Jersey and its political subdivisions, agencies
and public authorities are authorized to issue two general classes of
indebtedness: general obligation bonds and revenue bonds. Both classes of bonds
may be included in the New Jersey Municipal Money Market Portfolio. The
repayment of principal and interest on general obligation bonds is secured by
the full faith and credit of the issuer, backed by the issuer's taxing
authority, without recourse to any special project or source of revenue. Special
obligation or revenue bonds may be repaid only from revenues received in
connection with the project for which the bonds are issued, special excise
taxes, or other special revenue sources and generally are issued by entities
without taxing power. Neither the State of New Jersey nor any of its
subdivisions is liable for the repayment of principal or interest on revenue
bonds except to the extent stated in the preceding sentences.
General obligation bonds of the State are repaid from revenues obtained
through the State's general taxing authority. An inability to increase taxes may
adversely affect the State's ability to authorize or repay debt.
Public authorities, private non-profit corporations, agencies and similar
entities of New Jersey ("Authorities") are established for a variety of
beneficial purposes, including economic development, housing and mortgage
financing, health care facilities and public transportation. The Authorities are
not operating entities of the State of New Jersey, but are separate legal
entities that are managed independently. The State oversees the Authorities by
appointing the governing boards, designating management, and by significantly
influencing operations. The Authorities are not subject to New Jersey
constitutional restrictions on the incurrence of debt, applicable to the State
of New Jersey itself, and may issue special obligation or private activity bonds
in legislatively authorized amounts.
An absence or reduction of revenue will affect a bond-issuing Authority's
ability to repay debt on special obligation bonds and no assurance can be given
that sufficient revenues will be obtained to make such payments, although in
some instances repayment may be guaranteed or otherwise secured.
Various Authorities have issued bonds for the construction of health care
facilities, transportation facilities, office buildings and related facilities,
housing facilities, pollution control facilities, water and sewage facilities
and power and electric facilities. Each of these facilities may incur different
difficulties in meeting its debt repayment obligations. Hospital facilities, for
example, are subject to changes in Medicare and Medicaid reimbursement
regulations, attempts by Federal and state legislatures to limit the costs of
health care and management's ability to complete construction projects on a
timely basis as well as to maintain projected rates
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of occupancy and utilization. At any given time, there are several proposals
pending on a Federal and state level concerning health care which may further
affect a hospital's debt service obligation.
Housing facilities may be subject to increases in operating costs,
management's ability to maintain occupancy levels, rent restrictions and
availability of Federal or state subsidies, while power and electric facilities
may be subject to increased costs resulting from environmental restrictions,
fluctuations in fuel costs, delays in licensing procedures and the general
regulatory framework in which these facilities operate. All of these entities
are constructed and operated under rigid regulatory guidelines.
Some entities which financed facilities with proceeds of private activity
bonds issued by the New Jersey Economic Development Authority, a major issuer of
special obligation bonds, have defaulted on their debt service obligations.
Because these special obligation bonds were repayable only from revenue received
from the specific projects which they funded, the New Jersey Economic
Development Authority was unable to repay the debt service to bondholders for
such facilities. Each issue of special obligation bonds, however, depends on its
own revenue for repayment, and thus these defaults should not affect the ability
of the New Jersey Economic Development Authority to repay obligations on other
bonds that it issues in the future.
The State has, in the past, experienced a period of substantial economic
growth with unemployment levels below the national average. Recently, however,
the state has experienced an economic slowdown, and its unemployment rate has
risen to the extent the State has lost its relative advantage over the nation.
To the extent that any adverse conditions exist in the future which affect the
obligor's ability to repay debt, the value of the Portfolio may be immediately
and substantially affected.
The following are cases presently pending or threatened in which the State
has a potential for either a significant loss of revenue or a significant
unanticipated expenditure: (i) several labor unions have challenged 1992
legislation mandating a revaluation of several public employee pension funds
which resulted in a refund of $773 million in public employer contributions to
the State and annual savings to the State of approximately $226 million for
fiscal 1993 and thereafter; (ii) in June 1990, the State Supreme Court held the
State's public school funding mechanism unconstitutional; legislation which was
enacted to establish a new funding system has also been challenged; (iii)
several cases filed in the State courts challenged the basis on which recoveries
of certain costs for residents in State psychiatric hospitals and other
facilities are shared between the State Department of Human Services and the
State's county governments, and certain counties are seeking the recovery from
the Department of costs they have incurred for the maintenance of such
residents; (iv) a lawsuit filed in the United States District Court in 1990
alleges that the State Department of Human Services has established unreasonably
low Medicaid payment rates for long-term care facilities; (v) a number of
taxpayers are seeking refunds of taxes paid to the Spill Compensation Fund, on
the grounds, inter alia, that the State law is preempted by the Federal
Superfund legislation; (vi) the 1990 Fair Automobile Insurance Reform Act has
been challenged in several State court suits, including provisions in the Act
dealing with the premium tax surtax which was intended to raise $300 million in
1993; (vii) a suit was filed in 1991 seeking to impose directly on the State the
responsibility for funding the State's judicial system, which has been primarily
funded by the counties; (viii) several union welfare benefit plans are
challenging the State's hospital rate-setting system in a suit filed in United
States District Court; the Court held in 1992 that certain provisions of the
State system are preempted by Federal law; and (ix) the method by which various
State agencies reduced their personnel has been challenged and the case is
pending before the State Supreme Court.
Although the Portfolio generally intends to invest its assets primarily in
New Jersey Municipal Obligations rated within the two highest rating categories
of an NRSRO, there can be no assurance that such ratings will remain in effect
until such obligations mature or are redeemed or will not be revised downward or
withdrawn. Such revisions or withdrawals may have an adverse affect on the
market price of such securities.
ADDITIONAL INVESTMENT LIMITATIONS.
In addition to the investment limitations disclosed in the Prospectuses,
each Portfolio is subject to the investment limitations enumerated in this
subsection which may be changed with respect to a particular Portfolio only by a
vote of the holders of a majority of such Portfolio's outstanding shares (as
defined below under "Miscellaneous").
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No Portfolio may:
1. Purchase or sell real estate, except that each Portfolio may purchase
securities of issuers which deal in real estate and may purchase securities
which are secured by interests in real estate.
2. Acquire any other investment company or investment company security
except in connection with a merger, consolidation, reorganization or acquisition
of assets or where otherwise permitted by the 1940 Act.
3. Act as an underwriter of securities within the meaning of the Securities
Act of 1933 except to the extent that the purchase of obligations directly from
the issuer thereof, or the disposition of securities, in accordance with the
Portfolio's investment objective, policies and limitations may be deemed to be
underwriting.
4. Write or sell put options, call options, straddles, spreads, or any
combination thereof, except for transactions in options on securities,
securities indices, futures contracts and options on futures contracts.
5. Purchase securities of companies for the purpose of exercising control.
6. Purchase securities on margin, make short sales of securities or
maintain a short position, except that (a) this investment limitation shall not
apply to a Portfolio's transactions in futures contracts and related options or
a Portfolio's sale of securities short against the box, and (b) a Portfolio may
obtain short-term credit as may be necessary for the clearance or purchases and
sales of portfolio securities.
7. Purchase or sell commodity contracts, or invest in oil, gas or mineral
exploration or development programs, except that each Portfolio may, to the
extent appropriate to its investment policies, purchase securities (publicly
traded securities in the case of each Money Market Portfolio) of companies
engaging in whole or in part in such activities and may enter into futures
contracts and related options.
8. Make loans, except that each Portfolio may purchase and hold debt
instruments and enter into repurchase agreements in accordance with its
investment objective and policies and may lend portfolio securities.
Although the foregoing investment limitations would permit the Money Market
Portfolios to invest in options, futures contracts and options on futures
contracts, and to sell securities short against the box, those Portfolios do not
currently intend to trade in such instruments or engage in such transactions
during the next twelve months. Prior to making any such investments, a Money
Market Portfolio would notify its shareholders and add appropriate descriptions
concerning the instruments and transactions to its Prospectus.
TRUSTEES AND OFFICERS
The trustees and executive officers of the Fund, and their business
addresses and principal occupations during the past five years, are:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME AND ADDRESS POSITION WITH FUND DURING PAST FIVE YEARS
- ------------------------------ ---------------------- --------------------------------------
<S> <C> <C>
Philip E. Coldwell............ Trustee Economic Consultant; Chairman,
Coldwell Financial Consultants Coldwell Financial Consultants;
3330 Southwestern Blvd. Director, Maxus Energy Corporation
Dallas, TX 75225 (energy products) from 1989 to 1993;
Age: 72 Director or Trustee of Temporary
Investment Fund, Inc., Trust for
Federal Securities, and Municipal Fund
for Temporary Investment.
</TABLE>
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<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME AND ADDRESS POSITION WITH FUND DURING PAST FIVE YEARS
- ------------------------------ ---------------------- --------------------------------------
<S> <C> <C>
Robert R. Fortune............. Trustee Financial consultant; Chairman,
2920 Ritter Lane President and Chief Executive Officer,
Allentown, PA 18104 Associated Electric & Gas Insurance
Age: 78 Services Limited from 1984 to 1993;
Member of the Financial Executives
Institute and American Institute of
Certified Public Accountants;
Director, Trustee or Managing General
Partner of a number of investment
companies advised by PIMC; Director,
Prudential Utility Fund, Inc.,
Prudential Structured Maturity Fund,
Inc. and Prudential IncomeVertible
Fund, Inc.
Rodney D. Johnson............. Trustee President, Fairmount Capital Advisors,
Fairmont Capital Inc. (financial advisers) since 1987;
Advisors, Inc. Treasurer, North Philadelphia Health
1435 Walnut Street System (formerly Girard Medical
Philadelphia, PA 19102 Center) from 1988 to 1992; Member,
Age: 53 Board of Education, School District of
Philadelphia, 1983 to 1988; Treasurer,
Cascade Aphasia Center, 1984 to 1988;
Director or Trustee of Temporary
Investment Fund, Inc., Trust for
Federal Securities, Municipal Fund for
Temporary Investment, Municipal Fund
for California Investors, Inc. and
Municipal Fund for New York Investors,
Inc.
G. Willing Pepper(1).......... Chairman of the Board Retired; Chairman of the Board,
128 Springton Lake Road and President Specialty Composites Corporation until
Media, PA 19063 May 1984; Chairman of the Board, The
Age: 86 Institute for Cancer Research until
1979; Director, Philadelphia National
Bank until 1978; President, Scott
Paper Company from 1971 to 1973;
Director, Marmon Group, Inc. until
April 1986; Director, Trustee or
Managing General Partner of a number
of investment companies advised by
PIMC.
</TABLE>
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<PAGE> 288
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME AND ADDRESS POSITION WITH FUND DURING PAST FIVE YEARS
- ------------------------------ ---------------------- --------------------------------------
<S> <C> <C>
Anthony M. Santomero.......... Trustee Deputy Dean from 1990 to 1994, Richard
310 Keithwood Road K. Mellon Professor of Finance since
Wynnewood, PA 19096 April 1984, and Dean's Advisory
Age: 48 Council Member since July 1984, The
Wharton School, University of
Pennsylvania; Associate Editor,
Journal of Banking and Finance since
June 1978; Associate Editor, Journal
of Economics and Business since
October 1979; Associate Editor,
Journal of Money, Credit and Banking
since January 1980; Research
Associate, New York University Center
for Japan-U.S. Business and Economic
Studies since July 1989; Editorial
Advisory Board, Open Economics Review
since November 1990; Director, The
Zweig Fund and The Zweig Total Return
Fund; Director or Trustee of Temporary
Investment Fund, Inc., Trust for
Federal Securities, Municipal Fund for
Temporary Investment, and Municipal
Fund for California Investors, Inc.
David R. Wilmerding, Jr....... Vice-Chairman of the President, Gates, Wilmerding, Carper &
One Aldwyn Center Board Rawlings, Inc. (investment advisers)
Villanova, PA 19085 since February 1989; Director, Beaver
Age: 60 Management Corporation; Until
September 1988, President, Treasurer
and Trustee, The Mutual Assurance
Company; Until September 1988,
Chairman, President Treasurer and
Director, The Green Tree Insurance
Company (a wholly-owned subsidiary of
The Mutual Assurance Company); Until
September 1988, Director, Keystone
State Life Insurance Company;
Director, Trustee or Managing General
Partner of a number of investment
companies advised by PIMC.
Edward J. Roach............... Treasurer and Vice- Certified Public Accountant; Partner
400 Bellevue Parkway President of the accounting firm of Main Hurdman
Suite 100 until 1981; Vice Chairman of the
Wilmington, DE 19809 Board, Fox Chase Cancer Center;
Age: 70 Trustee Emeritus, Pennsylvania School
for the Deaf; Trustee Emeritus,
Immaculata College; President, Vice
President and/or Treasurer of a number
of investment companies advised by
PIMC.
</TABLE>
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<PAGE> 289
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME AND ADDRESS POSITION WITH FUND DURING PAST FIVE YEARS
- ------------------------------ ---------------------- --------------------------------------
<S> <C> <C>
Morgan R. Jones............... Secretary Partner in the law firm of Drinker
Philadelphia National Bank Biddle & Reath, Philadelphia,
Building Pennsylvania.
1345 Chestnut Street
Philadelphia, PA 19107-3496
Age: 55
</TABLE>
- ---------------
(1) This trustee may be deemed an "interested person" of the Fund as defined in
the 1940 Act.
The Fund pays trustees who are not affiliated with PNC Institutional
Management Corporation ("PIMC") or Provident Distributors, Inc. ("PDI" or
"Distributor") $5,500 annually and $500 per meeting of the Board or any
committee thereof that is not held in conjunction with a Board meeting (subject
to a cap of $6,000 per year for such meeting fees), and pays the Chairman an
additional $5,000 annually. Trustees who are not affiliated with PIMC or the
Distributor are reimbursed for any expenses incurred in attending meetings of
the Board of Trustees or any committee thereof. No officer, director or employee
of PIMC, Provident Capital Management, Inc. ("PCM"), PNC Bank, National
Association ("PNC Bank"), BlackRock Financial Management, Inc. ("BlackRock"),
PNC Equity Advisors Company ("PEAC"), PFPC Inc. ("PFPC"), Provident
Distributors, Inc. (formerly, MFD Group, Inc.) ("PDI" and, collectively with
PFPC, the "Administrators") or the Distributor currently receives any
compensation from the Fund. Drinker Biddle & Reath, of which Mr. Jones is a
partner, receives legal fees as counsel to the Fund. As of the date of this
Statement of Additional Information, the trustees and officers of the Fund, as a
group, owned less than 1% of the outstanding shares of each Portfolio.
The table below sets forth the compensation actually received from the Fund
Complex of which the Fund is a part by the trustees for the fiscal year ended
September 30, 1994:
<TABLE>
<CAPTION>
TOTAL COMPENSATION
AGGREGATE PENSION OR ESTIMATED FROM REGISTRANT
COMPENSATION RETIREMENT BENEFITS ANNUAL BENEFITS AND FUND
NAME OF PERSON, FROM ACCRUED AS PART OF UPON COMPLEX(1)
POSITION REGISTRANT FUND EXPENSES RETIREMENT PAID TO TRUSTEES
- -------------------------------- ------------ ------------------- --------------- ------------------
<S> <C> <C> <C> <C>
Philip E. Coldwell,............. $ 7,625 n/a n/a (3)(2)$44,025.00
Trustee
Robert R. Fortune,.............. $ 7,625 n/a n/a (4)(2)$56,725.00
Trustee
Rodney D. Johnson,.............. $ 7,625 n/a n/a (5)(2)$54,775.00
Trustee
G. Willing Pepper,.............. $ 11,625 n/a n/a (6)(2)$98,275.00
Chairman of the Board
and President
Anthony M. Santomero,........... $ 7,625 n/a n/a (4)(2)$44,025.00
Trustee
Henry M. Watts, Jr.,(3)......... $ 2,625 n/a n/a (7)(2)$61,875.00
Trustee
David R. Wilmerding, Jr.,....... $ 7,625 n/a n/a (5)(2)$61,025.04
Trustee
</TABLE>
- ---------------
(1) A Fund Complex means two or more investment companies that hold themselves
out to investors as related companies for purposes of investment and
investor services, or have a common investment adviser or have an
investment adviser that is an affiliated person of the investment adviser
of any of the other investment companies.
(2) Total number of such other investment companies trustee serves on within the
Fund Complex.
(3) Mr. Watts resigned as trustee of the Fund on May 4, 1994.
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<PAGE> 290
SHAREHOLDER AND TRUSTEE LIABILITY. Under Massachusetts law, shareholders
of a business trust may, under certain circumstances, be held personally liable
as partners for the obligations of the trust. However, the Fund's Declaration of
Trust provides that shareholders shall not be subject to any personal liability
in connection with the assets of the Fund for the acts or obligations of the
Fund, and that every note, bond, contract, order or other undertaking made by
the Fund shall contain a provision to the effect that the shareholders are not
personally liable thereunder. The Declaration of Trust provides for
indemnification out of the trust property of any shareholder held personally
liable solely by reason of his being or having been a shareholder and not
because of his acts or omissions or some other reason. The Declaration of Trust
also provides that the Fund shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Fund, and shall
satisfy any judgment thereon.
The Declaration of Trust further provides that all persons having any claim
against the trustees or Fund shall look solely to the trust property for
payment; that no trustee of the Fund shall be personally liable for or on
account of any contract, debt, tort, claim, damage, judgment or decree arising
out of or connected with the administration or preservation of the trust
property or the conduct of any business of the Fund; and that no trustee shall
be personally liable to any person for any action or failure to act except by
reason of his own bad faith, willful misfeasance, gross negligence or reckless
disregard of his duties as a trustee. With the exception stated, the Declaration
of Trust provides that a trustee is entitled to be indemnified against all
liabilities and expenses reasonably incurred by him in connection with the
defense or disposition of any proceeding in which he may be involved or with
which he may be threatened by reason of his being or having been a trustee, and
that the Fund will indemnify officers, representatives and employees of the Fund
to the same extent that trustees are entitled to indemnification.
INVESTMENT ADVISORY, ADMINISTRATION,
DISTRIBUTION AND SERVICING ARRANGEMENTS
ADVISORY AND SUB-ADVISORY AGREEMENTS. The advisory and sub-advisory
services provided by PIMC, BlackRock, PCM, PEAC and PNC Bank and the fees
received by each of them for such services are described in the Prospectuses. As
stated in the Prospectuses, PIMC may from time to time voluntarily waive its
advisory fees with respect to a Portfolio and may voluntarily reimburse
Portfolios for expenses. In addition, if the total expenses borne by any
Portfolio in any fiscal year exceed the expense limitations imposed by
applicable state securities regulations, PIMC and the Administrators will bear
the amount of such excess to the extent required by such regulations in
proportion to the fees otherwise payable to them for such year. Such amount, if
any, will be estimated and accrued daily and paid on a monthly basis. As of the
date of this Statement of Additional Information, to the knowledge of the Fund,
there were no state expense limitations more restrictive than the following: 2
1/2% of the first $30 million of average annual net assets, 2% of the next $70
million of average annual net assets, and 1 1/2% of average annual net assets
in excess of $100 million.
PIMC renders advisory services to each of the Portfolios pursuant to an
Investment Advisory Agreement. PCM renders sub-advisory services to the Value
Equity and International Equity Portfolios pursuant to Sub-Advisory Agreements.
PNC Bank renders sub-advisory services to the Money Market, Government Money
Market, Municipal Money Market, Pennsylvania Municipal Money Market, New Jersey
Municipal Money Market, Balanced and Tax-Free Income Portfolios pursuant to
Sub-Advisory Agreements. BlackRock renders sub-advisory services to the
Pennsylvania Tax-Free Income and Short-Term Bond Portfolios pursuant to Sub-
Advisory Agreements. PEAC renders sub-advisory services to the Growth Equity and
Small Cap Growth Equity Portfolios pursuant to Sub-Advisory Agreements. These
Advisory and Sub-Advisory Agreements are collectively referred to as the
"Advisory Contracts." From September 11, 1993 to March 29, 1995, PNC Bank served
as sub-adviser to the Growth Equity Portfolio. From December 1, 1992
(commencement of operations) to March 29, 1995, PNC Bank served as sub-adviser
to the Pennsylvania Tax-Free Income Portfolio. From September 1, 1993
(commencement of operations) to March 29, 1995, PNC Bank served as sub-adviser
to the Short-Term Bond Portfolio. From September 14, 1993 (commencement of
operations) to March 29, 1995, PNC Bank served as sub-adviser to the Small Cap
Growth Equity Portfolio.
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Under the Advisory Contracts, PIMC, PCM, PEAC, PNC Bank and BlackRock are
not liable for any error of judgment or mistake of law or for any loss suffered
by the Fund or a Portfolio in connection with the performance of the Advisory
Contracts, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of PIMC, PCM, PEAC, PNC Bank or BlackRock in the
performance of their respective duties or from reckless disregard of their
respective duties and obligations thereunder. Each of the Advisory Contracts is
terminable as to a Portfolio by vote of the Board of Trustees or by the holders
of a majority of the outstanding voting securities of the relevant Portfolio, at
any time without penalty, on 60 days' written notice to PIMC, PCM, PEAC, PNC
Bank or BlackRock, as the case may be. PIMC, PCM, PEAC, PNC Bank or BlackRock
may also terminate their advisory relationship with respect to a Portfolio, on
60 days' written notice to the Fund. Each of the Advisory Contracts terminates
automatically in the event of its assignment.
For the year ended September 30, 1994, the Fund paid advisory fees to PIMC,
after waivers, of $951,230, $171,405, $281,771, $42,612, $0, $49,646, $36,893,
$2,306,672, $467,637, $55,825, $1,408,053 and $470,579 with respect to the Money
Market, Municipal Money Market, Government Money Market, Pennsylvania Municipal
Money Market, Tax-Free Income, Pennsylvania Tax-Free Income, Short-Term Bond,
Value Equity, Growth Equity, Small Cap Growth Equity, International Equity and
Balanced Portfolios. For that year, PIMC waived advisory fees of $3,359,847,
$986,201, $336,382, $47,655, $227,003, $137,696, $865,002, $175,364, $160,320,
$477,733 and $202,166 for such respective Portfolios, and reimbursed the
Pennsylvania Municipal Money Market, Tax-Free Income and Pennsylvania Tax-Free
Income Portfolios for certain operational expenses totalling $19,022, $35,898
and $9,645, respectively.
For the year ended September 30, 1993, the Fund paid advisory fees to PIMC,
after waivers, of $2,899,093, $509,475, $601,820, $0, $1,996,726, $400,652,
$598,040 and $124,556 for the Money Market, Municipal Money Market, Government
Money Market, Tax-Free Income, Value Equity, Growth Equity, International Equity
and Balanced Portfolios, respectively. For that year, PIMC waived advisory fees
of $815,911, $131,249, $195,459, $43,457, $108,242, $31,912, $47,134 and $45,203
for such respective Portfolios, and reimbursed the Tax-Free Income Portfolio for
certain operational expenses totalling $7,314. For the period from commencement
of operations (December 1, 1992 for the Pennsylvania Tax-Free Income Portfolio;
June 1, 1993 for the Pennsylvania Municipal Money Market Portfolio; September 1,
1993 for the Short-Term Bond Portfolio; and September 14, 1993 for the Small Cap
Growth Equity Portfolio) to September 30, 1993, the Fund paid advisory fees to
PIMC, after waivers, of $0, $0, $0, and $0 for the Pennsylvania Municipal Money
Market, Pennsylvania Tax-Free Income, Short-Term Bond and Small Cap Growth
Equity Portfolios, respectively. For the same periods, PIMC waived advisory fees
of $18,117, $87,528, $2,078, and $2,773 for such respective Portfolios, and
reimbursed the Pennsylvania Municipal Money Market, Pennsylvania Tax-Free Income
and Short-Term Bond Portfolios for certain operational expenses totalling
$11,411, $19,064 and $1,349, respectively.
For the year ended September 30, 1992, the Fund paid advisory fees to PIMC,
after waivers, of $2,526,929, $495,175, $706,211, $303,330, $8,166, and $0 for
the Money Market, Municipal Money Market, Government Money Market, Growth
Equity, Balanced and Tax-Free Income Portfolios, respectively. For that year,
PIMC waived advisory fees of $315,866, $61,909, $88,276, $6,541, $26,089 and
$22,281 for the Money Market, Municipal Money Market, Government Money Market,
Growth Equity, Balanced and Tax-Free Income Portfolios, respectively, and
reimbursed the Tax-Free Income Portfolio for certain operational expenses
totalling $19,415. For the period from commencement of operations (April 20,
1992 for the Value Equity Portfolio and April 27, 1992 for the International
Equity Portfolio) to September 30, 1992, the Fund paid advisory fees to PIMC,
after waivers, of $786,513 and $187,950 for the Value Equity and International
Equity Portfolios, respectively. For the same periods, PIMC waived advisory fees
of $3,247 for the International Equity Portfolio.
For the year ended September 30, 1994, PIMC paid sub-advisory fees to the
specified Portfolios' sub-adviser, after waivers, of $0, $0, $0, $0, $0,
$33,198, $36,893, $2,018,338, $409,182, $55,825, $1,257,191, and $409,420 with
respect to the Money Market, Municipal Money Market, Government Money Market,
Pennsylvania Municipal Money Market, Tax-Free Income, Pennsylvania Tax-Free
Income, Short-Term Bond, Value Equity, Growth Equity, Small Cap Growth Equity,
International Equity and Balanced Portfolios.
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<PAGE> 292
For that year, such sub-advisers waived sub-advisory fees of $479,008, $85,703,
$140,886, $42,110, $33,359, $160,456, $85,319, $288,334, $58,455, $101,371,
$251,438, and $79,849 for such respective Portfolios.
For the year ended September 30, 1993, PIMC paid sub-advisory fees to the
specified Portfolios' sub-adviser, after waivers, of $0, $0, $0, $0, $1,452,164,
$291,383, $478,432 and $90,586 for the Money Market, Municipal Money Market,
Government Money Market, Tax-Free Income, Value Equity, Growth Equity,
International Equity and Balanced Portfolios, respectively. For that year, such
sub-advisers waived sub-advisory fees of $412,778, $71,192, $88,587, $30,420,
$78,721, $25,967, $37,707 and $32,875 for such respective Portfolios. For the
period from commencement of operations to September 30, 1993, the Fund paid
sub-advisory fees to the specified Portfolios' and sub-adviser, after waivers,
of $0, $0, $0, and $0 for the Pennsylvania Municipal Money Market, Pennsylvania
Tax-Free Income, Short-Term Bond, and Small Cap Growth Equity Portfolios,
respectively. For the same periods, such sub-advisers waived sub-advisory fees
of $2,013, $61,270, $1,456, and $2,017 for such respective Portfolios. For the
period from October 1, 1992 to September 10, 1993, PIMC paid sub-advisory fees
of $274,275 to PNC Bank Ohio for the Growth Equity Portfolio.
For the year ended September 30, 1992, PIMC paid sub-advisory fees to the
specified Portfolios' sub-adviser, after waivers, of $0, $0, $220,604, $5,939,
and $0 for the Money Market, Government Money Market, Growth Equity, Balanced,
and Tax-Free Income Portfolios, respectively. For that year, such sub-advisers
waived sub-advisory fees of $315,866, $88,276, $4,757, $18,974 and $15,597 for
the Money Market, Government Money Market, Growth Equity, Balanced and Tax-Free
Income Portfolios, respectively. For the period from commencement of operations
to September 30, 1992, PIMC paid sub-advisory fees to the specified Portfolios'
sub-adviser, after waivers, of $572,004 and $150,360 for the Value Equity and
International Equity Portfolios, respectively. For the same periods, the
specified Portfolio's sub-adviser waived sub-advisory fees of $2,598 for the
International Equity Portfolio. For the period from October 1, 1991 to May 8,
1992 for the Tax-Free Money Market Portfolio PIMC paid sub-advisory fees to the
particular Portfolio's sub-adviser, after waivers, of $192,992 and such
sub-adviser waived sub-advisory fees of $0. Such sub-advisory fees have no
effect on the advisory fees payable by each Portfolio to PIMC.
ADMINISTRATION AGREEMENTS. The Administrators serve as the Fund's
co-administrators pursuant to an Administration Agreement (the "Administration
Agreement"). The Administrators have agreed to maintain office facilities for
the Fund, furnish the Fund with statistical and research data, clerical,
accounting, and bookkeeping services, and certain other services required by the
Fund.
The Administration Agreement provides that the Administrators will not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund or a Portfolio in connection with the performance of the Administration
Agreement, except a loss resulting from willful misfeasance, bad faith or gross
negligence in the performance of their respective duties or from reckless
disregard of their respective duties and obligations thereunder.
For the year ended September 30, 1994, the Fund paid the Administrators
combined administration fees, after waivers, of $803,349, $42,931, $132,901,
$11,758, $0, $19,858, $14,758, $1,075,209, $128,262, $20,166, $502,876 and
$125,112 with respect to the Money Market, Municipal Money Market, Government
Money Market, Pennsylvania Municipal Money Market, Tax-Free Income, Pennsylvania
Tax-Free Income, Short-Term Bond, Value Equity, Growth Equity, Small Cap Growth
Equity, International Equity and Balanced Portfolios. For that year, the
Administrators waived combined administration fees of $541,066, $214,178,
$289,756, $114,573, $19,062, $90,020, $55,078, $61,908, $105,557, $58,432, and
$119,522 with respect to the Money Market, Municipal Money Market, Government
Money Market, Pennsylvania Municipal Money Market, Tax-Free Income, Pennsylvania
Tax-Free Income, Short-Term Bond, Value Equity, Growth Equity, Small Cap Growth
Equity, and Balanced Portfolios, respectively, and reimbursed the Pennsylvania
Municipal Money Market, Tax-Free Income, and Pennsylvania Tax-Free Income
Portfolios for certain operational expenses totalling $6,340, $14,359, and
$3,858, respectively.
For the period from February 1, 1993 to September 30, 1993, the Fund paid
the Administrators combined administration fees, after waivers, of $674,120,
$117,768, $157,519, $0, $0, $528,584, $101,208, $123,924 and $44,667 for the
Money Market, Municipal Money Market, Government Money Market, Tax-Free Income,
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<PAGE> 293
Pennsylvania Tax-Free Income, Value Equity, Growth Equity, International Equity
and Balanced Portfolios, respectively. For that period, the Administrators
waived combined administration fees of $101,509, $21,036, $30,288, $11,914,
$85,754, $9,382, $12,879, $6,477 and $8,046 for such respective Portfolios, and
reimbursed the Pennsylvania Tax-Free Income Portfolio for certain operational
expenses totalling $5,766. For the period from commencement of operations to
September 30, 1993, the Fund paid the Administrators combined administration
fees, after waivers, of $0, $0, and $173 for the Pennsylvania Municipal Money
Market, Short-Term Bond, and Small Cap Growth Equity Portfolios, respectively.
For the same period, the Administrators waived combined administration fees of
$6,039, $831, and $835 for such respective Portfolios.
For the period from October 1, 1992 to January 31, 1993, the Fund paid PFPC
and the former co-administrator combined administration fees, before waivers, of
$397,594, $74,771, $77,953, $0, $227,477, $43,210, $41,645 and $4,938 for the
Money Market, Municipal Money Market, Government Money Market, Tax-Free Income,
Value Equity, Growth Equity, International Equity and Balanced Portfolios,
respectively. For that period, PFPC and the former co-administrator waived
combined administration fees of $0, $0, $0, $5,469, $0, $0, $0 and $4,080 for
such respective Portfolios, and reimbursed the Tax-Free Income Portfolio for
certain operational expenses totalling $0. For the period from commencement of
operations to January 31, 1993, the Fund paid PFPC and the former
co-administrator combined administration fees, before waivers, of $0 for the
Pennsylvania Tax-Free Income Portfolio. For the same period, PFPC and the former
co-administrator waived combined administration fees of $1,774 for such
Portfolio, and reimbursed such Portfolio for certain operational expenses
totalling $1,859.
For the year ended September 30, 1992, the Fund paid PFPC and the former
co-administrator combined administration fees, after waivers, of $923,307,
$185,695, $264,829, $112,680, $3,511, $326,035 and $0 for the Money Market,
Municipal Money Market, Government Money Market, Growth Equity, Balanced,
Managed Income and Tax-Free Income Portfolios, respectively. For that year, PFPC
and the former co-administrator waived combined administration fees of $8,946
and $8,912 for the Balanced and Tax-Free Income Portfolios, respectively. For
the services provided and expenses assumed by PFPC and the former
co-administrator, the Fund paid them combined administration fees of $286,005
and $50,986 for the Value Equity and International Equity Portfolios,
respectively, for the periods from the dates the respective Portfolios commenced
operations to September 30, 1992. See "Investment Advisory, Administration,
Distribution and Servicing Agreements -- Advisory and Sub-Advisory Agreements"
regarding the Administrators' agreement to reimburse the Fund in the event the
expenses of a Portfolio exceed applicable state expense limitations.
CUSTODIAN AND TRANSFER AGENCY AGREEMENTS. PNC Bank is custodian of the
Fund's assets pursuant to a custodian agreement (the "Custodian Agreement").
Under the Custodian Agreement, PNC Bank or a sub-custodian (i) maintains a
separate account or accounts in the name of each Portfolio, (ii) holds and
transfers portfolio securities on account of each Portfolio, (iii) accepts
receipts and makes disbursements of money on behalf of each Portfolio, (iv)
collects and receives all income and other payments and distributions on account
of each Portfolio's securities and (v) makes periodic reports to the Board of
Trustees concerning each Portfolio's operations. PNC Bank is authorized to
select one or more banks or trust companies to serve as sub-custodian on behalf
of the Fund, provided that, with respect to sub-custodians other than
sub-custodians for foreign securities, PNC Bank remains responsible for the
performance of all its duties under the Custodian Agreement and holds the Fund
harmless from the acts and omissions of any sub-custodian. The Chase Manhattan
Bank, N.A., State Street Bank and Trust Company and Barclays Bank PLC serve as
the Fund's sub-custodians.
For its services to the Fund under the Custodian Agreement, PNC Bank
receives a fee which is calculated based upon each investment portfolio's
average gross assets, with a minimum monthly fee of $1,000 per investment
portfolio. PNC Bank is also entitled to out-of-pocket expenses and certain
transaction charges.
PFPC, an affiliate of PNC Bank, serves as the transfer and dividend
disbursing agent for the Fund pursuant to a Transfer Agency Agreement (the
"Transfer Agency Agreement"), under which PFPC (i) issues and redeems Service,
Investor, and Institutional classes of shares in each Portfolio, (ii) addresses
and mails all communications by each Portfolio to record owners of its shares,
including reports to shareholders, dividend and distribution notices and proxy
materials for its meetings of shareholders,
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<PAGE> 294
(iii) maintains shareholder accounts and, if requested, sub-accounts and (iv)
makes periodic reports to the Board of Trustees concerning the operations of
each Portfolio. PFPC may, on 30 days' notice to the Fund, assign its duties as
transfer and dividend disbursing agent to any other affiliate of PNC Bank Corp.
For its services with respect to the Fund's Institutional and Service Shares
under the Transfer Agency Agreement, PFPC receives fees at the annual rate of
.03% of the average net asset value of outstanding Institutional and Service
Shares in each Portfolio, plus per account fees and disbursements. For its
services under the Transfer Agency Agreement with respect to Investor Shares,
PFPC receives per account fees, with minimum annual fees of $24,000 for each
Portfolio, plus disbursements.
DISTRIBUTION AGREEMENT. The Fund has entered into a distribution agreement
with the Distributor under which the Distributor, as agent, offers shares of
each Portfolio on a continuous basis. The Distributor has agreed to use
appropriate efforts to effect sales of the shares, but it is not obligated to
sell any particular amount of shares.
SERVICE PLAN. As stated in the Prospectus for the Fund's Service Shares,
the Fund intends to enter into service agreements with institutions pursuant to
which institutions will render certain support services to their customers who
are the beneficial owners of Service Shares ("Customers"). Such services will be
provided to Customers who are the beneficial owners of Service Shares and are
intended to supplement the services provided by the Fund's Administrators and
transfer agent to the Fund's shareholders of record. In consideration for
payment of up to .15% (on an annualized basis) of the average daily net asset
value of Service Shares owned beneficially by their Customers, institutions may
provide one or more of the following services to such Customers: processing
purchase and redemption requests from Customers and placing orders with the
Fund's transfer agent or the Distributor; processing dividend payments from the
Fund on behalf of Customers; providing sub-accounting with respect to Service
Shares beneficially owned by Customers or the information necessary for
sub-accounting; and other similar services. In consideration for payment of a
service fee of up to a separate .15% (on an annualized basis) of the average
daily net asset value of Service Shares owned beneficially by their Customers,
institutions may provide one or more of these additional services to such
Customers: responding to Customer inquiries relating to the services performed
by the institution and to Customer inquiries concerning their investments in
Service Shares; providing information periodically to Customers showing their
positions in Service Shares; and other similar shareholder liaison services.
Customers who are beneficial owners of Service Shares should read the Prospectus
in light of the terms and fees governing their accounts with institutions. These
servicing fees are not paid to institutions with respect to other classes of
shares of the Portfolios ("Series A Investor Shares," "Series B Investor Shares"
and "Institutional Shares").
For the fiscal year ended September 30, 1994, the Service Shares of the
Money Market, Municipal Money Market, Government Money Market, Pennsylvania
Municipal Money Market, Tax-Free Income, Pennsylvania Tax-Free Income,
Short-Term Bond, Value Equity, Growth Equity, Small Cap Growth Equity,
International Equity and Balanced Portfolios bore expenses relating to the
Fund's Service Plan and other service fees aggregating $1,382,350, $368,547,
$677,020, $56,294, $3,523, $24,652, $13,458, $177,459, $58,828, $28,347,
$110,459 and $123,661, respectively.
PORTFOLIO TRANSACTIONS
In executing portfolio transactions, the adviser and sub-advisers seek to
obtain the best price and execution for a Portfolio, taking into account such
factors as the price (including the applicable brokerage commission or dealer
spread), size of the order, difficulty of execution and operational facilities
of the firm involved. While the adviser and sub-advisers generally seek
reasonably competitive commission rates, payment of the lowest commission or
spread is not necessarily consistent with obtaining the best price and execution
in particular transactions. Payments of commissions to brokers who are
affiliated persons of the Fund (or affiliated persons of such persons) will be
made in accordance with Rule 17e-1 under the 1940 Act.
No Portfolio has any obligation to deal with any broker or group of brokers
in the execution of portfolio transactions. The adviser and sub-advisers may,
consistent with the interests of a Portfolio, select brokers on the basis of the
research, statistical and pricing services they provide to a Portfolio and the
adviser's or sub-adviser's other clients. Information and research received from
such brokers will be in addition to, and not in
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<PAGE> 295
lieu of, the services required to be performed by the adviser and sub-advisers
under their respective contracts. A commission paid to such brokers may be
higher than that which another qualified broker would have charged for effecting
the same transaction, provided that the adviser or sub-adviser determines in
good faith that such commission is reasonable in terms either of the transaction
or the overall responsibility of the adviser or sub-adviser to a Portfolio and
its other clients and that the total commissions paid by a Portfolio will be
reasonable in relation to the benefits to a Portfolio over the long-term.
Commission rates for brokerage transactions on foreign stock exchanges are
generally fixed. In addition, the adviser or sub-adviser may take into account
the sale of shares of the Fund in allocating purchase and sale orders for
portfolio securities to brokers (including brokers that are affiliated with them
or Distributor).
For the year or period ended September 30, 1994, the Value Equity, Growth
Equity, Small Cap Growth Equity, International Equity, and Balanced Portfolios
paid brokerage commissions of $431,232, $530,428, $62,339, $1,031,631, and
$164,460, respectively.
For the year or period ended September 30, 1993, the Value Equity, Growth
Equity, Small Cap Growth Equity, International Equity and Balanced Portfolios
paid brokerage commissions of $136,565, $366,421, $1,186, $308,297 and $68,556,
respectively, of which $4,390 and $264 for the Growth Equity and Small Cap
Growth Equity Portfolios, respectively, was paid to Shearson Lehman Hutton Inc.
("Shearson"), an affiliate of the Fund's former distributor. Approximately 1%
and 22% of the aggregate brokerage commissions of the Growth Equity and Small
Cap Growth Equity Portfolios, respectively, were paid to Shearson, representing
approximately 1% and 22% of the aggregate dollar amounts of transactions by
those respective Portfolios involving the payment of commissions.
For the year ended September 30, 1992, the Growth Equity and Balanced
Portfolios paid brokerage commissions of $300,421 and $11,821, respectively, of
which $19,840 for the Growth Equity Portfolio was paid to Shearson Lehman Hutton
Inc. ("Shearson"), an affiliate of the Fund's former distributor. Approximately
7% of the Growth Equity Portfolio's aggregate brokerage commissions for the year
ended September 30, 1992 were paid to Shearson, representing approximately 7% of
the aggregate dollar amount of transactions by that Portfolio involving the
payment of commissions. For the period from commencement of operations to
September 30, 1992, the Value Equity and International Equity Portfolios paid
brokerage commissions of $68,214 and $84,226, respectively.
Over-the-counter issues, including corporate debt and U.S. Government
securities, are normally traded on a "net" basis without a stated commission,
through dealers acting for their own account and not as brokers. The Portfolios
will primarily engage in transactions with these dealers or deal directly with
the issuer unless a better price or execution could be obtained by using a
broker. Prices paid to a dealer with respect to both foreign and domestic
securities will generally include a "spread," which is the difference between
the prices at which the dealer is willing to purchase and sell the specific
security at the time, and includes the dealer's normal profit.
Purchases of money market instruments by a Portfolio are made from dealers,
underwriters and issuers. The Portfolios do not currently expect to incur any
brokerage commission expense on such transactions because money market
instruments are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission. The price of the
security, however, usually includes a profit to the dealer. Each Money Market
Portfolio intends to purchase only securities with remaining maturities of 13
months or less as determined in accordance with the rules of the SEC. As a
result, the portfolio turnover rates of a Money Market Portfolio will be
relatively high. However, because brokerage commissions will not normally be
paid with respect to investments made by a Money Market Portfolio, the turnover
rates should not adversely affect the Portfolio's net asset values or net
income.
Securities purchased in underwritten offerings include a fixed amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount. When securities are purchased or sold directly from or
to an issuer, no commissions or discounts are paid. It is the policy of the
Portfolios to give primary consideration to obtaining the most favorable price
and efficient execution of transactions involving money market instruments. In
seeking to implement this policy of the Portfolios, the adviser and sub-advisers
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<PAGE> 296
will effect transactions involving money market instruments with those dealers
they believe provide the most favorable prices and are capable of providing
efficient executions.
The adviser or sub-advisers may seek to obtain an undertaking from issuers
of commercial paper or dealers selling commercial paper to consider the
repurchase of such securities from a Portfolio prior to maturity at their
original cost plus interest (sometimes adjusted to reflect the actual maturity
of the securities), if it believes that a Portfolio's anticipated need for
liquidity makes such action desirable. Any such repurchase prior to maturity
reduces the possibility that a Portfolio would incur a capital loss in
liquidating commercial paper, especially if interest rates have risen since
acquisition of the particular commercial paper.
Investment decisions for each Portfolio and for other investment accounts
managed by the adviser or sub-advisers are made independently of each other in
the light of differing conditions. However, the same investment decision may be
made for two or more of such accounts. In such cases, simultaneous transactions
are inevitable. Purchases or sales are then averaged as to price and allocated
as to amount in a manner deemed equitable to each such account. While in some
cases this practice could have a detrimental effect upon the price or value of
the security as far as a Portfolio is concerned, in other cases it could be
beneficial to a Portfolio. A Portfolio will not purchase securities during the
existence of any underwriting or selling group relating to such securities of
which PIMC, BlackRock, PNC Bank, PCM, PEAC, the Administrators, Distributor or
any affiliated person (as defined in the 1940 Act) thereof is a member except
pursuant to procedures adopted by the Board of Trustees in accordance with Rule
10f-3 under the 1940 Act. In no instance will portfolio securities be purchased
from or sold to PIMC, BlackRock, PNC Bank, PCM, PEAC, the Administrators,
Distributor or any affiliated person of the foregoing entities except as
permitted by SEC exemptive order or by applicable law.
The portfolio turnover rate of a Portfolio is calculated by dividing the
lesser of a Portfolio's annual sales or purchases of portfolio securities
(exclusive of purchases or sales of securities whose maturities at the time of
acquisition were one year or less) by the monthly average value of the
securities held by the Portfolio during the year.
The Fund is required to identify any securities of its regular brokers or
dealers (as defined in Rule 10b-1 under the 1940 Act) or their parents held by
the Fund as of the end of its most recent fiscal year. As of September 30, 1994,
the following Portfolios held the following securities: (a) Money Market
Portfolio: variable rate obligations of Goldman Sachs Group L.P., Lehman
Brothers Holdings, Inc. and Morgan Stanley Group in the principal amounts of
$47,000,000, $50,000,000 and $29,998,328, respectively; medium-term note of
Morgan Stanley Group in the principal amount of $15,000,000; and repurchase
agreements with Kidder, Peabody & Co., Morgan Stanley & Co. and PaineWebber
Group in the principal amounts of $100,000,000, $65,000,000 and $10,000,000,
respectively; (b) Government Money Market Portfolio: repurchase agreements with
Kidder, Peabody & Co. and Morgan Stanley & Co. in the principal amounts of
$9,058,000 and $70,000,000, respectively; (c) Managed Income Portfolio:
corporate bonds and variable rate obligations of Morgan Stanley Group in the
principal amounts of $4,925,000 and $10,000,000, respectively; medium-term note
of Salomon Brothers, Inc. in the principal amount of $3,730,680; (d) Short-Term
Bond Portfolio: corporate bonds of Lehman Brothers, Inc. and Merrill Lynch Co.,
Inc. in the principal amounts of $992,500 and $956,250, respectively;
medium-term note of Salomon Brothers, Inc. in the principal amount of $932,670.
REDEMPTION AND PURCHASE INFORMATION
Service and Institutional Shares of each Portfolio are sold at the net
asset value per share next determined after a purchase order is received.
The Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase of a Portfolio's
shares by making payment in whole or in part in securities chosen by the Fund
and valued in the same way as they would be valued for purposes of computing a
Portfolio's net asset value. If payment is made in securities, a shareholder may
incur transaction costs in converting these securities into cash. The Fund has
elected, however, to be governed by Rule 18f-1 under the
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1940 Act so that a Portfolio is obligated to redeem its shares solely in cash up
to the lesser of $250,000 or 1% of its net asset value during any 90-day period
for any one shareholder of a Portfolio.
Under the 1940 Act, a Portfolio may suspend the right to redemption or
postpone the date of payment upon redemption for any period during which the New
York Stock Exchange (the "NYSE") is closed (other than customary weekend and
holiday closings), or during which trading on the NYSE is restricted, or during
which (as determined by the SEC by rule or regulation) an emergency exists as a
result of which disposal or valuation of portfolio securities is not reasonably
practicable, or for such other periods as the SEC may permit. (A Portfolio may
also suspend or postpone the recordation of the transfer of its shares upon the
occurrence of any of the foregoing conditions.)
In addition to the situations described in the Prospectuses, the Fund may
redeem shares involuntarily to reimburse a Portfolio for any loss sustained by
reason of the failure of a shareholder to make full payment for shares purchased
by the shareholder or to collect any charge relating to a transaction effected
for the benefit of a shareholder as provided in the Prospectus from time to
time.
VALUATION OF PORTFOLIO SECURITIES
In determining the approximate market value of portfolio investments, the
Fund may employ outside organizations, which may use, without limitation, a
matrix or formula method that takes into consideration market indexes, matrices,
yield curves and other specific adjustments. This may result in the securities
being valued at a price different from the price that would have been determined
had the matrix or formula method not been used. All cash, receivables and
current payables are carried on the Fund's books at their face value. Other
assets, if any, are valued at fair value as determined in good faith under the
supervision of the Board of Trustees.
MONEY MARKET PORTFOLIOS. The value of the portfolio securities of each
Money Market Portfolio is calculated using the amortized cost method of
valuation. Under this method the market value of an instrument is approximated
by amortizing the difference between the acquisition cost and value at maturity
of the instrument on a straight-line basis over the remaining life of the
instrument. The effect of changes in the market value of a security as a result
of fluctuating interest rates is not taken into account. The market value of
debt securities usually reflects yields generally available on securities of
similar quality. When such yields decline, market values can be expected to
increase, and when yields increase, market values can be expected to decline.
As indicated, the amortized cost method of valuation may result in the
value of a security being higher or lower than its market price, the price a
Money Market Portfolio would receive if the security were sold prior to
maturity. The Fund's Board of Trustees has established procedures for the
purpose of maintaining a constant net asset value of $1.00 per share for each
Money Market Portfolio, which include a review of the extent of any deviation of
net asset value per share, based on available market quotations, from the $1.00
amortized cost per share. Should that deviation exceed 1/2 of 1% for a Money
Market Portfolio, the Fund's Board of Trustees will promptly consider whether
any action should be initiated to eliminate or reduce material dilution or other
unfair results to shareholders. Such action may include redeeming shares in
kind, selling portfolio securities prior to maturity, reducing or withholding
dividends, shortening the average portfolio maturity, reducing the number of
outstanding shares without monetary consideration, and utilizing a net asset
value per share as determined by using available market quotations.
Each Money Market Portfolio will maintain a dollar-weighted average
portfolio maturity of 90 days or less, will not purchase any instrument with a
deemed maturity under Rule 2a-7 of the 1940 Act greater than 13 months, and will
limit portfolio investments, including repurchase agreements, to those
instruments that the adviser or sub-adviser (depending on the Money Market
Portfolio) determines present minimal credit risks pursuant to guidelines
adopted by the Fund's Board of Trustees. There can be no assurance that a
constant net asset value will be maintained for any Money Market Portfolio.
NON-MONEY MARKET PORTFOLIOS. The valuation of securities held by the
Non-Money Market Portfolios is discussed in their respective Prospectuses.
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<PAGE> 298
PERFORMANCE INFORMATION
MONEY MARKET PORTFOLIO YIELD. Each Money Market Portfolio's current and
effective yields for Service and Institutional Shares are computed separately
using standardized methods required by the SEC. The annualized yield for a class
of Service or Institutional Shares is computed by: (a) determining the net
change in the value of a hypothetical account having a balance of one share at
the beginning of a seven-calendar day period; (b) dividing the net change by the
value of the account at the beginning of the period to obtain the base period
return; and (c) annualizing the results (i.e., multiplying the base period
return by 365/7). The net change in the value of the account reflects the value
of additional shares purchased with dividends declared and all dividends
declared on both the original share and such additional shares, but does not
include realized gains and losses or unrealized appreciation and depreciation.
Compound effective yields are computed by adding 1 to the base period return
(calculated as described above) raising the sum to a power equal to 365/7 and
subtracting 1. In addition, a standardized "tax-equivalent yield" may be quoted
for Service and Institutional Shares in the Municipal Money Market, Pennsylvania
Municipal Money Market, and New Jersey Municipal Money Market Portfolios, which
is computed separately for each class by: (a) dividing the portion of the
Portfolio's yield for shares (as calculated above) that is exempt from Federal
or state income tax by one minus a stated Federal or state income tax rate; and
(b) adding the figure resulting from (a) above to that portion, if any, of the
yield that is not exempt from Federal and state income tax.
The annualized yield information for each Money Market Portfolio for the
seven-day period ended March 31, 1995 was as follows:
<TABLE>
<CAPTION>
TAX-EQUIVALENT YIELD
(ASSUMES A FEDERAL
EFFECTIVE INCOME TAX
PORTFOLIO YIELD YIELD RATE OF 28%)
- --------- ----- --------- --------------------
<S> <C> <C> <C>
Money Market
Service Shares........................................ 5.71% 5.87% N/A
Institutional Shares.................................. 6.01 6.19 N/A
Municipal Money Market
Service Shares........................................ 3.66 3.73 5.08%
Institutional Shares.................................. 3.96 4.04 5.50
Government Money Market
Service Shares........................................ 5.59 5.75 N/A
Institutional Shares.................................. 5.89 6.06 N/A
Pennsylvania Municipal Money Market
Service Shares........................................ 3.56 3.62 4.94
Institutional Shares.................................. 3.86 3.94 5.36
</TABLE>
The fees which may be imposed by institutions on their Customers are not
reflected in the calculations of yields for the Money Market Portfolios. No
shares of any class of the New Jersey Municipal Money Market Portfolio had been
issued prior to March 31, 1995. Yields on Institutional Shares will generally be
higher than yields on Service Shares.
From time to time, in advertisements or in reports to shareholders, the
yields of a Portfolio's Service or Institutional Shares may be quoted and
compared to those of other mutual funds with similar investment objectives and
to stock or other relevant indexes. For example, the yield of a Portfolio's
Service or Institutional Shares may be compared to the Donoghue's Money Fund
Average, which is an average compiled by IBC/Donoghue's MONEY FUND REPORT of
Holliston, MA 01746, a widely-recognized independent publication that monitors
the performance of money market funds, or to the data prepared by Lipper
Analytical Services, Inc., a widely-recognized independent service that monitors
the performance of mutual funds.
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<PAGE> 299
TOTAL RETURN. For purposes of quoting and comparing the performance of
shares of the Non-Money Market Portfolios to the performance of other mutual
funds and to stock or other relevant indexes in advertisements or in
communications to shareholders, performance may be stated in terms of total
return. The total return for each class of a Non-Money Market Portfolio will be
calculated independently of the other classes within that Portfolio. Under the
rules of the SEC, funds advertising performance must include total return quotes
calculated according to the following formula:
<TABLE>
<S> <C> <C> <C>
1/n
ERV
T = [(- - - - -) - 1]
P
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in terms
of years.
</TABLE>
All dividends and distributions by the particular Portfolio are assumed to
have been reinvested at net asset value as described in the particular
Prospectus on the reinvestment dates during the period. Total return, or "T" in
the formula above, is computed by finding the average annual compounded rates of
return over the specified periods that would equate the initial amount invested
to the ending redeemable value.
27
<PAGE> 300
Based on the foregoing calculation, the average annual total returns for
each Non-Money Market Portfolio for periods ended March 31, 1995 were as
follows:
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
FOR THE
YEAR
ENDED SINCE COMMENCEMENT
PORTFOLIO 3/31/95 OF OPERATIONS
- --------- ------- ------------------
<S> <C> <C>
Tax-Free Income
Service Shares(1)........................................... 8.09% 3.89%
Institutional Shares(2)..................................... 8.35 5.98
Pennsylvania Tax-Free Income
Service Shares(1)........................................... 6.70 2.97
Institutional Shares(3)..................................... 6.96 5.59
Short-Term Bond
Service Shares(4)........................................... 2.38 1.48
Institutional Shares(4)..................................... 2.64 1.73
Value Equity
Service Shares(1)........................................... 13.84 9.97
Institutional Shares(5)..................................... 14.12 10.85
Growth Equity
Service Shares(6)........................................... 6.28 3.02
Institutional Shares(2)..................................... 6.47 7.45
Small Cap Growth Equity
Service Shares(7)........................................... 18.08 10.60
Institutional Shares(8)..................................... 18.39 10.51
International Equity
Service Shares(1)........................................... (1.76) 6.64
Institutional Shares(9)..................................... (1.60) 10.44
Balanced
Service Shares(1)........................................... 6.38 5.63
Institutional Shares(10).................................... 6.62 8.60
</TABLE>
- ---------------
(1) Commenced operations on July 29, 1993.
(2) Commenced operations on January 21, 1993.
(3) Commenced operations on December 1, 1992.
(4) Commenced operations on September 1, 1993.
(5) Commenced operations on May 20, 1992.
(6) Commenced operations on July 28, 1993.
(7) Commenced operations on September 15, 1993.
(8) Commenced operations on September 14, 1993.
(9) Commenced operations on April 27, 1992.
(10)Commenced operations on May 1, 1992.
No shares of any class of the International Fixed Income Portfolio had been
issued prior to March 31, 1995.
Each class of the Non-Money Market Portfolios may also from time to time
include in advertisements and communications to shareholders a total return
figure that is not calculated according to the formula set
28
<PAGE> 301
forth above in order to compare more accurately the performance of each class of
a Non-Money Market Portfolio's shares with other performance measures. For
example, in comparing the total return of a Non-Money Market Portfolio's shares
with data published by Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc. or Weisenberger Investment Company Service, or with the
performance of the Standard & Poor's 500 Stock Index, EAFE, the Dow Jones
Industrial Average or the Shearson Lehman Hutton Government Corporate Bond
Index, as appropriate, a Non-Money Market Portfolio may calculate the aggregate
total return for its shares of a certain class for the period of time specified
in the advertisement or communication by assuming the investment of $10,000 in
such Non-Money Market Portfolio's shares and assuming the reinvestment of each
dividend or other distribution at net asset value on the reinvestment date.
Percentage increases are determined by subtracting the initial value of the
investment from the ending value and by dividing the remainder by the beginning
value. A Non-Money Market Portfolio does not, for these purposes, deduct from
the initial value invested or the ending value any amount representing front-end
or deferred sales charges, respectively, charged to purchasers of Series A and
Series B Investor Shares, respectively. The Series A and Series B Investor
classes of the Portfolio will, however, disclose the maximum applicable sales
charge and will also disclose that the performance data does not reflect sales
charges and that inclusion of sales charges would reduce the performance quoted.
NON-MONEY MARKET PORTFOLIO YIELD. The Balanced, Tax-Free Income,
Pennsylvania Tax-Free Income, Short-Term Bond, and International Fixed Income
Portfolios may advertise their yields on their Service and Institutional Shares.
Under the rules of the SEC, each such Portfolio advertising the respective
yields for its Service and Institutional Shares must calculate yield using the
following formula:
(a - b 6
YIELD = 2[ ------- + 1) -1]
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of
the period.
For the purpose of determining net investment income earned during the
period (variable "a" in the formula), dividend income on equity securities held
by a Portfolio is recognized by accruing 1/360th of the stated dividend rate of
the security each day that the security is in the Portfolio. Except as noted
below, interest earned on any debt obligations held by the Portfolio is
calculated by computing the yield to maturity of each obligation held by the
Portfolio based on the market value of the obligation (including actual accrued
interest) at the close of business on the last business day of each month, or,
with respect to obligations purchased during the month, the purchase price (plus
actual accrued interest) and dividing the result by 360 and multiplying the
quotient by the market value of the obligation (including actual accrued
interest) in order to determine the interest income on the obligation for each
day of the subsequent month that the obligation is held by the Portfolio. For
purposes of this calculation, it is assumed that each month contains 30 days.
The maturity of an obligation with a call provision is the next call date on
which the obligation reasonably may be expected to be called or, if none, the
maturity date.
With respect to debt obligations purchased at a discount or premium, the
formula generally calls for amortization of the discount or premium. However,
interest earned on tax-exempt obligations that are issued without original issue
discount and have a current market discount is calculated by using the coupon
rate of interest instead of the yield to maturity. In the case of tax-exempt
obligations that are issued with original issue discount but which have
discounts based on current market value that exceed the then-remaining portion
of the original issue discount (market discount), the yield to maturity is the
imputed rate based on the original issue discount calculation. On the other
hand, in the case of tax-exempt obligations that are issued with original issue
discount but which have discounts based on current market value that are less
than the then-
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<PAGE> 302
remaining portion of the original issue discount (market premium), the yield to
maturity is based on the market value.
With respect to mortgage or other receivables-backed obligations which are
expected to be subject to monthly payments of principal and interest ("pay
downs"), (a) gain or loss attributable to actual monthly pay downs are accounted
for as an increase or decrease to interest income during the period; and (b) a
Portfolio may elect either (i) to amortize the discount and premium on the
remaining security, based on the cost of the security, to the weighted-average
maturity date, if such information is available, or to the remaining term of the
security, if any, if the weighted-average maturity date is not available, or
(ii) not to amortize discount or premium on the remaining security. The
amortization schedule will be adjusted monthly to reflect changes in the market
values of debt obligations.
Undeclared earned income will be subtracted from the maximum offering price
per share (variable "d" in the formula). Undeclared earned income is the net
investment income which, at the end of the base period, has not been declared as
a dividend, but is reasonably expected to be and is declared and paid as a
dividend shortly thereafter.
Each of the Tax-Free Income and Pennsylvania Tax-Free Income Portfolios may
advertise the tax-equivalent yield for its shares of a specified class. Under
the rules of the SEC, such a Portfolio advertising its tax-equivalent yield must
calculate such tax-equivalent yield by dividing that portion of the yield of the
Portfolio which is tax-exempt by one minus a stated income tax rate and adding
the product to that portion, if any, of the yield of the Portfolio which is not
tax-exempt.
The annualized yield information for the 30-day period ended March 31, 1995
for the Portfolios referenced below was as follows:
<TABLE>
<CAPTION>
TAX-EQUIVALENT YIELD
(ASSUMES A FEDERAL INCOME
PORTFOLIO YIELD TAX RATE OF 28%)
- --------- ----- -------------------------
<S> <C> <C>
Tax-Free Income
Service Shares.............................................. 4.94% 6.86%
Institutional Shares........................................ 5.17 7.18
Pennsylvania Tax-Free Income
Service Shares.............................................. 5.32 7.39
Institutional Shares........................................ 5.55 7.71
Short-Term Bond
Service Shares.............................................. 6.20 N/A
Institutional Shares........................................ 6.42 N/A
</TABLE>
MISCELLANEOUS. Yields on shares of a Portfolio may fluctuate daily and do
not provide a basis for determining future yields. Because such yields will
fluctuate, they cannot be compared with yields on savings account or other
investment alternatives that provide an agreed to or guaranteed fixed yield for
a stated period of time. In comparing the yield of one fund to another,
consideration should be given to each fund's investment policies, including the
types of investments made, lengths of maturities of the portfolio securities,
and whether there are any special account charges which may reduce the effective
yield. The fees which may be imposed by Service Organizations and other
institutions on their customers are not reflected in the calculations of total
returns or yields for the Portfolios.
TAXES
The following is only a summary of certain additional tax considerations
generally affecting the Portfolios and their shareholders that are not described
in the Prospectuses. No attempt is made to present a detailed explanation of the
tax treatment of the Portfolios or their shareholders, and the discussion here
and in the Prospectuses is not intended as a substitute for careful tax
planning. Investors are urged to consult their tax advisers with specific
reference to their own tax situation.
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<PAGE> 303
Each Portfolio will elect to be taxed as a regulated investment company
under Part I of Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). As a regulated investment company, each Portfolio generally is
exempt from Federal income tax on its net investment income and realized capital
gains that it distributes to shareholders, provided that it distributes an
amount equal to at least the sum of (a) 90% of its investment company taxable
income (net investment income and the excess of net short-term capital gain over
net long-term capital loss, if any, for the year) and (b) 90% of its net
tax-exempt interest income, if any, for the year (the "Distribution
Requirement") and satisfies certain other requirements of the Code that are
described below. Distributions of investment company taxable income and net
tax-exempt interest income made during the taxable year or, under specified
circumstances, within twelve months after the close of the taxable year will
satisfy the Distribution Requirement.
In addition to satisfaction of the Distribution Requirement, each Portfolio
must derive at least 90% of its gross income from dividends, interest, certain
payments with respect to securities loans and gains from the sale or other
disposition of stock or securities or foreign currencies (including, but not
limited to, gains from forward foreign currency exchange contacts), or from
other income derived with respect to its business of investment in such stock,
securities, or currencies (the "Income Requirement") and derive less than 30% of
its gross income from the sale or other disposition of stock, securities and
certain other investments (including securities and forward foreign currency
exchange contracts, but only to the extent that such contracts are not directly
related to the Portfolio's principal business of investing in stock or
securities) held for less than three months (the "Short-Short Gain Test").
Future Treasury regulations may provide that foreign currency gains that are not
"directly related" to a Portfolio's principal business of investing in stock or
securities will not satisfy the Income Requirement. Interest (including original
issue discount and "accrued market discount") received by a Portfolio at
maturity or upon disposition of a security held for less than three months will
not be treated as gross income derived from the sale or other disposition of
such security held for less than three months for purposes of the Short-Short
Gain Test. However, any other income that is attributable to realized market
appreciation will be treated as gross income from the sale or other disposition
of securities for this purpose.
In addition to the foregoing requirements, at the close of each quarter of
its taxable year, at least 50% of the value of each Portfolio's assets must
consist of cash and cash items, U.S. government securities, securities of other
regulated investment companies, and securities of other issuers (as to which a
Portfolio has not invested more than 5% of the value of its total assets in
securities of such issuer and as to which a Portfolio does not hold more than
10% of the outstanding voting securities of such issuer), and no more than 25%
of the value of each Portfolio's total assets may be invested in the securities
of any one issuer (other than U.S. Government securities and securities of other
regulated investment companies), or in two or more issuers which such Portfolio
controls and which are engaged in the same or similar trades or businesses.
Each of the Money and Non-Money Market Municipal Portfolios is designed to
provide investors with tax-exempt interest income. Shares of the Money and
Non-Money Market Municipal Portfolios would not be suitable for tax-exempt
institutions and may not be suitable for retirement plans qualified under
Section 401 of the Code, H.R. 10 plans and individual retirement accounts
because such plans and accounts are generally tax-exempt and, therefore, not
only would not gain any additional benefit from the Portfolio's dividends being
tax-exempt but also such dividends would be taxable when distributed to the
beneficiary. In addition, the Money and Non-Money Market Municipal Portfolios
may not be an appropriate investment for entities which are "substantial users"
of facilities financed by private activity bonds or "related person" thereof.
"Substantial user" is defined under U.S. Treasury Regulations to include a
non-exempt person who regularly uses a part of such facilities in his trade or
business and (a) whose gross revenues derived with respect to the facilities
financed by the issuance of bonds are more than 5% of the total revenues derived
by all users of such facilities, (b) who occupies more than 5% of the entire
usable area of such facilities, or (c) for whom such facilities or a part
thereof were specifically constructed, reconstructed or acquired. "Related
persons" include certain related natural persons, affiliated corporations, a
partnership and its partners and an S corporation and its shareholders.
In order for the Money and Non-Money Market Municipal Portfolios to pay
exempt interest dividends for any taxable year, at the close of each quarter of
the taxable year at least 50% of the value of each such
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<PAGE> 304
Portfolio must consist of exempt interest obligations. Exempt interest dividends
distributed to shareholders are not included in the shareholder's gross income
for regular Federal income tax purposes. However, all shareholders required to
file a Federal income tax return are required to report the receipt of exempt
interest dividends and other exempt interest on their returns. Moreover, while
such dividends and interest are exempt from regular Federal income tax, they may
be subject to alternative minimum tax (currently imposed at the rates of 26% and
28% in the case of non-corporate taxpayers and at the rate of 20% in the case of
corporate taxpayers) in two circumstances. First, exempt interest dividends
derived from certain "private activity" bonds issued after August 7, 1986,
generally will constitute an item of tax preference for both corporate and non-
corporate taxpayers. Second, exempt interest dividends derived from all bonds,
regardless of the date of issue, must be taken into account by corporate
taxpayers in determining certain adjustments for alternative minimum tax
purposes. In addition, exempt interest dividends paid to corporate taxpayers may
in these two circumstances be subject to tax under the environmental tax under
Section 59A of the Code, which is imposed at the rate of 0.12% on the excess of
the modified alternative minimum taxable income of a corporate taxpayer over $2
million for taxable years beginning before January 1996. Receipt of exempt
interest dividends may result in collateral Federal income tax consequences to
certain other taxpayers, including financial institutions, property and casualty
insurance companies, individual recipients of Social Security or Railroad
Retirement benefits, and foreign corporations engaged in trade or business in
the United States. Prospective investors should consult their own tax advisors
as to such consequences.
If a Money or Non-Money Market Municipal Portfolio distributes exempt
interest dividends during the shareholder's taxable year, no deduction generally
will be allowed for any interest expense on indebtedness incurred to purchase or
carry shares of such Portfolio.
Distributions of investment company taxable income will be taxable (other
than interest on tax-exempt Municipal Obligations held by the Money Market and
Non-Money Market Municipal Portfolios and the possible allowance of the
dividends received deduction described below) to shareholders as ordinary
income, regardless of whether such distributions are paid in cash or are
reinvested in shares. Shareholders receiving any distribution from a Portfolio
in the form of additional shares will be treated as receiving a taxable
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date. The Money Market and Non-Money Market
Municipal Portfolios may each purchase securities that do not bear Tax-Exempt
Interest. Any income on such securities recognized by such a Portfolio will be
distributed and will be taxable to its shareholders.
Each Portfolio intends to distribute to shareholders any of its excess of
net long-term capital gain over net short-term capital loss ("net capital gain")
for each taxable year. Such gain is distributed as a capital gain dividend and
is taxable to shareholders as long-term capital gain, regardless of the length
of time the shareholder has held his shares, whether such gain was recognized by
the Portfolio prior to the date on which a shareholder acquired shares of the
Portfolio and whether the distribution was paid in cash or reinvested in shares.
In the case of corporate shareholders, distributions (other than capital
gain dividends) of a Non-Money Market Portfolio for any taxable year generally
qualify for the dividends received deduction to the extent of the gross amount
of "qualifying dividends" received by such Portfolio for the year. Generally, a
dividend will be treated as a "qualifying dividend" if it has been received from
a domestic corporation. Distributions of net investment income from debt
securities and of net realized short-term capital gains will be taxable to
shareholders as ordinary income and will not be treated as "qualifying
dividends" for purposes of the dividends received deduction.
Ordinary income of individuals will be taxable at a maximum nominal rate of
39.6%, but because of limitations on itemized deductions otherwise allowable and
the phase-out of personal exemptions, the maximum effective marginal rate of tax
for some taxpayers may be higher. An individual's long-term capital gains will
be taxable at a maximum rate of 28%. Capital gains and ordinary income of
corporate taxpayers are both taxed at a maximum nominal rate of 35%, but at
marginal rates of 39% for taxable income between $100,000 and $335,000 and 38%
for taxable income between $15,000,000 and $18,333,333. Investors should be
aware that any loss realized upon the sale, exchange or redemption of shares
held for six months or less will
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be treated as a long-term capital loss to the extent any capital gain dividends
have been paid with respect to such shares.
Generally, futures contracts held by a Portfolio at the close of the
Portfolio's taxable year will be treated for Federal income tax purposes as sold
for their fair market value on the last business day of such year, a process
known as "mark-to-market." Forty percent of any gain or loss resulting from such
constructive sale will be treated as short-term capital gain or loss and 60% of
such gain or loss will be treated as long-term capital gain or loss without
regard to the length of time a Portfolio holds the futures contract ("the 40-60
rule"). The amount of any capital gain or loss actually realized by a Portfolio
in a subsequent sale or other disposition of those futures contracts will be
adjusted to reflect any capital gain or loss taken into account by the Portfolio
in a prior year as a result of the constructive sale of the contracts. With
respect to futures contracts to sell, which will be regarded as parts of a
"mixed straddle" because their values fluctuate inversely to the values of
specific securities held by the Portfolio, losses as to such contracts to sell
will be subject to certain loss deferral rules which limit the amount of loss
currently deductible on either part of the straddle to the amount thereof which
exceeds the unrecognized gain (if any) with respect to the other part of the
straddle, and to certain wash sales regulations. Under short sales rules, which
also will be applicable, the holding period of the securities forming part of
the straddle will (if they have not been held for the long-term holding period)
be deemed not to begin prior to termination of the straddle. With respect to
certain futures contracts, deductions for interest and carrying charges will not
be allowed. Notwithstanding the rules described above, with respect to futures
contracts to sell which are properly identified as such, a Portfolio may make an
election which will exempt (in whole or in part) those identified futures
contracts from being treated for Federal income tax purposes as sold on the last
business day of the Fund's taxable year, but gains and losses will be subject to
such short sales, wash sales, loss deferral rules and the requirement to
capitalize interest and carrying charges. Under temporary regulations, a
Portfolio would be allowed (in lieu of the foregoing) to elect either (1) to
offset gains or losses from portions which are part of a mixed straddle by
separately identifying each mixed straddle to which such treatment applies, or
(2) to establish a mixed straddle account for which gains and losses would be
recognized and offset on a periodic basis during the taxable year. Under either
election, the 40-60 rule will apply to the net gain or loss attributable to the
futures contracts, but in the case of a mixed straddle account election, not
more than 50% of any net gain may be treated as long-term and no more than 40%
of any net loss may be treated as short-term. Options on futures contracts
generally receive Federal tax treatment similar to that described above.
Under the Federal income tax provisions applicable to regulated investment
companies, less than 30% of a company's gross income for a taxable year must be
derived from gains realized on the sale or other disposition of securities held
for less than three months. The Internal Revenue Service has issued a private
letter ruling with respect to certain other investment companies to the
following effect: gains realized from a futures contract to purchase or to sell
will be treated as being derived from a security held for three months or more
regardless of the actual period for which the contract is held if the gain
arises as a result of a constructive sale of the contract at the end of the
taxable year as described above, and will be treated as being derived from a
security held for less than three months only if the contract is terminated (or
transferred) during the taxable year (other than by reason of mark-to-market)
and less than three months elapses between the date the contract is acquired and
the termination date. Although private letter rulings are not binding on the
Internal Revenue Service with respect to the Portfolios, the Fund believes that
the Internal Revenue Service would take a comparable position with respect to
the Portfolios. In determining whether the 30% test is met for a taxable year,
increases and decreases in the value of a Portfolio's futures contracts and
securities that qualify as part of a "designated hedge," as defined in the Code,
may be netted.
Special rules govern the Federal income tax treatment of the portfolio
transactions of the International Equity and International Fixed Income
Portfolios and certain transactions of the other Portfolios that are denominated
in terms of a currency other than the U.S. dollar or determined by reference to
the value of one or more currencies other than the U.S. dollar. The types of
transactions covered by the special rules include the following: (i) the
acquisition of, or becoming the obligor under, a bond or other debt instrument
(including, to the extent provided in Treasury regulations, certain preferred
stock); (ii) the accruing of certain trade receivables and payables; (iii) the
entering into or acquisition of any forward contract or similar financial
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instruments; and (iv) the entering into or acquisition of any futures contract,
option or similar financial instrument, if such instrument is not
marked-to-market. The disposition of a currency other than the U.S. dollar by a
U.S. taxpayer also is treated as a transaction subject to the special currency
rules. With respect to such transactions, foreign currency gain or loss is
calculated separately from any gain or loss on the underlying transaction and is
normally taxable as ordinary gain or loss. A taxpayer may elect to treat as
capital gain or loss foreign currency gain or loss arising from certain
identified forward contracts that are capital assets in the hands of the
taxpayer and which are not part of a straddle ("Capital Asset Election"). In
accordance with Treasury regulations, certain transactions with respect to which
the taxpayer has not made the Capital Asset Election and that are part of a
"Section 988 hedging transaction" (as defined in the Code and the Treasury
regulations) are integrated and treated as a single transaction or otherwise
treated consistently for purposes of the Code. "Section 988 hedging
transactions" (as identified by such Treasury regulations) are not subject to
the mark-to-market or loss deferral rules under the Code. Some of the non-U.S.
dollar-denominated investments that the Portfolios may make (such as non-U.S.
dollar-denominated debt securities and obligations and preferred stock) and some
of the foreign currency contracts the International Equity and International
Fixed Income Portfolios may enter into will be subject to the special currency
rules described above. Gain or loss attributable to the foreign currency
component of transactions engaged in by a Portfolio which is not subject to the
special currency rules (such as foreign equity investments other than certain
preferred stocks) will be treated as capital gain or loss and will not be
segregated from the gain or loss on the underlying transaction.
In addition, certain forward foreign currency contracts held by a Portfolio
at the close of the Fund's taxable year will be subject to "mark-to-market"
treatment. If the Fund makes the Capital Asset Election with respect to such
contracts, the contract will be subject to the 40-60 rule described above.
Otherwise, such gain or loss will be ordinary in nature. To receive such Federal
income tax treatment, a foreign currency contract must meet the following
conditions: (1) the contract must require delivery of a foreign currency of a
type in which regulated futures contracts are traded or upon which the
settlement value of the contract depends; (2) the contract must be entered into
at arm's length at a price determined by reference to the price in the interbank
market; and (3) the contract must be traded in the interbank market. The
Treasury Department has broad authority to issue regulations under these
provisions respecting foreign currency contracts. As of the date of this
Statement of Additional Information the Treasury has not issued any such
regulations. Forward foreign currency contracts entered into by the
International Equity and International Fixed Income Portfolios also may result
in the creation of one or more straddles for Federal income tax purposes, in
which case certain loss deferral, short sales, and wash sales rules and
requirements to capitalize interest and carrying charges may apply.
If for any taxable year any Portfolio does not qualify as a regulated
investment company, all of its taxable income will be subject to tax at regular
corporate rates without any deduction for distributions to shareholders, and all
distributions (including amounts derived from interest on Municipal Obligations)
will be taxable as ordinary dividends to the extent of such Portfolio's current
and accumulated earnings and profits. Such distributions will be eligible for
the dividends received deduction in the case of corporate shareholders.
A 4% non-deductible excise tax is imposed on regulated investment companies
that fail to currently distribute specified percentages of their ordinary
taxable income and capital gain net income (excess of capital gains over capital
losses). Each Portfolio intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and any capital gain net income
prior to the end of the each calendar year to avoid liability for this excise
tax.
The Fund will be required in certain cases to withhold and remit to the
United States Treasury 31% of dividends and gross sale proceeds paid to any
shareholder (i) who has provided either an incorrect tax identification number
or no number at all, (ii) who is subject to backup withholding by the Internal
Revenue Service for failure to report the receipt of interest or dividend income
properly, or (iii) who has failed to certify to the Fund that he is not subject
to backup withholding or that he is an "exempt recipient."
Shareholders will be advised annually as to the Federal income tax
consequences of distributions made by the Portfolios each year.
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The foregoing general discussion of Federal income tax consequences is
based on the Code and the regulations issued thereunder as in effect on the date
of this Statement of Additional Information. Future legislative or
administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.
Although each Portfolio expects to qualify as a "regulated investment
company" and to be relieved of all or substantially all Federal income taxes,
depending upon the extent of its activities in states and localities in which
its offices are maintained, in which its agents or independent contractors are
located or in which it is otherwise deemed to be conducting business, each
Portfolio may be subject to the tax laws of such states or localities.
Shareholders should consult their tax advisors about state and local tax
consequences, which may differ from the Federal income tax consequences
described above.
ADDITIONAL INFORMATION CONCERNING SHARES
Shares of the Fund have noncumulative voting rights and, accordingly, the
holders of more than 50% of the Fund's outstanding shares (irrespective of
class) may elect all of the trustees. Shares have no preemptive rights and only
such conversion and exchange rights as the Board may grant in its discretion.
When issued for payment as described in the Prospectus, shares will be fully
paid and non-assessable by the Fund.
There will normally be no meetings of shareholders for the purpose of
electing trustees unless and until such time as required by law. At that time,
the trustees then in office will call a shareholders' meeting to elect trustees.
Except as set forth above, the trustees shall continue to hold office and may
appoint successor trustees. The Fund's Declaration of Trust provides that
meetings of the shareholders of the Fund shall be called by the trustees upon
the written request of shareholders owning at least 10% of the outstanding
shares entitled to vote.
The Funds' Declaration of Trust authorizes the Board of Trustees, without
shareholder approval (unless otherwise required by applicable law), to: (i) sell
and convey the assets belonging to a class of shares to another management
investment company for consideration which may include securities issued by the
purchaser and, in connection therewith, to cause all outstanding shares of such
class to be redeemed at a price which is equal to their net asset value and
which may be paid in cash or by distribution of the securities or other
consideration received from the sale and conveyance; (ii) sell and convert the
assets belonging to one or more classes of shares into money and, in connection
therewith, to cause all outstanding shares of such class to be redeemed at their
net asset value; or (iii) combine the assets belonging to a class of shares with
the assets belonging to one or more other classes of shares if the Board of
Trustees reasonably determines that such combination will not have a material
adverse effect on the shareholders of any class participating in such
combination and, in connection therewith, to cause all outstanding shares of any
such class to be redeemed or converted into shares of another class of shares at
their net asset value. However, the exercise of such authority may be subject to
certain restrictions under the 1940 Act. The Board of Trustees may authorize the
termination of any class of shares after the assets belonging to such class have
been distributed to its shareholders.
MISCELLANEOUS
COUNSEL. The law firm of Drinker Biddle & Reath, 1345 Chestnut Street,
Philadelphia, Pennsylvania 19107-3496, serves as the Fund's counsel.
INDEPENDENT ACCOUNTANTS. Coopers & Lybrand, L.L.P., 2400 Eleven Penn
Center, Philadelphia, Pennsylvania 19103, serves as the Fund's independent
accountants.
FIVE PERCENT OWNERS. The name, address and percentage ownership of each
person that on September 29, 1995 owned of record or beneficially 5% or more of
the outstanding shares of a Portfolio which had commenced operations as of that
date was as follows:
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<PAGE> 308
Money Market Portfolio: BHC Securities, 2005 Market St., Phila., PA 19103,
6.0%; PNC Bank, 200 Stevens Dr., Suite 260, Lester, PA 19113, 85.1%; Government
Money Market Portfolio: PNC Bank, 200 Stevens Dr., Suite 260, Lester, PA 19113,
76.5%; PNC Bank Pittsburgh, 960 Ft. Duquesne Blvd., Pittsburgh, PA 15222, 5.0%;
Municipal Money Market Portfolio: PNC Bank Pittsburgh, 960 Ft. Duquesne Blvd.,
Pittsburgh, PA 15222, 12.1%; PNC Bank Ohio, 201 E. Fifth St., Cincinnati, OH
45202, 8.1%; PNC Bank, Saxon and Co., 200 Stevens Dr., Suite 260, Lester, PA
19113, 73.1%; Ohio Municipal Money Market Portfolio: BHC Securities, 2005 Market
St., Phila., PA 19103, 26.4%; PNC Bank, 200 Stevens Dr., Suite 260, Lester, PA
19113, 58.9%; North Carolina Municipal Money Market Portfolio: Branch Banking &
Trust Company, P.O. Box 1847, Wilson, N.C. 27893, 5.6%; Centura Bank, P.O. Box
1220, Rocky Mount, NC 27802, 13.1%; United Carolina Bank Whiteville, P.O. Drawer
632, Whiteville, NC 28472, 22.3%; First Charter National Bank, P.O. Box 228,
Concord, NC 28926, 13.1%; McWood & Co., First Citizens Bank, P.O. Box 29522,
Raleigh, NC 27626, 13.0%; North Carolina Trust Co., 301 North Elm St.,
Greensboro, NC 27402, 17.0%; Pennsylvania Municipal Money Market Portfolio: BHC
Securities, 2005 Market St., Phila., PA 19103, 5.6%; PNC Bank, 200 Stevens Dr.,
Suite 260, Lester, PA 19113, 85.3%; Virginia Municipal Money Market Portfolio:
Oldom & Co., First Virginia Bank Inc., 6400 Arlington Blvd., Falls Church, VA
22042, 77.4%; Warritrust & Company, F&M Bank, P.O. Box 93, Warrenton, VA 22186,
5.8%; Piedmont Company, Piedmont Trust Bank, P.O. Box 4751, Martinsville, VA
24115, 9.9%; Managed Income Portfolio: PNC Bank, 200 Stevens Dr., Suite 260,
Lester, PA 19113, 92.3; Tax-Free Income Portfolio: BHC Securities, 2005 Market
St., Phila., PA 19103, 15.5%; PNC Bank, 200 Stevens Dr., Suite 260, Lester, PA
19113, 41.5%; Ohio Tax-Free Income Portfolio: BHC Securities, 2005 Market St.,
Phila., PA 19103, 32.3%; PNC Bank, 200 Stevens Dr., Suite 260, Lester, PA 19113,
60.6%; Pennsylvania Tax-Free Income: BHC Securities, 100 N. 20th St., Phila., PA
19103, 46.4%; PNC Bank, 200 Stevens Dr., Suite 260, Lester, PA 19113, 24.9%;
Intermediate Government Portfolio: PNC Bank, 200 Stevens Dr., Suite 260, Lester,
PA 19113, 91.2%; Short-Term Bond Portfolio: Medical Practice Account, 1020
Walnut St., Phila., PA 19107, 14.3%; PNC Bank, 200 Stevens Dr., Suite 260,
Lester, PA 19113, 83.7%; Intermediate-Term Bond Portfolio: PNC Bank, 200 Stevens
Dr., Suite 260, Lester, PA 19113, 92.9%; Government Income Portfolio: BHC
Securities, 100 N. 20th St., Phila., PA 19103, 20.3%; International Emerging
Markets Portfolio: First Charter National Bank, P.O. Box 228, Concord, NC 28026,
5.6%; PNC Bank, 200 Stevens Dr., Suite 260, Lester, PA 19113, 88.7%; Growth
Equity Portfolio: PNC Bank, 200 Stevens Dr., Suite 260, Lester, PA 19113, 96.4%;
Index Equity Portfolio: PNC Bank, 200 Stevens Dr., Suite 260, Lester, PA 19113,
91.5%; Small Cap Value Equity Portfolio: BHC Securities, 100 N. 20th St.,
Phila., PA 19103, 5.0%; PNC Bank, 200 Stevens Dr., Suite 260, Lester, PA 19113,
81.6%; International Equity Portfolio: PNC Bank, 200 Stevens Dr., Suite 260,
Lester, PA 19113, 91.6%; Balanced Portfolio: BHC Securities, 100 N. 20th St.,
Phila., PA 19103, 24.9%; PNC Bank, 200 Stevens Dr., Suite 260, Lester, PA 19113,
60.5%; Value Equity Portfolio: PNC Bank, 200 Stevens Dr., Suite 260, Lester, PA
19113, 91.1%; Small Cap Growth Equity Portfolio: PNC Bank, 200 Stevens Dr.,
Suite 260, Lester, PA 19113, 90.1%; and Core Equity Portfolio: PNC Bank, 200
Stevens Dr., Suite 260, Lester, PA 19113, 98.1%.
On September 29, 1995, PNC Bank held of record approximately 79% of the
Fund's outstanding shares, and may be deemed a controlling person of the Fund
under the 1940 Act. PNC Bank is a national bank organized under the laws of the
United States. All of the capital stock of PNC Bank is owned by PNC Bancorp,
Inc. All of the capital stock of PNC Bancorp, Inc. is owned by PNC Bank Corp., a
publicly-held bank holding company.
BANKING LAWS. Banking laws and regulations currently prohibit a bank
holding company registered under the Federal Bank Holding Company Act of 1956 or
any bank or non-bank affiliate thereof from sponsoring, organizing, controlling
or distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks generally
from underwriting securities, but such banking laws and regulations do not
prohibit such a holding company or affiliate or banks generally from acting as
investment adviser, administrator, transfer agent or custodian to such an
investment company, or from purchasing shares of such a company as agent for and
upon the order of customers. PIMC, BlackRock, PCM, PEAC and PNC Bank are subject
to such banking laws and regulations.
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PIMC, BlackRock, PCM, PEAC and PNC Bank believe they may perform the
services for the Fund contemplated by their respective agreements with the Fund
without violation of applicable banking laws or regulations. It should be noted,
however, that there have been no cases deciding whether bank and non-bank
subsidiaries of a registered bank holding company may perform services
comparable to those that are to be performed by these companies, and future
changes in either Federal or state statutes and regulations relating to
permissible activities of banks and their subsidiaries or affiliates, as well as
further judicial or administrative decisions or interpretations of present and
future statutes and regulations, could prevent these companies from continuing
to perform such services for the Fund. If such were to occur, it is expected
that the Board of Trustees would recommend that the Fund enter into new
agreements or would consider the possible termination of the Fund. Any new
advisory or sub-advisory agreement would be subject to shareholder approval.
SHAREHOLDER APPROVALS. As used in this Statement of Additional Information
and in the Prospectus, a "majority of the outstanding shares" of a class, series
or Portfolio means, with respect to the approval of an investment advisory
agreement, a distribution plan or a change in a fundamental investment policy,
the lesser of (1) 67% of the shares of the particular class, series or Portfolio
represented at a meeting at which the holders of more than 50% of the
outstanding shares of such class, series or Portfolio are present in person or
by proxy, or (2) more than 50% of the outstanding shares of such class, series
or Portfolio.
THE FUND'S NAME. PNC Bank Corp. is the owner of the registered service
mark "PNC." The Fund has entered into a licensing agreement with respect to its
non-exclusive use of "PNC," under which it has agreed not to claim any interest
to the name "PNC" except under the agreement. The license will terminate if it
is breached by the Fund or if neither PIMC nor any of PNC Bank Corp.'s
affiliates continues as the investment adviser or manager of the Fund.
FINANCIAL STATEMENTS
The Fund's Annual Report to Shareholders for the fiscal year ended
September 30, 1994 (the "1994 Annual Report") and its Semi-Annual Report to
Shareholders dated March 31, 1995 (the "1995 Semi-Annual Report") are
incorporated by reference in this Statement of Additional Information. The
financial statements and notes thereto in the 1994 Annual Report and the 1995
Semi-Annual Report are incorporated in this Statement of Additional Information
by reference. The financial statements included in the 1994 Annual Report have
been audited by the Fund's independent accountants, Coopers & Lybrand, L.L.P.,
whose reports thereon are incorporated herein by reference. Such financial
statements have been incorporated herein in reliance upon such report given upon
their authority as experts in accounting and auditing. Additional copies of the
1994 Annual Report and the 1995 Semi-Annual Report may be obtained at no charge
by telephoning the Distributor at the telephone number appearing on the front
page of this Statement of Additional Information.
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APPENDIX A
COMMERCIAL PAPER RATINGS
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered short-term in the relevant
market. The following summarizes the rating categories used by Standard and
Poor's for commercial paper:
"A-1" -- Issue's degree of safety regarding timely payment is strong. Those
issues determined to possess extremely strong safety characteristics are denoted
"A-1+."
"A-2" -- Issue's capacity for timely payment is satisfactory. However, the
relative degree of safety is not as high as for issues designated "A-1."
"A-3" -- Issue has an adequate capacity for timely payment. It is, however,
somewhat more vulnerable to the adverse effects of changes and circumstances
than an obligation carrying a higher designation.
"B" -- Issue has only a speculative capacity for timely payment.
"C" -- Issue has a doubtful capacity for payment.
"D" -- Issue is in payment default.
Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of 9 months. The following summarizes the rating categories used by
Moody's for commercial paper:
"Prime-1" -- Issuer or related supporting institutions are considered to
have a superior capacity for repayment of short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well established industries; high
rates of return on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protection; broad margins in earning
coverage of fixed financial charges and high internal cash generation; and well
established access to a range of financial markets and assured sources of
alternate liquidity.
"Prime-2" -- Issuer or related supporting institutions are considered to
have a strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternative liquidity is
maintained.
"Prime-3" -- Issuer or related supporting institutions have an acceptable
capacity for repayment of short-term promissory obligations. The effects of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.
"Not Prime" -- Issuer does not fall within any of the Prime rating
categories.
The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D1+," "D-1" and "D-1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper:
"D-1+" -- Debt possesses highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.
"D-1" -- Debt possesses very high certainty of timely payment. Liquidity
factors are excellent and supported by good fundamental protection factors. Risk
factors are minor.
A-1
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"D-1-" -- Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
"D-2" -- Debt possesses good certainty of timely payment. Liquidity factors
and company fundamentals are sound. Although ongoing funding needs may enlarge
total financing requirements, access to capital markets is good. Risk factors
are small.
"D-3" -- Debt possesses satisfactory liquidity, and other protection
factors qualify issue as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.
"D-4" -- Debt possesses speculative investment characteristics. Liquidity
is not sufficient to ensure against disruption in debt service. Operating
factors and market access may be subject to a high degree of variation.
"D-5" -- Issuer has failed to meet scheduled principal and/or interest
payments.
Fitch short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years. The following
summarizes the rating categories used by Fitch for short-term obligations:
"F-1+" -- Securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of assurance
for timely payment.
"F-1" -- Securities possess very strong credit quality. Issues assigned
this rating reflect an assurance of timely payment only slightly less in degree
than issues rated "F-1+."
"F-2" -- Securities possess good credit quality. Issues assigned this
rating have a satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as the "F-1+" and "F-1" categories.
"F-3" -- Securities possess fair credit quality. Issues assigned this
rating have characteristics suggesting that the degree of assurance for timely
payment is adequate; however, near-term adverse changes could cause these
securities to be rated below investment grade.
"F-S" -- Securities possess weak credit quality. Issues assigned this
rating have characteristics suggesting a minimal degree of assurance for timely
payment and are vulnerable to near-term adverse changes in financial and
economic conditions.
"D" -- Securities are in actual or imminent payment default.
Fitch may also use the symbol "LOC" with its short-term ratings to indicate
that the rating is based upon a letter of credit issued by a commercial bank.
Thomson BankWatch short-term ratings assess the likelihood of an untimely
or incomplete payment of principal or interest of unsubordinated instruments
having a maturity of one year or less which is issued by United States
commercial banks, thrifts and non-bank banks; non-United States banks; and
broker-dealers. The following summarizes the ratings used by Thomson BankWatch:
"TBW-1" -- This designation represents Thomson BankWatch's highest rating
category and indicates a very high degree of likelihood that principal and
interest will be paid on a timely basis.
"TBW-2" -- This designation indicates that while the degree of safety
regarding timely payment of principal and interest is strong, the relative
degree of safety is not as high as for issues rated "TBW-1."
"TBW-3" -- This designation represents the lowest investment grade category
and indicates that while the debt is more susceptible to adverse developments
(both internal and external) than obligations with higher ratings, capacity to
service principal and interest in a timely fashion is considered adequate.
"TBW-4" -- This designation indicates that the debt is regarded as
non-investment grade and therefore speculative.
IBCA assesses the investment quality of unsecured debt with an original
maturity of less than one year which is issued by bank holding companies and
their principal bank subsidiaries. The following summarizes the rating
categories used by IBCA for short-term debt ratings:
A-2
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"A1+" -- Obligations supported by the highest capacity for timely
repayment.
"A1" -- Obligations are supported by the highest capacity for timely
repayment.
"A2" -- Obligations are supported by a satisfactory capacity for timely
repayment, although such capacity may be susceptible to adverse changes in
business, economic or financial conditions.
"A3" -- Obligations are supported by a satisfactory capacity for timely
repayment. Such capacity is more susceptible to adverse changes in business,
economic or financial conditions than for obligations in higher categories.
"B" -- Obligations for which the capacity for timely repayment is
susceptible to adverse changes in business, economic or financial conditions.
"C" -- Obligations for which there is an inadequate capacity to ensure
timely repayment.
"D" -- Obligations which have a high risk of default or which are currently
in default.
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:
"AAA" -- This designation represents the highest rating assigned by
Standard & Poor's to a debt obligation and indicates an extremely strong
capacity to pay interest and repay principal.
"AA" -- Debt is considered to have a very strong capacity to pay interest
and repay principal and differs from AAA issues only in small degree.
"A" -- Debt is considered to have a strong capacity to pay interest and
repay principal although such issues are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt in
higher-rated categories.
"BBB" -- Debt is regarded as having an adequate capacity to pay interest
and repay principal. Whereas such issues normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.
"BB," "B," "CCC," "CC" and "C" -- Debt is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "C" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
"BB" -- Debt has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
"B" -- Debt has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The "B" rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied "BB" or "BB-"
rating.
"CCC" -- Debt has a currently identifiable vulnerability to default, and is
dependent upon favorable business, financial and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The "CCC" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"B" or "B-" rating.
"CC" -- This rating is typically applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" rating.
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"C" -- This rating is typically applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC-" debt rating. The "C" rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
"CI" -- This rating is reserved for income bonds on which no interest is
being paid.
"D" -- Debt is in payment default. This rating is used when interest
payments or principal payments are not made on the date due, even if the
applicable grace period has not expired, unless S & P believes such payments
will be made during such grace period. "D" rating is also used upon the filing
of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-) -- The ratings from "AA" through "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
"r" -- This rating is attached to highlight derivative, hybrid, and certain
other obligations that S & P believes may experience high volatility or high
variability in expected returns due to non-credit risks. Examples of such
obligations are: securities whose principal or interest return is indexed to
equities, commodities, or currencies; certain swaps and options; and interest
only and principal only mortgage securities.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" -- Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
"Aa" -- Bonds are judged to be of high quality by all standards. Together
with the "Aaa" group they comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in "Aaa" securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in "Aaa" securities.
"A" -- Bonds possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
"Baa" -- Bonds considered medium-grade obligations, i.e., they are neither
highly protected nor poorly secured. Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have speculative
characteristics as well.
"Ba," "B," "Caa," "Ca" and "C" -- Bonds that possess one of these ratings
provide questionable protection of interest and principal ("Ba" indicates some
speculative elements; "B" indicates a general lack of characteristics of
desirable investment; "Caa" represents a poor standing; "Ca" represents
obligations which are speculative in a high degree; and "C" represents the
lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be in default.
Con. (---) -- Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operation experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
Moody's applies numerical modifiers 1, 2 and 3 in each generic
classification from "Aa" to "B" in its bond rating system. The modifier 1
indicates that the issuer ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issuer ranks at the lower end of its generic rating category.
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The following summarizes the long-term debt ratings used by Duff & Phelps
for corporate and municipal long-term debt:
"AAA" -- Debt is considered to be of the highest credit quality. The risk
factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
"AA" -- Debt is considered of high credit quality. Protection factors are
strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
"A" -- Debt possesses protection factors which are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.
"BBB" -- Debt possesses below average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
"BB," "B," "CCC," "DD" and "DP" -- Debt that possesses one of these ratings
is considered to be below investment grade. Although below investment grade,
debt rated "BB" is deemed likely to meet obligations when due. Debt rated "B"
possesses the risk that obligations will not be met when due. Debt rated "CCC"
is well below investment grade and has considerable uncertainty as to timely
payment of principal, interest or preferred dividends. Debt rated "DD" is a
defaulted debt obligation, and the rating "DP" represents preferred stock with
dividend arrearages.
To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.
The following summarizes the highest four ratings used by Fitch for
corporate and municipal bonds:
"AAA" -- Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
"AA" -- Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA." Because bonds rated
in the "AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated "F-1+."
"A" -- Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
"BBB" -- Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have an adverse impact on these bonds, and
therefore, impair timely payment. The likelihood that the ratings of these bonds
will fall below investment grade is higher than for bonds with higher ratings.
"BB," "B," "CCC," "CC," "C," "DDD," "DD" and "D" -- Bonds that possess one
of these ratings are considered by Fitch to be speculative investments. The
ratings "BB" to "C" represent Fitch's assessment of the likelihood of timely
payment of principal and interest in accordance with the terms of obligation for
bond issues not in default. For defaulted bonds, the rating "DDD" to "D" is an
assessment of the ultimate recovery value through reorganization or liquidation.
To provide more detailed indications of credit quality, the Fitch ratings
from and including "AA" to "C" may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major rating categories.
IBCA assesses the investment quality of unsecured debt with an original
maturity of more than one year which is issued by bank holding companies and
their principal bank subsidiaries. The following summarizes the rating
categories used by IBCA for long-term debt ratings:
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"AAA" -- Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk substantially.
"AA" -- Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial.
Adverse changes in business, economic or financial conditions may increase
investment risk albeit not very significantly.
"A" -- Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business, economic or financial conditions may lead to
increased investment risk.
"BBB" -- Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
adequate, although adverse changes in business, economic or financial conditions
are more likely to lead to increased investment risk than for obligations in
higher categories.
"BB," "B," "CCC," "CC" and "C" -- Obligations are assigned one of these
ratings where it is considered that speculative characteristics are present.
"BB" represents the lowest degree of speculation and indicates a possibility of
investment risk developing. "C" represents the highest degree of speculation and
indicates that the obligations are currently in default.
IBCA may append a rating of plus (+) or minus (-) to a rating to denote
relative status within major rating categories.
Thomson BankWatch assesses the likelihood of an untimely repayment of
principal or interest over the term to maturity of long term debt and preferred
stock which are issued by United States commercial banks, thrifts and non-bank
banks; non-United States banks; and broker-dealers. The following summarizes the
rating categories used by Thomson BankWatch for long-term debt ratings:
"AAA" -- This designation represents the highest category assigned by
Thomson BankWatch to long-term debt and indicates that the ability to repay
principal and interest on a timely basis is extremely high.
"AA" -- This designation indicates a very strong ability to repay principal
and interest on a timely basis with limited incremental risk compared to issues
rated in the highest category.
"A" -- This designation indicates that the ability to repay principal and
interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
"BBB" -- This designation represents Thomson BankWatch's lowest investment
grade category and indicates an acceptable capacity to repay principal and
interest. Issues rated "BBB" are, however, more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
"BB," "B," "CCC" and "CC," -- These designations are assigned by Thomson
BankWatch to non-investment grade long-term debt. Such issues are regarded as
having speculative characteristics regarding the likelihood of timely payment of
principal and interest. "BB" indicates the lowest degree of speculation and "CC"
the highest degree of speculation.
"D" -- This designation indicates that the long-term debt is in default.
PLUS (+) OR MINUS (-) -- The ratings from "AAA" through "CC" may include a
plus or minus sign designation which indicates where within the respective
category the issue is placed.
MUNICIPAL NOTE RATINGS
A Standard and Poor's rating reflects the liquidity concerns and market
access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's Ratings Group for municipal
notes:
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"SP-1" -- The issuers of these municipal notes exhibit very strong or
strong capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics are given a plus (+) designation.
"SP-2" -- The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest.
"SP-3" -- The issuers of these municipal notes exhibit speculative capacity
to pay principal and interest.
Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:
"MIG-1"/"VMIG-1" -- Loans bearing this designation are of the best quality,
enjoying strong protection by established cash flows, superior liquidity support
or demonstrated broadbased access to the market for refinancing.
"MIG-2"/"VMIG-2" -- Loans bearing this designation are of high quality,
with margins of protection ample although not so large as in the preceding
group.
"MIG-3"/"VMIG-3" -- Loans bearing this designation are of favorable
quality, with all security elements accounted for but lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well established.
"MIG-4"/"VMIG-4" -- Loans bearing this designation are of adequate quality,
carrying specific risk but having protection commonly regarded as required of an
investment security and not distinctly or predominantly speculative.
"SG" -- Loans bearing this designation are of speculative quality and lack
margins of protection.
Fitch and Duff & Phelps use the short-term ratings described under
Commercial Paper Ratings for municipal notes.
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