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COMPASS CAPITAL FUNDS
ANNUAL REPORT
TO SHAREHOLDERS
SEPTEMBER 30, 1996
BOND
PORTFOLIOS
NOT FDIC INSURED
(BULLET)MAY LOSE VALUE
(BULLET)NO BANK GUARANTEE
<PAGE>
COMPASS CAPITAL FUNDS
BOND PORTFOLIOS
- ---------------
(BULLET) Short Government Bond (BULLET) International Bond
(BULLET) Intermediate Government Bond (BULLET) Tax-Free Income
(BULLET) Intermediate Bond (BULLET) Pennsylvania Tax-Free Income
(BULLET) Core Bond (BULLET) New Jersey Tax-Free Income
(BULLET) Government Income (BULLET) Ohio Tax-Free Income
(BULLET) Managed Income
TABLE OF CONTENTS
- -----------------
Letter from the President ................................................. 1
Portfolio Summaries
Short Government Bond ............................................... 2
Intermediate Government Bond ........................................ 3
Intermediate Bond ................................................... 4
Core Bond ........................................................... 5
Government Income ................................................... 6
Managed Income ...................................................... 7
International Bond .................................................. 8
Tax-Free Income ..................................................... 9
Pennsylvania Tax-Free Income ........................................ 10
New Jersey Tax-Free Income .......................................... 11
Ohio Tax-Free Income ................................................ 12
Schedules of Investments/Statements of Assets
and Liabilities .....................................................14-45
Portfolio Financial Statements
Statements of Operations ............................................46-47
Statements of Changes in Net Assets .................................48-51
Financial Highlights ................................................52-59
Notes to Financial Statements ............................................. 60
Report of Independent Accountants ......................................... 75
<PAGE>
PRESIDENT'S LETTER COMPASS CAPITAL FUNDS
November 15, 1996
Dear Shareholder,
We are pleased to present this annual report of the Compass Capital Funds.
We hope that you will agree that the enhancements made to our shareholder
reports are helpful.The most important change is the creation of individual
portfolio summaries that should make it easier for you to find out about
investment activity in your portfolio.Equally important is the addition of a
chart that illustrates how all classes of each portfolio performed compared to
its benchmark, making it easier to evaluate performance.These changes - designed
to help you stay informed about your investment - are part of our continuing
effort to improve how we communicate with you. We hope you find them useful now
and in the future.
WHAT HAPPENED IN THE ECONOMY AND FINANCIAL MARKETS
Over the last twelve months, the financial markets have rewarded most
investors with remarkable gains.The stock market, reflecting the continued
strength of corporate earnings, was up over 26% - extending the bull market to
an unprecedented sixth year and making it one of the longest bull markets in the
post-World War II era.Similarly the bond market, reflecting moderate economic
growth and relatively low inflation produced returns of over 4%. So, whether
invested in stocks or bonds, most investors have had a great year.
OUR THOUGHTS ON THE ECONOMY
We believe that favorable long-term trends of slower growth and low
inflation should give the stock and bond markets reason to advance in the coming
year. However, with the markets having registered dramatic gains over the last
couple of years and short-term volatility increasing, it may be unrealistic to
expect the stock and bond markets to replicate that performance over the year.
We believe stock market gains of 8-10% should still be viewed as excellent.
WHAT THIS MEANS TO SHAREHOLDERS
More than ever, we would like to remind all our shareholders to stay
focused on the long term and to use prudence when assessing an investment
strategy. Additionally, it is important for investors to keep in mind that a
regular program of investing in diversified portfolios of stocks and bonds may
prove successful and actually reduce the overall level of risk to their
investment.
Finally, with our portfolio managers maintaining a pure investment style -
the strict adherence to investment policy guidelines - investors are assured
that they are getting what they expected when making their investment. As a
result, we are confident that Compass Capital Funds give investors the best
opportunity to match their expectations with actual investment results.
On the following pages, you will find a summary of the portfolio's
performance in light of the recent economic environment. We would like to thank
you for your confidence in CompassCapital Funds and we look forward to helping
you reach your long-term investment goals.
Sincerely,
/s/ KAREN H. SABATH
Karen H. Sabath
President, Compass Capital Group, Inc.
1
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COMPASS CAPITAL FUNDS
SHORT GOVERNMENT BOND PORTFOLIO SUMMARY
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT IN THE
SHORT GOVERNMENT BOND PORTFOLIO AND
THE MERRILL 1-3 YEAR TREASURY INDEX FROM
INCEPTION AND AT EACH FISCAL YEAR END
PORTFOLIO SUB-ADVISOR:
BlackRock Financial Management, Inc.
TOTAL NET ASSETS (9/30/96): $228.5 million
PERFORMANCE BENCHMARK:
Merrill Lynch 1-3 Year Treasury Index
INVESTMENT APPROACH:
Pursues a total return that exceeds the total return of its benchmark while
providing monthly income by investing in securities rated AAA by a major
rating agency or issued by the U.S. government or government agency. The
Portfolio emphasizes securities with maturities from 3 to 5 years.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET) The Manager reduced overall mortgage exposure, predominately selling
newly issued pass-through securities and Treasury-indexed adjustable-
rate mortgages. Remaining core mortgage holdings emphasize seasoned,
or older issue, bonds, which are expected to perform well should
interest rates fall significantly.
(BULLET) Proceeds from these sales were recycled into U.S. Treasuries and agency
bonds and fixed- and floating-rate asset-backed securities.
CHART
[GRAPHIC OMITTED]
Plot points for Short Government Bond Portfolio Summary are as follows:
Institutional Service Investor A Merrill 1-3 Year
Class Class Class Treasury Index
7/17/92 $10,000 $10,000 $ 9,700 $10,000
6/30/93 $10,464 $10,464 $10,150 $10,531
6/30/94 $10,709 $10,709 $10,388 $10,700
6/30/95 $11,519 $11,519 $11,173 $11,529
3/31/96 $12,017 $12,008 $11,643 $12,037
9/30/96 $12,345 $12,312 $11,928 $12,360
For the period ended September 30, 1996. Past Performance is not
predictive of future results.
- -------------------------------------------------
Average Annual Total Return
---------------------------
1 Year From Inception
------ --------------
Institutional Class 4.89% 5.13%
Service Class 4.64% 5.07%
Investor A Class 1.37% 4.28%
- --------------------------------------------------
The performance information above includes information relating to each class of
the Portfolio since the commencement of operations of the Portfolio, rather than
the date such class was introduced. The performance information of Service and
Investor A shares prior to their introduction dates on 1/13/96 does not reflect
shareholder servicing, shareholder processing and distribution fees and certain
other expenses borne by Service and Investor A shares which, if reflected, would
change the performance quoted with respect to such periods. If these expenses
had been reflected in the performance information, then the performance of
Service and Investor A shares for such periods would be reduced. Performance
information presented for Service and Investor A shares prior to their
introduction is based upon historical expenses of the predecessor class
(Institutional shares) which do not reflect the actual expenses that an investor
would have incurred as a holder of Service or Investor A shares of the
Portfolio.
2
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COMPASS CAPITAL FUNDS
INTERMEDIATE GOVERNMENT BOND PORTFOLIO SUMMARY
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
INTERMEDIATE GOVERNMENT BOND PORTFOLIO AND THE
LEHMAN INTERMEDIATE GOVERNMENT INDEX FROM INCEPTION
AND AT EACH FISCAL YEAR END
PORTFOLIO SUB-ADVISOR:
BlackRock Financial Management, Inc.
TOTAL NET ASSETS (9/30/96): $179.7 million
PERFORMANCE BENCHMARK:
Lehman Intermediate Government Index
INVESTMENT APPROACH:
Pursues current income consistent with the preservation of capital by
investing in securities rated AAA by a major rating agency or issued by the
U.S. government or government agency. The Portfolio emphasizes securities
with maturities from 5 to 10 years.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET) The Manager reduced overall mortgage exposure, predominately
selling newly issued pass-through securities and Treasury-indexed
adjustable-rate mortgages. Remaining core mortgage holdings
emphasize seasoned, or older issue, bonds, which are expected to
perform well should interest rates fall significantly.
(BULLET) Proceeds from these sales were recycled into U.S. Treasuries and
agency bonds and fixed- and floating-rate asset-backed
securities.
CHART
[GRAPHIC OMITTED]
Plot points for Intermediate Government Bond Portfolio Summary are as follows:
Lehman
Intermediate
Institutional Service Investor A Government
Class Class Class Index
4/20/92 $10,000 $10,000 $ 9,600 $10,000
9/30/92 $10,714 $10,714 $10,285 $10,746
9/30/93 $11,452 $11,447 $10,989 $11,567
9/30/94 $11,099 $11,069 $10,620 $11,393
9/30/95 $12,240 $12,172 $11,678 $12,605
9/30/96 $12,831 $12,722 $12,189 $13,248
For the period ended September 30, 1996. Past Performance is not
predictive of future results.
- ---------------------------------------------------
Average Annual Total Return
---------------------------
1 Year From Inception
------ --------------
Institutional Class 4.82% 28.31%
Service Class 4.51% 27.22%
Investor A Class 0.16% 21.89%
- ---------------------------------------------------
The performance information above includes information relating to each class of
the Portfolio since the commencement of operations of the Portfolio, rather than
the date such class was introduced. The performance information of Service and
Investor A shares prior to their introduction dates on 7/29/93 and 5/11/92,
respectively, does not reflect shareholder servicing, shareholder processing and
distribution fees and certain other expenses borne by Service and Investor A
shares which, if reflected, would change the performance quoted for such
periods. If these expenses had been reflected in the performance information,
then the performance of Service and Investor A shares for such periods would be
reduced. Performance information presented for Service and Investor A shares
prior to their introduction is based upon historical expenses of the predecessor
class (Institutional shares) which do not reflect the actual expenses that an
investor would have incurred as a holder of Service or Investor A shares of the
Portfolio.
3
<PAGE>
COMPASS CAPITAL FUNDS
INTERMEDIATE BOND PORTFOLIO SUMMARY
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT IN THE INTERMEDIATE BOND
PORTFOLIO AND THE LEHMAN INTERMEDIATE GOVERNMENT/CORPORATE
INDEX FROM INCEPTION AND AT EACH FISCAL YEAR END
PORTFOLIO SUB-ADVISOR:
BlackRock Financial Management, Inc.
TOTAL NET ASSETS (9/30/96): $254.2 million
PERFORMANCE BENCHMARK:
Lehman Intermediate Government/Corporate Index
INVESTMENT APPROACH:
Pursues current income consistent with the preservation of capital by
investing in securities rated BBB or higher by a major rating agency or
deemed by the Manager to be of comparable credit quality. The Portfolio
emphasizes securities with maturities from 5 to 10 years.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET) The Manager reduced overall mortgage exposure, predominately
selling newly issued pass-through securities and Treasury-indexed
adjustable-rate mortgages. Remaining core mortgage holdings
emphasize seasoned, or older issue, bonds, which are expected to
perform well should interest rates fall significantly.
(BULLET) The Manager also reduced total corporate bond exposure during
the third quarter, paring cyclical names while adding more
defensive issues.
(BULLET) Proceeds from these sales were recycled into U.S. Treasuries
and agency bonds and fixed- and floating-rate asset-backed
securities.
CHART
[GRAPHIC OMITTED]
Plot points for Intermediate Bond Portfolio Summary are as follows:
Lehman
Intermediate
Institutional Service Investor A Government/
Class Class Class Corporate Index
9/17/93 $10,000 $10,000 $ 9,600 $10,000
9/30/93 $10,010 $10,010 $ 9,610 $10,021
9/30/94 $ 9,658 $ 9,639 $ 9,241 $ 9,854
9/30/95 $10,697 $10,647 $10,195 $10,965
9/30/96 $11,243 $11,147 $10,680 $11,529
For the period ended September 30, 1996. Past Performance is not
predictive of future results.
- ---------------------------------------------------
Average Annual Total Return
---------------------------
1 Year From Inception
------ --------------
Institutional Class 5.10% 3.93%
Service Class 4.79% 3.64%
Investor A Class 0.58% 2.19%
- ---------------------------------------------------
The performance information above includes information relating to each class of
the Portfolio since the commencement of operations of the Portfolio, rather than
the date such class was introduced. The performance information of Service and
Investor A shares prior to their introduction dates on 9/23/93 and 5/20/94,
respectively, does not reflect shareholder servicing, shareholder processing and
distribution fees and certain other expenses borne by Service and Investor A
shares which, if reflected, would change the performance quoted for such
periods. If these expenses had been reflected in the performance information,
then the performance of Service and Investor A shares for such periods would be
reduced. Performance information presented for Service and Investor A shares
prior to their introduction is based upon historical expenses of the predecessor
class (Institutional shares) which do not reflect the actual expenses that an
investor would have incurred as a holder of Service or Investor A shares of the
Portfolio.
4
<PAGE>
COMPASS CAPITAL FUNDS
CORE BOND PORTFOLIO SUMMARY
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT IN THE
CORE BOND PORTFOLIO AND THE
LEHMAN AGGREGATE INDEX FROM INCEPTION AND AT EACH FISCAL YEAR END
PORTFOLIO SUB-ADVISOR:
BlackRock Financial Management, Inc.
TOTAL NET ASSETS (9/30/96): $281.6 million
PERFORMANCE BENCHMARK:
Lehman Aggregate Index
INVESTMENT APPROACH:
Pursues a total return that exceeds the total return of its benchmark while
providing monthly income by investing in securities rated BBB or higher by
a major rating agency or deemed by the Manager to be of comparable credit
quality. The Portfolio emphasizes securities with maturities from 5 to 10
years.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET) The Manager reduced overall mortgage exposure, predominately
selling newly issued pass-through securities and Treasury-indexed
adjustable-rate mortgages. Remaining core mortgage holdings
emphasize seasoned, or older issue, bonds, which are expected to
perform well should interest rates fall significantly.
(BULLET) The Manager also reduced total corporate bond exposure during
the third quarter, paring cyclical names while adding more
defensive issues.
(BULLET) Proceeds from these sales were recycled into U.S. Treasuries
and agency bonds and fixed- and floating-rate asset-backed
securities.
CHART
[GRAPHIC OMITTED]
Plot points for Core Bond Portfolio Summary are as follows:
Lehman
Institutional Service Investor A Investor B Aggregate
Class Class Class Class Index
12/09/92 $10,000 $10,000 $ 9,600 $10,000 $10,000
6/30/93 $10,687 $10,687 $10,260 $10,687 $10,724
6/30/94 $10,617 $10,617 $10,192 $10,617 $10,583
6/30/95 $11,935 $11,935 $11,457 $11,935 $11,911
3/31/96 $12,423 $12,399 $11,900 $12,396 $12,437
9/30/96 $12,726 $12,706 $12,181 $12,263 $12,740
For the period ended September 30, 1996. Past Performance is not
predictive of future results.
- --------------------------------------------------
Average Annual Total Return
---------------------------
1 Year From Inception
------ --------------
Institutional Class 4.60% 6.53%
Service Class 4.43% 6.49%
Investor A Class 0.13% 5.31%
Investor B Class -0.77% 5.50%
- --------------------------------------------------
The performance information above includes information relating to each class of
the Portfolio since the commencement of operations of the Portfolio, rather than
the date such class was introduced. The performance information of Service,
Investor A and Investor B shares prior to their introduction dates on 1/13/96,
1/31/96, and 3/18/96, respectively, does not reflect shareholder servicing,
shareholder processing and distribution fees and certain other expenses borne by
Service, Investor A and Investor B shares which, if reflected, would change the
performance quoted for such periods. If these expenses had been reflected in the
performance information, then the performance of Service, Investor A and
Investor B shares for such periods would be reduced. Performance information
presented for Service, Investor A and Investor B shares prior to their
introduction is based upon historical expenses of the predecessor class
(Institutional shares) which do not reflect the actual expenses that an investor
would have incurred as a holder of Service, Investor A or Investor B shares of
the Portfolio.
5
<PAGE>
COMPASS CAPITAL FUNDS
GOVERNMENT INCOME PORTFOLIO SUMMARY
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT IN THE GOVERNMENT INCOME PORTFOLIO AND THE
LEHMAN MORTGAGE/MERRILL LYNCH 10 YEAR TREASURY INDEX FROM INCEPTION AND
AT EACH FISCAL YEAR END
PORTFOLIO SUB-ADVISOR:
BlackRock Financial Management, Inc.
TOTAL NET ASSETS (9/30/96): $14.8 million
PERFORMANCE BENCHMARK:
Lehman Mortgage Index/Merrill Lynch 10-Year Treasury
INVESTMENT APPROACH:
Pursues current income consistent with preservation of capital by investing
in securities rated AAA by a major rating agency or issued by the U.S.
government or government agency. The Portfolio emphasizes securities with
maturities from 10 to 15 years.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET) The Portfolio's exposure to the mortgage pass-through sector
remained constant during the third quarter. The Manager has taken
a defensive view of the mortgage market, however, as the
combination of tight yield spreads and the potential for
increased interest rate volatility bears watching.
(BULLET) The Manager reduced the Portfolio's Treasury-indexed
adjustable-rate mortgage holdings, as this sector offers only a
modest yield advantage versus comparable maturity Treasuries.
CHART
[GRAPHIC OMITTED]
Plot points for Government Income Portfolio Summary are as follows:
Lehman Mortgage/Merrill Lynch
Investor A Class Investor B Class 10 Year Treasury Index
10/03/94 $ 9,550 $10,000 $10,000
9/30/95 $10,914 $11,350 $11,537
9/30/96 $11,400 $11,301 $11,998
For the period ended September 30, 1996. Past Performance is not
predictive of future results.
- -----------------------------------------------------------------
Average Annual Total Return
---------------------------
1 Year From Inception
------ --------------
Investor A Class -0.24% 6.78%
Investor B Class -0.99% 6.32%
- -----------------------------------------------------------------
6
<PAGE>
COMPASS CAPITAL FUNDS
MANAGED INCOME PORTFOLIO SUMMARY
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT IN THE
MANAGED INCOME PORTFOLIO AND THE
SALOMON BROAD INVESTMENT GRADE ("BIG") INDEX
FROM INCEPTION AND AT EACH FISCAL YEAR END
PORTFOLIO SUB-ADVISOR:
BlackRock Financial Management, Inc.
TOTAL NET ASSETS (9/30/96): $741.0 million
PERFORMANCE BENCHMARK:
Salomon BIG (Broad Investment Grade) Index
INVESTMENT APPROACH:
Pursues current income consistent with the preservation of capital by
investing in securities rated BBB or higher by a major rating agency or
deemed by the Manager to be of comparable credit quality. The Portfolio
emphasizes securities with maturities from 5 to 10 years.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET) The Manager reduced overall mortgage exposure, predominately
selling newly issued pass-through securities and Treasury-indexed
adjustable-rate mortgages. Remaining core mortgage holdings
emphasize seasoned, or older issue, bonds, which are expected to
perform well should interest rates fall significantly.
(BULLET) Proceeds from these sales were recycled into U.S. Treasuries
and agency bonds, asset-backed securities and corporate bonds.
Within the corporate sector, the Manager added defensive issues
while paring more cyclical names.
CHART
[GRAPHIC OMITTED]
Plot points for Managed Income Portfolio Summary
are as follows:
Institutional Service Investor A Salomon BIG
Class Class Class Index
11/01/89 $10,000 $10,000 $ 9,550 $10,000
9/30/90 $10,380 $10,380 $ 9,913 $10,507
9/30/91 $11,910 $11,910 $11,374 $12,191
9/30/92 $13,316 $13,316 $12,717 $13,736
9/30/93 $14,935 $14,940 $14,263 $15,133
9/30/94 $14,148 $14,104 $13,440 $14,649
9/30/95 $16,025 $15,935 $15,153 $16,709
9/30/96 $16,718 $16,580 $15,735 $17,534
For the period ended September 30, 1996. Past Performance is not
predictive of future results.
- ----------------------------------------------------------
Average Annual Total Return
--------------------------------
1 Year 5 Years From Inception
------ ------- --------------
Institutional Class 4.33% 7.02% 7.71%
Service Class 4.05% 6.84% 7.58%
Investor A Class -0.85% 5.73% 6.77%
- ----------------------------------------------------------
The performance information above includes information relating to each class of
the Portfolio since the commencement of operations of the Portfolio, rather than
the date such class was introduced. The performance information of Service and
Investor A shares prior to their introduction dates on 7/29/93 and 2/5/92,
respectively, does not reflect shareholder servicing, shareholder processing and
distribution fees and certain other expenses borne by Service and Investor A
shares which, if reflected, would change the performance quoted for such
periods. If these expenses had been reflected in the performance information,
then the performance of Service and Investor A shares for such periods would be
reduced. Performance information presented for Service and Investor A shares
prior to their introduction is based upon historical expenses of the predecessor
class (Institutional shares) which do not reflect the actual expenses that an
investor would have incurred as a holder of Service or Investor A shares of the
Portfolio.
7
<PAGE>
COMPASS CAPITAL FUNDS
INTERNATIONAL BOND PORTFOLIO SUMMARY
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT IN THE INTERNATIONAL BOND PORTFOLIO AND THE
SALOMON NON-U.S. HEDGED WORLD GOVERNMENT BOND INDEX
FROM INCEPTION AND AT EACH FISCAL YEAR END
PORTFOLIO SUB-ADVISOR:
Morgan Grenfell Asset Management
TOTAL NET ASSETS (9/30/96): $39.0 million
PERFORMANCE BENCHMARK:
Salomon Non-U.S. Hedged World Government Bond Index
INVESTMENT APPROACH:
Pursues current income consistent with the preservtion of capital by
investing in investment grade international fixed income securities.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET) The Manager increased the Portfolio's exposure to Italy, as
the higher yielding European markets currently appear more
attractive than the core European (UK, German) markets.
(BULLET) The Manager initiated a new position in Canada, which is a
market that we believe will continue to perform well due to low
inflation and receding sovereignty issues.
(BULLET) The overweight Swedish position was reduced and the Spanish
position was eliminated.
CHART
[GRAPHIC OMITTED]
Plot points for International Bond Portfolio Summary are as follows:
Salomon Non-
U.S. Hedged
Institutional Service Investor A Investor B Investor C World Government
Class Class Class Class Class Bond Index EST
7/01/91 $10,000 $10,000 $ 9,500 $10,000 $10,000 $10,000
2/28/92 $10,584 $10,584 $10,055 $10,584 $10,584 $10,750
2/28/93 $11,599 $11,599 $11,019 $11,599 $11,599 $11,750
2/28/94 $12,798 $12,798 $12,158 $12,798 $12,798 $12,730
2/28/95 $12,990 $12,990 $12,340 $12,990 $12,990 $12,855
1/31/96 $15,171 $15,171 $14,412 $15,171 $15,171 $14,876
9/30/96 $16,002 $15,989 $15,179 $15,769 $15,928 $15,608
For the period ended September 30, 1996. Past Performance is not
predictive of future results.
- ---------------------------------------------------------
Average Annual Total Return
-------------------------------
1 Year 5 Years From Inception
------ ------- --------------
Institutional Class 11.89% 9.08% 9.35%
Service Class 11.80% 9.07% 9.34%
Investor A Class 6.13% 7.94% 8.26%
Investor B Class 6.36% 8.54% 9.05%
Investor C Class 10.26% 8.98% 9.26%
- ---------------------------------------------------------
The performance information above includes information relating to each class of
the Portfolio since the commencement of operations of the Portfolio, rather than
the date such class was introduced. The performance information of
Institutional, Investor A, Investor B and Investor C shares prior to their
introduction dates on 6/10/96, 4/22/96, 4/19/96 and 9/11/96, respectively, does
not reflect shareholder servicing, shareholder processing and distribution fees
and certain other expenses borne by Institutional, Investor A, Investor B and
Investor C shares which, if reflected, would change the performance quoted for
such periods. If these expenses had been reflected in the performance
information, then the performance of Investor A, Investor B and Investor C
shares for such periods would be reduced and the performance of Institutional
shares for such periods would be increased. Performance information presented
for Institutional, Investor A, Investor B and Investor C shares prior to their
introduction is based upon historical expenses of the predecessor class (Service
shares) which do not reflect the actual expenses that an investor would have
incurred as a holder of Institutional, Investor A, Investor B or Investor C
shares of the Portfolio.
8
<PAGE>
COMPASS CAPITAL FUNDS
TAX-FREE INCOME PORTFOLIO SUMMARY
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT IN THE
TAX-FREE INCOME PORTFOLIO AND
THE LEHMAN MUNICIPAL BOND INDEX
FROM INCEPTION AND AT EACH
FISCAL YEAR END
PORTFOLIO SUB-ADVISOR:
BlackRock Financial Management, Inc.
TOTAL NET ASSETS (9/30/96): $49.4 million
PERFORMANCE BENCHMARK:
Lehman Municipal Bond Index
INVESTMENT APPROACH:
Seeks a high level of current income exempt from Federal income tax by
investing in a portfolio of municipal fixed income securities rated BBB or
higher by a major rating agency or deemed by the sub-advisor to be of
comparable credit quality.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET) The Manager has been emphasizing premium bonds in the short
and intermediate term sectors.
(BULLET) The recent surge in municipal bond issuance has allowed the
Manager to seek intermediate maturity bonds (7-12 year maturity
range), helping to alleviate the Portfolio's current
underweighting in that portion of the municipal yield curve.
CHART
[GRAPHIC OMITTED]
Plot points for Tax-Free Income Portfolio Summary are as follows:
Institutional Service Investor A Investor B Lehman Municipal
Class Class Class Class Bond Index
5/14/90 $10,000 $10,000 $ 9,600 $10,000 $10,000
9/30/90 $10,139 $10,139 $ 9,733 $10,139 $10,202
9/30/91 $11,296 $11,296 $10,844 $11,296 $11,548
9/30/92 $12,504 $12,504 $12,004 $12,504 $12,755
9/30/93 $14,199 $14,193 $13,620 $14,188 $14,381
9/30/94 $13,660 $13,624 $13,045 $13,589 $14,034
9/30/95 $15,241 $15,155 $14,478 $15,082 $15,599
9/30/96 $16,378 $16,238 $15,487 $16,105 $16,541
For the period ended September 30, 1996. Past Performance is not
predictive of future results.
- ----------------------------------------------------------
Average Annual Total Return
-------------------------------
1 Year 5 Years From Inception
------ ------- --------------
Institutional Class 7.45% 7.71% 8.03%
Service Class 7.14% 7.53% 7.88%
Investor A Class 2.68% 6.52% 7.09%
Investor B Class 1.97% 6.92% 7.74%
- ----------------------------------------------------------
The performance information above includes information relating to each class of
the Portfolio since the commencement of operations of the Portfolio, rather than
the date such class was introduced. The performance information of
Institutional, Service and Investor B shares prior to their introduction dates
on 1/21/93, 7/29/93 and 7/18/96, respectively, does not reflect shareholder
servicing, shareholder processing and distribution fees and certain other
expenses borne by Institutional, Service and Investor B shares which, if
reflected, would change the performance quoted for such periods. If these
expenses had been reflected in the performance information, then the performance
of Institutional shares and Service shares for such periods would be higher and
the performance of Investor B shares for such periods would be reduced.
Performance information presented for Institutional, Service and Investor B
shares prior to their introduction is based upon historical expenses of the
predecessor class (Investor A shares) which do not reflect the actual expenses
that an investor would have incurred as a holder of Institutional, Service or
Investor B shares of the Portfolio.
9
<PAGE>
COMPASS CAPITAL FUNDS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO SUMMARY
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT IN THE
PA TAX-FREE INCOME PORTFOLIO
AND THE LEHMAN LOCAL GO INDEX
FROM INCEPTION AND AT EACH
FISCAL YEAR END
PORTFOLIO SUB-ADVISOR:
BlackRock Financial Management, Inc.
TOTAL NET ASSETS (9/30/96): $83.9 million
PERFORMANCE BENCHMARK:
Lehman Local General Obligation Index
INVESTMENT APPROACH:
Seeks a high level of current income exempt from Federal and Pennsylvania
state and local income tax by investing in a portfolio of municipal fixed
income securities rated BBB or higher by a major rating agency or deemed by
the sub-advisor to be of comparable credit quality.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET) The Manager has been emphasizing premium bonds in the short
and intermediate term sectors.
(BULLET) The recent surge in municipal bond issuance has allowed the
Manager to seek intermediate maturity bonds (7-12 year maturity
range), helping to alleviate the Portfolio's current
underweighting in that portion of the municipal yield curve.
CHART
[GRAPHIC OMITTED]
Plot points for Pennsylvania Tax-Free Income Portfolio Summary are as follows:
Institutional Service Investor A Investor B Lehman Local
Class Class Class Class GO Index
12/01/92 $10,000 $10,000 $ 9,600 $10,000 $10,000
9/30/93 $11,169 $11,165 $10,723 $11,169 $11,131
9/30/94 $10,813 $10,808 $10,391 $10,813 $10,942
9/30/95 $11,982 $11,944 $11,460 $11,859 $12,104
9/30/96 $12,737 $12,653 $12,112 $12,081 $12,802
For the period ended September 30, 1996. Past Performance is not
predictive of future results.
- ---------------------------------------------------
Average Annual Total Return
---------------------------
1 Year From Inception
------ --------------
Institutional Class 6.29% 6.51%
Service Class 5.97% 6.33%
Investor A Class 1.58% 5.12%
Investor B Class 0.31% 5.05%
- ---------------------------------------------------
The performance information above includes information relating to each class of
the Portfolio since the commencement of operations of the Portfolio, rather than
the date such class was introduced. The performance information of Service and
Investor B shares prior to their introduction dates on 7/29/93 and 10/3/94,
respectively, does not reflect shareholder servicing, shareholder processing and
distribution fees and certain other expenses borne by Service and Investor B
shares which, if reflected, would change the performance quoted for such
periods. If these expenses had been reflected in the performance information,
then the performance of Service and Investor B shares for such periods would be
reduced. Performance information presented for Service and Investor B shares
prior to their introduction is based upon historical expenses of the predecessor
class (Institutional shares) which do not reflect the actual expenses that an
investor would have incurred as a holder of Service or Investor B shares of the
Portfolio.
10
<PAGE>
COMPASS CAPITAL FUNDS
NEW JERSEY TAX-FREE INCOME PORTFOLIO SUMMARY
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT IN THE
NJ TAX-FREE INCOME PORTFOLIO
AND THE LEHMAN LOCAL GO INDEX
FROM INCEPTION AND AT EACH
FISCAL YEAR END
PORTFOLIO SUB-ADVISOR:
BlackRock Financial Management, Inc.
TOTAL NET ASSETS (9/30/96): $89.0 million
PERFORMANCE BENCHMARK:
Lehman Local General Obligation Index
INVESTMENT APPROACH:
Seeks a high level of current income exempt from Federal and New Jersey
state and local income tax by investing in a portfolio of municipal fixed
income securities rated BBB or higher by a major rating agency or deemed by
the sub-advisor to be of comparable credit quality.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET) The Manager has been emphasizing premium bonds in the short and
intermediate term sectors.
(BULLET) The recent surge in municipal bond issuance has allowed the
Manager to seek intermediate maturity bonds (7-12 year maturity
range), helping to alleviate the Portfolio's current
underweighting in that portion of the municipal yield curve.
CHART
[GRAPHIC OMITTED]
New Jersey Tax-Free Income Portfolio Summary are as follows:
Service Investor A Investor B Lehman Local
Class Class Class GO Index
7/01/91 $10,000 $ 9,600 $10,000 $10,000
2/29/92 $10,802 $10,370 $10,802 $10,500
2/28/93 $12,247 $11,757 $12,247 $12,329
2/28/94 $12,882 $12,367 $12,882 $12,939
2/28/95 $13,074 $12,551 $13,074 $13,161
1/31/96 $14,427 $13,850 $14,427 $14,573
9/30/96 $14,449 $13,848 $14,254 $14,785
For the period ended September 30, 1996. Past Performance is not
predictive of future results.
- ---------------------------------------------------------
Average Annual Total Return
-------------------------------
1 Year 5 Years From Inception
------ ------- --------------
Service Class 4.68% 6.89% 7.25%
Investor A Class 0.33% 5.98% 6.39%
Investor B Class -0.37% 6.38% 6.98%
- ---------------------------------------------------------
The performance information above includes information relating to each class of
the Portfolio since the commencement of operations of the Portfolio, rather than
the date such class was introduced. The performance information of Investor A
and Investor B shares prior to their introduction dates on 1/26/96 and 7/2/96,
respectively, does not reflect shareholder servicing, shareholder processing and
distribution fees and certain other expenses borne by Investor A and Investor B
shares which, if reflected, would change the performance quoted for such
periods. If these expenses had been reflected in the performance information,
then the performance of Investor A and Investor B shares for such periods would
be reduced. Performance information presented for Investor A and Investor B
shares prior to their introduction is based upon historical expenses of the
predecessor class (Service shares) which do not reflect the actual expenses that
an investor would have incurred as a holder of Investor A or Investor B shares
of the Portfolio.
11
<PAGE>
COMPASS CAPITAL FUNDS
OHIO TAX-FREE INCOME PORTFOLIO SUMMARY
COMPARISON OF CHANGE IN VALUE
OF A $10,000 INVESTMENT IN THE
OH TAX-FREE INCOME PORTFOLIO
AND THE LEHMAN LOCAL GO INDEX
FROM INCEPTION AND AT EACH
FISCAL YEAR END
PORTFOLIO SUB-ADVISOR:
BlackRock Financial Management, Inc.
TOTAL NET ASSETS (9/30/96): $9.8 million
PERFORMANCE BENCHMARK:
Lehman Local General Obligation Index
INVESTMENT APPROACH:
Seeks a high level of current income exempt from Federal and Ohio state and
local income tax by investing in a portfolio of municipal fixed income
securities rated BBB or higher by a major rating agency or deemed by the
sub-advisor to be of comparable credit quality.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET) The Manager has been emphasizing premium bonds in the short
and intermediate term sectors.
(BULLET) The recent surge in municipal bond issuance has allowed the
Manager to seek intermediate maturity bonds (7-12 year maturity
range), helping to alleviate the Portfolio's current
underweighting in that portion of the municipal yield curve.
CHART
[GRAPHIC OMITTED]
Plot points for Ohio Tax-Free Income Portfolio Summary are as follows:
Institutional Service Investor A Investor B Lehman Local
Class Class Class Class GO Index
12/01/92 $10,000 $10,000 $ 9,600 $10,000 $10,000
9/30/93 $10,910 $10,907 $10,474 $10,910 $11,131
9/30/94 $10,493 $10,469 $10,073 $10,493 $10,942
9/30/95 $11,621 $11,565 $11,133 $11,503 $12,104
9/30/96 $12,333 $12,234 $11,761 $12,000 $12,802
For the period ended September 30, 1996. Past Performance is not
predictive of future results.
- -----------------------------------------------
Average Annual Total Return
---------------------------
1 Year From Inception
------ --------------
Institutional Class 6.12% 5.62%
Service Class 5.80% 5.40%
Investor A Class 1.42% 4.32%
Investor B Class 0.11% 4.18%
- -----------------------------------------------
The performance information above includes information relating to each class of
the Portfolio since the commencement of operations of the Portfolio, rather than
the date such class was introduced. The performance information of Service and
Investor B shares prior to their introduction dates on 7/29/93 and 10/13/94,
respectively, does not reflect shareholder servicing, shareholder processing and
distribution fees and certain other expenses borne by Service and Investor B
shares which, if reflected, would change the performance quoted for such
periods. If these expenses had been reflected in the performance information,
then the performance of Service and Investor B shares for such periods would be
reduced. Performance information presented for Service and Investor B shares
prior to their introduction is based upon historical expenses of the predecessor
class (Institutional shares) which do not reflect the actual expenses that an
investor would have incurred as a holder of Service or Investor B shares of the
Portfolio.
12
<PAGE>
COMPASS CAPITAL FUNDS
BOND REPORT
IMPORTANT TAX INFORMATION FOR SHAREHOLDERS OF THE COMPASS BOND PORTFOLIOS
During the fiscal year ended September 30, 1996, the following Portfolios
of Compass Capital Funds declared the following dividends from net realized
capital gains:
SHORT-TERM LONG-TERM
CAPITAL GAIN, CAPITAL GAIN,
PER SHARE PER SHARE
------------- -------------
Intermediate Bond Portfolio ..... $ .03 $ --
Government Income Portfolio ..... .28 --
Managed Income Portfolio ........ .0625 .0415
IMPORTANT TAX INFORMATION FOR THE TAX-FREE INCOME, PENNSYLVANIA TAX-FREE INCOME,
NEW JERSEY TAX-FREE INCOME AND OHIO TAX-FREE INCOME PORTFOLIOS
During the fiscal year ended September 30, 1996, 100% of the income
dividends paid by the Tax-Free Income, Pennsylvania Tax-Free Income, New Jersey
Tax-Free Income and Ohio Tax-Free Income Portfolios were exempt-interest
dividends for purposes of federal income taxes and, accordingly, were exempt
from such taxes. However, the percentage of these dividends which must be
included in federal alternative minimum taxable income for purposes of
determining any liability for the alternative minimum tax is as follows:
Tax-Free Income Portfolio 15.7%, Pennsylvania Tax-Free Income Portfolio 0.9%,
New Jersey Tax-Free Income Portfolio 1.8%, and Ohio Tax-Free Income Portfolio
10.6%.
In January 1997, you will be furnished with a schedule showing the annual
percentage breakdown by state or U.S. possession of the source of interest
earned by each Portfolio in 1996.
See accompanying notes to financial statements.
13
<PAGE>
AS OF SEPTEMBER 30, 1996
SCHEDULE OF INVESTMENTS
SHORT GOVERNMENT BOND PORTFOLIO
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 52.2%
Refcorp STRIPS
5.56% 10/15/98 $ 1,250 $ 1,102,637
Tennessee Valley Authority
8.37% 10/01/99 2,000 2,110,000
5.98% 04/01/36 5,050 5,056,312
U.S. Treasury Notes
6.12%(DAGGER) 03/31/98 31,500 31,564,572
6.25%(DAGGER) 06/30/98 35,960 36,079,024
#6.12% 08/31/98 12,350 12,356,916
#6.37% 05/15/99 5,005 5,021,817
#6.00% 08/15/99 20,385 20,245,768
6.37%(DAGGER) 03/31/01 4,150 4,139,583
------------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $117,221,623) 117,676,629
------------
MORTGAGE PASS-THROUGHS -- 11.5%
Federal Home Loan Mortgage
Corporation
7.25% 10/03-06/08 263 263,136
7.37% 03/01/06 242 242,272
8.00% 09/11-04/2 24,182 4,262,892
8.25% 06/01/09 163 167,140
8.75% 01/01/13 236 245,167
Federal National Mortgage Association
6.50% 10/01/05 2,196 2,181,829
Federal National Mortgage
Association, 1 Year CMT ARM
6.89%** 11/01/96 1,374 1,423,971
7.64%** 03/01/25 3,942 4,047,055
Government National Mortgage
Association, 1 Year CMT ARM
6.50%** 01/18-03/22 4,736 4,776,814
7.00%** 10/20/21 813 829,307
Government National Mortgage
Association
8.25% 01/15/09 7,206 7,472,420
------------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $26,059,475) 25,912,003
------------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS -- 3.6%
Capstead Securities Corp. IV,
Series 92-1, Class F
8.40% 04/25/19 242 243,055
Federal National Mortgage Association,
Series 96, Class T
6.20% 02/26/01 6,800 6,679,937
Kidder Peabody Mortgage Assets Trust,
Series 14, Class B
8.50% 09/01/14 77 77,238
Federal National Mortgage Association,
Series 91-146, Class S
16.72% 10/25/06 659 677,261
Collateralized Mortgage Securities Corp.,
Series I, Class 2
9.45% 05/01/13 98 98,214
Morgan Stanley Capital I, Series 86-C,
Class U4
9.00% 11/01/06 407 413,409
------------
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $8,194,782) 8,189,114
------------
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
COMMERCIAL MORTGAGE-BACKED
SECURITIES -- 0.2%
Structured Assets Securities Corp,.
Series 96-C, Class A1
5.71% 02/25/28 $ 520 $ 516,352
(Cost $518,846) ------------
ASSET BACKED SECURITIES -- 24.5%
Associates Manufactured Housing Pass
Through, Series 96-1, Class A1
6.20% 03/27/03 2,550 2,550,000
Banc One Auto Grantor Trust,
Series 96-A, Class A
6.10% 10/15/02 1,786 1,785,583
Banc One Auto Grantor Trust,
Series 96-B, Class A
6.70% 02/12/03 1,208 1,213,794
Chase Manhattan Grantor Trust,
Series 95-A, Class A
6.00% 09/17/01 3,660 3,653,513
Chase Manhattan Grantor Trust,
Series 96-A, Class A
5.20% 02/15/02 5,331 5,258,085
6.61% 09/16/02 9,795 9,831,731
Chevy Chase Auto Receivables Trust,
Series 96-1, Class A
6.60% 01/01/99 1,287 1,290,752
EQCC Home Equity Loan Trust,
Series 94-1, Class A
5.80% 03/15/09 2,485 2,401,410
Fifth Third Auto Grantor Trust,
Series 96-B, Class A
6.45% 03/15/02 7,000 7,016,406
Fifth Third Bank Asset Trust,
Series 96, Class A
6.20% 09/01/01 4,353 4,347,069
Ford Credit Grantor Trust,
Series 95-B, Class A
5.90% 10/15/00 1,063 1,058,874
Honda Auto Receivables
Grantor Trust, Series 95-A,
Class A
6.20% 12/15/00 4,594 4,591,241
John Deere Owner Trust,
Series 93-B, Class B
4.10% 10/15/00 92 91,693
Merrill Lynch Asset Backed Corp.,
Series 93-1, Class A2
5.12% 07/15/98 71 71,118
MLCC Mortgage Investors, Inc.
Series 96-B, Class A
5.90% 07/15/21 1,953 1,955,306
Nationsbank Auto Grantor Trust,
Series 95-A, Class A
5.85% 06/15/02 1,618 1,612,786
New York City Trust, Series 96-1,
Class A
6.81% 05/25/05 4,055 4,064,823
Premier Auto Trust, Series 93-2,
Class A3
4.90% 10/15/98 306 302,772
Premier Auto Trust, Series 93-6,
Class A2
4.65% 11/02/99 2,222 2,197,072
------------
TOTAL ASSET BACKED SECURITIES
(Cost $55,380,110) 55,294,028
------------
See accompanying notes to financial statements.
14
<PAGE>
AS OF SEPTEMBER 30, 1996
COMPASS CAPITAL FUNDS
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
CORPORATE BONDS -- 5.3%
FINANCE -- 1.7%
Lehman Brothers Holdings
7.00% 05/13/99 $ 3,650 $ 3,685,520
------------
YANKEE -- 3.6%
Banco Internacio
6.05% 07/16/01 2,187 2,184,293
Bayerische Landesbank
7.75% 12/19/97 2,200 2,234,211
Credit Local
8.12% 01/30/98 2,200 2,246,696
Landwirtschaft Rentenbank
7.62% 12/08/97 1,500 1,520,562
------------
8,185,762
------------
TOTAL CORPORATE BONDS
(Cost $11,886,107) 11,871,282
------------
SHORT TERM INVESTMENTS -- 2.7%
Federal Home Loan Bank
Discount Notes
5.70% 10/01/96 3,465 3,465,000
5.80% 10/08/96 1,500 1,496,250
4.40% 10/27/96 1,000 977,500
Smith Barney Money Market Fund 71 70,837
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $6,023,297) 6,009,587
------------
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $225,284,240*) $225,468,995
============
- ----------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 568,605
Gross unrealized depreciation (383,850)
----------
$ 184,755
=========
** Rates shown are the rates as of September 30, 1996.
# Total or partial securites on loan.
(DAGGER) Partial principal in the amount of $2,800,000 has been pledged as
collateral for reverse repurchase agreements.
See accompanying notes to financial statements.
15
<PAGE>
SEPTEMBER 30, 1996
STATEMENT OF ASSETS AND LIABILITIES
SHORT GOVERNMENT BOND PORTFOLIO
ASSETS
Investments at value (Cost $225,284,240) .................. $225,468,995
Interest receivable ....................................... 2,200,381
Principal receivable ...................................... 74,620
Investments sold receivable ............................... 11,341,120
Capital shares sold receivable ............................ 15,150
Other assets .............................................. 66,818
------------
TOTAL ASSETS ....................................... 239,167,084
------------
LIABILITIES
Investments purchased payable ............................. 6,621,755
Capital shares redeemed payable ........................... 128,404
Distributions payable ..................................... 850,316
Accrued expenses payable .................................. 205,498
Reverse repurchase agreements payable ..................... 2,866,862
------------
TOTAL LIABILITIES .................................. 10,672,835
------------
NET ASSETS (Applicable to 13,852,951 Institutional
shares, 9,379,509 Service shares and 95,732
Investor A shares outstanding) ............................ $228,494,249
============
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER INSTITUTIONAL SHARE
($135,686,491 (DIVIDE) 13,852,951) ........................ $ 9.79
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SERVICE SHARE ($91,870,100 (DIVIDE) 9,379,509) ........ $ 9.79
============
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($937,658 (DIVIDE) 95,732) ........... $ 9.79
============
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($9.79 (DIVIDE) 0.970) .................................... $ 10.09
============
See accompanying notes to financial statements.
16
<PAGE>
AS OF SEPTEMBER 30, 1996
SCHEDULE OF INVESTMENTS COMPASS CAPITAL FUNDS
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 46.5%
Federal Home Loan Mortgage
Corporation Strike Notes
5.80% 04/08/97 $ 1,000 $ 997,500
Federal Home Loan Bank Notes
4.90% 04/27/98 3,000 2,932,500
Small Business Administration
Participation Certificates
7.25% 08/01/16 3,000 2,977,031
Small Business Administration
6.67% 02/10/06 2,800 2,681,000
7.35% 08/01/06 2,500 2,487,500
6.65% 11/01/15 2,463 2,378,359
Tennessee Valley Authority
5.98% 04/01/36 4,200 4,218,375
U.S. Treasury Notes
6.12% 03/31/98 9,200 9,218,859
#6.12% 08/31/98 8,800 8,804,928
#6.37% 05/15/99 3,100 3,110,416
#6.00% 08/15/99 8,215 8,158,891
6.87% 08/31/99 5 5,078
6.37% 03/31/01 16,205 16,164,324
#6.50% 08/31/01 13,325 13,340,589
7.00% 07/15/06 3,625 3,701,632
------------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $81,001,297) 81,176,982
------------
MORTGAGE PASS-THROUGHS -- 21.2%
Federal Home Loan Mortgage
Corporation
6.50% 01/24-06/26 4,357 4,101,268
7.00% 05/01/16 545 547,510
8.00% 06/01/17 1,663 1,680,760
Federal Home Loan Mortgage
Corporation 1 Year CMT ARM
7.00%** 04/01/22 1,608 1,636,605
Federal Home Loan Mortgage
Corporation 15 Year
7.00% 05/01/02 409 401,660
Federal Housing Administration,
USGI
7.46% 05/01/21 1,922 1,923,090
Federal National Mortgage
Association
6.50% 10/01/05 1,606 1,595,666
Federal National Mortgage
Association 10 Year
6.00% 02/01/04 2,796 2,715,394
Federal National Mortgage
Association Multi-Family 7-Year
7.77% 07/01/01 3,300 3,403,799
Federal National Mortgage
Association Multi-Family
6.50% 10/25/03 5,773 5,669,928
Federal National Mortgage
Association, 1 Year CMT ARM
7.64%** 03/01/25 4,380 4,496,728
Federal National Mortgage
Association, Multi-Family
7.26% 01/25/11 2,000 2,006,562
Government National Mortgage
Association
7.00% 04/15/26 214 206,336
9.00% 11/15/17 4,634 4,879,018
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
MORTGAGE PASS-THROUGHS (CONTINUED)
Government National Mortgage
Association, 15 Year
7.00% 10/15/07 $ 1,783 $ 1,770,052
-------------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $37,393,418) 37,034,376
-------------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS -- 5.8%
Collateralized Mortgage Obligation
Trust, Series 36, Class A, (PO)
6.11% 10/25/17 1,062 779,337
Community Program Loan Trust,
Series 87, Class A
4.50% 10/01/18 4,500 3,751,875
Federal National Mortgage
Association, Series 96-6, Class D
6.72% 02/26/01 5,600 5,576,375
-------------
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $10,420,813) 10,107,587
-------------
COMMERCIAL MORTGAGE-BACKED
SECURITIES -- 1.0%
Structured Asset Securities Corp.,
Series 96, Class A1B
5.75% 02/25/28 1,700 1,672,471
(Cost $1,700,022) -------------
ASSET BACKED SECURITIES -- 23.6%
Associates Manufactured Housing,
Series 96-1, Class A
6.20% 12/01/98 2,300 2,300,000
Banc One Auto Grantor Trust,
Series 96-B, Class A
6.55% 02/15/03 5,005 5,028,573
Chemical Master Credit Card
Trust 1, Series 1996-3, Class A
7.09% 02/15/09 4,600 4,582,750
Chevy Chase Auto Receivables
Trust, Series 96-1, Class A
6.60% 12/15/02 1,746 1,751,735
Fifth Third Bank Asset Trust,
Series 96, Class A
6.20% 09/15/01 4,336 4,330,371
First Chicago Master Trust,
Series 92-E, Class A
6.25% 08/15/99 3,000 2,996,250
MLCC Mortgage Investors, Inc.,
Series 96-C, Class A
5.88% 12/15/21 1,190 1,189,900
New York City Tax Lien Trust,
Series 96-1, Class A
6.81% 05/25/05 3,449 3,457,436
Standard Credit Card Trust,
Series 90-6, Class A
9.37% 07/10/97 1,750 1,793,203
The Money Store Home Equity Trust
8.12% 06/15/15 1,661 1,712,646
Chase Manhattan Grantor Trust,
Series 96, Class A(DOUBLE DAGGER)
5.20% 02/15/02 3,330 3,283,917
Discover Card Master Trust I,
Series 96-4, Class A
5.96% 10/16/13 3,500 3,535,000
See accompanying notes to financial statements.
17
<PAGE>
AS OF SEPTEMBER 30, 1996
SCHEDULE OF INVESTMENTS
INTERMEDIATE GOVERNMENT BOND PORTFOLIO (CONTINUED)
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
ASSET BACKED SECURITIES (CONTINUED)
HFC Home Equity Loan Asset
Backed Certificates, Series 93-1,
Class A
4.75% 05/20/08 $ 1,253 $ 1,242,109
Union Acceptance Corp.,
Series 96, Class A
5.40% 04/07/03 3,942 3,892,660
------------
TOTAL ASSET BACKED SECURITIES
(Cost $41,105,204) 41,096,550
------------
MUNICIPAL BONDS -- 1.1%
Stanislaus County Taxable
Pension Obligation
7.15% 08/15/13 2,000 1,957,500
(Cost $2,000,000) -----------
PURCHASED OPTIONS -- 0.0%
December 10-year Note Future Call 18 22,788
(Cost $26,523) -----------
SHORT TERM INVESTMENTS -- 0.8%
Federal Home Loan Bank Discount Notes
5.70% 10/01/96 650 650,000
Smith Barney Money Market Fund 758 757,700
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $1,407,700) 1,407,700
------------
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $175,054,977) $174,475,954
============
- ----------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 578,770
Gross unrealized depreciation (1,157,793)
-----------
$ (579,023)
===========
** Rates shown are the rates as of September 30, 1996.
# Total or partial securities on loan.
(DOUBLE DAGGER) Principal amount of securities pledged as collateral is $100,000
on 116 long U.S. Treasury Note and 43 short U.S. Treasury Bond
futures contracts expiring December 1996. The value of such
contracts on September 30, 1996 was $17,013,125, thereby
resulting in an unrealized loss of $14,188.
See accompanying notes to financial statements.
18
<PAGE>
SEPTEMBER 30, 1996
STATEMENT OF ASSETS AND LIABILITIES COMPASS CAPITAL FUNDS
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
ASSETS
Investments at value (Cost $175,054,977) ................ $174,475,954
Interest receivable ..................................... 1,254,737
Principal receivable .................................... 49,852
Investments sold receivable ............................. 19,309,583
Capital shares sold receivable .......................... 78,381
Other assets ............................................ 18,338
------------
TOTAL ASSETS ..................................... 195,186,845
------------
LIABILITIES
Investments purchased payable ........................... 13,540,534
Capital shares redeemed payable ......................... 922,971
Distributions payable ................................... 888,155
Accrued expenses payable ................................ 112,341
Deferred dollar roll income ............................. 9,092
Futures margin payable .................................. 4,969
------------
TOTAL LIABILITIES ................................ 15,478,062
------------
NET ASSETS (Applicable to 12,727,178
Institutional shares, 4,785,545
Service shares and 594,767 Investor A
shares outstanding) ..................................... $179,708,783
============
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER INSTITUTIONAL SHARE
($126,311,922 (DIVIDE) 12,727,178) ...................... $ 9.92
============
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SERVICE SHARE
($47,494,140 (DIVIDE) 4,785,545) ........................ $ 9.92
============
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE
($5,902,721 (DIVIDE) 594,767) ........................... $ 9.92
============
MAXIMUM OFFERING PRICE PER INVESTOR A
SHARE ($9.92 (DIVIDE) 0.960) ............................ $ 10.33
============
See accompanying notes to financial statements.
19
<PAGE>
AS OF SEPTEMBER 30, 1996
SCHEDULE OF INVESTMENTS
INTERMEDIATE BOND PORTFOLIO
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
U.S. GOVERNMENT & AGENCY SECURITIES -- 33.6%
Federal Home Loan Mortgage
Corporation, Strike Note
5.80% 04/08/97 $ 1,000 $ 997,500
Federal Home Loan Bank Notes
4.90% 04/27/97 2,000 1,955,000
Small Business Administration,
Series 96, Class A
6.67% 02/10/06 3,100 2,968,250
Small Business Administration,
Series 96, Class C
7.35% 08/01/06 3,000 2,985,000
Small Business Administration,
Series 95, Class K
6.65% 11/01/15 2,660 2,568,627
Small Business Administration,
Series 96-20H, Class 1
7.25% 08/01/16 4,000 3,969,375
Tennessee Valley Authority
5.98% 04/01/98 5,450 5,473,844
U.S. Treasury Notes
6.12% 03/31/98 2,900 2,905,945
#6.12% 08/31/98 11,500 11,506,440
#6.37% 05/15/99 7,135 7,158,974
#6.00%(DAGGER) 08/15/99 3,430 3,406,573
6.87% 08/31/99 1,660 1,685,830
#6.37% 03/31/01 11,905 11,875,117
6.62% 06/30/01 7,050 7,093,075
#6.50% 08/31/01 15,620 15,638,274
7.25% 08/15/04 2,200 2,279,640
------------
TOTAL U.S. GOVERNMENT & AGENCY SECURITIES
(Cost $84,394,217) 84,467,464
------------
MORTGAGE PASS-THROUGHS -- 16.3%
Federal Home Loan Mortgage
Corporation
6.50% 02/01/25 4,914 4,625,500
7.00% 09/25-10/25 1,817 1,758,111
9.00% 12/16-06/21 1,494 1,560,385
Federal Home Loan Mortgage
Corporation, 1 Year CMT ARM
7.00%** 04/01/22 1,072 1,091,070
Federal Home Loan Mortgage
Corporation, 15 Year
8.50% 10/98-06/05 3,959 4,088,347
9.00% 09/97-12/01 215 222,293
9.50% 01/01/05 627 654,448
Federal Housing Administration,
USGI, Series 2056
7.46% 05/01/21 2,288 2,289,392
Federal National Mortgage
Association
8.00% 03/01/08 4,959 5,077,041
Federal National Mortgage
Association, 1 Year CMT ARM
7.64%** 03/01/25 4,380 4,496,728
Federal National Mortgage
Association, 10 Year
6.00% 02/01/04 3,704 3,597,897
Federal National Mortgage
Association, 15 Year
9.50% 03/01/05 25 25,940
Federal National Mortgage
Association, Multi-Family
6.50% 10/25/03 1,800 1,746,563
7.26% 01/25/11 2,000 2,006,563
Government National Mortgage
Association
6.50% 12/23-12/23 990 925,960
9.00% 11/15/17 3,862 4,102,054
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
MORTGAGE PASS-THROUGHS (CONTINUED)
Government National Mortgage
Association, 15 Year
7.50% 04/07-12/07 $ 2,420 $ 2,446,161
8.00% 05/15/99 195 199,923
------------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $41,164,523) 40,914,376
------------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS -- 6.3%
Bear Stearns Secured Investors
Trust, Series 88-8, Class B (PO)
8.48% 12/01/18 263 259,379
Community Program Loan Trust,
Series 87-A, Class A4
4.50% 10/01/18 4,800 4,002,000
Federal National Mortgage
Association, Series 96-6, Class D
6.72% 02/26/01 7,899 7,865,755
Federal National Mortgage
Association, Series 89-16,
Class B (PO)
5.56% 03/25/19 2,049 1,496,662
Federal National Mortgage
Association, Trust 91-1, Class L (IO)
15.56% 01/25/21 1,254 429,434
Prudential Home Mortgage
Securities, Series 93-55, Class A,
1 Year CMT ARM
7.95%** 12/25/23 1,701 1,729,035
------------
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $16,122,048) 15,782,265
------------
CORPORATE BONDS -- 17.2%
FINANCE -- 8.2%
American Savings Bank
6.62% 02/15/06 1,350 1,274,873
Crestar Financial Corp.
7.87% 02/15/03 1,500 1,527,059
CS First Boston
7.75% 05/15/06 1,000 1,023,040
Equitable Life Surplus Note
8.90% 02/15/00 500 525,800
GMAC Putable Asset Trust
6.37% 09/30/98 2,600 2,594,907
Goldman Sachs Group LP
8.25% 07/15/02 1,800 1,884,978
Ikon Capital Resources
6.93% 06/07/99 2,400 2,410,174
Metropolitan Life Insurance Co.
6.25% 02/01/03 2,000 1,900,448
6.95% 12/01/05 1,000 961,366
New American Capital, Inc.
6.62% 06/15/00 1,500 1,492,045
Paine Webber Group, Inc.
7.06% 10/14/96 1,400 1,410,500
Potomac Capital Management Corp.
7.05% 10/02/01 1,550 1,544,013
Prudential Insurance Co.
8.50% 11/01/96 500 501,120
Salomon, Inc.
7.65% 07/01/07 1,550 1,536,438
------------
20,586,761
------------
INDUSTRIAL -- 4.4%
Anixter, Inc.
8.00% 09/17/0 2,750 2,758,718
See accompanying notes to financial statements.
20
<PAGE>
AS OF SEPTEMBER 30, 1996
COMPASS CAPITAL FUNDS
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
CORPORATE BONDS (CONTINUED)
INDUSTRIAL (CONTINUED)
News America Holdings
8.50% 02/15/05 $ 3,000 $ 3,172,398
RJR Nabisco, Inc.
6.70% 06/15/02 2,400 2,342,867
6.85% 06/15/05 300 287,297
7.05% 07/15/07 450 432,274
Tenneco Credit Corp.
10.12% 12/01/97 1,500 1,573,155
Texaco Capital Co.
9.00% 12/15/99 500 534,375
------------
11,101,084
------------
UTILITY -- 0.8%
Connecticut Light and Power(DOUBLE DAGGER)
7.62% 04/01/97 1,458 1,458,000
Mobile Energy Services Co.,
1st Mortgage Bond
8.66% 01/01/17 488 494,503
------------
1,952,503
------------
YANKEE -- 3.8%
Ontario Hydroelectric
7.75% 12/05/97 4,800 4,869,769
Siam Commercial Bank
7.50% 03/15/06 1,500 1,459,593
Quebec Province
9.00% 05/08/01 2,150 2,306,701
London Insurance Group
6.87% 09/15/05 1,000 964,176
------------
9,600,239
------------
TOTAL CORPORATE BONDS
(Cost $43,366,445) 43,240,587
------------
ASSET BACKED SECURITIES -- 24.6%
Associates Manufactured Housing,
Series 96-1, Class A
6.20% 12/01/98 3,200 3,200,000
Associates Manufactured Housing,
Series 96-1, Class B
8.00% 02/01/14 2,500 2,498,437
Banc One Auto Grantor Trust,
Series 96-B, Class A
6.55% 02/15/03 1,553 1,560,592
Chase Manhattan Grantor Trust,
Series 96-A, Class A
5.20% 04/15/02 4,491 4,429,469
Chemical Master Credit Card Trust 1
Series 96-3, Class A
7.09% 02/15/09 6,000 5,977,500
Chevy Chase Auto Receivables Trust,
Series 96-1, Class A
6.60% 12/15/02 1,746 1,751,735
Discover Card Master Trust I,
Series 96-4, Class A
5.87% 10/16/13 5,500 5,555,000
Fifth Third Auto Grantor Trust,
Series 96-B, Class A
6.45% 03/15/02 6,900 6,916,172
Fifth Third Bank Asset Trust,
Series 96, Class A
6.20% 09/15/01 5,835 5,826,317
First Chicago Master Trust II,
Series 92-E, Class A
6.25% 08/15/99 4,000 3,995,000
Fleet Finance Home Equity Trust,
Series 91-2, Class B
8.65% 10/15/06 1,350 1,385,648
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
ASSET BACKED SECURITIES (CONTINUED)
Green Tree Financial Corp.,
Series 94-4, Class A1
6.55% 07/15/19 $ 843 $ 844,308
Green Tree Financial Corp.,
Series 94-5, Class A1
6.60% 11/15/19 1,419 1,421,199
HFC Home Equity Loan Asset
Backed Certificates, Series 93-1,
Class A3
4.75% 05/20/08 2,418 2,397,051
MLCC Mortgage Investors, Inc.,
Series 96-C, Class A
5.94% 12/15/21 1,487 1,487,375
New York City Tax Lien Trust,
Series 96-1A, Class A
6.81% 05/25/05 2,983 2,990,215
Standard Credit Card Trust ,
Series 90-6, Class A
9.37% 07/10/97 2,400 2,459,250
The Money Store Home Equity
Trust Series 1995-A3, Class A8
8.12% 06/15/15 2,372 2,446,637
Union Acceptance Corp.,
Series 96-A, Class A
5.40% 04/07/03 4,888 4,826,898
------------
TOTAL ASSET BACKED SECURITIES
(Cost $61,991,417) 61,968,803
------------
COMMERCIAL MORTGAGE-BACKED
SECURITIES -- 2.0%
Merrill Lynch Mortgage Investors, Inc.,
Series 95-C1, Class C
7.58% 05/25/15 1,200 1,196,431
Resolution Trust Corp., Series 93-C3,
Class D
7.10% 12/25/24 2,025 1,985,297
Structured Asset Securities Corp.,
Series 95-4, Class A
5.75% 02/25/28 1,750 1,721,661
------------
TOTAL COMMERCIAL MORTGAGE-
BACKED SECURITIES
(Cost $4,961,136) 4,903,389
------------
PURCHASED OPTIONS-- 0.0%
Dec 10yr Note Futures Call Options 22 27,852
(Cost $32,417) ------------
SHORT TERM INVESTMENTS -- 0.0%
Smith Barney Money Market Fund
(Cost $90,807) 91 90,807
------------
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $252,123,010) $251,395,543
============
- ----------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 835,276
Gross unrealized depreciation (1,562,743)
-----------
$ (727,467)
===========
** Rates shown are the rates as of September 30, 1996.
# Total or partial securities on loan.
(DAGGER) Partial principal in the amount of $400,000 has been pledged as
collateral for reverse repurchase agreements.
(DOUBLE DAGGER) Principal amount of securities pledged as collateral of
$200,000 on 161 net long U.S. Treasury Notes and 42 short
U.S. Treasury Bonds future contracts expiring December 1996.
The value of such contracts on September 30, 1996 was
$21,697,844, thereby resulting in an unrealized gain of $2,469.
See accompanying notes to financial statements.
21
<PAGE>
SEPTEMBER 30, 1996
STATEMENT OF ASSETS AND LIABILITIES
INTERMEDIATE BOND PORTFOLIO
ASSETS
Investments at value (Cost $252,123,010) .................. $251,395,543
Interest receivable ....................................... 2,475,051
Principal receivable ...................................... 22,835
Investments sold receivable ............................... 20,425,034
Capital shares sold receivable ............................ 1,391,541
Other assets .............................................. 30,910
------------
TOTAL ASSETS ....................................... 275,740,914
------------
LIABILITIES
Investments purchased payable ............................. 19,700,357
Capital shares redeemed payable ........................... 99,195
Distributions payable ..................................... 1,195,084
Accrued expenses payable .................................. 115,337
Deferred dollar roll income ............................... 12,123
Reverse repurchase agreements payable ..................... 400,056
Futures margin payable .................................... 12,438
------------
TOTAL LIABILITIES .................................. 21,534,590
------------
NET ASSETS (Applicable to 22,302,863
Institutional shares, 4,866,086 Service
shares, 100,344 Investor A shares
outstanding) .............................................. $254,206,324
============
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER INSTITUTIONAL SHARE
($207,909,035 (DIVIDE) 22,302,863) ........................ $ 9.32
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SERVICE SHARE ($45,361,804 (DIVIDE) 4,866,086) ........ $ 9.32
============
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($935,485 (DIVIDE) 100,344) .......... $ 9.32
============
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($9.32 (DIVIDE) 0.960) .................................... $ 9.71
============
See accompanying notes to financial statements.
22
<PAGE>
AS OF SEPTEMBER 30, 1996
SCHEDULE OF INVESTMENTS COMPASS CAPITAL FUNDS
CORE BOND PORTFOLIO
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 52.3%
Small Business Administration,
Series 96-1, Class C
7.35% 08/01/06 $ 3,350 $ 3,333,250
Small Business Administration,
Series 96-2, Class B
6.37% 02/01/16 3,922 3,710,886
U.S. Treasury Bonds
6.00% 02/15/26 19,620 17,252,455
6.75% 08/15/26 17,400 17,005,192
U.S. Treasury Notes
6.12%(DAGGER) 03/31/98 5,450 5,461,172
#6.37% 05/15/99 11,155 11,192,481
6.87% 08/31/99 10,665 10,830,947
#6.37%(DAGGER) 03/31/01 35,755 35,665,251
6.50% 05/31/01 7,125 7,135,473
#6.50% 08/31/01 20,500 20,523,983
6.87% 05/15/06 7,310 7,393,699
#7.00% 07/15/06 17,725 18,099,707
------------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $157,223,241) 157,604,496
------------
MORTGAGE PASS-THROUGHS -- 16.7%
Federal Home Loan Mortgage
Corporation
6.50% 03/01/26 25 23,268
7.00% 03/25-05/26 18,462 17,862,315
7.50% 01/26-07/26 16,983 16,799,268
8.00% 11/15-02/26 6,147 6,205,370
Federal Housing Administration
East Point Chelsea
10.25% 05/01/33 99 104,181
Federal Housing Administration GNMA
9.00% 10/15/24 482 504,422
9.50% 11/15/26 618 660,774
Federal National Mortgage
Association Multi-Family
6.50% 10/25/03 100 97,031
Federal National Mortgage
Association
7.50% 09/01/10 250 252,149
8.00% 10/01/09 205 209,274
9.00% 06/01/24 521 544,543
Government National Mortgage
Association
7.00% 08/25-10/25 3,928 3,782,924
8.50% 01/10-04/20 1,650 1,699,915
9.00% 09/16-12/19 1,426 1,496,272
10.50% 01/15/16 31 34,215
11.00% 05/16-09/19 17 18,916
11.50% 07/15/13 8 9,567
12.00% 01/13-03/15 8 9,621
12.50% 04/15/13 1 1,739
------------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $49,878,753) 50,315,764
------------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS -- 5.0%
Community Program Loan Trust,
Series 87-4, Class A
4.50% 10/01/18 9,850 8,212,438
Federal Home Loan Mortgage
Corporation, Series 1114, Class D
8.00% 03/15/05 15 14,995
Federal National Mortgage
Association, Trust 90-37, Class H
9.50% 09/25/18 135 134,894
Federal National Mortgage
Association Series 1993-254,
Class C (PO)
7.00% 07/25/23 1,068 723,440
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS (CONTINUED)
Federal National Mortgage
Association Series 1994-24,
Class D (PO)
6.00% 11/25/23 $ 3,288 $ 2,153,463
Federal National Mortgage
Association Series 1996-45,
Class E (PO)
6.40% 01/25/24 1,400 770,910
Federal Home Loan Mortgage
Corporation, Series 1907,
Class L (PO)
6.65% 06/15/20 1,000 570,000
Federal National Mortgage
Association, Trust 91-1,
Class L (IO)
10.96% 01/25/21 313 107,094
Prudential Home Mortgage
Securities, Series 93-55,
Class A, 1 Year CMT ARM
7.95%** 12/25/23 2,324 2,361,609
Salomon Brothers Mortgage
Securities, Series 87-3,
Class A (PO)
3.97% 10/23/17 133 96,726
------------
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $15,638,758) 15,145,569
------------
COMMERCIAL MORTGAGE-BACKED
SECURITIES -- 7.0%
Associates Manufactured
Housing, Series 1996-1,
Class B1
8.00% 02/01/14 2,815 2,813,241
Chase Manhattan Grantor Trust,
Series 96-A, Class A
5.20% 02/15/02 8,286 8,171,607
Chemical Master Credit Card
Trust 1 Series 1996-3
7.09% 02/15/09 2,580 2,570,325
Discover Card Master Trust I,
Series 96-4, Class A
5.87% 10/16/13 3,675 3,711,750
First Boston Mortgage Securities
Corp., Series 93-M1, Class A
6.75% 09/25/06 118 114,050
Goldman Sachs Mortgage
Securities Corp. II
7.41% 02/15/27 2,841 2,827,706
Paine Webber Mortgage
Acceptance Corp., Series 95-M1,
Class A
6.70% 01/15/07 800 786,589
------------
TOTAL COMMERCIAL MORTGAGE-BACKED
SECURITIES
(Cost $20,949,884) 20,995,268
------------
ASSET BACKED SECURITIES -- 5.6%
CIT Group Securitization Corp.,
Series 95-2, Class B
7.65% 05/15/26 300 279,562
Green Tree Financial Corp.,
Series 93-1, Class A
6.90% 04/15/18 400 394,500
Green Tree Financial Corp.,
Series 93-3, Class B
6.85% 10/15/18 4,000 3,781,250
Green Tree Financial Corp.,
Series 93-4, Class A
6.60% 01/15/19 600 589,125
See accompanying notes to financial statements.
23
<PAGE>
AS OF SEPTEMBER 30, 1996
SCHEDULE OF INVESTMENTS
CORE BOND PORTFOLIO (CONTINUED)
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
ASSET BACKED SECURITIES (CONTINUED)
Green Tree Financial Corp.,
Series 94-5, Class A
7.95% 11/15/19 $ 400 $ 410,125
Green Tree Financial Corp.,
Series 95-7, Class B
7.35% 11/15/26 600 586,406
Green Tree Financial Corp.,
Series 96-2, Class B
7.90% 04/15/27 3,650 3,563,312
Green Tree Home Improvement
Loan Trust, Series 94-D, Class M
9.05% 01/15/15 700 743,969
Merrill Lynch Asset Backed Corp.,
Series 93-1, Class A
5.12% 07/15/98 71 71,118
Merrill Lynch Mortgage Investors,
Inc., Series 92-D, Class A
7.75% 07/15/17 300 303,000
National Credit Card Trust,
Series 89-4, Class A
9.45% 12/31/97 87 87,719
Premier Auto Trust, Series 93-2,
Class A
4.90% 10/15/98 1,224 1,211,088
Standard Credit Card Master Trust,
Series 95-1, Class A
8.25% 01/07/07 2,040 2,171,962
The Money Store Home Equity
Trust Series 1995-A3, Class A8
8.12% 06/15/15 2,452 2,528,192
------------
TOTAL ASSET BACKED SECURITIES
(Cost $17,122,976) 16,721,328
------------
CORPORATE BONDS -- 13.0%
FINANCE -- 4.2%
Allmerica Financial Corp.(DOUBLE DAGGER)
7.62% 10/15/25 2,900 2,801,544
Associates Corp. of North America
7.87% 09/30/01 1,000 1,039,792
Crestar Financial Corp.
8.25% 07/15/02 400 418,884
Equitable Life Assurance Co.
7.70% 12/01/15 250 242,310
Fleet Financial
7.12% 04/15/06 2,750 2,695,269
General Electric Capital Corp.
8.12% 02/01/99 1,000 1,036,808
Liberty Mutual Co.
8.50% 05/15/25 300 312,725
Meditrust
7.37% 07/15/00 350 350,834
Merita Bank
6.50% 01/15/06 2,000 1,870,245
Metropolitan Life Insurance Co.
6.30% 11/01/03 400 379,218
Salomon Brothers, Inc.
6.70% 12/01/98 450 449,586
7.50% 02/01/03 1,000 996,250
------------
12,593,465
------------
INDUSTRIAL -- 6.6%
Caterpillar Financial Services
8.72% 07/21/97 100 102,148
Ford Capital BV
9.00% 08/15/98 1,000 1,044,034
Ford Motor Credit
8.00% 06/15/02 1,000 1,050,000
7.75% 03/15/05 4,000 4,102,037
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
INDUSTRIAL (CONTINUED)
GMAC Putable Asset Trust
6.37% 09/30/98 $ 2,800 $ 2,794,515
ITT Corp.
6.25% 11/15/00 250 243,750
Nabisco, Inc.
6.85% 06/15/05 1,000 957,657
7.55% 06/15/15 3,175 3,044,406
News America Holdings, Inc.
7.75% 12/01/45 2,000 1,831,437
Philip Morris
7.65% 07/01/08 255 254,583
TECO Energy, Inc.
9.25% 06/19/97 1,000 1,021,250
Tele-Communications, Inc.
8.25% 01/15/03 750 756,008
Texaco Capital
8.26% 09/15/98 1,250 1,295,312
Union Pacific Corp.
7.00% 02/01/16 1,450 1,345,132
------------
19,842,269
------------
YANKEE -- 2.2%
Bangkok Bank Public Co.
Limited Series 144a
7.25% 09/15/05 1,900 1,824,124
Hydro-Quebec
7.50% 04/01/16 3,000 2,906,180
Republic of Columbia Yankee
Notes
7.25% 02/15/03 1,250 1,174,651
Quebec Province
7.50% 07/15/23 1,000 955,863
------------
6,860,818
------------
TOTAL CORPORATE BONDS
(Cost $39,708,907) 39,296,552
------------
SHORT TERM INVESTMENTS -- 0.4%
Smith Barney Money Market Fund
(Cost $1,327,955) 1,328 1,327,955
------------
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $301,850,474*) 301,406,932
============
- ----------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 1,758,322
Gross unrealized depreciation (2,201,864)
-----------
$ (443,542)
===========
** Rates shown are the rates as of September 30, 1996.
# Total or partial securities on loan.
(DAGGER) Partial principal in the amount of $11,900,000 has been pledged as
collateral for reverse repurchase agreements.
(DOUBLE DAGGER) Principal amount of securities pledged as collateral of $869,445
on 1 short U.S. Treasury Note and 340 short Bonds future
contracts expiring December 1996. The value of such contracts on
September 30, 1996 was $37,231,031, thereby resulting in an
unrealized loss of $412,563. Outstanding at September 30, 1996
are 59 30-year U.S. Treasury Bond future call options written
expiring in November 1996 with a value of $14,750 and an
exercise price of $114.
See accompanying notes to financial statements.
24
<PAGE>
SEPTEMBER 30, 1996
STATEMENT OF ASSETS AND LIABILITIES COMPASS CAPITAL FUNDS
CORE BOND PORTFOLIO
ASSETS
Investments at value (Cost $301,850,474) .................. $301,406,932
Interest receivable ....................................... 2,920,682
Principal receivable ...................................... 1,831
Investments sold receivable ............................... 21,986,961
Capital shares sold receivable ............................ 274,426
Futures margin receivable ................................. 95,813
Other assets .............................................. 62,320
------------
TOTAL ASSETS ....................................... 326,748,965
------------
LIABILITIES
Investments purchased payable ............................. 31,221,565
Capital shares redeemed payable ........................... 18,100
Distributions payable ..................................... 1,506,592
Accrued expenses payable .................................. 170,897
Deferred dollar roll income ............................... 18,608
Reverse repurchase agreements payable ..................... 12,148,500
Call options written (Premiums received $66,929) .......... 14,750
------------
TOTAL LIABILITIES .................................. 45,099,012
------------
NETASSETS (Applicable to 17,031,012
Institutional shares, 12,274,536 Service
shares, 33,503 Investor A shares and
156,825 Investor B shares outstanding) .................... $281,649,953
============
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER INSTITUTIONAL SHARE
($162,625,532 (DIVIDE) 17,031,012) ........................ $ 9.55
============
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SERVICE SHARE
($117,207,011 (DIVIDE) 12,274,536) ........................ $ 9.55
============
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($319,914 (DIVIDE) 33,503) ........... $ 9.55
============
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($9.55 (DIVIDE) 0.960) .................................... $ 9.95
============
NETASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred
sales charge of 4.5%) PER INVESTOR B SHARE
($1,497,496 (DIVIDE) 156,825) ............................. $ 9.55
============
See accompanying notes to financial statements.
25
<PAGE>
AS OF SEPTEMBER 30, 1996
SCHEDULE OF INVESTMENTS
GOVERNMENT INCOME PORTFOLIO
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS -- 9.3%
Federal Home Loan Bank Notes
4.40% 04/27/98 $ 500 $ 488,750
U.S. Treasury Bonds
6.75% 08/15/26 250 244,328
#U.S. Treasury Notes
7.00%(DAGGER) 07/15/06 1,245 $ 1,271,319
------------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $1,996,690) 2,004,397
------------
MORTGAGE PASS-THROUGHS -- 81.8%
Federal Home Loan Mortgage
Corporation 15 Year(DOUBLE DAGGER)
7.00%(DAGGER) 08/10-03/11 2,817 2,788,302
7.50% 08/15/11 500 502,656
9.00%(DAGGER) 06/01/21 873 916,182
Federal Home Loan Mortgage
Corporation
7.00%(DAGGER) 10/01/25 498 481,659
7.50%(DAGGER) 11/25-01/26 1,985 1,964,690
Federal Home Loan Mortgage
Corporation 1 Year CMT ARM
7.00%**(DAGGER) 04/01/22 279 283,678
Federal National Mortgage
Association 15 Year
7.00% 08/10-01/11 570 563,505
Government National Mortgage
Association 1 Year CMT ARM
7.12%**(DAGGER) 04/20/23 1,900 1,940,046
Government National Mortgage
Association 15 Year
7.00% 09/01/11 1,000 992,500
Government National Mortgage
Association
6.50% 12/23-10/26 1,295 1,209,980
7.50% 12/15/25 976 964,320
8.50% 04/26-08/26 4,848 5,150,001
------------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $17,755,419) 17,757,519
------------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS -- 5.0%
Capstead Securities, Corp. IV,
Series 92-1, Class F
8.40% 04/25/19 163 163,941
Merrill Lynch Trust, Series 36,
Class D
9.85% 11/01/18 885 917,911
------------
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $1,096,743) 1,081,852
------------
ASSET BACKED SECURITIES -- 1.4%
Small Business Administration
Series 96-I
7.70% 09/01/16 300 305,250
(Cost $300,000) ------------
MUNICIPAL BONDS -- 2.5%
Los Angeles County Taxable
Pension Obligation
8.62% 06/30/06 500 550,000
(Cost $524,332) ------------
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
TOTAL INVESTMENTS IN SECURITIES -- 100%
(Cost $21,673,184) $ 21,699,018
============
REVERSE REPURCHASE
AGREEMENTS -- (39.9%)
Aubrey Lanston (Agreement dated
09/30/96 to be repurchased at
$311,550. Collateralized by
$300,000 U.S. Treasury Notes,
7.0% due 07/15/06. The value
of the collateral is $311,550.)
4.95% 10/07/96 $ 311 (311,293)
Lehman Brothers (Agreement dated
09/18/96 to be repurchased at
$4,306,962. Collateralized by
$4,432,742 Federal Home Loan
Mortgage Corporation Notes,
6.5% to 9.0% due 10/01/10 to
07/01/26. The value of the
collateral is $4,306,962.)
5.55% 10/10/96 4,301 (4,301,006)
Lehman Brothers (Agreement dated
09/11/96 to be repurchased at
$284,148. Collateralized by
$278,714 Federal Home Loan
Mortgage Corporation Notes,
7.0% due 04/01/22. The value
of the collateral is $284,148.)
5.50% 10/10/96 283 (283,759)
Lehman Brothers (Agreement dated
09/24/96 to be repurchased at
$1,011,131. Collateralized by
$992,358 Government National
Mortgage Association, 7.00%
due 04/20/23. The value of the
collateral is $1,011,131.)
5.56% 10/23/96 1,008 (1,007,711)
------------
TOTAL REVERSE REPURCHASE
AGREEMENTS
(Cost $5,903,769) $ 5,903,769
============
- ----------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 101,974
Gross unrealized depreciation (76,140)
----------
$ 25,834
==========
** Rates shown are the rates as of September 30, 1996.
# Total or partial securities on loan.
(DAGGER) Partial principal in the amount of $6,003,813 has been pledged as
collateral for reverse repurchase agreements.
(DOUBLE DAGGER) Principal amount of securities pledged as collateral of
$112,957 on 16 net short U.S. Treasury Notes and 3 short U.S.
Treasury Bonds future contracts expiring December 1996. The
value of such contracts on September 30, 1996 was $4,209,594,
thereby resulting in an unrealized loss of $12,094.
See accompanying notes to financial statements.
26
<PAGE>
SEPTEMBER 30, 1996
STATEMENT OF ASSETS AND LIABILITIES COMPASS CAPITAL FUNDS
GOVERNMENT INCOME PORTFOLIO
ASSETS
Investments at value (Cost $21,673,184) ................... $21,699,018
Cash ...................................................... 63,530
Interest receivable ....................................... 171,025
Principal receivable ...................................... 5,337
Investments sold receivable ............................... 1,441,548
Capital shares sold receivable ............................ 41,759
Other assets .............................................. 86,896
-----------
TOTAL ASSETS ....................................... 23,509,113
-----------
LIABILITIES
Investments purchased payable ............................. 2,726,322
Capital shares redeemed payable ........................... 6,812
Distributions payable ..................................... 74,054
Accrued expenses payable .................................. 26,695
Deferred dollar roll income ............................... 1,574
Reverse repurchase agreements payable ..................... 5,903,756
-----------
TOTAL LIABILITIES .................................. 8,739,213
-----------
NET ASSETS (Applicable to 358,070
Investor A shares, 1,090,531
Investor B shares outstanding) ............................ $14,769,900
===========
NET ASSET VALUE AND REDEMPTION
PRICE PER INVESTOR A SHARE
($3,650,842 (DIVIDE) 358,070) ............................. $ 10.20
===========
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($10.20 (DIVIDE) 0.955) ................................... $ 10.68
===========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE (subject to a maximum contingent
deferred sales charge of 4.5%) PER INVESTOR B
SHARE ($11,119,058 (DIVIDE) 1,090,531) .................... $ 10.20
===========
See accompanying notes to financial statements.
27
<PAGE>
AS OF SEPTEMBER 30, 1996
SCHEDULE OF INVESTMENTS
MANAGED INCOME PORTFOLIO
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS -- 22.9%
Federal Home Loan Bank Notes
4.90% 04/27/98 $ 8,000 $ 7,820,000
Small Business Administration,
Series 96-20B, Class 1
6.37% 02/01/16 8,530 8,071,178
Small Business Association,
Series 96-10C
7.35% 08/01/06 8,700 8,656,500
U.S. Treasury Bonds
6.75% 08/15/26 7,185 7,021,972
U.S. Treasury Notes
#6.37% 05/15/99 25,665 25,751,234
#6.00% 08/15/99 21,570 21,422,675
6.87% 03/31/00 8,200 8,330,625
6.37% 03/31/01 58,000 57,854,414
#6.50% 08/31/01 39,950 39,996,738
7.00% 07/15/06 2,660 2,716,232
------------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $187,550,465) 187,641,568
------------
MORTGAGE PASS-THROUGHS -- 29.3%
Federal Home Loan Mortgage
Corporation
6.50% 01/26-06/26 3,392 3,193,063
7.00% 09/25-05/26 17,099 16,543,257
7.50% 02/23-12/26 78,789 78,000,653
9.00% 09/20-06/21 5,004 5,254,379
10.00% 11/15/98 108 117,174
Federal Home Loan Mortgage
Corporation, 1 Year CMT ARM
7.00%** 04/01/22 1,967 2,001,533
Federal Home Loan Mortgage
Corporation, 15 Year
6.50% 03/01/11 787 764,119
7.50% 01/10-10/20 83,796 83,597,184
Federal National Mortgage
Association
6.50% 08/01/25 43 40,387
7.00% 12/01/25 3,497 3,376,800
Federal National Mortgage
Association, 15 Year
7.00% 10/10-06/11 3,592 3,551,658
Government National Mortgage
Association
6.50% 10/23-01/24 17,718 16,571,803
7.00% 02/05-03/26 20,336 19,585,733
8.50% 07/01-09/01 1,010 1,040,245
9.00% 06/00-01/01 2,974 3,092,398
9.50% 06/00-12/02 3,028 3,226,998
-----------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $240,160,230) 239,957,384
-----------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS -- 2.2%
Capstead Securities, Corp. IV,
Series 92-1, Class F
8.40% 04/25/19 484 486,111
Community Program Loan Trust,
Series 87, Class A4
4.50% 10/01/18 13,375 11,151,406
Federal Home Loan Mortgage
Corp., 1907 LP (PO)
6.65% 06/15/20 2,148 1,224,120
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS(CONTINUED)
Prudential Home Mortgage
Securites, Series 93-52, Class A1,
1 Year CMT ARM
8.14%** 11/25/23 $ 5,394 $ 5,478,760
-----------
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $19,093,012) 18,340,397
-----------
ASSET BACKED SECURITIES -- 11.1%
Associates Manufactured Housing
Pass-Through, Series 96-1
8.00% 03/15/27 1,500 1,499,062
Chemical Master Credit Card
Trust 1 Series 1996-3
7.09% 02/15/09 12,805 12,756,981
Chevy Chase Auto Receivables
Trust, Series 96-1, Class A
6.60% 12/15/02 7,813 7,837,633
CIT Group Securitization Corp.,
Series 95-2, Class B
7.65% 05/15/26 3,950 3,680,906
Discover Card Master Trust I,
Series 96-4, Class A
5.87% 10/16/13 16,000 16,160,000
Discover Card Master Trust,
Series 96-3, Class A
6.05% 08/18/08 7,650 7,035,609
Equicon Home Equity Loan Trust,
Series 93-1,Class I (IO)
10.74% 02/18/13 22,277 696,163
First Chicago Master Trust II
6.25% 08/15/99 9,592 9,580,010
Green Tree Financial Corp.,
Series 95-7, Class B1
7.35% 11/15/26 3,925 3,836,074
Green Tree Financial Corp.,
Series 96-2, Class B2
7.90% 04/15/27 2,500 2,440,625
Green Tree Financial Corp.,
Series 96-C
7.75% 06/15/21 4,450 4,504,234
Green Tree Financial Corp.,
Series 96-8
7.95% 01/01/05 3,000 3,004,687
New York City Tax Lien Trust
6.81% 05/25/05 5,593 5,606,653
Premier Auto Trust, Series 96-3,
Class A4
6.75% 11/06/00 7,836 7,891,097
Standard Credit Card Master Trust,
Series 95-1, Class A
8.25% 01/07/07 4,040 4,301,337
-----------
TOTAL ASSET BACKED SECURITIES
(Cost $91,640,429) 90,831,071
-----------
CORPORATE BONDS -- 21.1%
FINANCE -- 8.6%
Associates Corp., N.A.
7.46% 03/28/00 4,000 4,085,932
Equitable Life Assurance Society
7.70% 12/01/15 3,500 3,392,347
Finova Capital Corp.
7.40% 05/06/06 4,350 4,352,780
Fleet Norstar Financial Group Inc.
8.62% 01/15/07 6,732 7,282,764
See accompanying notes to financial statements.
28
<PAGE>
AS OF SEPTEMBER 30, 1996
COMPASS CAPITAL FUNDS
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
CORPORATE BONDS (CONTINUED)
FINANCE (CONTINUED)
Household International Corp.
6.00% 03/15/99 $ 5,000 $ 4,931,250
Ikon Capital Resources
6.93% 06/07/99 7,300 7,330,945
Larwin Group - Participation in
Asset Exchange
8.00% 12/01/99 2 1,770
Liberty Mutual Co.(DOUBLE DAGGER)
8.50% 05/15/25 4,250 4,430,272
Metropolitan Life Insurance Co.
6.30% 11/01/03 3,950 3,744,781
7.00% 11/01/05 2,500 2,421,821
Morgan Stanley Group, Inc.
7.50% 09/01/99 5,000 5,106,250
NationsBank Corp
7.80% 09/15/16 6,150 6,179,799
New American Capital, Inc.
6.91% 04/12/00 5,200 5,239,000
Paine Webber, Inc.
6.31% 07/22/99 5,000 4,919,063
Prudential Insurance Co.
7.65% 07/01/07 600 594,750
Salomon Brothers, Inc.
7.50% 02/01/03 4,000 3,987,282
Salomon, Inc.
8.90% 02/15/00 2,500 2,629,000
------------
70,629,806
------------
INDUSTRIAL -- 7.5%
Burlington Industries
7.25% 09/15/05 2,000 1,935,034
Burlington Northern
7.00% 12/15/25 2,000 1,811,214
Coastal Corp.
9.75% 08/01/03 2,000 2,250,160
10.25% 10/15/04 2,500 2,911,222
General Motors Acceptance Corp.
6.30% 03/31/97 5,000 5,011,449
General Motors Acceptance
Corp. (PAT)
6.37% 09/30/98 7,600 7,585,113
Georgia Pacific
8.62% 05/15/25 5,000 5,052,629
ITT Corp.
7.75% 11/15/25 5,150 4,737,609
News America Holdings, Inc.
7.75% 12/01/35 6,290 5,759,868
Philip Morris
7.65% 07/01/08 870 868,578
Ralston Purina Co.
7.87% 06/15/25 2,800 2,761,500
RJR Nabisco, Inc.
6.85% 06/15/05 4,550 4,357,341
7.05% 07/15/07 1,950 1,869,562
7.55% 06/15/15 4,800 4,602,566
Tele-Communications, Inc.
8.25% 01/15/03 1,900 1,915,220
Tenneco Credit Corp.
10.12% 12/01/97 1,300 1,363,401
Time Warner Entertainment
7.25% 09/01/08 6,600 6,238,504
------------
61,030,970
------------
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
UTILITY -- 0.7%
Idaho Power Co.
8.75% 03/15/27 $ 2,250 $ 2,376,652
Mobile Energy Services Co.
8.66% 01/01/17 2,100 2,126,364
Pennsylvania Power & Light Co.
9.37% 07/01/21 1,000 1,083,750
------------
5,586,766
------------
YANKEE -- 4.3%
ABN AMRO Bank - Global
7.55% 06/28/06 1,000 1,017,815
Fairfax Financial
8.30% 04/15/26 4,400 4,416,659
London Life Insurance Co.
6.87% 09/15/05 3,000 2,892,528
Ontario Hydroelectric
7.75% 12/05/97 2,000 2,029,071
#Reliance Industries
9.37% 06/24/26 2,470 2,602,313
Republic of Columbia
7.25% 02/15/03 2,675 2,513,754
7.25% 02/23/04 3,000 2,774,990
Quebec Province, Series NN
7.12% 02/09/24 8,950 8,169,677
Siam Commercial Bank
7.50% 03/15/06 6,300 6,130,290
Tenaga Nasional
7.50% 01/15/36 2,250 2,030,951
Thai Farmers Bank PLC
8.25% 08/21/16 1,000 975,872
------------
35,553,920
------------
TOTAL CORPORATE BONDS
(Cost $173,503,681) 172,801,462
------------
MUNICIPAL BONDS -- 1.8%
Los Angeles County Taxable
Pension Obligation
8.30% 06/30/0 2,000 2,130,000
8.62% 06/30/06 8,300 9,130,000
6.97% 06/30/08 3,855 3,739,350
------------
TOTAL MUNICIPAL BONDS
(Cost $14,649,272) 14,999,350
------------
COMMERCIAL MORTGAGE-
BACKED SECURITIES -- 1.2%
CS First Boston, Series 95, Class C
7.45% 11/25/27 2,000 1,959,687
Merrill Lynch Mortgage Investors,
Inc., Series 95-C, Class D
7.98% 05/25/15 2,200 2,191,866
Merrill Lynch Mortgage Investors,
Inc., Series 96-C1, Class A2
7.24% 04/25/28 4,713 4,713,000
Morgan Stanley, Series 95,
Class D
8.25% 08/15/27 1,000 1,004,859
------------
TOTAL COMMERCIAL MORTGAGE-
BACKED SECURITIES
(Cost $9,887,631) 9,869,412
------------
See accompanying notes to financial statements.
29
<PAGE>
AS OF SEPTEMBER 30, 1996
SCHEDULE OF INVESTMENTS
MANAGED INCOME PORTFOLIO (CONTINUED)
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
SHORT TERM INVESTMENTS -- 10.4%
Federal Home Loan Bank
Discount Notes
5.15% 10/01/96 59,710 $ 59,710,000
5.70% 10/01/96 18,730 18,730,000
Ford Motor Co.
8.00% 10/01/96 7,000 7,000,000
Smith Barney Money Market Fund 22 21,810
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $85,461,810) 85,461,810
------------
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $821,946,530) $819,902,454
============
- ----------------
* Cost for Federal income tax purposes at September 30, 1996 was $822,126,282.
The gross unrealized appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 3,255,670
Gross unrealized depreciation (5,479,498)
------------
$ (2,223,828)
============
** Rates shown are the rates as of September 30, 1996.
# Total or partial securities on loan.
(DOUBLE DAGGER) Principal amount of securities pledged as collateral of
$2,665,668 on 147 short U.S. Treasury Notes and 160 long U.S.
Treasury Bonds future contracts expiring December 1996. The
value of such contracts on September 30, 1996 was $38,074,500,
thereby resulting in an unrealized loss of $113,781. Outstanding
at September 30, 1996 are 160 30-year U.S. Treasury Bond future
call options written expiring in November 1996 with a value of
$40,000 and an exercise price of $114.
See accompanying notes to financial statements.
30
<PAGE>
SEPTEMBER 30, 1996
STATEMENT OF ASSETS AND LIABILITIES COMPASS CAPITAL FUNDS
MANAGED INCOME PORTFOLIO
ASSETS
Investments at value (Cost $821,946,530) .................. $819,902,454
Interest receivable ....................................... 7,279,737
Investments sold receivable ............................... 40,621,270
Capital shares sold receivable ............................ 289,810
Futures margin receivable ................................. 22,894
Other assets .............................................. 21,240
------------
TOTAL ASSETS ....................................... 868,137,405
------------
LIABILITIES
Investments purchased payable ............................. 121,704,752
Capital shares redeemed payable ........................... 884,582
Distributions payable ..................................... 4,047,873
Accrued expenses payable .................................. 371,390
Deferred dollar roll income ............................... 79,202
Call options written (Premiums received $181,500) ......... 40,000
------------
TOTAL LIABILITIES .................................. 127,127,799
------------
NET ASSETS (Applicable to 55,992,639 Institutional
shares, 16,366,403 Service shares and 1,109,756
Investor A shares outstanding) ............................ $741,009,606
============
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER INSTITUTIONAL SHARE
($564,743,845 (DIVIDE) 55,992,639) ........................ $ 10.09
============
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SERVICE SHARE
($165,072,689 (DIVIDE) 16,366,403) ........................ $ 10.09
============
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE
($11,193,072 (DIVIDE) 1,109,756) .......................... $ 10.09
============
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($10.09 (DIVIDE) 0.955) ................................... $ 10.57
============
See accompanying notes to financial statements.
31
<PAGE>
AS OF SEPTEMBER 30, 1996
SCHEDULE OF INVESTMENTS
INTERNATIONAL BOND PORTFOLIO
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
FOREIGN BONDS -- 97.9%
CANADA -- 6.2%
Government of Canada
8.75% 12/01/05 1,900 $ 1,556,588
Province of Ontario Global Bond
7.50% 01/19/06 1,000 749,119
------------
2,305,707
------------
DENMARK -- 9.9%
Kingdom of Denmark
7.00% 12/15/04 5,400 941,590
8.00% 03/15/06 15,000 2,741,468
------------
3,683,058
------------
GERMANY -- 20.7%
Bayerische Hypotheken Bank
6.00% 09/13/00 2,000 1,364,643
Federal Rebublic of Germany
7.25% 10/21/02 2,100 1,500,609
DEPFA - Bank
5.00% 02/22/01 1,800 1,181,526
Federal National Mortgage
Association Global Bond
6.00% 08/23/00 1,500 1,023,483
Norddeutsche Landesbank
Finance
6.00% 01/05/04 2,500 1,636,915
Westdeutsche Landbank
6.25% 09/15/03 1,500 1,005,543
------------
7,712,719
------------
ITALY -- 14.0%
European Bank Reconstruction
& Development
9.75% 07/28/00 2,500,000 1,749,938
European Investment Bank
12.75% 02/15/00 2,300,000 1,732,372
Bayerische Vereinsbank
9.65% 08/04/00 2,500,000 1,744,329
------------
5,226,639
------------
JAPAN -- 19.4%
Asian Development Bank
3.12% 06/29/05 160,000 1,465,712
Austria Republic
6.25% 10/16/03 135,000 1,493,109
Interamerican Development Bank
6.00% 10/30/01 135,000 1,435,623
Japan Development Bank
6.50% 09/20/01 145,000 1,572,837
KFW International Finance, Inc.
6.00% 11/29/99 50,000 510,421
World Bank Global Bond
4.50% 03/20/03 75,000 755,127
------------
7,232,829
------------
SPAIN -- 4.4%
Government of Spain
8.40% 04/30/01 200,000 1,613,582
------------
SWEDEN -- 8.1%
Sweden Government Bond
10.25% 05/05/00 8,700 1,472,770
13.00% 06/15/01 8,200 1,544,493
------------
3,017,263
------------
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
UNITED KINGDOM -- 15.2%
Abbey National Treasury PLC
8.00% 04/02/03 $ 200 $ 317,695
8.00% 04/02/03 600 953,085
Halifax Building Society PLC
6.50% 02/16/04 1,250 1,817,020
National Power PLC
10.62% 03/26/01 500 871,509
Treasury Bond
7.50% 12/07/06 1,100 1,701,057
------------
5,660,366
------------
TOTAL FOREIGN BONDS
(Cost $36,082,384) 36,452,163
------------
FOREIGN TIME DEPOSITS -- 2.1%
Denmark Time Deposit
3.50% 10/02/96 4,619 788,280
(Cost $794,653) ------------
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $36,877,037) $37,240,443
============
- ----------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $1,144,937
Gross unrealized depreciation (781,531)
----------
$ 363,406
==========
** In local currency.
See accompanying notes to financial statements.
32
<PAGE>
SEPTEMBER 30, 1996
STATEMENT OF ASSETS AND LIABILITIES COMPASS CAPITAL FUNDS
INTERNATIONAL BOND PORTFOLIO
ASSETS
Investments at value (Cost $36,877,037) ................... $37,240,443
Cash denominated in foreign currencies
(Cost $188,286) ......................................... 186,143
Cash ...................................................... 648,394
Interest receivable ....................................... 1,152,214
Investments sold receivable ............................... 1,501,574
Capital shares sold receivable ............................ 16,746
Net unrealized appreciation on
forward foreign currency contracts ...................... 251,642
Prepaid expenses .......................................... 13,992
-----------
TOTAL ASSETS ....................................... 41,011,148
-----------
LIABILITIES
Investments purchased payable ............................. 1,681,071
Capital shares redeemed payable ........................... 112
Accrued expenses payable .................................. 26,871
Net unrealized depreciation on
forward foreign currency contracts ...................... 102,202
Distributions payable ..................................... 151,702
-----------
TOTAL LIABILITIES .................................. 1,961,958
-----------
NET ASSETS (Applicable to 2,637,770 Institutional
shares, 669,324 Service shares, 15,017
Investor A shares, 11,579 Investor B shares,
and 1,643 Investor C shares outstanding) .................. $39,049,190
===========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER INSTITUTIONAL SHARE
($30,882,307 (DIVIDE) 2,637,770) .......................... $ 11.71
===========
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SERVICE SHARE
($7,836,269 (DIVIDE) 669,324) ............................. $ 11.71
===========
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE
($175,812 (DIVIDE) 15,017) ................................ $ 11.71
===========
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($11.71 (DIVIDE) 0.950) ................................... $ 12.33
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($135,562 (DIVIDE) 11,579) ........... $ 11.71
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($19,240 (DIVIDE) 1,643) ............. $ 11.71
===========
See accompanying notes to financial statements.
33
<PAGE>
AS OF SEPTEMBER 30, 1996
SCHEDULE OF INVESTMENTS
TAX-FREE INCOMEPORTFOLIO
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
MUNICIPAL BONDS -- 99.9%
ALABAMA -- 1.1%
Courtland Ind. Dev. Bd.
(Champion Int. Corp.)
Series 1992A
7.20% 12/01/13 $ 500 $ 541,875
------------
ARIZONA -- 0.4%
Phoenix G.O., Series 1992
6.37% 07/01/13 200 211,500
------------
COLORADO -- 8.1%
Arapahoe Cnty. Cap. Imp. Rev.
Hgwy. Trust Fund Series 1986
7.16% 08/31/04 900 546,750
Arapahoe Cnty. Cap. Imp. Rev.
Hgwy. Trust Fund
Series 1986E-470
7.00% 08/31/26 1,500 1,606,410
Denver City & Cnty. Aprt. Rev.
Series 1991D
7.00% 11/15/25 1,000 1,036,250
Denver City & Cnty. Aprt. Rev.
Series 1992
6.75% 11/15/13 500 520,625
Jefferson Cnty. Sch. Dist. G.O.,
Series 1992
6.00% 12/15/12 300 310,500
------------
4,020,535
------------
CONNECTICUT -- 4.1%
Mashantucket West Pequot Tribe
Spl Rev. Series 1996A-144a
6.40% 09/01/11 2,000 2,020,000
------------
FLORIDA -- 3.3%
Dade County Spec. Oblig.
(Ref. Bonds) Series 1996B
6.25% 10/01/14 2,000 690,000
Florida Dep. of Trans. G.O.,
Series 1991
6.25% 07/01/07 400 422,500
Palm Beach Cnty. Sld. Wst.
Auth. Rev. Series 1984A
8.62% 07/01/04 500 529,155
------------
1,641,655
------------
GEORGIA -- 2.4%
Georgia G.O., Series 1992B
6.30% 03/01/10 310 338,675
Georgia Mun. Elec. Auth. Rev.
Series 1992B
6.12% 01/01/14 400 412,500
Gwinnett Cnty. G.O., Series 1992
6.00% 01/01/10 400 417,500
------------
1,168,675
------------
HAWAII -- 4.8%
Hawaii Harbor Rev.(Ref. Bonds)
Series 1994
6.20% 07/01/08 1,785 1,872,019
Hawaii Hgwy. Rev. (Ref. Bonds)
Series 1996
5.25% 07/01/16 500 476,360
------------
2,348,379
------------
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
ILLINOIS -- 2.3%
Illinois Ed. Fac. Auth. Rev. Shedd
Aquar. Soc. Series 1987A
8.62% 07/01/17 $ 560 $ 584,909
Winnebago & Boone Cnty. G.O.,
(Sch. Dist. No. 205)
Series 1992C
5.90% 02/01/05 500 529,375
------------
1,114,284
------------
INDIANA -- 2.2%
Indianapolis Int. Apt. Auth.
(Federal Express Corp. Prj.)
Series 1994
7.10% 01/15/17 1,000 1,061,250
------------
KANSAS -- 1.7%
Johnson Cnty. G.O., Internal
Insp. Series 1992A
6.00% 09/01/07 400 420,000
Kansas Dept. of Trans.
Series 1994A
6.00% 09/01/12 400 411,000
------------
831,000
------------
KENTUCKY -- 2.2%
Jefferson Cnty. Cap. Proj. Corp.
( Lease Rev.) Series 1993A
5.65% 08/15/03 300 312,750
Kentucky Econ. Dev. Fin. Auth.
Hlth. Fac. Rev. (Scottsville
Med. Ctr.) Series 1994A
9.00% 11/01/24 725 754,906
------------
1,067,656
------------
MARYLAND -- 3.3%
Baltimore Port Fac. Rev.
(E.I. du Pont Co.) Series 1984A
6.50% 10/01/11 100 108,000
Maryland Energy Fin. Admin.
Sld. Wst. Disp. Rev. (Rsc. Rec.
Imps.) Series 1996
6.45% 12/01/16 1,500 1,539,375
------------
1,647,375
------------
MICHIGAN -- 8.8%
Dickinson Cnty. Econ. Dev.
Corp. Pol. Ctrl. Rev.
(Champion Int. Corp. )
Series 1993
5.85% 10/01/18 2,400 2,310,000
Michigan St. Trunk Line Rev.
Series 1992B
5.50% 10/01/21 1,000 952,500
Wyandotte Elec. Rev.
(Ref. Bonds) Series 1992
6.25% 10/01/17 1,000 1,056,250
------------
4,318,750
------------
MINNESOTA -- 1.4%
Southern Minnesota Mun. Pwr.
Agcy. Pwr. Sply. Sys. Rev.
Series 1986C
5.00% 01/01/17 750 687,188
------------
See accompanying notes to financial statements.
34
<PAGE>
AS OF SEPTEMBER 30, 1996
COMPASS CAPITAL FUNDS
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
MUNICIPAL BONDS (CONTINUED)
MISSOURI -- 3.9%
Lake of the Ozarks Cnty. Rev.
(Mo. Bdg. Sys.) Series 1996
6.25% 12/01/16 $ 2,000 $ 1,915,000
------------
NEW JERSEY -- 4.2%
Elizabethtown Econ. Dev. Auth.
(Ref. Bonds) Series 1991B
6.60% 08/01/21 2,000 2,080,420
------------
NEW YORK -- 11.1%
New York City G.O., Series 1995A
6.00% 08/01/05 1,000 1,011,250
New York City G.O., Series 1996A
6.00% 08/01/05 1,000 1,011,250
New York City G.O., Series 1996B
5.50% 08/15/05 500 488,125
New York City Mun. Wtr. Fin.
Auth. Wtr. and Swr. Sys. Rev.
Series 1994G
3.75%** 10/01/96 900 900,000
New York St. Hsg. Fin. Agcy.
Rev. (Ref. Bonds) Series 1996A
6.37% 11/01/04 2,000 2,082,500
------------
5,493,125
------------
NORTH CAROLINA -- 8.6%
North Carolina Eastern Mun.
Pwr. Sys. Rev. (Ref. Bonds)
Series 1987A
7.25% 01/01/21 500 511,930
North Carolina Eastern Mun.
Pwr. Sys. Rev. (Ref. Bonds)
Series 1993B
6.00% 01/01/22 2,000 1,975,000
North Carolina Mun. Pwr. Agcy.
Rev. (Catawba Elec. Prj.)
Series 1988
7.50% 01/01/17 1,350 1,415,812
North Carolina Mun. Pwr. Agcy.
Rev. (Catawba Elec. Prj.)
Series 1992A
6.00% 01/01/10 300 315,375
------------
4,218,117
------------
OHIO -- 1.1%
Columbus Refuse Coal Fired
Plant 5-E-L Series 1991
6.62% 09/15/01 190 207,575
Ohio Wtr. Dev. Auth. Rev. Clean
Wtr. Series 1992
5.65% 12/01/05 300 315,000
------------
522,575
------------
OREGON -- 0.6%
Portland Swr. Sys. Rev.
Series 1992A
6.00% 10/01/12 300 310,875
------------
PENNSYLVANIA -- 1.0%
Wayne Highlands Sch. Dist.
G.O., Series 1994
6.00% 04/01/12 500 506,250
------------
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
SOUTH CAROLINA -- 3.9%
Piedmont Mun. Pwr Agcy. Elec.
Rev. Series 1996
6.55% 01/01/16 $ 1,000 $ 1,005,000
Piedmont Mun. Pwr. Agcy. Elec.
Rev. Series 1985B
6.25% 01/01/18 500 518,125
South Carolina Pub. Ser. Auth.
Rev. (Santee Cooper Prj.)
Series 1991D
6.50% 07/01/14 100 106,250
Spartanburg Wtr. Sys. Imp. Rev.
Series 1992
6.20% 06/01/09 300 313,875
------------
1,943,250
------------
SOUTH DAKOTA -- 1.1%
South Dakota Lease Rev. Tran.
Cert. Series 1993A
6.37% 09/01/05 500 536,250
------------
TENNESSEE -- 2.6%
Maury Cnty. Ind. Dev. Pol. Ctrl.
Rev. (Saturn Corp. Prj.)
Series 1994
6.50% 09/01/24 1,250 1,303,125
------------
TEXAS -- 8.7%
Matagorda Cnty. Nav. Dist. #1
(Ref. Bonds) Series 1989B
7.70% 02/01/19 700 737,625
San Antonio Elec. & Gas Rev.
(Ref. Bonds) Series 1991B
5.00% 02/01/16 1,000 918,750
Texas Wtr. Dev. Bd. Rev.
Series 1996A
5.25% 07/15/17 2,175 2,058,094
University of Texas (Univ. Rev.)
Series 1991A
7.00% 08/15/07 500 554,925
------------
4,269,394
------------
UTAH -- 0.2%
Salt Lake City Hos. Rev.
Series 1988A
8.12% 05/15/15 100 118,875
------------
VERMONT -- 2.2%
Vermont G.O., (Pub. & Sch. Imp.)
Series 1990A
6.75% 02/01/08 1,000 1,083,750
------------
VIRGINIA -- 1.9%
Hampton G.O., Series 1995
6.00% 01/15/08 400 420,500
Virginia Hsg. Dev. Auth. Rev.
(Commonwealth Mtg.)
Series 1995A-1
6.70% 07/01/05 500 523,750
------------
944,250
------------
WASHINGTON -- 2.2%
Washington Health Care
Facilities Authority Sisters of
Providence Series 1985B
3.75%** 10/15/96 1,100 1,100,000
------------
See accompanying notes to financial statements.
35
<PAGE>
AS OF SEPTEMBER 30, 1996
SCHEDULE OF INVESTMENTS
TAX-FREE INCOMEPORTFOLIO (CONTINUED)
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
MUNICIPAL BONDS (CONTINUED)
WISCONSIN -- 0.5%
Milwaukee Met. Swr. Dist. G.O.,
Series 1992A
6.12% 10/01/03 $ 250 $ 269,687
------------
TOTAL MUNICIPAL BONDS
(Cost $48,274,001) 49,295,065
------------
SHORT TERM INVESTMENTS -- 0.1%
Smith Barney Tax-Free Money
Market Fund
(Cost $30,890) 31 30,890
------------
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $48,304,891*) $ 49,325,955
============
- ----------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $1,040,889
Gross unrealized depreciation (19,825)
----------
$1,021,064
==========
** Rates shown are the rates as of September 30, 1996 and the maturities shown
are the longer of readjustment date or the date the principal amount can be
recovered through demand.
See accompanying notes to financial statements.
36
<PAGE>
SEPTEMBER 30, 1996
STATEMENT OF ASSETS AND LIABILITIES COMPASS CAPITAL FUNDS
TAX-FREE INCOME PORTFOLIO
ASSETS
Investments at value (Cost $48,304,891) ..................... $49,325,955
Interest receivable ......................................... 765,295
Investments sold receivable ................................. 4,014,392
Capital shares sold receivable .............................. 18,096
Other assets ................................................ 25,924
-----------
TOTAL ASSETS ......................................... 54,149,662
-----------
LIABILITIES
Investments purchased payable ............................... 4,444,193
Capital shares redeemed payable ............................. 42,661
Accrued expenses payable .................................... 60,714
Distributions payable ....................................... 207,927
-----------
TOTAL LIABILITIES .................................... 4,755,495
-----------
NET ASSETS (Applicable to 770,581 Institutional
shares, 3,337,028 Service shares, 449,699
Investor A shares and 931 Investor B
shares outstanding) ......................................... $49,394,167
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER INSTITUTIONAL SHARE ($8,350,396 (DIVIDE) 770,581) ....... $ 10.84
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SERVICE SHARE ($36,160,776 (DIVIDE) 3,337,028) .......... $ 10.84
===========
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($4,872,905 (DIVIDE) 449,699) .......... $ 10.84
===========
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($10.84 (DIVIDE) 0.960) ..................................... $ 11.29
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($10,090 (DIVIDE) 931) ................. $ 10.84
===========
See accompanying notes to financial statements.
37
<PAGE>
AS OF SEPTEMBER 30, 1996
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
MUNICIPAL BONDS -- 102.0%
PENNSYLVANIA -- 98.1%
Allegheny Cnty. G.O. Bonds
Ser. 91C-38
6.20% 09/01/01 $ 250 $ 267,188
Allegheny Cnty. Hosp. Dev. Auth.
Rev. Bonds (Children's Hosp.
Prj.) Ser. 90A
7.00% 07/01/06 500 530,000
Allegheny Cnty. Hosp. Dev. Auth.
Rev. Bonds (Mercy Hosp.
Prj.) Ser. 86
7.37% 04/01/15 750 765,000
Allegheny Cnty. Res. Fin. Auth.
Mtg. Rev. Bonds (Single
Family Mtg. Prj.) Ser. 94Y
6.25% 05/01/17 385 392,219
Beaver Cnty G.O. Bond
Series 1996A
5.80% 10/01/17 3,500 3,508,750
Cambria Cnty. Unltd. Tax G.O.
Bonds Ser. 91
8.25% 06/01/00 500 538,750
Cambria Twp. Wtr. Auth. Ind. Rev.
Bond Ser. 93A
6.00% 12/01/12 1,000 1,037,500
Central Bucks Sch. Dist. Unltd.
Tax G.O. Bonds Ser. 94A
6.70% 11/15/09 500 554,375
Chester Cnty. Unltd. Tax G.O.
Bonds Ser. 91
6.70% 12/15/04 385 416,763
Crawford Central Sch. Dist.
Unltd. Tax G.O. Bonds Ser. 95
5.75% 02/15/11 1,585 1,606,795
Dauphin Cnty. Gen. Auth. Rev.
Bonds (A-F Sch. Dist. Pooled
Fin. Prog.) Ser. 86
5.30% 06/01/05 535 535,000
5.40% 06/01/06 565 564,955
5.50% 06/01/07 550 545,875
6.85% 06/01/09 800 850,000
Deer Lakes Sch. Dist. Unltd.
Tax G.O. Bonds Ser. 95
6.35% 01/15/14 1,000 1,045,000
6.45% 01/15/19 1,300 1,358,500
Delaware Cnty. Auth. Hlth. Care
Rev. Bonds (Mercy Hlth.
Corp.) Ser. 93B
6.00% 11/15/07 1,000 988,750
Delaware Cnty. Mem. Hosp.
Auth. Rev. Bonds Ser. 95
5.50% 08/15/19 3,000 2,891,250
Erie Cnty. Prison Auth. Lease
Rev. Bonds Ser. 91
6.25% 11/01/01 500 535,625
Geisinger Auth. Hlth. Sys. Rev.
Bonds Ser. 92B
4.00% 07/01/22 300 300,000
Harrisburg Auth. Lease Rev.
Bonds Ser. 91
6.50% 06/01/04 500 535,625
Indiana Cnty. Hosp. Auth. Rev.
Bonds Ser. 92A
7.12% 07/01/23 1,500 1,578,750
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
PENNSYLVANIA (CONTINUED)
Lancaster Cnty. Hosp. Auth. Rev.
Bonds (Hlth. Center-Masonic
Homes Prj.) Ser. 94
5.30% 11/15/08 $ 500 $ 488,125
Lebanon Cnty. Hosp. Auth. Rev.
Bonds (Good Samaritan
Hosp. Prj.) Ser. 93
5.55% 11/15/04 355 353,670
Ligonier Valley Sch. Dist. Unltd.
Tax G.O. Bonds Ser. 94
5.65% 03/01/14 2,000 2,002,500
Montgomery Cnty. Hghr. Ed. &
Hlth. Auth. Rev. Bonds
(Beaver Coll.) Ser. 96
5.75% 04/01/12 1,690 1,675,214
Montgomery Cnty. Hghr. Ed. &
Hlth. Auth. Rev. Bonds
(Frankford Hosp. Prj.) Ser. 86
7.87% 01/01/19 500 514,876
Moon Twp. Wtr. & Swr. Auth.
Rev. Bonds Ser. 94
6.70% 12/01/19 1,000 1,067,500
New Garden Twp. Swr. Auth.
Rev. Bonds Ser. 91
7.00% 03/01/15 420 455,700
Northampton Cnty. Hghr. Ed.
Auth. Rev. Bonds (Moravian
Coll.) Ser. 94
6.10% 07/01/12 1,950 2,001,188
Northampton Cnty. Ind. Dev.
Auth. Polltn. Ctrl. Rev. Bonds
(Metropolitan Edison Co. Prj.)
Ser. 95A
6.10% 07/15/21 1,000 1,026,250
Northumberland Cnty. Auth.
Comwlth. Lease Rev. Bonds
Ser. 91
6.25% 10/15/09 2,500 2,678,125
Northumberland Cnty. Auth. Gtd.
Lease Rev. Bonds Ser. 92
6.50% 08/15/07 500 545,625
Parkland Sch. Dist. Rev. Bonds
Ser. 96
5.75% 09/01/14 2,910 2,928,188
Pennsbury Sch. Dist. Unltd. Tax
G.O. Bonds Ser. 94
6.65% 08/15/09 685 762,062
Pennsylvania Cert. Part. Bond
Ser. 93A
5.25% 07/01/11 3,290 3,154,287
Pennsylvania Comwlth. Tpke.
Rev. Bonds Ser. 91L
6.50% 06/01/04 445 480,045
Pennsylvania Convention Ctr.
Rev. Bond Ser. 94A
5.55% 09/01/09 1,000 1,088,750
Pennsylvania Fin. Auth. Rev.
Bonds (Mun. Cap. Imp. Prj.)
Ser. 93
6.60% 11/01/09 3,260 3,459,675
Pennsylvania Hghr. Ed. Fac.
Auth. Rev. Bonds (Duquesne
Univ.) Ser. 91C
6.75% 04/01/20 1,000 1,065,000
See accompanying notes to financial statements.
38
<PAGE>
AS OF SEPTEMBER 30, 1996
COMPASS CAPITAL FUNDS
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
PENNSYLVANIA (CONTINUED)
Pennsylvania Hghr. Ed. Fac.
Auth. Rev. Bonds (Philadelphia
Coll. of Textiles & Science)
Ser. 93
4.95% 02/01/02 $ 255 $ 248,944
5.15% 02/01/04 1,230 1,188,488
Pennsylvania Hsg. Fin. Agcy.
Rev. Bonds Ser. 92
6.40% 07/01/12 500 513,126
Pennsylvania Hsg. Fin. Agy. Rev.
Bond (Single Family Mtg.)
Series 1994-39B
6.87% 10/01/24 1,500 1,575,000
Pennsylvania Ifra. Auth. Rev.
Bonds (Pennvest Pool Prog.)
Ser. 94
6.00% 09/01/06 1,930 2,062,687
Pennsylvania Ifra. Invest. Auth.
Rev. Bonds (Pennvest Prj.)
Ser. 90B
6.80% 09/01/10 2,000 2,197,500
Pennsylvania Intrgov. Coop.
Auth. Spec. Tax Rev. Bonds
(City of Philadelphia Fdg. Prog.)
Ser. 93
5.75% 06/15/15 1,000 978,750
Pennsylvania Intrgov. Coop.
Auth. Spec. Tax Rev. Bonds
(City of Philadelphia Fdg. Prog.)
Ser. 94
7.00% 06/15/04 500 565,000
Pennsylvania Intrgov. Coop.
Auth. Spl. Tax Rev. Bonds
(City of Philadelphia Fdg. Prog.)
Ser. 92
6.00% 06/15/02 1,400 1,485,750
Pennsylvania St. Hghr. Ed. Fac.
Rev. Bonds (Drexel Univ.) Ser. 90
7.25% 05/01/10 500 543,750
Pennsylvania St. Hghr. Ed. Fac.
Rev. Bonds (Susquehanna Univ.)
Ser. 90
6.90% 03/01/02 750 781,875
Pennsylvania St. Pub. Sch. Bldg.
Auth. Rev. Bonds (Mid Valley
Sch. Dist. Prj.) Ser. 92D
6.25% 01/01/07 500 533,125
Pennsylvania St. Tpke. Comnwlth.
Oil Franchise Tax Rev. Bonds
Ser. 94A
5.87% 12/01/08 500 518,125
Pennsylvania St. Tpke. Comnwlth.
Tpke. Rev. Bonds Ser. 92P
6.00% 12/01/09 500 517,500
Pennsylvania St. Unltd. Tax G.O.
Bonds Ser. 93A
5.00% 07/01/15 3,000 2,730,000
Pennsylvania Unltd. Tax G.O.
Bonds Ser. 94A
6.50% 11/01/05 250 269,062
Philadelphia Auth. for Ind. Dev.
Rev. Bonds (Nat. Bd. of Med.
Examiners Prj.) Ser. 92
6.75% 05/01/12 500 536,250
Philadelphia G.O. Bonds Ser. 94B
5.90% 11/15/09 2,600 2,687,750
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
PENNSYLVANIA (CONTINUED)
Philadelphia Gas Works Asset
Gtd. Rev. Bonds Ser. 94
5.25% 08/01/15 $1,500 $ 1,380,000
Philadelphia Hosp. & Hghr. Ed.
Fac. Auth. Rev. Bonds
(Friends' Hosp.) Ser. 93
5.95% 05/01/04 500 499,375
6.20% 05/01/11 500 473,125
Philadelphia Mun. Auth. Rev.
Bonds Ser. 93A
5.62% 11/15/14 2,000 1,975,000
Philadelphia Sch. Dist. Unltd.
Tax G.O. Bonds Ser. 91A
6.70% 07/01/99 250 264,688
Philadelphia Wtr. & Waste Wtr.
Rev. Bonds Ser. 93
5.50% 06/15/07 1,250 1,279,687
Philadelphia Wtr. & Waste Wtr.
Rev. Bonds Ser. 95
6.75% 08/01/03 500 555,625
6.25% 08/01/11 750 810,000
Pittsburgh G.O. Bonds Ser. 92D
6.12% 09/01/17 500 521,875
Ringgold Sch. Dist. Rev. Bonds
Ser. 95
6.20% 02/01/19 500 521,875
Schuylkill Redev. Auth. Comnwlth.
Lease Rev. Bonds Ser. 91A
7.12% 06/01/13 1,250 1,385,938
Southeastern Pennsylvania
Trans. Auth. Spec. Rev. Bonds
Ser. 95A
5.87% 03/01/09 1,230 1,273,050
5.90% 03/01/20 2,075 2,069,812
West Chester Area Sch. Dist.
G.O. Bonds Ser. 95
6.20% 09/01/14 1,000 1,063,750
West Mifflin Sanitation Swr.
Mun. Auth. Rev. Bonds Ser. 96
5.80% 08/01/26 1,025 1,014,750
Westmoreland Cnty. Ind. Dev.
Auth. Rev. Bonds
(Westmoreland Hlth. Sys.
Prj.) Ser 93A
6.00% 07/01/11 200 206,000
-----------
82,320,682
-----------
NEW YORK -- 2.7%
New York City Mun. Wtr. Fin.
Auth. Wtr. & Swr. System
Rev. Bonds Ser. 94G
3.75% 06/15/24 2,250 2,250,000
-----------
PUERTO RICO -- 1.0%
Puerto Rico Elec. Pwr. Auth.
Rev. Bonds Ser. 91P
6.75% 07/01/03 250 272,500
Puerto Rico Pub. Bldg. Auth.
Rev. Bonds Ser. 92J
6.50% 07/01/03 500 543,125
-----------
815,625
-----------
See accompanying notes to financial statements.
39
<PAGE>
AS OF SEPTEMBER 30, 1996
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
VIRGINIA -- 0.2%
Peninsula Ports Auth. Port Fac.
Rev. Bonds (Shell Coal &
Terminal Co. Prj.) Ser. 87
3.75%** 10/01/96 $ 200 $ 200,000
-----------
TOTAL MUNICIPAL BONDS
(Cost $83,909,947) 85,586,307
-----------
SHORT TERM INVESTMENTS -- 0.3%
Smith Barney Tax Free Money
Market Fund 129 129,281
Vanguard Pennsylvania
Tax-Exempt Money Fund 100 100,000
-----------
TOTAL SHORT TERM INVESTMENTS
(Cost $229,281) 229,281
-----------
TOTAL INVESTMENTS IN
SECURITIES
(Cost $84,139,228) 102.3% 85,815,588
LIABILITIES IN EXCESS OF
OTHER ASSETS (2.3%) (1,905,073)
-----------
NET ASSETS (Applicable to 345,675
Institutional shares, 3,284,996
Service shares, 3,642,501 Investor A
shares and 763,765 Investor B shares
outstanding) 100.0% $83,910,515
===== ===========
NET ASSET VALUE AND
REDEMPTION PRICE PER
INSTITUTIONAL, SERVICE
AND INVESTOR A SHARE
($75,936,354 (DIVIDE) 7,273,172) $10.44
======
OFFERING PRICE PER
INSTITUTIONAL AND
SERVICE SHARE $10.44
======
MAXIMUM OFFERING PRICE
PER INVESTOR A SHARE
($10.44 (DIVIDE) .960) $10.88
======
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION PRICE
(SUBJECT TO A CONTINGENT DEFERRED
SALES CHARGE OF 4.5%) PER
INVESTOR B SHARE
($7,974,161 (DIVIDE) 763,765) $10.44
======
- ----------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $1,808,896
Gross unrealized depreciation (132,536)
----------
$1,676,360
==========
** Rates shown are the rates as of September 30, 1996, and the maturities shown
are the longer of the next interest readjustment date or the date the
principal amount can be recovered through demand.
See accompanying notes to financial statements.
40
<PAGE>
AS OF SEPTEMBER 30, 1996
SCHEDULE OF INVESTMENTS COMPASS CAPITAL FUNDS
NEW JERSEY TAX-FREE INCOME PORTFOLIO
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
MUNICIPAL BONDS -- 100.0%
NEW JERSEY -- 90.7%
Absecon Bd. of Ed. G.O., Ser. 92
5.62% 12/15/02 $ 770 $ 790,213
Brick Township Mun. Util. Auth.
Rev., Ser. 77
6.75% 12/01/16 1,000 1,125,000
Brigantine G.O., Ser. 92
6.25% 08/01/03 730 789,313
Cherry Hill Township Unlimited
Tax G.O., Ser. 92
6.00% 06/01/06 500 525,000
Dover Township G.O., Ser. 92
6.00% 10/15/03 1,000 1,078,750
Edison Township G.O., Ser. 91
6.50% 06/01/04 500 548,750
Essex Cnty. Imp. Auth. Lease
Rev., Jail & Yth. Hsg. Proj.,
Ser. 94
6.90% 12/01/14 500 575,000
Essex Cnty. Util. Auth. Sol. Wste.
Rev., Ser. 96
5.75% 04/01/05 2,000 2,067,500
Evesham Mun. Util. Auth. Rev.,
Ser. 90B
6.80% 07/01/01 1,010 1,025,009
6.85% 07/01/02 1,080 1,096,448
Jersey City Sch. G. O., Ser. 96a
6.00% 10/01/06 1,500 1,582,500
Knowlton Township Bd. of Ed.
Unlimited Tax G.O., Ser. 91
6.60% 08/15/11 169 188,013
Lacey Township Wtr. Auth. Rev.,
Ser. 93
6.00% 12/01/12 1,000 1,032,500
Mercer Cnty. Imp. Rev., Hamilton
Bd. of Ed. Proj., Ser. 92
5.90% 06/01/03 500 526,875
Middlesex Cnty Import Auth. Rev.,
Ser. 96
5.80% 09/15/13 1,000 1,001,250
Morristown G.O., Ser. 95
6.40% 08/01/14 500 547,500
New Jersey Econ. Dev. Auth. Mkt.
Trans. Fac. Rev., Ser. 91A
5.70% 07/01/05 4,000 4,140,000
New Jersey Econ. Dev. Auth. Mkt.
Trans. Fac. Rev., Ser. 94
5.87% 07/01/11 4,000 4,085,000
New Jersey Econ. Dev. Auth. Rev.,
Invamed Inc. Proj., Ser. 95
6.00% 07/01/06 300 306,750
6.10% 07/01/07 200 204,500
New Jersey Econ. Dev. Auth. Rev.,
Kiva L.P. Proj., Ser. 95
5.55% 08/01/04 565 584,069
New Jersey Econ. Dev. Auth. Rev.,
Performing Arts Ctr. Proj.,
Ser. 96C
6.00% 06/15/05 1,920 2,047,200
5.75% 06/15/08 3,000 3,097,500
New Jersey Econ. Dev. Auth. Rev.,
Trenton OFC Complex, Ser. 89
6.62% 06/15/01 1,050 1,135,313
New Jersey Econ. Dev. Auth. Rev.,
W.Y. Hldg. Co. Proj., Ser. 95
5.95% 06/01/05 865 871,488
New Jersey Econ. Dev. Auth. Rev.,
Elizabethtown Wtr. Proj., Ser. 91B
6.60% 08/01/21 1,000 1,040,210
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
NEW JERSEY (CONTINUED)
New Jersey Ed. Auth. Rowan
Coll. Rev., Ser. 96
5.87% 07/01/16 $ 2,185 $ 2,231,431
New Jersey Hlth. Care Fac. Fin.
Auth. Rev., Cathederal. Hlth.
Ctr., Ser. 90
7.25% 02/15/21 1,000 1,075,000
New Jersey Hlth. Care Fac. Fin.
Auth. Rev., St. Josephs Hosp.
Ctr., Ser. 96
5.60% 07/01/07 4,000 4,040,000
New Jersey Sports & Expo. Con.
Ctr. Lux. Tax Rev., Ser. 93A
6.00% 07/01/12 1,000 1,022,500
New Jersey St. G.O., Ser. 92D
5.90% 02/15/08 3,000 3,131,250
6.00% 02/15/11 2,000 2,135,000
New Jersey St. G.O., Ser. 96
6.00% 07/15/06 3,000 3,217,500
New Jersey St. Hsg. & Mtg. Fin.
Agcy. Rev., Ser. 92A
6.70% 05/01/05 500 528,750
6.70% 11/01/05 1,000 1,057,500
6.95% 11/01/13 750 785,625
New Jersey St. Hwy. Auth. Rev.,
Gard. St. Pkwy., Ser. 92
6.00% 01/01/05 1,350 1,427,625
6.20% 01/01/10 750 803,438
6.25% 01/01/14 500 519,375
New Jersey St. Tpke. Auth. Rev.,
Ser. 91A
6.40% 01/01/02 1,350 1,427,625
6.90% 01/01/14 970 973,618
New Jersey St. Tpke. Auth. Rev.,
Ser. 91C
6.25% 01/01/10 1,350 1,400,625
6.50% 01/01/16 500 541,250
New Jersey St. Trans. Auth. Rev.,
Ser. 92A
6.00% 06/15/00 1,030 1,080,212
New Jersey Wstwtr. Rev., Ser. 89B
7.00% 05/15/04 950 1,018,875
New Jersey Wstwtr. Treatment
Trust Rev., Ser. 96C
6.25% 05/15/03 2,500 2,693,750
6.25% 05/15/06 3,000 3,255,000
Newark Bd. of Ed. G.O., Ser. 94
5.87% 12/15/13 1,000 1,026,250
North Bergen Township G.O.,
Ser. 92
5.90% 08/15/01 500 525,000
North Jersey Wtr. Sply. Rev.,
Wanaque Nth. Proj., Ser. 91A
6.50% 11/15/06 510 552,712
Northwest Bergen Cnty. Rev.,
Ser. 92
5.90% 07/15/06 755 795,581
Ocean Cnty. G.O., Ser.91
6.30% 04/15/97 1,000 1,014,280
Ocean Cnty. Util. Auth. Rev.,
Ser. 95A
6.30% 01/01/12 1,005 1,057,762
Passaic Valley Wtr. Comm. Sply.
Rev., Ser. 92A
5.95% 12/15/02 500 533,125
Point Pleasant G.O., Ser. 95
5.70% 12/01/03 500 523,125
Port Auth. N. Y. & N. J. Rev.,
Ser. 95
5.75% 11/01/09 3,275 3,291,375
See accompanying notes to financial statements.
41
<PAGE>
AS OF SEPTEMBER 30, 1996
SCHEDULE OF INVESTMENTS
NEW JERSEY TAX-FREE INCOME PORTFOLIO (CONTINUED)
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
NEW JERSEY (CONTINUED)
Tinton Falls Sch. Sys. G.O.,
Ser. 94
5.87% 10/15/09 $ 1,010 $ 1,030,200
Warren Cnty. Pol. Ctrl. Fin. Auth.
Rev., Ser. 92B
5.70% 12/01/03 500 529,375
Weehawken Township G.O.,
Ser.92
6.15% 07/01/04 350 375,812
West Windsor Plainsboro
Township Bd. of Ed. G.O.,
Ser. 93
5.80% 03/15/06 1,000 1,045,000
Winslow Township Unlimited
Tax G.O., Ser.92
6.40% 10/01/05 870 931,987
Woodbridge Township G.O.,
Ser. 92
6.05% 08/15/05 500 526,875
------------
80,136,059
------------
NEW YORK -- 1.3%
New York City Mun. Wtr. Fin.
Auth. Wtr. & Swr. System
Rev., Ser. 94G
3.75%** 10/15/96 1,200 1,200,000
------------
PENNSYLVANIA -- 2.8%
Delaware River Joint Toll Bdg.
Rev., Ser. 92
6.25% 07/01/12 1,400 1,459,500
Delaware River Port Auth. PA &
NJ Rev., Ser. 96
5.40% 01/01/16 1,000 980,000
------------
2,439,500
------------
PUERTO RICO -- 5.2%
Puerto Rico Elec. Pwr. Auth.
Rev., Ser. 95Z
5.25% 07/01/21 1,500 1,374,375
Puerto Rico Elec. Pwr. Auth.
Rev., Ser. 94S
6.12% 07/01/08 1,000 1,076,250
Puerto Rico Elec. Pwr. Auth.
Rev., Ser. 94T
5.50% 07/01/20 2,250 2,140,312
------------
4,590,937
------------
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $86,685,166) $ 88,366,496
============
- ----------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $1,811,697
Gross unrealized depreciation (130,367)
----------
$1,681,330
==========
** Rates shown are the rates as of September 30, 1996, and the maturities shown
are the longer of the next interest readjustment date or the date the
principal amount can be recovered through demand.
See accompanying notes to financial statements.
42
<PAGE>
SEPTEMBER 30, 1996
STATEMENT OF ASSETS AND LIABILITIES COMPASS CAPITAL FUNDS
NEW JERSEY TAX-FREE INCOME PORTFOLIO
ASSETS
Investments at value (Cost $86,685,166) .................... $88,366,496
Interest receivable ........................................ 1,389,842
Investments sold receivable ................................ 4,457,825
Capital shares sold receivable ............................. 106,651
Other assets ............................................... 38,797
-----------
TOTAL ASSETS ........................................ 94,359,611
-----------
LIABILITIES
Cash overdraft ............................................. 42,361
Investments purchased payable .............................. 4,899,236
Capital shares redeemed payable ............................ 30,544
Accrued expenses payable ................................... 65,252
Distributions payable ...................................... 321,630
-----------
TOTAL LIABILITIES ................................... 5,359,023
-----------
NET ASSETS (Applicable to 7,816,279 Service shares,
79,324 Investor A shares and 2,688 Investor B
shares outstanding) ........................................ $89,000,588
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SERVICE SHARE ($88,076,493 (DIVIDE) 7,816,279) ......... $ 11.27
===========
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($893,803 (DIVIDE) 79,324) ............ $ 11.27
===========
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($11.27 (DIVIDE) 0.960) .................................... $ 11.74
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($30,292 (DIVIDE) 2,688) .............. $ 11.27
===========
See accompanying notes to financial statements.
43
<PAGE>
AS OF SEPTEMBER 30, 1996
STATEMENT OF NET ASSETS
OHIO TAX-FREE INCOME PORTFOLIO
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
MUNICIPAL BONDS -- 102.6%
OHIO -- 88.1%
Akron Swr. Sys. Rev., Ser. 96
5.87% 12/01/16 $ 500 $ 508,750
Brunswick G.O., Ser. 94
6.30% 12/01/05 210 217,088
Butler Cnty. Hosp. Fac. Rev.,
Middletown Reg. Hosp.,
Ser. 91
6.75% 11/15/03 50 54,438
Cleveland Apt. Sys. Rev.,
Ser. 94B
5.70% 01/01/04 150 154,875
Cleveland Packaging Fac. Rev.
Bonds Ser.96
6.00% 09/15/06 500 532,500
Columbus Mun. Apt. Auth. Rev.
Port Columbus Int. Apt.
Ser. 94A
6.00% 01/01/04 150 155,813
Cuyahoga Cnty. Hosp. Rev.,
Ser. 96
6.00% 01/15/05 500 531,250
Fairfield City Sch. Dist. G.O.,
Ser. 94
7.45% 12/01/14 300 340,875
Hamilton Cnty. Swr. Sys. Rev.,
Ser. 95A
6.00% 12/01/02 500 535,000
Kings Loc. Sch. Dist. G.O.,
Ser. 94
7.60% 12/01/05 200 224,500
Loveland City Sch. Dist. G.O., Ser. 92
6.65% 12/01/02 145 156,056
Lucas Cnty. G.O., Ser. 96
6.00% 12/01/05 500 538,125
Medina G.O., Ser. 86
7.25% 12/01/03 50 56,562
Montgomery Cnty. Hosp. Rev.
Kettering Mem. Hosp., Ser. 89
7.37% 04/01/99 200 215,000
North Royalton City Sch. Dist.
G.O., Ser. 94
6.62% 12/01/06 100 112,125
Northwestern Loc. Sch. Dist.
G.O. Wayne & Ashland Cntys.,
Ser 94
7.20% 12/01/10 300 352,125
Ohio G.O., Ser. 95
6.00% 08/01/05 225 238,781
Ohio Hsg. Fin. Agcy. Rev. Res.
Mort., Ser. 94B-2
6.35% 09/01/04 150 150,375
Ohio Pfc Higher Ed. Rev.,
Ser. 92ii-a
5.50% 12/01/07 400 402,500
- --------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ------- ------------
OHIO(CONTINUED)
Ohio State Bldg. Data Ctr. Rev.
Ser. 93A
5.90% 10/01/07 $ 450 $ 468,562
Ohio State Higher Ed. Fac.
Comm. Rev. Ohio Dominican
Coll., Ser. 94
6.62% 12/01/04 250 261,562
Ohio State Tpke. Rev., Ser. 96
6.00% 02/15/05 400 429,500
Ohio State Wtr. Dev. Auth. Rev.
Steel-Cargill North Star
Broken Hill Proj. Ser. 95
6.30% 09/01/20 500 513,750
Olentangy Loc. Sch. Dist.
G.O. Ser. 95A
6.00% 12/01/08 225 237,094
Student Loan Fund. Corp.
Rev. Cincinnati, Ser. 93A
5.75% 08/01/03 65 65,650
Summit Cnty. Hosp. Rev.
Cuyahoga Falls Gen. Hosp.
Proj., Ser. 94
6.65% 07/01/14 200 203,000
Toledo G.O., Ser. 96
6.00% 12/01/06 500 533,125
Univ. of Toledo Gen. Rec.
Rev., Ser. 92A
5.90% 06/01/20 425 429,781
-----------
8,618,762
-----------
PUERTO RICO -- 9.4%
Puerto Rico Elec. Pwr. Auth.
Rev. Bonds Ser. 95Z
5.25% 07/01/21 1,000 916,250
-----------
VIRGINIA -- 1.0%
Peninsula Prt. Auth. of Virginia
Prt Fac. Rev. Shell Coal &
Terminal Co. Proj. Ser. 87
3.75%** 10/01/96 100 100,000
-----------
WYOMING -- 4.1%
Unita Cnty. Wyoming Poll. Ctrl.
Rev. Poll. Ctrl. Ser. 93
3.70%** 10/01/96 400 400,000
-----------
TOTAL MUNICIPAL BONDS
(Cost $9,782,463) 10,035,012
-----------
SHORT TERM INVESTMENTS -- 0.9%
Smith Barney Tax Free Money
Market Fund
(Cost $90,502) 91 90,502
-----------
TOTAL INVESTMENTS IN
SECURITIES -- 103.5%
(Cost $9,872,965*) 10,125,514
See accompanying notes to financial statements.
44
<PAGE>
AS OF SEPTEMBER 30, 1996
COMPASS CAPITAL FUNDS
- --------------------------------------------------------------------------------
VALUE
-----------
LIABILITIES IN EXCESS OF
OTHER ASSETS (3.5%) $ (345,477)
------ -----------
NET ASSETS (Applicable to 40,247
Institutional, 628,016 Service,
278,985 Investor A and 15,838
Investor B shares outstanding) 100.0% $ 9,780,037
===== ===========
NET ASSET VALUE AND
REDEMPTION PRICE PER
INSTITUTIONAL, SERVICE
AND INVESTOR A SHARE
($9,619,203 (DIVIDE) 947,248) $10.15
======
OFFERING PRICE PER
INSTITUTIONAL AND
SERVICE SHARE $10.15
======
MAXIMUM OFFERING PRICE
PER INVESTOR A SHARE
($10.15 (DIVIDE) .960) $10.57
======
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION PRICE
(SUBJECT TO A CONTINGENT DEFERRED
SALES CHARGE OF 4.5%) PER
INVESTOR B SHARE
($160,834 (DIVIDE) 15,838) $10.15
======
- ----------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $253,277
Gross unrealized depreciation (728)
--------
$252,549
========
** Rates shown are the rates as of September 30, 1996, and the maturities shown
are the longer of the next interest readjustment date or the date the
principal amount can be recovered through demand.
- --------------------------------------
INVESTMENT ABBREVIATIONS
ARM Adjustable Rate Mortgage
CMT Constant Maturity Treasury
G.O. General Obligations
IO Interest Only
PO Prinicipal Only
- --------------------------------------
See accompanying notes to financial statements.
45
<PAGE>
FOR THE PERIOD ENDED SEPTEMBER 30, 1996
STATEMENTS OF OPERATIONS COMPASS CAPITAL FUNDS
<TABLE>
<CAPTION>
SHORT GOVERNMENT CORE
BOND BOND
PORTFOLIO PORTFOLIO
------------------------ --------------------------
FOR THE FOR THE FOR THE FOR THE
PERIOD PERIOD INTERMEDIATE PERIOD PERIOD
4/1/96 7/1/95 GOVERNMENT INTERMEDIATE 4/1/96 7/1/95
THROUGH THROUGH BOND BOND THROUGH THROUGH
9/30/96 3/31/96 PORTFOLIO PORTFOLIO 9/30/96 3/31/96
---------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest ............................... $7,060,312 $ 4,722,663 $12,503,091 $15,137,312 $10,233,661 $ 5,315,543
---------- ----------- ----------- ----------- ----------- ------------
Expenses:
Investment advisory fee ................ 563,812 316,814 952,916 1,112,805 707,818 378,895
Administration fee ..................... 259,160 146,185 428,641 501,800 325,596 169,829
Custodian fee .......................... 27,070 13,650 61,615 67,014 20,782 19,628
Transfer agent fee ..................... 34,232 15,063 64,653 63,529 53,346 18,940
Service fees ........................... 203,626 116,290 145,143 125,956 260,087 150,454
Distribution fees ...................... 1,779 418 26,750 3,107 2,537 26
Legal and audit ........................ 16,597 11,581 15,413 25,028 23,858 11,250
Printing ............................... 5,053 7,882 9,904 17,946 23,309 7,174
Registration fees and expenses ......... 12,882 22,444 30,001 32,964 21,641 31,255
Organization ........................... 2,192 13,477 -- 4,571 2,500 44,490
Trustees' fees and officer's salary .... 2,435 2,057 3,770 3,724 5,040 3,105
Other .................................. 7,686 40,202 15,774 17,973 8,975 9,448
---------- ----------- ----------- ----------- ----------- ------------
1,136,524 706,063 1,754,580 1,976,417 1,455,489 844,494
Less fees voluntarily waived and
expenses reimbursed .................. (308,916) (150,900) (565,375) (671,838) (411,870) (206,223)
---------- ----------- ----------- ----------- ----------- ------------
Total operating expenses .......... 827,608 555,163 1,189,205 1,304,579 1,043,619 638,271
---------- ----------- ----------- ----------- ----------- ------------
Interest expense .......................... 116,272 248,772 317,003 669,801 329,458 55,045
---------- ----------- ----------- ----------- ----------- ------------
Total expenses .................... 943,880 803,935 1,506,208 1,974,380 1,373,077 693,316
---------- ----------- ----------- ----------- ----------- ------------
Net investment income ..................... 6,116,432 3,918,728 10,996,883 13,162,932 8,860,584 4,622,227
---------- ----------- ----------- ----------- ----------- ------------
Realized and unrealized gain (loss) on
investments and foreign currency
transactions:
Net realized gain (loss) from:
Investment transactions ........... (1,541,367) 1,395,164 (1,481,776) (193,924) (3,335,514) 6,070,648
Futures contracts -- -- (33,242) (20,658) 512,405 --
Foreign currency transactions
and forward foreign currency
contracts ......................... -- -- -- -- -- --
Change in unrealized appreciation
(depreciation) from:
Investments .......................... 1,327,995 (3,644,972) (695,980) (2,067,611) 966,309 (14,061,504)
Futures contracts -- -- (13,472) 3,382 (410,910) --
Foreign currency transactions
and forward foreign currency
contracts ......................... -- -- -- -- -- --
---------- ----------- ----------- ----------- ----------- ------------
Net gain (loss) on investments and
foreign currency transactions .......... (213,372) (2,249,808) (2,224,470) (2,278,811) (2,267,710) (7,990,856)
---------- ----------- ----------- ----------- ----------- ------------
Net increase (decrease) in net assets
resulting from operations .............. $5,903,060 $ 1,668,920 $ 8,772,413 $10,884,121 $ 6,592,874 $ (3,368,629)
========== =========== =========== =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL
BOND
PORTFOLIO
------------------------
FOR THE FOR THE
PERIOD PERIOD PENNSYLVANIA
GOVERNMENT MANAGED 2/1/96 3/1/95 TAX-FREE TAX-FREE
INCOME INCOME THROUGH THROUGH INCOME INCOME
PORTFOLIO PORTFOLIO 9/30/96 1/31/96 PORTFOLIO PORTFOLIO
---------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest ............................... $1,326,053 $44,722,334 $1,704,063 $2,890,562 $2,279,538 $4,350,495
---------- ----------- ---------- ---------- ---------- ----------
Expenses:
Investment advisory fee ................ 70,051 3,310,695 138,377 330,008 199,220 389,436
Administration fee ..................... 31,542 1,461,270 56,447 81,222 91,554 175,945
Custodian fee .......................... 19,387 180,233 34,897 53,484 15,461 20,529
Transfer agent fee ..................... 18,114 217,549 10,790 27,237 6,145 50,240
Service fees ........................... 36,432 430,434 49,515 -- 79,482 104,773
Distribution fees ...................... 91,988 49,521 224 -- 24,604 210,028
Legal and audit ........................ 1,402 61,402 9,441 16,294 3,118 6,441
Printing ............................... 1,826 35,017 3,597 2,634 2,626 4,085
Registration fees and expenses ......... 28,746 37,540 14,200 1,734 32,643 9,757
Organization ........................... 6,703 -- 3,319 -- 2,353 9,193
Trustees' fees and officer's salary .... 240 11,092 491 1,945 732 1,372
Other .................................. 5,702 31,118 7,307 6,131 800 12,081
---------- ----------- ---------- ---------- ---------- ----------
312,133 5,825,871 328,605 520,689 458,738 993,880
Less fees voluntarily waived and
expenses reimbursed .................. (106,873) (1,487,363) (33,573) (1,157) (128,804) (228,439)
---------- ----------- ---------- ---------- ---------- ----------
Total operating expenses .......... 205,260 4,338,508 295,032 519,532 329,934 765,441
---------- ----------- ---------- ---------- ---------- ----------
Interest expense .......................... 287,812 -- 19,500 -- -- --
---------- ----------- ---------- ---------- ---------- ----------
Total expenses .................... 493,072 4,338,508 314,532 519,532 329,934 765,441
---------- ----------- ---------- ---------- ---------- ----------
Net investment income ..................... 832,981 40,383,826 1,389,531 2,371,030 1,949,604 3,585,054
---------- ----------- ---------- ---------- ---------- ----------
Realized and unrealized gain (loss) on
investments and foreign currency
transactions:
Net realized gain (loss) from:
Investment transactions ........... 3,550 (2,904,496) 367,234 1,833,513 (15,719) (125,976)
Futures contracts (48,717) (2,183,739) -- -- -- --
Foreign currency transactions
and forward foreign currency
contracts ......................... -- -- 1,385,712 2,104,030 -- --
Change in unrealized appreciation
(depreciation) from:
Investments .......................... (261,150) (8,084,037) (265,436) (782,301) (1,509) 564,065
Futures contracts (11,921) (112,230) -- -- -- --
Foreign currency transactions
and forward foreign currency
contracts ......................... -- -- (893,159) 1,646,033 -- --
---------- ----------- ---------- ---------- ---------- ----------
Net gain (loss) on investments and
foreign currency transactions .......... (318,238) (13,284,502) 594,351 4,081,275 (17,228) 438,089
---------- ----------- ---------- ---------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations .............. $ 514,743 $27,099,324 $1,983,882 $7,172,305 $1,932,376 $4,023,143
========== =========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
NEW JERSEY
TAX-FREE
INCOME
PORTFOLIO
------------------------
FOR THE FOR THE
PERIOD PERIOD OHIO
2/1/96 3/1/95 TAX-FREE
THROUGH THROUGH INCOME
9/30/96 1/31/96 PORTFOLIO
--------- ---------- ---------
<S> <C> <C> <C>
Investment income:
Interest ............................... $3,254,967 $4,777,540 $513,048
--------- ---------- --------
Expenses:
Investment advisory fee ................ 307,414 537,769 46,840
Administration fee ..................... 138,308 164,026 21,114
Custodian fee .......................... 16,175 9,758 13,098
Transfer agent fee ..................... 22,069 68,874 5,049
Service fees ........................... 183,893 12,814 17,688
Distribution fees ...................... 1,482 1 12,401
Legal and audit ........................ 15,839 14,780 3,266
Printing ............................... 4,577 4,744 449
Registration fees and expenses ......... 15,694 2,550 2,586
Organization ........................... 2,063 7,914 2,471
Trustees' fees and officer's salary .... 1,229 3,853 165
Other .................................. 8,307 16,632 7,999
--------- ---------- --------
717,050 843,715 133,126
Less fees voluntarily waived and
expenses reimbursed .................. (192,340) (13,871) (55,297)
--------- ---------- --------
Total operating expenses .......... 524,710 829,844 77,829
--------- ---------- --------
Interest expense .......................... -- -- --
--------- ---------- --------
Total expenses .................... 524,710 829,844 77,829
--------- ---------- --------
Net investment income ..................... 2,730,257 3,947,696 435,219
--------- ---------- --------
Realized and unrealized gain (loss) on
investments and foreign currency
transactions:
Net realized gain (loss) from:
Investment transactions ........... (800,973) 366,047 (25,177)
Futures contracts 6,301 -- --
Foreign currency transactions
and forward foreign currency
contracts ......................... -- -- --
Change in unrealized appreciation
(depreciation) from:
Investments .......................... (1,956,552) 5,294,882 103,074
Futures contracts -- -- --
Foreign currency transactions
and forward foreign currency
contracts ......................... -- -- --
--------- ---------- --------
Net gain (loss) on investments and
foreign currency transactions .......... (2,751,224) 5,660,929 77,897
--------- ---------- --------
Net increase (decrease) in net assets
resulting from operations .............. $ (20,967) $9,608,625 $513,116
========= ========== ========
</TABLE>
See accompanying notes to financial statements.
46&47
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS COMPASS CAPITAL FUNDS
<TABLE>
<CAPTION>
SHORT GOVERNMENT INTERMEDIATE GOVERNMENT
BOND PORTFOLIO BOND PORTFOLIO
-------------------------------------------- ----------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE FOR THE FOR THE
4/1/96 THROUGH 7/1/95 THROUGH YEAR ENDED YEAR ENDED YEAR ENDED
9/30/96 3/31/96 6/30/95 9/30/96 9/30/95
------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ........................ $ 6,116,432 $ 3,918,728 $ 2,082,671 $ 10,996,883 $ 11,103,911
Net gain (loss) on investment ................ (213,372) (2,249,808) 908,723 (2,224,470) 7,168,332
------------ ------------ ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations ................. 5,903,060 1,668,920 2,991,394 8,772,413 18,272,243
------------ ------------ ----------- ------------ ------------
Distributions to shareholders from:
Net investment income:
Institutional Shares ......................... (2,376,647) (1,842,630)2 (2,092,080) (7,708,808) (7,538,593)
Service Shares ............................... (3,508,349) (2,026,179) -- (2,611,126) (3,019,296)
Investor A Shares ............................ (21,906) (5,132) -- (401,159) (515,648)
Investor B Shares ............................ -- -- -- -- --
Investor C Shares ............................ -- -- -- -- --
------------ ------------ ----------- ------------ ------------
Total distribution from net
investment income ....................... (5,906,902) (3,873,941) (2,092,080) (10,721,093) (11,073,537)
------------ ------------ ----------- ------------ ------------
In excess of net investment income:
Institutional Shares ......................... -- (164,529)2 -- -- --
Service Shares ............................... -- -- -- -- --
Investor A Shares ............................ -- -- -- -- --
------------ ------------ ----------- ------------ ------------
Total distribution in excess of net
investment income ....................... -- (164,529) -- -- --
------------ ------------ ----------- ------------ ------------
Net realized gains:
Institutional Shares ......................... -- (58,282)2 (27,706) -- --
Service Shares ............................... -- -- -- -- --
Investor A Shares ............................ -- -- -- -- --
Investor B Shares ............................ -- -- -- -- --
------------ ------------ ----------- ------------ ------------
Total distributions from net realized gains -- (58,282) (27,706) -- --
------------ ------------ ----------- ------------ ------------
Total distributions to shareholders ....... (5,906,902) (4,096,752) (2,119,786) (10,721,093) (11,073,537)
------------ ------------ ----------- ------------ ------------
Capital share transactions ........................ (6,733,602) 193,173,293 12,349,814 (12,741,291) (11,093,899)
------------ ------------ ----------- ------------ ------------
Total increase (decrease) in net assets ... (6,737,444) 190,745,461 13,221,422 (14,689,971) (3,895,193)
------------ ------------ ----------- ------------ ------------
Net assets:
Beginning of period .......................... 235,231,693 44,486,232 31,264,810 194,398,754 198,293,947
------------ ------------ ----------- ------------ ------------
End of period ................................ $228,494,249 $235,231,693 $44,486,232 $179,708,783 $194,398,754
============ ============ =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE CORE
BOND PORTFOLIO BOND PORTFOLIO
-------------------------- ------------------------------------------
FOR THE FOR THE FOR THE PERIOD FOR THE PERIOD FOR THE
YEAR ENDED YEAR ENDED 4/1/96 THROUGH 7/1/95 THROUGH YEAR ENDED
9/30/96 9/30/95 9/30/96 3/31/96 6/30/95
------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ........................ $ 13,162,932 $ 8,282,180 $ 8,860,584 $ 4,622,227 $ 1,075,779
Net gain (loss) on investment ................ (2,278,811) 6,126,253 (2,267,710) (7,990,856) 1,074,604
------------ ------------ ------------ ------------ -----------
Net increase (decrease) in net assets
resulting from operations ................. 10,884,121 14,408,433 6,592,874 (3,368,629) 2,150,383
------------ ------------ ------------ ------------ -----------
Distributions to shareholders from:
Net investment income:
Institutional Shares ......................... (10,531,863) (6,107,918) (3,574,577) (1,906,399)2 (1,083,760)
Service Shares ............................... (2,326,763) (2,086,482) (5,178,248) (2,729,527) --
Investor A Shares ............................ (45,490) (26,612) (5,121) (228) --
Investor B Shares ............................ -- -- (15,457) (58) --
Investor C Shares ............................ -- -- -- -- --
------------ ------------ ------------ ------------ -----------
Total distribution from net
investment income ....................... (12,904,116) (8,221,012) (8,773,403) (4,636,212) (1,083,760)
------------ ------------ ------------ ------------ -----------
In excess of net investment income:
Institutional Shares ......................... -- -- -- -- --
Service Shares ............................... -- -- -- -- --
Investor A Shares ............................ -- -- -- -- --
------------ ------------ ------------ ------------ -----------
Total distribution in excess of net
investment income ....................... -- -- -- -- --
------------ ------------ ------------ ------------ -----------
Net realized gains:
Institutional Shares ......................... (519,741) -- -- (880,411)2 (9,414)
Service Shares ............................... (125,660) -- -- -- --
Investor A Shares ............................ (2,393) -- -- -- --
Investor B Shares ............................ -- -- -- -- --
------------ ------------ ------------ ------------ -----------
Total distributions from net realized gains (647,794) -- (880,411) (9,414)
------------ ------------ ------------ ------------ -----------
Total distributions to shareholders ....... (13,551,910) (8,221,012) (8,773,403) (5,516,623) (1,093,174)
------------ ------------ ------------ ------------ -----------
Capital share transactions ........................ 94,529,679 48,409,985 (13,073,874) 273,598,804 18,626,241
------------ ------------ ------------ ------------ -----------
Total increase (decrease) in net assets ... 91,861,890 54,597,406 (15,254,403) 264,713,552 19,683,450
------------ ------------ ------------ ------------ -----------
Net assets:
Beginning of period .......................... 162,344,434 107,747,028 296,904,356 32,190,804 12,507,354
------------ ------------ ------------ ------------ -----------
End of period ................................ $254,206,324 $162,344,434 $281,649,953 $296,904,356 $32,190,804
============ ============ ============ ============ ===========
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT MANAGED
INCOME PORTFOLIO INCOME PORTFOLIO
----------------------------- ----------------------------
FOR THE FOR THE PERIOD FOR THE FOR THE
YEAR ENDED 10/03/94 1 THROUGH YEAR ENDED YEAR ENDED
9/30/96 9/30/95 9/30/96 9/30/95
----------- ----------------- ------------ ------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ........................ $ 832,981 $ 471,896 $ 40,383,826 $ 32,642,122
Net gain (loss) on investment ................ (318,238) 624,907 (13,284,502) 31,108,808
----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations ................. 514,743 1,096,803 27,099,324 63,750,930
----------- ------------ ------------ ------------
Distributions to shareholders from:
Net investment income:
Institutional Shares ......................... -- -- (30,992,031) (26,544,370)
Service Shares ............................... -- -- (8,387,287) (5,430,486)
Investor A Shares ............................ (213,995) (116,675) (669,888) (667,266)
Investor B Shares ............................ (595,251) (355,221) -- --
Investor C Shares ............................ -- -- -- --
----------- ------------ ------------ ------------
Total distribution from net
investment income ....................... (809,246) (471,896) (40,049,206) (32,642,122)
----------- ------------ ------------ ------------
In excess of net investment income:
Institutional Shares ......................... -- -- -- (643,455)
Service Shares ............................... -- -- -- (131,639)
Investor A Shares ............................ -- -- -- (16,175)
----------- ------------ ------------ ------------
Total distribution in excess of net
investment income ....................... -- -- -- (791,269)
----------- ------------ ------------ ------------
Net realized gains:
Institutional Shares ......................... -- -- (4,581,107) --
Service Shares ............................... -- -- (1,264,449) --
Investor A Shares ............................ (81,209) -- (119,989) --
Investor B Shares ............................ (277,151) -- -- --
----------- ------------ ------------ ------------
Total distributions from net realized gains (358,360) -- (5,965,545) --
----------- ------------ ------------ ------------
Total distributions to shareholders ....... (1,167,606) (471,896) (46,014,751) (33,433,391
----------- ------------ ------------ ------------
Capital share transactions ........................ 2,245,029 12,552,827 187,954,362 68,016,777
----------- ------------ ------------ ------------
Total increase (decrease) in net assets ... 1,592,166 13,177,734 169,038,935 98,334,316
----------- ------------ ------------ ------------
Net assets:
Beginning of period .......................... 13,177,734 -- 571,970,671 473,636,355
----------- ------------ ------------ ------------
End of period ................................ $14,769,900 $ 13,177,734 $741,009,606 $571,970,671
=========== ============ ============ ============
<FN>
- ----------------
1 Commencement of operations.
2 Institutional Shares include all activity of the prior class of shares before January 13, 1996, the date of the merger.
</FN>
</TABLE>
See accompanying notes to financial statements.
48&49
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) COMPASS CAPITAL FUNDS
<TABLE>
<CAPTION>
INTERNATIONAL TAX-FREE
BOND PORTFOLIO INCOME PORTFOLIO
---------------------------------------------- ----------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE FOR THE FOR THE
2/1/96 THROUGH 3/1/95 THROUGH YEAR ENDED YEAR ENDED YEAR ENDED
9/30/96 1/31/96 2/28/95 9/30/96 9/30/95
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ........................ $ 1,389,531 $ 2,371,030 $ 2,695,000 $ 1,949,604 $ 476,804
Net gain (loss) on investment and foreign
currency related transactions ............. 594,351 4,801,275 (2,000,000) (17,228) 544,133
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations ................. 1,983,882 7,172,305 695,000 1,932,376 1,020,937
----------- ----------- ----------- ----------- -----------
Distributions to shareholders from:
Net investment income:
Institutional Shares ......................... (348,627) -- -- (377,242) (7,110)
Service Shares ............................... (602,036)1 (3,221,772)1 (570,000) (1,297,915) (152,612)
Investor A Shares ............................ (978) -- -- (268,319) (315,032)
Investor B Shares ............................ (633) -- -- (78) --
Investor C Shares ............................ (14) -- -- -- --
----------- ----------- ----------- ----------- -----------
Total distribution from net
investment income ....................... (952,288) (3,221,772) (570,000) (1,943,554) (474,754)
----------- ----------- ----------- ----------- -----------
In excess of net investment income:
Institutional Shares ......................... -- -- -- -- --
Service Shares ............................... -- -- -- -- --
Investor A Shares ............................ -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total distribution in excess of net
investment income ....................... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net realized gains:
Institutional Shares ......................... -- -- -- -- (191)
Service Shares ............................... -- -- (1,055,000) -- (5,402)
Investor A Shares ............................ -- -- -- -- (13,686)
Investor B Shares ............................ -- -- -- --
----------- ----------- ----------- ----------- -----------
Total distributions from net realized gains -- -- (1,055,000) -- (19,279)
----------- ----------- ----------- ----------- -----------
Total distributions to shareholders ....... (952,288) (3,221,772) (1,625,000) (1,943,554) (494,033)
----------- ----------- ----------- ----------- -----------
Capital share transactions ........................ 390,815 (11,980,752) (301,000) 37,830,177 1,834,910
----------- ----------- ----------- ----------- -----------
Total increase (decrease) in net assets ... 1,422,409 (8,030,219) (1,231,000) 37,818,999 2,361,814
----------- ----------- ----------- ----------- -----------
Net assets:
Beginning of period .......................... 37,626,781 45,657,000 46,888,000 11,575,168 9,213,354
----------- ----------- ----------- ----------- -----------
End of period ................................ $39,049,190 $37,626,781 $45,657,000 $49,394,167 $11,575,168
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
PENNSYLVANIA TAX-FREE NEW JERSEY TAX-FREE
INCOME PORTFOLIO INCOME PORTFOLIO
---------------------------- ------------------------------------------------
FOR THE FOR THE FOR THE PERIOD FOR THE PERIOD FOR THE
YEAR ENDED YEAR ENDED 2/1/96 THROUGH 3/1/95 THROUGH YEAR ENDED
9/30/96 9/30/95 9/30/96 1/31/96 2/28/95
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ........................ $ 3,585,054 $ 2,926,137 $ 2,730,257 $ 3,947,696 $ 4,781,000
Net gain (loss) on investment and foreign
currency related transactions ............. 438,089 2,922,626 (2,751,224) 5,660,929 (4,062,000)
----------- ----------- ----------- ----------- ------------
Net increase (decrease) in net assets
resulting from operations ................. 4,023,143 5,848,763 (20,967) 9,608,625 719,000
----------- ----------- ----------- ----------- ------------
Distributions to shareholders from:
Net investment income:
Institutional Shares ......................... (179,824) (75,362) -- -- --
Service Shares ............................... (1,340,668) (622,721) (2,881,377) (3,798,344)2 (4,773,000)
Investor A Shares ............................ (1,875,997) (2,145,636) (15,162) (1) --
Investor B Shares ............................ (210,626) (82,418) (271) -- --
Investor C Shares ............................ -- -- -- -- --
----------- ----------- ----------- ----------- ------------
Total distribution from net
investment income ....................... (3,607,115) (2,926,137) (2,896,810) (3,798,345) (4,773,000)
----------- ----------- ----------- ----------- ------------
In excess of net investment income:
Institutional Shares ......................... -- -- -- -- --
Service Shares ............................... -- -- -- -- --
Investor A Shares ............................ -- -- -- -- --
----------- ----------- ----------- ----------- ------------
Total distribution in excess of net
investment income ....................... -- -- -- -- --
----------- ----------- ----------- ----------- ------------
Net realized gains:
Institutional Shares ......................... -- -- -- -- --
Service Shares ............................... -- -- -- -- (73,000)
Investor A Shares ............................ -- -- -- -- --
Investor B Shares ............................ -- -- -- -- --
----------- ----------- ----------- ----------- ------------
Total distributions from net realized gains -- -- -- -- (73,000)
----------- ----------- ----------- ----------- ------------
Total distributions to shareholders ....... (3,607,115) (2,926,137) (2,896,810) (3,798,345) (4,846,000)
----------- ----------- ----------- ----------- ------------
Capital share transactions ........................ 20,804,503 1,048,267 (6,071,841) (4,677,074) (10,370,000)
----------- ----------- ----------- ----------- ------------
Total increase (decrease) in net assets ... 21,220,531 3,970,893 (8,989,618) 1,133,206 (14,497,000)
----------- ----------- ----------- ----------- ------------
Net assets:
Beginning of period .......................... 62,689,984 58,719,091 97,990,206 96,857,000 111,354,000
----------- ----------- ----------- ----------- ------------
End of period ................................ $83,910,515 $62,689,984 $89,000,588 $97,990,206 $ 96,857,000
=========== =========== =========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
OHIO TAX-FREE
INCOME PORTFOLIO
--------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
9/30/96 9/30/95
---------- ----------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ........................ $ 435,219 $ 453,884
Net gain (loss) on investment and foreign
currency related transactions ............. 77,897 377,450
---------- ----------
Net increase (decrease) in net assets
resulting from operations ................. 513,116 831,334
---------- ----------
Distributions to shareholders from:
Net investment income:
Institutional Shares ......................... (16,530) (7,866)
Service Shares ............................... (266,806) (259,043)
Investor A Shares ............................ (144,228) (184,186)
Investor B Shares ............................ (4,383) (2,789)
Investor C Shares ............................ -- --
---------- ----------
Total distribution from net
investment income ....................... (431,947) (453,884)
---------- ----------
In excess of net investment income:
Institutional Shares ......................... -- --
Service Shares ............................... -- --
Investor A Shares ............................ -- --
---------- ----------
Total distribution in excess of net
investment income ....................... -- --
---------- ----------
Net realized gains:
Institutional Shares ......................... -- --
Service Shares ............................... -- --
Investor A Shares ............................ -- --
Investor B Shares ............................ -- --
---------- ----------
Total distributions from net realized gains -- --
---------- ----------
Total distributions to shareholders ....... (431,947) (453,884)
---------- ----------
Capital share transactions ........................ 939,853 1,341
---------- ----------
Total increase (decrease) in net assets ... 1,021,022 378,791
---------- ----------
Net assets:
Beginning of period .......................... 8,759,015 8,380,224
---------- ----------
End of period ................................ $9,780,037 $8,759,015
========== ==========
<FN>
- ----------------
1 Service Shares include all activity of the prior class of shares before
February 13, 1996 the date of the merger.
2 Service Shares includes all activity of the prior class of shares for all periods
before January 13, 1996, the date of the merger.
</FN>
</TABLE>
See accompanying notes to financial statements.
50&51
<PAGE>
FINANCIAL HIGHLIGHTS COMPASS CAPITAL FUNDS
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET NET GAIN DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS
ASSET (LOSS) ON DISTRIBUTIONS IN EXCESS FROM NET IN EXCESS
VALUE NET INVESTMENTS FROM NET OF NET REALIZED OF NET
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT INVESTMENT CAPITAL REALIZED
OF PERIOD INCOME AND UNREALIZED) INCOME INCOME GAINS GAINS
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------
SHORT GOVERNMENT BOND PORTFOLIO
- -------------------------------
INSTITUTIONAL CLASS
4/1/96 through
9/30/96 $ 9.79 $0.28 $(0.01) $(0.27) $ -- $ -- $ --
7/1/95 through
3/31/96 9.83 0.42 -- (0.41) (0.04) (0.01) --
6/30/95 9.71 0.58 0.13 (0.58) -- (0.01) --
6/30/94 9.96 0.48 (0.25) (0.48) -- -- --
7/17/92 1 through
6/30/93 10.00 0.51 (0.06) (0.49) -- -- --
SERVICE CLASS
4/1/96 through
9/30/96 $ 9.79 $0.26 $(0.01) $(0.25) $ -- $ -- $ --
1/13/96 1 through
3/31/96 9.91 0.11 (0.12) (0.11) -- -- --
INVESTOR A CLASS
4/1/96 through
9/30/96 $ 9.79 $0.25 $(0.01) $(0.24) $ -- $ -- $ --
1/13/96 1 through
3/31/96 9.91 0.10 (0.12) (0.10) -- -- --
- --------------------------------------
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
- --------------------------------------
INSTITUTIONAL CLASS
9/30/96 $10.02 $0.58 $(0.11) $(0.57) $ -- $ -- $ --
9/30/95 9.64 0.58 0.38 (0.58) -- -- --
9/30/94 10.60 0.55 (0.86) (0.55) -- (0.10) --
9/30/93 10.46 0.54 0.16 (0.54) -- (0.02) --
4/20/92 1 through
9/30/92 10.00 0.24 0.46 (0.24) -- -- --
SERVICE CLASS
9/30/96 $10.02 $0.56 $(0.12) $(0.54) $ -- $ -- $ --
9/30/95 9.64 0.56 0.37 (0.55) -- -- --
9/30/94 10.60 0.53 (0.86) (0.53) -- (0.10) --
7/29/93 1 through
9/30/93 10.45 0.09 0.15 (0.09) -- -- --
INVESTOR A CLASS
9/30/96 $10.03 $0.55 $(0.13) $(0.53) $ -- $ -- $ --
9/30/95 9.64 0.55 0.39 (0.55) -- -- --
9/30/94 10.60 0.53 (0.87) (0.52) -- (0.10) --
9/30/93 10.46 0.54 0.16 (0.54) -- (0.02) --
5/11/92 1 through
9/30/92 10.05 0.24 0.41 (0.24) -- -- --
- ---------------------------
INTERMEDIATE BOND PORTFOLIO
- ---------------------------
INSTITUTIONAL CLASS
9/30/96 $ 9.43 $0.56 $(0.09) $(0.55) $ -- $(0.03) --
9/30/95 9.05 0.56 0.38 (0.56) -- -- --
9/30/94 10.01 0.54 (0.88) (0.56) -- (0.06) --
9/17/93 1 through
9/30/93 10.00 0.02 (0.01) -- -- -- --
SERVICE CLASS
9/30/96 $ 9.43 $0.53 $(0.09) $(0.52) $ -- $(0.03) $ --
9/30/95 9.05 0.54 0.38 (0.54) -- -- --
9/30/94 10.01 0.54 (0.91) (0.53) -- (0.06) --
9/23/93 1 through
9/30/93 9.99 -- 0.02 -- -- -- --
INVESTOR A CLASS
9/30/96 $ 9.43 $0.52 $(0.09) $(0.51) $ -- $(0.03) $ --
9/30/95 9.05 0.54 0.38 (0.54) -- -- --
5/20/94 1 through
9/30/94 9.23 0.20 (0.17) (0.21) -- -- --
</TABLE>
<TABLE>
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
NET NET EXPENSES RATIO OF NET INCOME
ASSET ASSETS RATIO OF TO AVERAGE INVESTMENT TO AVERAGE
VALUE END OF EXPENSES TO NET ASSETS INCOME TO NET ASSETS PORTFOLIO
END OF TOTAL PERIOD AVERAGE NET (EXCLUDING AVERAGE NET (EXCLUDING TURNOVER
PERIOD RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------
SHORT GOVERNMENT BOND PORTFOLIO
- -------------------------------
INSTITUTIONAL CLASS
4/1/96 through
9/30/96 $ 9.79 2.70% $135,686 0.55%2,8 0.83%2 5.72%2 5.45%2 228%
7/1/95 through
3/31/96 9.79 4.25 52,843 0.63 2,8 0.83 2 5.25 2 5.05 2 185
6/30/95 9.83 6.99 44,486 0.57 1.05 6.08 5.60 586
6/30/94 9.71 2.33 31,265 0.57 1.02 4.70 4.25 455
7/17/92 1 through
6/30/93 9.96 4.63 51,611 0.56 2 0.66 2 5.32 2 5.22 2 513
SERVICE CLASS
4/1/96 through
9/30/96 $ 9.79 2.54% $ 91,870 0.85%2,8 1.13%2 5.40%2 5.13%2 228%
1/13/96 1 through
3/31/96 9.79 (0.11) 181,670 0.85 2,8 1.05 2 5.25 2 5.05 2 185
INVESTOR A CLASS
4/1/96 through
9/30/96 $ 9.79 2.46%3 $938 1.02%2,8 1.30%2 5.20%2 4.92%2 228%
1/13/96 1 through
3/31/96 9.79 (0.15)3 719 1.01 2,8 1.21 2 4.94 2 4.74 2 185
- --------------------------------------
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
- --------------------------------------
INSTITUTIONAL CLASS
9/30/96 $ 9.92 4.82% $126,312 0.53%9 0.83% 6.03% 5.73% 580%
9/30/95 10.02 10.28 134,835 0.42 9 0.79 5.94 5.57 247
9/30/94 9.64 (3.08) 128,974 0.40 0.80 5.48 5.08 9
9/30/93 10.60 6.88 137,065 0.73 0.81 5.23 5.15 80
4/20/92 1 through
9/30/92 10.46 7.14 105,620 0.80 2 0.80 2 5.28 2 5.28 2 38
SERVICE CLASS
9/30/96 $ 9.92 4.51% $ 47,494 0.83%9 1.13% 5.73% 5.43% 580%
9/30/95 10.02 9.99 49,762 0.69 9 1.06 5.67 5.30 247
9/30/94 9.64 (3.31) 60,812 0.65 1.05 5.30 4.90 9
7/29/93 1 through
9/30/93 10.60 2.30 15,035 0.67 2 0.75 2 5.14 2 5.06 2 80
INVESTOR A CLASS
9/30/96 $ 9.92 4.36%3 $ 5,903 0.95%9 1.25% 5.64% 5.35% 580%
9/30/95 10.03 9.98 3 9,802 0.709 1.07 5.67 5.30 247
9/30/94 9.64 (3.36)3 8,508 0.65 1.05 5.24 4.84 9
9/30/93 10.60 6.84 3 7,666 0.76 0.84 5.19 5.11 80
5/11/92 1 through
9/30/92 10.46 6.64 3 1,484 0.80 2 0.80 2 5.28 2 5.28 2 38
- ---------------------------
INTERMEDIATE BOND PORTFOLIO
- ---------------------------
INSTITUTIONAL CLASS
9/30/96 $ 9.32 5.10% $207,909 0.53%10 0.83% 6.27% 5.97% 670%
9/30/95 9.43 10.76 124,979 0.47 10 0.81 6.18 5.84 262
9/30/94 9.05 (3.52) 71,896 0.45 0.88 5.54 5.11 92
9/17/93 1 through
9/30/93 10.01 0.10 56,713 0.45 2 0.84 2 4.72 2 4.33 2 4
SERVICE CLASS
9/30/96 $ 9.32 4.79% $ 45,362 0.83%10 1.13% 5.98% 5.67% 670%
9/30/95 9.43 10.46 36,718 0.74 10 1.09 5.90 5.55 262
9/30/94 9.05 (3.80) 35,764 0.70 1.13 5.33 4.90 92
9/23/93 1 through
9/30/93 10.01 0.20 91 0.70 2 1.09 2 4.35 2 3.96 2 4
INVESTOR A CLASS
9/30/96 $ 9.32 4.74%3 $ 935 0.97%10 1.27% 5.83% 5.53% 670%
9/30/95 9.43 10.35 3 647 0.76 10 1.11 5.89 5.55 262
5/20/94 1 through
9/30/94 9.05 0.31 3 87 0.85 2 1.28 2 5.35 2 4.92 2 92
</TABLE>
See accompanying notes to financial statements.
52&53
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) COMPASS CAPITAL FUNDS
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET NET GAIN DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS NET
ASSET (LOSS) ON DISTRIBUTIONS IN EXCESS FROM NET IN EXCESS ASSET
VALUE NET INVESTMENTS FROM NET OF NET REALIZED OF NET VALUE
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT INVESTMENT CAPITAL REALIZED END OF
OF PERIOD INCOME AND UNREALIZED) INCOME INCOME GAINS GAINS PERIOD
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------
CORE BOND PORTFOLIO
- -------------------
INSTITUTIONAL CLASS
4/1/96 through
9/30/96 $ 9.61 $0.30 $(0.06) $(0.30) $ -- $ -- $ -- $ 9.55
7/1/95 through
3/31/96 9.85 0.47 (0.07) (0.47) -- (0.17) -- 9.61
6/30/95 9.36 0.62 0.50 (0.62) -- (0.01) -- 9.85
6/30/94 10.37 0.55 (0.60) (0.55) -- (0.41) -- 9.36
12/9/92 1 through
6/30/93 10.00 0.32 0.37 (0.32) -- -- -- 10.37
SERVICE CLASS
4/1/96 through
9/30/96 $ 9.61 $0.30 $(0.07) $(0.29) $ -- $ -- $ -- $ 9.55
1/13/96 1 through
3/31/96 9.91 0.11 (0.30) (0.11) -- -- -- 9.61
INVESTOR CLASS A
4/1/96 through
9/30/96 $ 9.61 $0.28 $(0.06) $(0.28) $ -- $ -- $ -- $ 9.55
1/31/96 1 through
3/31/96 9.99 0.08 (0.38) (0.08) -- -- -- 9.61
INVESTOR CLASS B
4/1/96 through
9/30/96 $ 9.61 $0.26 $(0.07) $(0.25) $ -- $ -- $ -- $ 9.55
3/18/96 1 through
3/31/96 9.58 0.01 0.03 (0.01) -- -- -- 9.61
- ---------------------------
GOVERNMENT INCOME PORTFOLIO
- ---------------------------
INVESTOR A CLASS
9/30/96 $10.68 $0.68 $(0.22) $(0.66) $ -- $(0.28) $ -- $10.20
10/3/94 1 through
9/30/95 10.00 0.55 0.68 (0.55) -- -- -- 10.68
INVESTOR B CLASS
9/30/96 $10.68 $0.60 $(0.21) $(0.59) $ -- $(0.28) $ -- $10.20
10/3/94 1 through
9/30/95 10.00 0.50 0.68 (0.50) -- -- -- 10.68
- ------------------------
MANAGED INCOME PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
9/30/96 $10.38 $0.64 $(0.21) $(0.62) $ -- $(0.10) $ -- $10.09
9/30/95 9.79 0.65 0.60 (0.65) (0.01) -- -- 10.38
9/30/94 11.17 0.64 (1.21) (0.64) (0.02) (0.14) (0.01) 9.79
9/30/93 10.74 0.67 0.56 (0.67) -- (0.13) -- 11.17
9/30/92 10.26 0.69 0.48 (0.69) -- -- -- 10.74
SERVICE CLASS
9/30/96 $10.38 $0.61 $(0.20) $(0.60) $ -- $(0.10) $ -- $10.09
9/30/95 9.79 0.63 0.60 (0.63) (0.01) -- -- 10.38
9/30/94 11.17 0.59 (1.18) (0.62) (0.02) (0.14) (0.01) 9.79
7/29/93 1 through
9/30/93 10.96 0.11 0.21 (0.11) -- -- -- 11.17
INVESTOR A CLASS
9/30/96 $10.38 $0.59 $(0.20) $(0.58) $ -- $(0.10) $ -- $10.09
9/30/95 9.79 0.60 0.60 (0.60) (0.01) -- -- 10.38
9/30/94 11.18 0.57 (1.19) (0.60) (0.02) (0.14) (0.01) 9.79
9/30/93 10.74 0.66 0.57 (0.66) -- (0.13) -- 11.18
2/5/92 1 through
9/30/92 10.40 0.46 0.34 (0.46) -- -- -- 10.74
</TABLE>
<TABLE>
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
NET EXPENSES RATIO OF NET INCOME
ASSETS RATIO OF TO AVERAGE INVESTMENT TO AVERAGE
END OF EXPENSES TO NET ASSETS INCOME TO NET ASSETS PORTFOLIO
TOTAL PERIOD AVERAGE NET (EXCLUDING AVERAGE NET (EXCLUDING TURNOVER
RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
=========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------
CORE BOND PORTFOLIO
- -------------------
INSTITUTIONAL CLASS
4/1/96 through
9/30/96 2.55% $162,626 0.55%2,11 0.84%2 6.75%2 6.45%2 308%
7/1/95 through
3/31/96 3.93 64,707 0.66 2,11 0.91 2 5.89 2 5.64 2 723
6/30/95 11.79 32,191 0.55 1.75 6.62 5.43 435
6/30/94 (0.69) 12,507 0.55 2.65 5.61 3.51 722
12/9/92 1 through
6/30/93 6.88 7,803 0.55 2 2.44 2 5.57 2 3.68 2 354
SERVICE CLASS
4/1/96 through
9/30/96 2.40% $117,207 0.85%2,11 1.14%2 6.33%2 6.04%2 308%
1/13/96 1 through
3/31/96 (1.90) 232,040 0.85 2,11 1.10 2 5.46 2 5.21 2 723
INVESTOR CLASS A
4/1/96 through
9/30/96 2.36%3 $ 320 1.02%2,11 1.31%2 6.29%2 6.00%2 308%
1/31/96 1 through
3/31/96 (2.96)3 80 1.02 2,11 1.27 2 5.43 2 5.19 2 723
INVESTOR CLASS B
4/1/96 through
9/30/96 1.98%4 $ 1,497 1.72%2,11 2.01%2 5.68%2 5.39%2 308%
3/18/96 1 through
3/31/96 (0.33)4 77 1.77 2,11 2.02 4.71 2 4.46 2 723
- ---------------------------
GOVERNMENT INCOME PORTFOLIO
- ---------------------------
INVESTOR A CLASS
9/30/96 4.43%3 $ 3,651 0.91%12 1.67% 8.59% 7.83% 434%
10/3/94 1 through
9/30/95 14.27 3 2,990 0.37 2,12 1.81 2 6.89 2 5.44 2 258
INVESTOR B CLASS
9/30/96 3.68%4 $ 11,119 1.64%12 2.40% 7.81% 7.05% 434%
10/3/94 1 through
9/30/95 13.52 4 10,188 1.05 2,12 2.50 2 6.17 2 4.72 2 258
- ------------------------
MANAGED INCOME PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
9/30/96 4.33% $564,744 0.58% 0.81% 6.17% 5.95% 638%
9/30/95 13.27 443,148 0.57 0.77 6.44 6.24 203
9/30/94 (5.27) 395,060 0.55 0.77 6.11 5.89 61
9/30/93 12.13 341,791 0.74 0.78 6.25 6.21 72
9/30/92 11.80 314,075 0.80 0.80 6.28 6.28 56
SERVICE CLASS
9/30/96 4.05% $165,073 0.88% 1.11% 5.87% 5.65% 638%
9/30/95 12.97 116,846 0.85 1.05 6.14 5.94 203
9/30/94 (5.49) 67,655 0.80 1.02 5.95 5.73 61
7/29/93 1 through
9/30/93 2.93 15,322 0.80 2 0.84 2 5.83 2 5.79 2 72
INVESTOR A CLASS
9/30/96 3.83%3 $ 11,193 1.05% 1.29% 5.67% 5.44% 638%
9/30/95 12.74 3 11,977 1.05 1.25 5.96 5.76 203
9/30/94 (5.76)3 10,921 1.00 1.22 5.66 5.44 61
9/30/93 12.13 3 7,252 0.84 0.88 6.09 6.05 72
2/5/92 1 through
9/30/92 7.86 3 1,417 0.80 2 0.80 2 6.28 2 6.28 2 56
</TABLE>
See accompanying notes to financial statements.
54&55
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) COMPASS CAPITAL FUNDS
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET NET GAIN DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS NET
ASSET (LOSS) ON DISTRIBUTIONS IN EXCESS FROM NET IN EXCESS ASSET
VALUE NET INVESTMENTS FROM NET OF NET REALIZED OF NET VALUE
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT INVESTMENT CAPITAL REALIZED END OF
OF PERIOD INCOME AND UNREALIZED) INCOME INCOME GAINS GAINS PERIOD
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------
INTERNATIONAL BOND PORTFOLIO
- ----------------------------
INSTITUTIONAL CLASS
6/10/96 1 through
9/30/96 $11.37 $0.21 $ 0.30 $(0.17) $ -- $ -- $ -- $11.71
SERVICE CLASS
2/1/96 through
9/30/96 $11.39 $0.89 $(0.29) $(0.28) $ -- $ -- $ -- $11.71
3/1/95 through
1/31/96 10.52 0.62 1.13 (0.88) -- -- -- 11.39
2/28/95 10.75 0.62 (0.48) (0.13) -- (0.24) -- 10.52
2/28/94 10.76 0.65 0.46 (0.90) -- (0.22) -- 10.75
2/28/93 10.21 0.52 0.47 (0.30) -- (0.14) -- 10.76
7/1/91 1 through
2/29/92 10.00 0.31 0.26 -- -- (0.36) -- 10.21
INVESTOR A CLASS
4/22/96 1 through
9/30/96 $11.37 $0.26 $ 0.32 $(0.24) $ -- $ -- $ -- $11.71
INVESTOR B CLASS
4/19/96 1 through
9/30/96 $11.36 $0.22 $ 0.33 $(0.20) $ -- $ -- $ -- $11.71
INVESTOR C CLASS
9/11/96 1 through
9/30/96 $11.58 $0.02 $ 0.12 $(0.01) $ -- $ -- $ -- $11.71
- -------------------------
TAX-FREE INCOME PORTFOLIO
- -------------------------
INSTITUTIONAL CLASS
9/30/96 $10.61 $0.49 $ 0.28 $(0.54) $ -- $ -- $ -- $10.84
9/30/95 10.04 0.53 0.59 (0.53) -- (0.02) -- 10.61
9/30/94 11.31 0.53 (0.93) (0.53) -- (0.34) -- 10.04
1/21/93 1 through
9/30/93 10.61 0.42 0.70 (0.42) -- -- -- 11.31
SERVICE CLASS
9/30/96 $10.61 $0.51 $ 0.23 $(0.51) $ -- $ -- $ -- $10.84
9/30/95 10.04 0.50 0.59 (0.50) -- (0.02) -- 10.61
9/30/94 11.31 0.51 (0.93) (0.51) -- (0.34) -- 10.04
7/29/93 1 through
9/30/93 10.97 0.09 0.34 (0.09) -- -- -- 11.31
INVESTOR A CLASS
9/30/96 $10.61 $0.45 $ 0.21 $(0.43) $ -- $ -- $ -- $10.84
9/30/95 10.04 0.48 0.59 (0.48) -- (0.02) -- 10.61
9/30/94 11.31 0.48 (0.93) (0.48) -- (0.34) -- 10.04
9/30/93 10.60 0.55 0.83 (0.55) -- (0.12) -- 11.31
9/30/92 10.33 0.58 0.49 (0.59) -- (0.21) -- 10.60
INVESTOR B CLASS
7/18/96 1 through
9/30/96 $10.74 $0.08 $ 0.10 $(0.08) $ -- $ -- $ -- $10.84
- --------------------------------------
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
- --------------------------------------
INSTITUTIONAL CLASS
9/30/96 $10.33 $0.52 $ 0.12 $(0.53) $ -- $ -- $ -- $10.44
9/30/95 9.82 0.52 0.51 (0.52) -- -- -- 10.33
9/30/94 10.70 0.53 (0.85) (0.53) -- (0.03) -- 9.82
12/1/92 1 through
9/30/93 10.00 0.39 0.73 (0.39) -- (0.03) -- 10.70
SERVICE CLASS
9/30/96 $10.33 $0.50 $ 0.11 $(0.50) $ -- $ -- $ -- $10.44
9/30/95 9.82 0.50 0.51 (0.50) -- -- -- 10.33
9/30/94 10.70 0.51 (0.85) (0.51) -- (0.03) -- 9.82
7/29/93 1 through
9/30/93 10.43 0.09 0.28 (0.09) -- (0.01) -- 10.70
INVESTOR A CLASS
9/30/96 $10.33 $0.48 $ 0.11 $(0.48) $ -- $ -- $ -- $10.44
9/30/95 9.82 0.48 0.51 (0.48) -- -- -- 10.33
9/30/94 10.70 0.52 (0.85) (0.52) -- (0.03) -- 9.82
12/1/92 1 through
9/30/93 10.00 0.42 0.73 (0.42) -- (0.03) -- 10.70
</TABLE>
<TABLE>
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
NET EXPENSES RATIO OF NET INCOME
ASSETS RATIO OF TO AVERAGE INVESTMENT TO AVERAGE
END OF EXPENSES TO NET ASSETS INCOME TO NET ASSETS PORTFOLIO
TOTAL PERIOD AVERAGE NET (EXCLUDING AVERAGE NET (EXCLUDING TURNOVER
RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------
INTERNATIONAL BOND PORTFOLIO
- ----------------------------
INSTITUTIONAL CLASS
6/10/96 1 through
9/30/96 4.48% $30,882 0.92%2 1.32%2 6.28%2 5.88%2 108%
SERVICE CLASS
2/1/96 through
9/30/96 5.39% $ 7,836 1.09%2 1.20%2 3.82%2 3.72%2 108%
3/1/95 through
1/31/96 16.79 37,627 1.23 2 1.23 2 5.62 2 5.62 2 159
2/28/95 1.50 45,657 1.24 1.24 5.96 5.96 131
2/28/94 10.24 46,888 1.38 1.38 6.00 6.00 128
2/28/93 9.55 38,257 1.30 1.30 6.31 6.31 115
7/1/91 1 through
2/29/92 5.84 27,774 1.33 2 1.37 2 6.79 2 6.75 2 110
INVESTOR A CLASS
4/22/96 1 through
9/30/96 5.13%3 $176 1.45%2 1.86%2 5.29%2 4.88%2 108%
INVESTOR B CLASS
4/19/96 1 through
9/30/96 4.90%4 $136 2.09%2 2.49%2 4.61%2 4.21%2 108%
INVESTOR C CLASS
9/11/96 1 through
9/30/96 1.24%4 $19 1.53%2 1.93%2 2.79%2 2.38%2 108%
- -------------------------
TAX-FREE INCOME PORTFOLIO
- -------------------------
INSTITUTIONAL CLASS
9/30/96 7.45% $ 8,350 0.55% 0.89% 5.10% 4.78% 268%
9/30/95 11.54 271 0.52 1.30 5.19 4.41 92
9/30/94 (3.77) 132 0.50 1.73 4.97 3.74 40
1/21/93 1 through
9/30/93 10.72 675 0.50 2 1.28 2 5.14 2 4.36 2 71
SERVICE CLASS
9/30/96 7.14% $36,161 0.85% 1.18% 4.88% 4.56% 268%
9/30/95 11.24 4,713 0.80 1.57 4.92 4.15 92
9/30/94 (4.02) 2,109 0.75 1.98 4.75 3.52 40
7/29/93 1 through
9/30/93 3.92 634 0.71 2 1.49 2 4.99 2 4.21 2 71
INVESTOR A CLASS
9/30/96 6.94%3 $ 4,873 1.04% 1.37% 4.67% 4.35% 268%
9/30/95 10.99 3 6,591 1.00 1.78 4.74 3.96 92
9/30/94 (4.19)3 6,972 0.95 2.18 4.53 3.30 40
9/30/93 13.48 3 7,831 0.57 1.36 5.06 4.27 71
9/30/92 10.67 3 7,349 0.53 1.67 5.56 4.42 38
INVESTOR B CLASS
7/18/96 1 through
9/30/96 1.72%4 $10 1.65%2 1.98%2 3.84%2 3.51%2 268%
- --------------------------------------
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
- --------------------------------------
INSTITUTIONAL CLASS
9/30/96 6.29% $ 3,609 0.55% 0.85% 5.01% 4.72% 119%
9/30/95 10.81 2,092 0.52 0.84 5.23 4.91 66
9/30/94 (2.96) 639 0.39 0.99 5.27 4.67 30
12/1/92 1 through
9/30/93 11.69 256 0.09 2 0.97 2 5.19 2 4.31 2 40
SERVICE CLASS
9/30/96 5.97% $34,297 0.85% 1.15% 4.74% 4.44% 119%
9/30/95 10.51 13,815 0.79 1.11 5.04 4.72 66
9/30/94 (3.20) 11,518 0.55 1.15 4.97 4.37 30
7/29/93 1 through
9/30/93 3.54 3,894 0.34 2 0.01 2 4.90 2 4.02 2 40
INVESTOR A CLASS
9/30/96 5.81%3 $38,031 1.00% 1.30% 4.58% 4.29% 119%
9/30/95 10.30 3 42,775 0.98 1.30 4.88 4.56 66
9/30/94 (3.06)3 46,563 0.41 1.01 5.06 4.46 30
12/1/92 1 through
9/30/93 11.69 3 35,934 0.07 2 0.95 2 5.19 2 4.31 2 40
</TABLE>
See accompanying notes to financial statements.
56&57
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) COMPASS CAPITAL FUNDS
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
NET NET GAIN DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS NET
ASSET (LOSS) ON DISTRIBUTIONS IN EXCESS FROM NET IN EXCESS ASSET
VALUE NET INVESTMENTS FROM NET OF NET REALIZED OF NET VALUE
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT INVESTMENT CAPITAL REALIZED END OF
OF PERIOD INCOME AND UNREALIZED) INCOME INCOME GAINS GAINS PERIOD
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTOR B CLASS
9/30/96 $10.33 $0.40 $ 0.11 $(0.40) $ -- $ -- $ -- $10.44
10/3/94 1 through
9/30/95 9.82 0.42 0.51 (0.42) -- -- -- 10.33
- -----------------------------
NEW JERSEY TAX-FREE PORTFOLIO
- -----------------------------
SERVICE CLASS
2/1/96 through
9/30/96 $11.61 $0.73 $(0.32) $(0.75) $ -- $ -- $ -- $11.27
3/1/95 through
1/31/96 10.94 0.46 0.65 (0.44) -- -- -- 11.61
2/28/95 11.31 0.51 (0.36) (0.51) -- (0.01) -- 10.94
2/28/94 11.30 0.54 0.04 (0.54) -- (0.03) -- 11.31
2/28/93 10.46 0.52 0.85 (0.53) -- -- -- 11.30
7/1/91 1 through
2/29/92 10.00 0.34 0.45 (0.33) -- -- -- 10.46
INVESTOR A CLASS
2/1/96 through
9/30/96 $11.61 $0.34 $(0.34) $(0.34) $ -- $ -- $ -- $11.27
1/26/96 1 through
1/31/96 11.54 -- 0.07 -- -- -- -- 11.61
INVESTOR B CLASS
7/2/96 1 through
9/30/96 $11.15 $0.09 $ 0.12 $(0.09) $ -- $ -- $ -- $11.27
- ------------------------------
OHIO TAX-FREE INCOME PORTFOLIO
- ------------------------------
INSTITUTIONAL CLASS
9/30/96 $10.05 $0.50 $ 0.10 $(0.50) $ -- $ -- $ -- $10.15
9/30/95 9.60 0.55 0.45 (0.55) -- -- -- 10.05
9/30/94 10.53 0.53 (0.91) (0.53) -- (0.02) -- 9.60
12/1/92 1 through
9/30/93 10.00 0.36 0.53 (0.36) -- -- -- 10.53
SERVICE CLASS
9/30/96 $10.05 $0.48 $ 0.10 $(0.48) $ -- $ -- $ -- $10.15
9/30/95 9.60 0.52 0.45 (0.52) -- -- -- 10.05
9/30/94 10.53 0.49 (0.91) (0.49) -- (0.02) -- 9.60
7/29/93 1 through
9/30/93 10.24 0.09 0.29 (0.09) -- -- -- 10.53
INVESTOR A CLASS
9/30/96 $10.05 $0.46 $ 0.10 $(0.46) $ -- $ -- $ -- $10.15
9/30/95 9.60 0.52 0.45 (0.52) -- -- -- 10.05
9/30/94 10.53 0.53 (0.91) (0.53) -- (0.02) -- 9.60
12/1/92 1 through
9/30/93 10.00 0.36 0.53 (0.36) -- -- -- 10.53
INVESTOR B CLASS
9/30/96 $10.05 $0.38 $ 0.10 $(0.38) $ -- $ -- $ -- $10.15
10/13/94 1 through
9/30/95 9.58 0.42 0.47 (0.42) -- -- -- 10.05
</TABLE>
<TABLE>
<CAPTION>
RATIO OF NET
RATIO OF INVESTMENT
NET EXPENSES RATIO OF NET INCOME
ASSETS RATIO OF TO AVERAGE INVESTMENT TO AVERAGE
END OF EXPENSES TO NET ASSETS INCOME TO NET ASSETS PORTFOLIO
TOTAL PERIOD AVERAGE NET (EXCLUDING AVERAGE NET (EXCLUDING TURNOVER
RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTOR B CLASS
9/30/96 5.04%4 $ 7,974 1.74% 2.03% 3.81% 3.51% 119%
10/3/94 1 through
9/30/95 9.69 4 4,008 1.57 2 1.89 2 4.07 2 3.75 2 66
- -----------------------------
NEW JERSEY TAX-FREE PORTFOLIO
- -----------------------------
SERVICE CLASS
2/1/96 through
9/30/96 0.15% $ 88,077 0.85%2 1.17%2 4.44%2 4.13%2 109%
3/1/95 through
1/31/96 10.35 97,976 0.88 2 0.90 2 4.43 2 4.41 2 26
2/28/95 1.49 96,857 0.79 0.87 4.71 4.63 28
2/28/94 5.18 111,354 0.38 0.86 4.75 4.27 12
2/28/93 13.48 47,169 0.48 1.04 5.04 4.48 16
7/1/91 1 through
2/29/92 8.02 10,673 0.52 2 1.29 2 5.35 2 4.58 2 0
INVESTOR A CLASS
2/1/96 through
9/30/96 (0.01)%3 $ 894 1.01%2 1.33%2 4.29%2 3.98%2 109%
1/26/96 1 through
1/31/96 0.63 3 14 1.02 2 1.36 2 2.79 2 2.45 2 26
INVESTOR B CLASS
7/2/96 1 through
9/30/96 2.04%4 $ 30 1.74%2 2.06%2 3.48%2 3.16%2 109%
- ------------------------------
OHIO TAX-FREE INCOME PORTFOLIO
- ------------------------------
INSTITUTIONAL CLASS
9/30/96 6.12% $ 409 0.51% 1.10% 4.96% 4.37% 136%
9/30/95 10.75 200 0.12 1.19 5.61 4.54 63
9/30/94 (3.75) 127 0.10 1.49 5.16 3.77 61
12/1/92 1 through
9/30/93 9.10 1,676 0.08 2 2.59 2 4.99 2 2.48 2 36
SERVICE CLASS
9/30/96 5.80% $ 6,377 0.79% 1.38% 4.69% 4.10% 136%
9/30/95 10.45 5,150 0.39 1.46 5.39 4.31 63
9/30/94 (4.00) 4,428 0.35 1.74 5.06 3.67 61
7/29/93 1 through
9/30/93 3.68 907 0.32 2 2.83 2 4.71 2 2.20 2 36
INVESTOR A CLASS
9/30/96 5.66%3 $ 2,833 0.91% 1.50% 4.57% 3.98% 136%
9/30/95 10.46 3 3,303 0.38 1.45 5.42 4.35 63
9/30/94 (3.75)3 3,825 0.10 1.49 5.18 3.79 61
12/1/92 1 through
9/30/93 9.10 3 2,386 0.07 2 2.58 2 4.90 2 2.39 2 36
INVESTOR B CLASS
9/30/96 4.87%4 $ 161 1.66% 2.26% 3.80% 3.21% 136%
10/13/94 1 through
9/30/95 9.33 4 106 1.17 2 2.25 2 4.48 2 3.41 2 63
<FN>
1 Commencement of operations of share class.
2 Annualized.
3 Sales load not reflected in total return.
4 Contingent deferred sales load not reflected in total return.
5 Institutional Class includes all activity of the prior class of shares before January 13, 1996, the date of the merger.
6 Service Class includes all activity of the prior class of shares before January 13, 1996, the date of the merger.
7 Service Class includes all activity of the prior class of shares before February 13, 1996, the date of the merger.
8 Including interest expense, ratios for the Institutional, Service and Investor A Classes would have been 0.64%, 0.97%
and 1.12%, respectively, for the period ended September 30, 1996, and 0.96%, 1.18% and 1.34%, respectively, for the
period ended March 31, 1996. For the periods prior to March 31, 1996, interest income was presented net of interest expense.
9 Including interest expense, ratios for the Institutional, Service and Investor A Classes would have been 0.70%, 1.00% and 1.14%,
respectively, for the period ended September 30, 1996, and 0.42%, 0.69% and 0.70%, respectively, for the period ended
September 30, 1995.
10 Including interest expense, ratios for the Institutional, Service and Investor A Classes would have been 0.83%, 1.14%
and 1.27%, respectively, for the period ended September 30, 1996, and 0.55%, 0.82% and 0.84%, respectively, for the period
ended September 30, 1995.
11 Including interest expense, ratios for the Institutional, Service, Investor A and Investor B Classes would have been 0.80%,
1.08%, 1.27% and 2.00%, respectively, for the period ended September 30, 1996, and 0.75%, 0.94%, 1.11% and 1.86%,
respectively, for the period ended March 31 1996. For the periods prior to March 31, 1996, interest income was presented net
of interest expense.
12 Including interest expense, ratios for the Investor A and Investor B Classes would have been 2.96% and 3.69%, respectively,
for the period ended September 30, 1996, and 0.92% and 1.60%, respectively, for the period ended September 30, 1995.
</FN>
</TABLE>
See accompanying notes to financial statements.
58&59
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Compass Capital FundsSM ("the Fund") (formerly The PNC(REGISTRATION MARK)
Fund) was organized on December 22, 1988 as a Massachusetts business trust and
is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. The Fund currently has 29
publicly-offered portfolios, 11 of which are included in these financial
statements (the "Portfolios"). Each Portfolio is authorized to issue an
unlimited number of shares with a par value of $0.001. Portfolios of the Fund
offer as many as five classes of shares. Shares of all classes of a Portfolio
represent equal pro rata interests in such Portfolio, except that each class
bears different expenses which reflect the difference in the range of services
provided to them. The following table provides a list of the Portfolios included
in this report along with a summary of their respective class-specific fee
arrangements as provided under the Fund's Amended and Restated Distribution and
Service Plan (the "Plan"). Fees are expressed as a percentage of average daily
net asset values of the respective classes.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Share Classes
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional Service Investor A Investor B Investor C
- -----------------------------------------------------------------------------------------------------------------------------------
Contractual Actual Contractual Actual Contractual Actual Contractual Actual Contractual Actual
Fees Fees(4) Fees(1) Fees(4) Fees(2) Fees(4) Fees(3) Fees(4) Fees(3) Fees(4)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Short Government Bond None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Intermediate Government Bond None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Intermediate Bond None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Core Bond None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Government Income None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Managed Income None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% N/A
- -----------------------------------------------------------------------------------------------------------------------------------
International Bond None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- -----------------------------------------------------------------------------------------------------------------------------------
Tax-Free Income None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania Tax-Free Income None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% N/A
- -----------------------------------------------------------------------------------------------------------------------------------
New Jersey Tax-Free Income None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Ohio Tax-Free Income None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% N/A
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) -- the maximum annual contractual fees are comprised of a .15% service fee and .15% shareholder processing fee.
(2) -- the maximum annual contractual fees are comprised of a .10% distribution fee, .25% service fee and .15% shareholder
processing fee.
(3) -- the maximum annual contractual fees are comprised of a.75% distribution fee, .25% service fee and .15% shareholder
processing fee.
(4) -- the actual fees are as of September 30, 1996.
</FN>
</TABLE>
In addition, Institutional and Service shares bear a Transfer Agent fee at
an annual rate not to exceed .03% and Investor A, Investor B and Investor C
shares bear a Transfer Agent fee at an annual rate not to exceed .10% of the
average daily net asset of such respective classes.
(A) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires the use of management estimates. Actual results could differ from the
estimates.
SECURITY VALUATION -- Portfolio securities for which market quotations are
readily available are valued at market value, which is currently determined
using the last reported sales price. If no sales are reported, as in the case of
some securities traded over-the-counter, portfolio securities are valued at the
mean between the last reported bid and asked prices. Corporate bonds and
tax-exempt bonds are valued on the basis of quotations provided by a pricing
service which uses information with respect to transactions on bonds, quotations
from bond dealers, market transactions in comparable securities and various
relationships between securities in determining value. Short-term obligations
with maturities of 60 days or less are valued at amortized cost which
approximates market value. Discounts and premiums on debt securities are
amortized for book and tax purposes using the effective yield-to-maturity method
over the term of the instrument.
60
<PAGE>
COMPASS CAPITAL FUNDS
DIVIDENDS TO SHAREHOLDERS -- Dividends from net investment income are
declared by each Portfolio each day on "settled" shares (i.e. shares for which
the particular Portfolio has received payment in federal funds) and are paid
monthly. Over the course of a year, substantially all of each Portfolio's net
investment income will be declared as dividends. The amount of the daily
dividend for each Portfolio will be based on periodic projections of its net
investment income. Net realized capital gains, if any, will be distributed at
least annually. The character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes due to differences between
generally accepted accounting principles and tax accounting principles related
to the character of income and expense recognition.
FEDERAL TAXES -- No provision is made for federal taxes as it is the Fund's
intention to have each Portfolio continue to qualify as a regulated investment
company and to make the requisite distributions to its shareholders which will
be sufficient to relieve it from federal income and excise taxes.
FOREIGN CURRENCY TRANSLATION -- The books and records of the International
Bond Portfolio are maintained in U.S. dollars. Foreign currency amounts are
translated into U.S. dollars on the following basis:
(I) market value of investment securities, assets and liabilities at
the current rate of exchange; and
(II) purchases and sales of investment securities, income and expenses
at the relevant rates of exchange prevailing on the respective
dates of such transactions.
The International Bond Portfolio isolates that portion of gains and losses
on investment securities which is due to changes in the foreign exchange rates
from that which is due to changes in market prices of such securities.
The International Bond Portfolio reports certain foreign currency related
transactions as components of realized and unrealized gains for financial
reporting purposes, whereas such components are treated as ordinary income for
federal income tax purposes.
FORWARD FOREIGN CURRENCY CONTRACTS -- The International Bond Portfolio
enters into forward foreign currency contracts as a hedge against either
specific transactions or portfolio positions. These contracts are adjusted by
the daily exchange rate of the underlying currency and any gains or losses are
recorded as unrealized until the contract settlement date. Such contracts, which
protect the value of the International Bond Portfolio's investment securities
against a decline in the value of currency, do not eliminate fluctuations in the
underlying prices of the securities. They simply establish an exchange rate at a
future date. Also, although such contracts tend to minimize the risk of loss due
to a decline in the value of a hedged currency, at the same time they tend to
limit any potential gain that might be realized should the value of such foreign
currency increase. Risks may arise upon entering into these contracts from the
potential inability of counterparties to meet the terms of their contracts and
from unanticipated movements in the value of a foreign currency relative to the
U.S. dollar.
The aggregate principal amounts of the contracts are not recorded as the
International Bond Portfolio intends to settle the contracts prior to delivery.
Under the terms of foreign currency contracts open at September 30, 1996, the
International Bond Portfolio is obligated to deliver or receive currency in
exchange for U.S. dollars as indicated below:
UNREALIZED
VALUE AT FOREIGN
SETTLEMENT CURRENCY CONTRACT SEPTEMBER 30, EXCHANGE
DATE BOUGHT AMOUNT 1996 GAIN/(LOSS)
- ---------- ----------------------- ---------- ------------- -----------
10/17/96 German Deutsche Mark .. $1,853,409 $1,835,877 $(17,532)
10/17/96 Swedish Krone ......... 1,633,077 1,637,456 4,379
---------- ---------- --------
$3,486,486 $3,473,333 $(13,153)
========== ========== ========
61
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
UNREALIZED
VALUE AT FOREIGN
SETTLEMENT CURRENCY CONTRACT SEPTEMBER 30, EXCHANGE
DATE SOLD AMOUNT 1996 GAIN/(LOSS)
- --------- -------------------------- ----------- ------------- -----------
10/17/96 Danish Krone ............. $ 4,445,204 $ 4,441,345 $ 3,859
10/17/96 German Deutsche Mark ..... 10,980,402 10,851,342 129,060
10/17/96 Swedish Krone ............ 4,452,294 4,482,252 (29,958)
10/17/96 Canadian Dollar .......... 2,056,893 2,071,950 (15,057)
12/19/96 German Deutsche Mark ..... 318,709 309,455 9,254
12/19/96 British Pound Sterling ... 5,753,500 5,786,159 (32,659)
12/19/96 Swedish Krone ............ 188,523 188,853 (330)
12/19/96 Italian Lira ............. 5,241,397 5,246,719 (5,322)
12/19/96 Japanese Yen ............. 7,631,159 7,526,069 105,090
12/19/96 Canadian Dollar .......... 204,978 206,322 (1,344)
----------- ----------- --------
$41,273,059 $41,110,466 $162,593
=========== =========== ========
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Investment transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and
federal income tax purposes. Interest income is recorded on the accrual basis.
Expenses not directly attributable to a specific Portfolio or class are
allocated among all of the Portfolios or classes of the Fund based on their
relative net assets.
REPURCHASE AGREEMENTS -- Money market instruments may be purchased from
banks and non-bank dealers subject to the seller's agreement to repurchase them
at an agreed upon date and price. Collateral for repurchase agreements may have
longer maturities than the maximum permissible remaining maturity of portfolio
investments. The seller will be required on a daily basis to maintain the value
of the securities subject to the agreement at not less than the repurchase
price. The agreements are conditioned upon the collateral being deposited under
the Federal Reserve book-entry system or held in a separate account by the
Fund's custodian or an authorized securities depository.
REVERSE REPURCHASE AGREEMENTS -- The Fund enters into reverse repurchase
agreements with qualified, third party brokers-dealers as determined by and
under the direction of the Fund's Board of Trustees. Interest on the value of
the reverse repurchase agreements issued and outstanding is based upon
competitive market rates at the time of issuance. At the time the Fund enters
into a reverse repurchase agreement, it identifies for segregation certain
liquid securities having a value not less than the repurchase price, including
accrued interest, of the reverse repurchase agreement.
TBA PURCHASE COMMITMENTS -- The Portfolios may enter into "TBA" (to be
announced) purchase commitments to purchase securities for a fixed price at a
future date, typically not exceeding 45 days. TBA purchase commitments may be
considered securities in themselves, and involve a risk of loss if the value of
the security to be purchased declines prior to settlement date, which risk is in
addition to the risk of decline in the value of a Portfolio's other assets.
Unsettled TBA purchase commitments are valued at the current market value of the
underlying securities, according to the procedures described under "Security
Valuation" above.
MORTGAGE DOLLAR ROLLS -- Each Portfolio (except the Tax-Free Income,
Pennsylvania Tax-Free Income, New Jersey Tax-Free Income and Ohio Tax-Free
Income Portfolios) may enter into mortgage dollar rolls (principally using
TBA's) in which the Portfolio sells mortgage securities for delivery in the
current month and simultaneously contracts to repurchase similar, but not
identical, securities at an agreed-upon price on a fixed date. The Portfolio
accounts for such dollar rolls as purchases and sales and receives compensation
as consideration for entering into the commitment to repurchase. A Portfolio
must maintain liquid securities having a value not less than the repurchase
price (including accrued interest) for such dollar rolls.
In a "fee" roll, the compensation is recorded as deferred income and
amortized to income over the roll period. In a "drop" roll, the compensation is
paid via a lower price for the security upon its repurchase. The counterparty
receives all principal and interest payments, including prepayments, made in
respect of a security subject to such a contract while it is the holder.
Mortgage dollar rolls may be renewed with a new purchase and repurchase price
fixed and a cash settlement made on settlement date without physical delivery of
the securities subject to the contract. A Portfolio engages in dollar rolls for
the purpose of enhancing its yield, principally by earning a negotiated fee.
62
<PAGE>
COMPASS CAPITAL FUNDS
ORGANIZATION COSTS -- Costs incurred by each Portfolio in connection with
its organization, registration and initial public offering have been deferred
and are being amortized using the straight-line method over a five-year period
beginning on the date on which each Portfolio commenced its investment
activities.
SECURITIES LENDING -- Loans of securities are required at all times to be
secured by collateral at least equal to 102% of the market value of the
securities on loan. However, in the event of default or bankruptcy by the other
party to the agreement, realization and/or retention of the collateral may be
subject to legal proceedings. The market value of securities on loan to brokers
and the value of collateral held by the Fund with respect to such loans
(including rights to draw on letters of credit) at September 30, 1996, is as
follows:
VALUE OF
MARKET VALUE OF COLLATERAL
PORTFOLIO SECURITIES LOANED RECEIVED
- -------- ----------------- -----------
Short Government Portfolio .......... $44,534,985 $45,832,035
Intermediate Government Portfolio ... 30,512,330 31,417,365
Intermediate Bond Portfolio ......... 41,342,612 42,429,419
Core Bond Portfolio ................. 70,309,474 72,477,244
Government Income Portfolio ......... 51,057 53,000
Managed Income Portfolio ............ 80,613,046 83,187,968
OTHER -- Securities denominated in currencies other than U.S. dollars are
subject to changes in value due to fluctuations in exchange rates.
Some countries in which the Portfolios invest require governmental approval
for the repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if there is a deterioration in a
country's balance of payments or for other reasons, a country may impose
temporary restrictions on foreign capital remittances abroad.
The securities exchanges of certain foreign markets are substantially
smaller, less liquid and more volatile than the major securities markets in the
United States. Consequently, acquisition and disposition of securities by the
Portfolios may be inhibited.
(B) TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Pursuant to an Investment Advisory Agreement, PNC Asset Management Group,
Inc. ("PAMG"), a wholly-owned subsidiary of PNC Bank, National Association ("PNC
Bank"), serves as investment adviser for the Portfolios. BlackRock Financial
Management, Inc. ("BlackRock"), a wholly-owned subsidiary of PAMG, serves as
sub-adviser for all of the Portfolios except for International Bond Portfolio,
which is sub-advised by Morgan Grenfell Investment Services Limited ("Morgan
Grenfell"). PAMG, PNC Bank and BlackRock are indirect wholly-owned subsidiaries
of PNC Bank Corp.
For its advisory services, PAMG is entitled to receive fees, computed daily
and paid monthly, at the following annual rates, based on each Portfolio's
average daily net assets:
EACH PORTFOLIO
EXCEPT THE INTERNATIONAL INTERNATIONAL
BOND PORTFOLIO BOND PORTFOLIO
------------------------- --------------
INVESTMENT INVESTMENT
AVERAGE DAILY NET ASSETS ADVISORY FEE ADVISORY FEE
- -------------------------- ------------------------- --------------
first $1 billion ......... .500% .550%
$1 billion - $2 billion .. .450 .500
$2 billion - $3 billion .. .425 .475
greater than $3 billion .. .400 .450
63
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PAMG may, at its discretion, waive all or any portion of its advisory fee
for any Portfolio. For the periods ended September 30, 1996, advisory fees and
waivers for each Portfolio were as follows:
GROSS NET ADVISORY
ADVISORY FEE WAIVER FEE
------------ ---------- ------------
Short Government Bond Portfolio . $ 563,812 $225,525 $ 338,287
Intermediate Government Bond
Portfolio ..................... 952,916 413,502 539,414
Intermediate Bond Portfolio ..... 1,112,805 461,939 650,866
Core Bond Portfolio ............. 707,818 283,127 424,691
Government Income Portfolio ..... 70,051 70,051 --
Managed Income Portfolio ........ 3,310,695 993,209 2,317,486
International Bond Portfolio .... 138,377 4,580 133,797
Tax-Free Income Portfolio ....... 199,220 86,076 113,144
Pennsylvania Tax-Free Income
Portfolio ..................... 389,436 160,989 228,447
New Jersey Tax-Free Income
Portfolio ..................... 307,414 122,966 184,448
Ohio Tax-Free Income Portfolio .. 46,840 41,353 5,487
PAMG pays BlackRock and Morgan Grenfell fees for their sub-advisory
services.
PFPC Inc. ("PFPC"), an indirect wholly-owned subsidiary of PNC Bank Corp.,
Compass Capital Group, Inc. ("CCG"), an indirect wholly-owned subsidiary of PNC
Bank Corp., and Compass Distributors, Inc. ("CDI") act as co-administrators for
the Fund. The combined administration fee is computed daily and payable monthly,
based on a percentage of the average daily net assets of each Portfolio, at the
following annual rates: .23% of the first $500 million, .21% of the next $500
million, .19% of the next $1 billion and .18% of average daily net assets in
excess of $2 billion.
PFPC, CCG and CDI may, at their discretion, voluntarily waive all or any
portion of their administration fees for any Portfolio. For the periods ended
September 30, 1996, administration fees and waivers for each Portfolio were as
follows:
GROSS NET
ADMINISTRATION ADMINISTRATION
FEE WAIVER FEE
-------------- -------- ---------------
Short Government Bond Portfolio . $ 259,160 $ 83,391 $175,769
Intermediate Government Bond
Portfolio ..................... 428,641 151,873 276,768
Intermediate Bond Portfolio ..... 501,800 209,899 291,901
Core Bond Portfolio ............. 325,596 128,743 196,853
Government Income Portfolio ..... 31,542 29,795 1,747
Managed Income Portfolio ........ 1,461,270 494,154 967,116
International Bond Portfolio .... 56,447 28,993 27,454
Tax-Free Income Portfolio ....... 91,554 42,728 48,826
Pennsylvania Tax-Free Income
Portfolio ..................... 175,945 67,450 108,494
New Jersey Tax-Free Income
Portfolio ..................... 138,308 69,374 68,934
Ohio Tax-Free Income Portfolio .. 21,114 10,465 10,649
In addition, PNC Bank serves as custodian for each of the Fund's
Portfolios. PFPC serves as transfer and dividend disbursing agent.
PAMG, PFPC, CCG and CDI have also voluntarily agreed to reimburse expenses
in the amount of $3,479 with respect to the Ohio Tax-Free Income Portfolio and
$7,027 with respect to the Government Income Portfolio for the fiscal year ended
September 30, 1996.
PAMG, PFPC, CCG and CDI also agreed for the periods ended September 30,
1996 to reimburse each Portfolio for the amount, if any, by which the total
operating and management expenses of such Portfolio for any fiscal year exceed
the most restrictive state blue sky expense limitation in effect from time to
time, to the extent required by such limitation. No such reimbursements were
necessary for the periods ended September 30, 1996.
64
<PAGE>
COMPASS CAPITAL FUNDS
(C) PURCHASES AND SALES OF SECURITIES
For the fiscal year ended September 30, 1996, purchases and sales of
securities, other than short-term and government securities, were as follows:
PURCHASES SALES
-------------- ---------------
Short Government Bond Portfolio ........ $ 157,564,446 $ 184,180,595
Intermediate Government Bond Portfolio . 464,322,334 453,377,671
Intermediate Bond Portfolio ............ 703,034,210 636,985,432
Core Bond Portfolio .................... 415,265,249 292,409,722
Government Income Portfolio ............ 57,668,780 35,930,356
Managed Income Portfolio ............... 2,079,778,306 1,299,735,623
International Bond Portfolio ........... 38,102,076 37,903,736
Tax-Free Income Portfolio .............. 152,552,800 103,590,852
Pennsylvania Tax-Free Income Portfolio . 114,759,294 90,668,277
New Jersey Tax-Free Income Portfolio ... 100,207,304 107,572,917
Ohio Tax-Free Income Portfolio ......... 14,110,466 12,525,060
For the fiscal year ended September 30, 1996, purchases and sales of
government securities were as follows:
PURCHASES SALES
-------------- --------------
Short Government Bond Portfolio ........ $ 354,847,532 $ 334,491,068
Intermediate Government Bond Portfolio . 671,809,687 635,637,308
Intermediate Bond Portfolio ............ 883,513,774 851,681,977
Core Bond Portfolio .................... 583,595,170 612,207,901
Government Income Portfolio ............ 47,424,162 53,757,264
Managed Income Portfolio ............... 2,979,668,714 2,804,009,595
65
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(D) CAPITAL SHARES
Transactions in capital shares for each period were as follows:
<TABLE>
<CAPTION>
SHORT GOVERNMENT BOND PORTFOLIO
--------------------------------------------------------------------------------------------------
FOR THE PERIOD 4/1/96 FOR THE PERIOD 7/1/95 FOR THE YEAR ENDED
THROUGH 9/30/96 THROUGH 3/31/96 6/30/95
------------------------------ ------------------------------ ------------------------------
SHARES VALUE SHARES VALUE SHARES VALUE
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Prior Shares
Exchanged in merger .. -- $ -- (5,134,946) $ (50,925,592) -- $ --
Shares sold .......... -- -- 2,933,108 28,958,863 3,732,764 35,832,684
Shares issued in
reinvestment of
dividends ......... -- -- 86,191 850,722 202,717 1,972,138
Shares redeemed ...... -- -- (2,408,838) (23,680,688) (2,629,898) (25,455,008)
------------- ------------- ------------- ------------- ------------- -------------
-- -- (4,524,485) (44,796,695) 1,305,583 12,349,814
Institutional Shares
Exchanged in merger .. -- -- 5,134,946 50,887,316 -- --
Shares sold .......... 9,225,816 89,952,232 416,055 4,146,059 -- --
Shares issued in
merger ............ -- -- 940,915 9,405,883 -- --
Shares issued in
reinvestment of
dividends ......... 23,549 229,714 10,535 104,431 -- --
Shares redeemed ...... (791,967) (7,725,214) (1,106,898) (11,157,065) -- --
------------- ------------- ------------- ------------- ------------- -------------
8,457,398 82,456,732 5,395,553 53,386,624 -- --
Service Shares
Shares sold .......... 16,672,550 162,889,478 475,915 4,712,118 -- --
Shares issued in
merger ............ -- -- 19,399,025 192,267,748 -- --
Shares issued in
reinvestment of
dividends ......... 57,731 564,224 50,924 503,581 -- --
Shares redeemed ...... (25,900,305) (252,860,371) (1,376,331) (13,627,909) -- --
------------- ------------- ------------- ------------- ------------- -------------
(9,170,024) (89,406,669) 18,549,533 183,855,538 -- --
Investor A Shares
Shares sold .......... 53,769 523,653 39,732 397,522 -- --
Shares issued in
merger ............ -- -- 34,465 337,269 -- --
Shares issued in
reinvestment of
dividends ......... 1,958 19,101 301 2,975 -- --
Shares redeemed ...... (33,479) (326,419) (1,014) (9,940) -- --
------------- ------------- ------------- ------------- ------------- -------------
22,248 216,335 73,484 727,826 -- --
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease) ... (690,378) $ (6,733,602) 19,494,085 $ 193,173,293 1,305,583 $ 12,349,814
============= ============= ============= ============= ============= =============
</TABLE>
66
<PAGE>
COMPASS CAPITAL FUNDS
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
9/30/96 9/30/95
------------------------------ ------------------------------
SHARES VALUE SHARES VALUE
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class .................. 3,580,617 $ 35,995,887 26,590,354 $ 259,605,434
Service Class ........................ 1,372,028 13,740,362 10,448,411 101,923,874
Investor A Class ..................... 140,064 1,399,514 267,053 2,604,567
Shares issued in reinvestment of dividends:
Institutional Class .................. 322,528 3,252,027 630,753 6,148,282
Service Class ........................ 89,356 901,214 227,356 2,209,698
Investor A Class ..................... 36,588 366,222 51,849 505,595
Shares redeemed:
Institutional Class .................. (4,630,262) (46,321,923) (27,151,217) (264,697,056)
Service Class ........................ (1,641,252) (16,487,300) (12,021,173) (117,212,240)
Investor A Class ..................... (559,603) (5,587,294) (224,167) (2,182,053)
------------- ------------- ------------- -------------
Net decrease .............................. (1,289,936) $ (12,741,291) (1,180,781) $ (11,093,899)
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND PORTFOLIO
----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
9/30/96 9/30/95
------------------------------ ------------------------------
SHARES VALUE SHARES VALUE
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class .................. 12,073,053 $ 113,370,659 26,801,698 $ 244,543,588
Service Class ........................ 2,319,939 21,815,444 6,336,367 57,979,751
Investor A Class ..................... 57,644 541,668 66,539 607,535
Shares issued in merger:
Institutional Class .................. -- -- 1,103,217 10,414,371
Service Class ........................ -- -- -- --
Investor A Class ..................... -- -- -- --
Shares issued in reinvestment of dividends:
Institutional Class .................. 483,706 4,588,719 568,561 5,225,884
Service Class ........................ 91,490 867,920 159,312 1,458,975
Investor A Class ..................... 4,611 43,286 2,890 26,612
Shares redeemed:
Institutional Class .................. (3,508,326) (32,933,287) (23,165,781) (211,763,234)
Service Class ........................ (1,439,046) (13,480,000) (6,554,873) (59,987,572)
Investor A Class ..................... (30,508) (284,730) (10,462) (95,925)
------------- ------------- ------------- -------------
Net increase .............................. 10,052,563 $ 94,529,679 5,307,468 $ 48,409,985
============= ============= ============= =============
</TABLE>
67
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
CORE BOND PORTFOLIO
--------------------------------------------------------------------------------------------------
FOR THE PERIOD 4/1/96 FOR THE PERIOD 7/1/95 FOR THE YEAR ENDED
THROUGH 9/30/96 THROUGH 3/31/96 6/30/95
------------------------------ ------------------------------ ------------------------------
SHARES VALUE SHARES VALUE SHARES VALUE
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Prior Class
Exchanged in merger -- $ -- (4,700,542) $ (46,206,171) -- $ --
Shares sold ....... -- -- 1,497,044 14,872,835 1,971,644 18,993,483
Shares issued in
reinvestment
of dividends ... -- -- 196,492 1,955,692 104,932 995,146
Shares redeemed ... -- -- (260,446) (2,606,563) (145,220) (1,362,388)
------------- ------------- ------------- ------------- ------------- -------------
-- -- (3,267,452) (31,984,207) 1,931,356 18,626,241
Institutional Class
Exchanged in merger -- -- 4,700,542 46,582,367 -- --
Shares sold ....... 15,972,754 151,512,501 2,616,796 25,552,564 -- --
Shares issued in
reinvestment
of dividends ... 119,442 1,135,289 27,377 269,114 -- --
Shares redeemed ... (5,791,581) (54,781,902) (614,318) (6,135,169) -- --
------------- ------------- ------------- ------------- ------------- -------------
10,300,615 97,865,888 6,730,397 66,268,876 -- --
Service Class
Shares sold ....... 24,290,953 231,789,252 346,922 3,408,413 -- --
Shares issued in
merger ......... -- -- 25,643,056 254,122,684 -- --
Shares issued in
reinvestment
of dividends ... 54,759 522,688 40,334 396,628 -- --
Shares redeemed ... (36,205,585) (344,905,834) (1,895,903) (18,771,943) -- --
------------- ------------- ------------- ------------- ------------- -------------
(11,859,873) (112,593,894) 24,134,409 239,155,782 -- --
Investor A Class
Shares sold ....... 41,711 395,732 9,091 87,910 -- --
Shares issued in
reinvestment
of dividends ... 285 2,706 4 40 -- --
Shares redeemed ... (16,852) (159,534) (736) (7,068) -- --
------------- ------------- ------------- ------------- ------------- -------------
25,144 238,904 8,359 80,882 -- --
Investor B Class
Shares sold ....... 155,168 1,476,084 8,051 77,471 -- --
Shares issued in
reinvestment
of dividends ... 311 2,944 -- -- -- --
Shares redeemed ... (6,705) (63,800) -- -- -- --
------------- ------------- ------------- ------------- ------------- -------------
148,774 1,415,228 8,051 77,471 -- --
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease) (1,385,340) $ (13,073,874) 27,613,764 $ 273,598,804 1,931,356 $ 18,626,241
============= ============= ============= ============= ============= =============
</TABLE>
68
<PAGE>
COMPASS CAPITAL FUNDS
<TABLE>
<CAPTION>
GOVERNMENT INCOME PORTFOLIO
------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD
9/30/96 10/3/941 THROUGH 9/30/95
---------------------------- ----------------------------
SHARES VALUE SHARES VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares sold:
Investor A Class ....... 182,347 $ 1,897,315 300,898 $ 3,068,403
Investor B Class ....... 262,359 2,723,489 999,120 10,170,346
Shares issued in reinvestment
of dividends:
Investor A Class ....... 25,834 269,474 10,966 113,720
Investor B Class ....... 50,171 524,556 18,231 190,601
Shares redeemed:
Investor A Class ....... (130,085) (1,347,617) (31,890) (328,162)
Investor B Class ....... (176,000) (1,822,188) (63,350) (662,081)
------------ ------------ ------------ ------------
Net increase ................ 214,626 $ 2,245,029 1,233,975 $ 12,552,827
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MANAGED INCOME PORTFOLIO
----------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
9/30/96 9/30/95
------------------------------ ------------------------------
SHARES VALUE SHARES VALUE
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class .... 17,536,625 $ 178,831,880 81,039,235 $ 809,394,059
Service Class .......... 8,904,551 91,416,793 17,764,304 177,958,649
Investor A Class ....... 305,441 3,146,031 356,045 3,587,731
Shares issued in reinvestment
of dividends:
Institutional Class .... 1,660,070 17,311,187 2,491,007 24,875,485
Service Class .......... 354,837 3,702,327 395,609 3,967,740
Investor A Class ....... 66,577 684,743 61,685 615,380
Shares redeemed:
Institutional Class .... (5,901,770) (60,385,014) (81,193,145) (810,656,296)
Service Class .......... (4,151,437) (42,503,459) (13,813,314) (137,936,912)
Investor A Class ....... (416,188) (4,250,126) (379,561) (3,789,059)
------------- ------------- ------------- -------------
Net increase ................ 18,358,706 $ 187,954,362 6,721,865 $ 68,016,777
============= ============= ============= =============
<FN>
- ----------------
1 Commencement of operations.
</FN>
</TABLE>
69
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL BOND PORTFOLIO
--------------------------------------------------------------------------------------------
FOR THE PERIOD 2/1/96 FOR THE PERIOD 3/1/95 FOR THE YEAR ENDED
THROUGH 9/30/96 THROUGH 1/31/96 2/28/95
---------------------------- ---------------------------- ----------------------------
SHARES VALUE SHARES VALUE SHARES VALUE
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Prior Class
Exchanged in merger -- $ -- -- $ -- -- $ --
Shares sold ....... -- -- 315,538 3,593,223 -- --
Shares issued in
reinvestment
of dividends .... -- -- 140,790 1,586,753 -- --
Shares redeemed ... -- -- (1,495,630) (17,160,728) -- --
------------ ------------ ------------ ------------ ------------ ------------
-- -- (1,039,302) (11,980,752) -- --
Institutional Class
Exchanged in merger -- -- -- -- -- --
Shares sold ....... 2,641,656 30,118,521 -- -- -- --
Shares issued in
reinvestment
of dividends .... 1,056 12,134 -- -- -- --
Shares redeemed ... (4,942) (56,751) -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
2,637,770 30,073,904 -- -- -- --
Service Class
Exchanged in merger -- -- -- -- -- --
Shares sold ....... 3,506,950 39,736,225 -- -- 717,000 7,437,000
Shares issued in
reinvestment
of dividends .... 7,479 84,539 -- -- 122,000 1,240,000
Shares redeemed ... (6,146,919) (69,828,926) -- -- (861,000) (8,979,000)
------------ ------------ ------------ ------------ ------------ ------------
(2,632,490) (30,008,162) -- -- -- --
Investor A Class
Shares sold ....... 15,076 173,354 -- -- -- --
Shares issued in
reinvestment
of dividends .... 21 244 -- -- -- --
Shares redeemed ... (80) (921) -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
15,017 172,677 -- -- -- --
Investor B Class
Shares sold ....... 11,631 133,879 -- -- -- --
Shares issued in
reinvestment
of dividends .... 17 196 -- -- -- --
Shares redeemed ... (69) (795) -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
11,579 133,280 -- -- -- --
Investor C Class
Shares sold ....... 1,643 19,116 -- -- -- --
Shares issued in
reinvestment
of dividends .... -- -- -- -- -- --
Shares redeemed ... -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
1,643 19,116 -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) 33,519 $ 390,815 (1,039,302) $(11,980,752) (22,000) $ (301,000)
============ ============ ============ ============ ============ ============
</TABLE>
70
<PAGE>
COMPASS CAPITAL FUNDS
<TABLE>
<CAPTION>
TAX-FREE INCOME PORTFOLIO
------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
9/30/96 9/30/95
---------------------------- ----------------------------
SHARES VALUE SHARES VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class .... 1,048,619 $ 11,425,325 24,770 $ 264,124
Service Class .......... 3,210,017 34,310,198 470,326 4,886,018
Investor A Class ....... 32,034 350,965 41,149 418,358
Investor B Class ....... 931 10,000 -- --
Shares issued in merger:
Institutional Class .... -- -- -- --
Service Class .......... 2,577,471 28,042,882 -- --
Investor A Class ....... -- -- -- --
Investor B Class ....... -- -- -- --
Shares issued in reinvestment
of dividends:
Institutional Class .... 104 1,120 56 585
Service Class .......... 11,741 126,791 4,229 42,982
Investor A Class ....... 18,717 201,428 25,911 262,939
Investor B Class ....... -- -- -- --
Shares redeemed:
Institutional Class .... (303,674) (3,221,356) (12,488) (126,996)
Service Class .......... (2,906,457) (31,020,750) (240,413) (2,481,706)
Investor A Class ....... (222,266) (2,396,426) (140,436) (1,431,394)
Investor B Class ....... -- -- -- --
------------ ------------ ------------ ------------
Net increase ................ 3,467,237 $ 37,830,177 173,104 $ 1,834,910
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
9/30/96 9/30/95
---------------------------- ----------------------------
SHARES VALUE SHARES VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class .... 437,476 $ 4,614,807 174,604 $ 1,773,519
Service Class .......... 2,874,431 29,852,257 584,628 5,807,836
Investor A Class ....... 334,060 3,474,285 444,461 4,391,785
Investor B Class ....... 423,077 4,400,686 384,161 3,817,733
Shares issued in merger:
Institutional Class .... -- -- -- --
Service Class .......... 1,676,837 17,707,384 -- --
Investor A Class ....... -- -- -- --
Investor B Class ....... -- -- -- --
Shares issued in reinvestment
of dividends:
Institutional Class .... -- -- -- --
Service Class .......... 3,966 41,263 6,576 62,462
Investor A Class ....... 139,571 1,458,004 179,097 1,806,597
Investor B Class ....... 11,556 120,479 5,701 57,559
Shares redeemed:
Institutional Class .... (294,414) (3,067,917) (37,001) (380,000)
Service Class .......... (2,608,165) (27,050,410) (425,531) (4,223,172)
Investor A Class ....... (973,547) (10,132,270) (1,223,482) (12,048,917)
Investor B Class ....... (59,032) (614,065) (1,698) (17,135)
------------ ------------ ------------ ------------
Net increase ................ 1,965,816 $ 20,804,503 91,516 $ 1,048,267
============ ============ ============ ============
</TABLE>
71
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
NEW JERSEY TAX-FREE INCOME PORTFOLIO
--------------------------------------------------------------------------------------------------
FOR THE PERIOD 2/1/96 FOR THE PERIOD 3/1/95 FOR THE YEAR ENDED
THROUGH 9/30/96 THROUGH 1/31/96 2/28/95
------------------------------ ------------------------------ ------------------------------
SHARES VALUE SHARES VALUE SHARES VALUE
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Prior Class
Exchanged in merger -- $ -- (8,451,682) $ (94,366,666) -- $ --
Shares sold ....... -- -- 790,370 8,844,324 2,019,000 21,923,000
Shares issued in
reinvestment
of dividends ... -- -- 122,048 1,368,581 180,000 1,934,000
Shares redeemed ... -- -- (1,317,562 (14,786,239) (3,191,000) (34,227,000)
------------- ------------- ------------- ------------- ------------- -------------
-- -- (8,857,006) (98,940,000) (992,000) (10,370,000)
Service Class
Exchanged in merger -- -- 8,451,862 94,366,666 -- --
Shares sold ....... 8,219,826 92,127,639 75,252 843,989 -- --
Shares issued in
reinvestment
of dividends ... 84,899 959,061 -- -- -- --
Shares redeemed ... (8,927,137) (100,070,903) (83,191) (962,039) -- --
------------- ------------- ------------- ------------- ------------- -------------
(622,412) (6,984,203) 8,443,923 94,248,616 -- --
Investor A Class
Shares sold ....... 112,810 1,272,555 1,237 14,310 -- --
Shares issued in
reinvestment
of dividends ... 1,001 11,231 -- -- -- --
Shares redeemed ... (35,724) (401,424) -- -- -- --
------------- ------------- ------------- ------------- ------------- -------------
78,087 882,362 1,237 14,310 -- --
Investor B Class
Shares sold ....... 5,376 60,000 -- -- -- --
Shares issued in
reinvestment
of dividends ... -- -- -- -- -- --
Shares redeemed ... (2,688) (30,000) -- -- -- --
------------- ------------- ------------- ------------- ------------- -------------
2,688 30,000 -- -- -- --
------------- ------------- ------------- ------------- ------------- -------------
Net decrease ........... (541,637) $ (6,071,841) (411,846) $ (4,677,074) (992,000) $ (10,370,000)
============= ============= ============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
OHIO TAX-FREE INCOME PORTFOLIO
--------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
9/30/96 9/30/95
-------------------------- --------------------------
SHARES VALUE SHARES VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class .... 23,824 $ 242,825 15,107 $ 149,562
Service Class .......... 392,400 3,988,131 163,992 1,576,763
Investor A Class ....... 19,356 195,385 34,691 326,770
Investor B Class ....... 4,892 49,500 10,355 100,009
Shares issued in reinvestment
of dividends:
Institutional Class .... 290 2,930 217 2,100
Service Class .......... 250 2,521 1,987 18,626
Investor A Class ....... 12,671 128,646 17,613 170,813
Investor B Class ....... 355 3,600 236 2,346
Shares redeemed:
Institutional Class .... (3,750) (38,068) (8,638) (82,274)
Service Class .......... (276,903) (2,814,297) (114,927) (1,115,016)
Investor A Class ....... (81,490) (821,320) (122,186) (1,148,358)
Investor B Class ....... -- -- -- --
----------- ----------- ----------- -----------
Net increase (decrease) ..... 91,895 $ 939,853 (1,553) $ 1,341
=========== =========== =========== ===========
</TABLE>
72
<PAGE>
COMPASS CAPITAL FUNDS
(E) AT SEPTEMBER 30, 1996, NET ASSETS CONSISTED OF:
<TABLE>
<CAPTION>
SHORT INTERMEDIATE
GOVERNMENT GOVERNMENT INTERMEDIATE CORE
BOND BOND BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Capital paid-in .......................... $ 233,197,782 $ 185,487,158 $ 255,090,246 $ 283,058,463
Undistributed net investment income ...... -- 91,753 100,772 123,608
Accumulated net realized gain (loss) on
investment transactions ................ (4,888,288) (5,277,633) (259,696) (729,844)
Net unrealized appreciation (depreciation)
on investments ......................... 184,755 (592,495) (724,998) (802,274)
------------- ------------- ------------- -------------
$ 228,494,249 $ 179,708,783 $ 254,206,324 $ 281,649,953
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT MANAGED INTERNATIONAL TAX-FREE
INCOME INCOME BOND INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Capital paid-in .......................... $ 14,797,856 $ 751,438,651 $ 33,605,063 $ 49,246,836
Undistributed net investment income ...... -- -- 1,937,243 11,969
Distributions in excess of net
investment income ...................... -- (587,175) -- --
Accumulated net realized gain (loss) on
investment transactions ................ (41,869) (7,827,063) 3,009,747 (885,702)
Net unrealized appreciation (depreciation)
on investments ......................... 13,913 (2,014,807) 497,137 1,021,064
------------- ------------- ------------- -------------
$ 14,769,900 $ 741,009,606 $ 39,049,190 $ 49,394,167
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
PENNSYLVANIA NEW JERSEY OHIO
TAX-FREE TAX-FREE TAX-FREE
INCOME INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------
<S> <C> <C> <C>
Capital paid-in .......................... $ 84,396,705 $ 88,191,085 $ 9,894,294
Undistributed net investment income ...... -- -- 3,272
Accumulated net realized gain (loss) on
investment transactions ............... (2,162,550) (871,827) (370,078)
Net unrealized appreciation (depreciation)
on investments ........................ 1,676,360 1,681,330 252,549
------------ ------------ ------------
$ 83,910,515 $ 89,000,588 $ 9,780,037
============ ============ ============
</TABLE>
(F) CAPITAL LOSS CARRYOVERS
At September 30, 1996, capital loss carryovers were available to offset
possible future realized capital gains as follows: $4,554,018 in the Short
Government Bond Portfolio which expire in the year 2004, $3,887,798 in the
Intermediate Government Bond Portfolio which expire in the year 2004, $1,140,754
in the Core Bond Portfolio which expire in the year 2004, $1,032 in the
Government Income Portfolio which expire in the year 2004, $844,279 in the
Managed Income Portfolio which expire in the year 2004, $204,724 in the
International Bond Portfolio which expire in the year 2004, $857,093 in the
Tax-Free Income Portfolio which expire in the year 2004, $2,047,106 in the
Pennsylvania Tax-Free Income Portfolio which expire in the year 2004 and
$349,829 in the Ohio Tax-Free Income Portfolio which expire in the year 2004. At
September 30, 1996, the deferred post-October losses were as follows: $230,164
in the Short Government Bond Portfolio, $1,403,305 in the Intermediate
Government Bond Portfolio, $638,794 in the Intermediate Bond Portfolio, $29,785
in the Government Income Portfolio, $4,944,922 in the Managed Income Portfolio,
$28,609 in the Tax-Free Income Portfolio, $90,126 in the Pennsylvania Tax-Free
Income Portfolio, $928,457 in the New Jersey Tax-Free Income Portfolio, $20,249
in the Ohio Tax-Free Income Portfolio.
73
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) COMPASS CAPITAL FUNDS
(G) MERGER
On September 29, 1995 and October 2, 1995, respectively, the Board of
Trustees of the Fund and the Board of Trustees of The Compass Capital Group of
Funds ("Compass") approved an asset purchase agreement providing for the
transfer of all of the assets and liabilities of Compass to the Fund. At a
special meeting of shareholders held on December 11, 1995, the shareholders of
Compass voted to approve the asset purchase agreement. Pursuant to the asset
purchase agreement, on January 13, 1996 all of the assets and liabilities of
Compass were transferred to the Fund in a tax-free exchange for Service shares
of the Fund, except the assets and liabilities of the Compass International
Fixed Income Fund which were transferred on February 13, 1996. The details of
these business combinations as they relate to the Portfolios are described
below.
On September 29, 1995 and September 28, 1995, respectively, the Board of
Trustees of the Fund and the Board of Directors of The BFM Institutional Trust,
Inc. ("BFM") approved an asset purchase agreement providing for the transfer of
all of the assets and liabilities of BFM to the Fund. At a special meeting of
shareholders held on December 20, 1995, the shareholders of BFM voted to approve
the asset purchase agreement. Pursuant to the asset purchase agreement, on
January 13, 1996 all of the assets and liabilities of BFM's Short Duration
Portfolio and Core Fixed Income Portfolio were transferred to the Fund in a
tax-free exchange for Institutional shares of the Fund. The detail of these
business combinations as they relate to the Portfolios are described below.
The following table summarizes certain relevant information of the Fund
prior to and immediately after the above-referenced business combinations.
Unless indicated otherwise, the Fund Portfolio is the accounting survivor. The
new combined funds maintain all the operating history of the accounting
survivor.
THE COMPASS CAPITAL GROUP OF FUNDS
AND BFM INSTITUTIONAL TRUST, INC.
- ----------------------------------------------------------------------
UNREALIZED
NET ASSET APPRECIATION
SHARES AT VALUE AT (DEPRECIATION)
FUND NAME 1/13/96 1/13/96 AT 1/13/96
- ------------------------ ---------- ------------ --------------
Compass Short/
Intermediate ......... 17,823,988 $185,294,507 $2,323,602
BFM Short Duration ..... 5,134,946 50,887,316 152,254
Compass Fixed Income ... 23,551,686 254,122,684 12,296,000
BFM Core Fixed Income .. 4,700,542 46,582,367 496,596
Compass International ..
Fixed Income ......... 3,283,656 37,282,000 743,937
Compass Municipal Bond . 2,613,503 28,042,883 666,296
Compass Pennsylvania ...
Municipal Bond ....... 1,753,206 17,707,384 261,087
Compass New Jersey .....
Municipal Bond ....... 8,451,862 96,739,285 2,320,972
COMPASS CAPITAL FUNDS
- ----------------------------------------------------------------------
COMBINED
SHARES NET ASSETS
NEW ISSUED IN AFTER NAV
PORTFOLIO BUSINESS BUSINESS PER
NAME COMBINATION COMBINATION SHARE
- ------------------------ ----------- ------------ -------
Short Government
Bond 1 18,697,730
5,134,946 $252,550,348 $9.91
Core Bond 1 25,643,056
4,700,542 300,705,051 $9.91
International Bond 2,3 3,283,656 37,282,000 $11.35
Tax-Free Income 2,577,471 52,470,771 $10.88
Pennsylvania
Tax-Free Income 1,676,837 85,209,617 $10.56
New Jersey
Tax-Free Income 2 8,451,862 96,739,285 $11.45
- --------------
1 The BFM Institutional Trust, Inc.'s portfolio is the accounting survivor in
this business combination.
2 The Compass Capital Group of Funds portfolio is the accounting survivor in
this business combination.
3 The effective date for this business combination was on February 13, 1996.
74
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS COMPASS CAPITAL FUNDS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF THE COMPASS CAPITAL FUNDS:
We have audited the accompanying statements of assets and liabilities, including
the schedule of investments, of the Short Government Bond, Intermediate
Government Bond,Intermediate Bond, Core Bond, Government Income,Managed Income,
International Bond, Tax-Free Income and New-Jersey Tax-Free Income Portfolios of
the Compass Capital Fund, and the statements of net assets of the Pennsylvania
Tax-Free Income and Ohio Tax-Free Income Portfolios of the Compass Capital Funds
as of September 30, 1996, and the related statements of operations for the
periods then ended, the statements of changes in net assets for each of the two
years (or periods) in the period then ended, and the financial highlights for
each of the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of materials misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments held by the
custodian and brokers as of September 30, 1996. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Compass Capital Funds (Short Government Bond,Intermediate Government Bond,
Intermediate Bond, Core Bond, Government Income, Managed Income, International
Bond, Tax-Free Income, Pennsylvania Tax-Free Income, New Jersey Tax-Free and
Ohio Tax-Free Income Portfolios), as of September 30, 1996, and the results of
their operations for the periods then ended, the changes in their net assets for
each of the two years (or periods) in the period then ended and the financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
November 22, 1996
75
<PAGE>
Investment Adviser
PNC Asset Management Group, Inc.
Philadelphia, Pennsylvania 19101
Sub-Adviser -- Short Government Bond
Portfolio, Intermediate Government Bond
Portfolio, Intermediate Bond Portfolio, Core
Bond Portfolio, Government Income
Portfolio, Managed Income Portfolio,
Tax-Free Income Portfolio, Pennsylvania
Tax-Free Income Portfolio, New Jersey
Tax-Free Income Portfolio and Ohio
Tax-Free Income Portfolio
BlackRock Financial Management, Inc.
New York, New York 10154
Sub-Adviser -- International Bond Portfolio
Morgan Grenfell Investment Services Limited
London, United Kingdom
Custodian
PNCBank, National Association
Philadelphia,Pennsylvania 19101
Co-Administrator and Transfer Agent
PFPC Inc.
Wilmington, Delaware 19809
Co-Administrator and Distributor
Compass Distributors, Inc.
Radnor, Pennsylvania 19087
Co-Administrator
Compass Capital Group, Inc.
New York, NY 10154
Counsel
Drinker Biddle & Reath
Philadelphia, Pennsylvania 19107
Independent Accountants
Coopers & Lybrand, L.L.P.
Philadelphia, Pennsylvania 19103
<PAGE>
COMPASS CAPITAL FUNDS
COMPASS CAPITAL FUNDS
Compass Capital Funds is a leading mutual fund company currently managing in
excess of $11 billion in over 25 portfolios designed to fit a broad range of
investment goals. Each portfolio is managed by recognized experts in equity,
fixed income, international, and tax-free investing who adhere to a pure
investment style.
STOCK PORTFOLIOS
================================================================================
Index Equity Small Cap Value Equity
Select Equity Small Cap Growth Equity
Growth Equity International Equity
Value Equity International Emerging Markets
STOCK & BOND PORTFOLIOS
================================================================================
Balanced
BOND PORTFOLIOS
================================================================================
Short Government Bond Government Income
Intermediate Government Bond Managed Income
Intermediate Bond International Bond
Core Bond
TAX-FREE BOND PORTFOLIOS
================================================================================
Tax-Free Income New Jersey Tax-Free Income
Pennsylvania Tax-Free Income Ohio Tax-Free Income
MONEY MARKET PORTFOLIOS
================================================================================
Money Market North Carolina Municipal Money Market
U.S. Treasury Money Market Ohio Municipal Money Market
Municipal Money Market Pennsylvania Municipal Money Market
New Jersey Municipal Money Market Virginia Municipal Money Market
<PAGE>
[LOGO]
COMPASS CAPITAL FUNDS
P.O. Box 8907
Wilmington, DE 19899
COMPASS CAPITAL FUNDS - AT YOUR SERVICE
As a Compass Capital Funds shareholder, you have some special privileges.
Whether it's automatic investment plans, informative newsletters or ready access
to your account, you can benefit from services designed to make investing
simple.
24-HOUR ACCOUNT INFORMATION
Call us at 1-800-441-7762, 24 hours a day, 7 days a week to get information
about your account balances, recent transactions and share prices. Note:
Institutional and Service Share Class investors should call 1-800-441-7764.
You can also reach us on the Internet through the World Wide Web by accessing
HTTP://WWW.COMPASSFUNDS.COM.
EXCHANGE PRIVILEGES
Should your investment goals change, shareholders in our Investor Class shares
may exchange all or part of their investments into the same share class of any
other portfolio of Compass Capital funds.(1)
AUTOMATIC INVESTMENT PLANS
Investor Class shareholders who want to invest regularly can arrange to have $50
or more automatically deducted from their checking or savings account and
invested in any of the Compass Capital portfolios.
SYSTEMATIC WITHDRAWAL PLANS
Investor Class shareholders can establish a systematic withdrawal plan and
receive periodic payments, of $100 or more from their Compass Capital
portfolios, as long as their account is at least $10,000.
RETIREMENT PLANS
Shareholders may make investments in conjunction with individual IRA accounts or
rollover IRAs.
(1) Compass Capital Funds reserves the right to modify or terminate the
exchange privileges at any time.
- --------------------------------------------------------------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY PNC BANK, NATIONAL ASSOCIATION OR ANY OTHER BANK AND SHARES ARE NOT FEDERALLY
INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENTS IN SHARES OF THE FUND
INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
- --------------------------------------------------------------------------------
SR 9/30/96-BP
