COMPASS CAPITAL FUNDS
THE MULTI-SECTOR MORTGAGE SECURITIES PORTFOLIO III
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
MARCH 31, 1997
(UNAUDITED)
<PAGE>
COMPASS CAPITAL FUNDS
THE MULTI-SECTOR MORTGAGE SECURITIES PORTFOLIO III
SCHEDULE OF INVESTMENTS (UNAUDITED)
MARCH 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
RATING* (000) DESCRIPTION VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL MORTGAGE-BACKED SECURITIES 98.2%
AETNA COMMERCIAL MORTGAGE,
<S> <C> <C> <C> <C>
AAA $2,000 6.59%, Series 1995-C5, Class A2, 12/26/30 $1,968,689
AA+ 500 6.89%, Series 1995-C5, Class C, 12/26/30 478,242
ASSET SECURITIZATION CORP.,
AA 1,000 7.36%, Series 1996-D2, Class A2 , 02/14/29 980,937
AAA 2,500 7.47%, Series 1996-D3, Class A1D, 10/13/26 2,475,781
CBA MORTGAGE CORP.
A 367 7.73%, Series 1993-C1, Class D, 12/25/03 366,580
BBB 1,000 7.96%, Series 1993-C1, Class D, 12/25/03 1,001,959
CAROLINA FIRST BANK,
BBB 3,000 7.64%, Series 1996 C1, Class B, 03/18/27 3,022,500
CAROUSEL CENTER FINANCE, INC.,
BBB+ 1,418 7.53%, Series 1, Class C, 10/15/07 1,411,388
CENTRAL LIFE ASSURANCE CO.,
AA+ 3,444 8.90%, Series 1994-1, Class A2, 11/01/20 3,568,540
CITIBANK, N.A. MULTIFAMILY MORTGAGE,
BBB+ 3,000 8.00%, Series 1994-1, Class M1, 01/25/19 2,987,892
CS FIRST BOSTON MORTGAGE SECURITIES CORP.,
AAA 3,084 6.45%, Series 1995-WF1, Class A1, 12/21/27 3,004,824
BBB 500 8.01%, Series 1995AEW1, Class D, 11/25/27 497,031
DLJ MORTGAGE ACCEPTANCE CORP.
BBB 3,000 9.40%, Series 1993-MF7, Class B, 06/18/03 3,163,403
FDIC REAL ESTATE MORTGAGE INSURANCE CORP.,
AA 4,000 8.45%, Series 1994-C1, Class 2C, 09/25/25 4,114,375
AAA 383 7.85%, Series 1994-C1, Class 2A2, 09/25/25 386,801
BBB 3,000 7.25%, Series 1996-C1, Class ID, 05/25/26 2,899,687
GOLDMAN SACHS,
AAA 2,500# 7.41%, Series 1996, Class A2, 02/15/27 2,484,766
GENERAL MOTORS ACCEPTANCE CORP.,
BB+ 3,000 7.86%, Series 1996-C1, Class E. 10/15/28 2,843,438
J.P. MORGAN, COMMERCIAL MORTGAGE FINANCE CORP.,
BBB 2,500 7.30%, Series 1996-C2, Class D, 11/25/27 2,410,251
KIDDER PEABODY ACCEPTANCE CORP. 1,
A 2,500 7.00%, Series 1994-C1, Class C, 02/01/06 2,470,486
LB COMMERCIAL CONDUIT MORTGAGE TRUST,
BBB 2,000 7.05%, Series 1995-C2, Class D, 09/25/25 1,908,213
LENNAR UNITED STATES PARTNERS, LTD.,
BB 873 11.70%, Series 1995-1, Class F, 05/15/05 873,304
LTC COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES,
A 2,125 9.50%, Series 1994-1, Class C, 06/15/26 2,201,538
BBB 2,000 7.97%, Series 1996, Class D, 04/15/28 1,991,875
MERRILL LYNCH MORTGAGE INVESTMENTS, INC., PASS-THROUGH CERTIFICATES,
A 1,000 7.58%, Series 1995-C1, Class C, 05/25/15 987,033
BBB- 3,000 6.96%, Series 1996-C1, Class A3, 11/21/28 2,687,344
MORGAN STANLEY CAPITAL INVESTMENTS, INC., PASS-THROUGH CERTIFICATES,
Baaa3 3,000 7.85%, Series 1997-C1, Class E, 02/15/20 2,932,500
BBB 3,500 7.10%, Series 1995, Class d, 02/15/27 3,565,625
BBB- 1,700 7.51%, Series 1996-C1, Class D2, 02/15/06 1,604,375
MIDLAND REALTY ACCEPTANCE CORP.,
BBB 3,000 7.64%, Series 1996-C2, Class D, 01/25/29 2,956,406
See Notes to Financial Statements
1
<PAGE>
COMPASS CAPITAL FUNDS
THE MULTI-SECTOR MORTGAGE SECURITIES PORTFOLIO III
SCHEDULE OF INVESTMENTS (UNAUDITED)
MARCH 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
RATING* (000) DESCRIPTION VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE CAPITAL FUNDING, INC.,
BBB $2,000 8.52%, Series 1994-MC1, Class A5, 06/25/19 $2,026,495
BBB- 2,368 7.70%, Series 1996-MC1, Class F, 05/15/06 2,263,028
NATIONSLINK FUNDING CORP.,
BBB- 2,700 7.69%, Series 1996-1, Class E, 02/20/06 2,620,165
NB COMMERCIAL MORTGAGE CERTIFICATE
BB 2,500 8.73% Series FSI, Class E, 10/20/23 2,041,406
NOMURA ASSET CAPITAL CORP.,
BBB 1,000 7.64%, Series 1993-M1, Class A1, 11/25/03 998,204
OREGON COMMERCIAL MORTGAGE,
A 3,000 7.60%, Series 1995 - 1 Class C, 06/01/23 2,971,476
PAINE WEBBER MORTGAGE ACCEPTANCE CORP.,
BBB 2,000 7.30%, Series 1995 MI, Class D, 01/15/07 1,973,025
A 2,000 6.90%, Series 1995 M2, Class C, 12/01/03 1,965,501
PHOENIX REAL ESTATE SECURITIES, INC.,
BBB+ 3,545 8.00%, Series 1993-1, Class C 11/25/23 3,572,141
RESOLUTION TRUST CORP.,
A 1,820 7.10%, Series 1993-C3, Class D, 12/25/24 1,790,068
BBB 3,000 8.00%, Series 1994-C1, Class C, 06/25/26 3,023,438
A 585 8.00%, Series 1994-C1, Class D, 06/25/26 582,927
BBB 2,500 10.625%, Series 1994-N2, Class A, 12/14/04 2,500,000
AAA 2,000 6.90%, Series 1995-C1, Class A2C, 02/25/27 1,992,500
BBB 3,000 6.90%, Series 1995-C1, Class D, 02/25/27 2,835,000
AAA 2,500 6.55%, Series 1995-C2, Class A1C, 05/25/27 2,420,702
BB 2,385 8.00%, Series 1994-C2, Class G, 04/25/25 2,274,828
BBB 2,767 7.00%, Series 1995-C2, Class D, 05/25/27 2,613,176
SALOMON BROTHERS MORTGAGE SECURITIES,
AA 3,000 7.127%, Series 1996-C1, Class B, 01/20/28 2,906,250
SOUTHERN PACIFIC SECURITIES,
BBB 1,000 7.125% Series 1996-C1, Class D, 09/25/26 1,018,125
STRUCTURED ASSET SECURITIES CORP. MULTI,
BBB 3,000 7.375%, Series 1995-C1, Class D, 09/25/24 2,902,161
AA 1,900 7.00%, Series 1995-C4, Class C, 06/25/26 1,856,062
BB+ 3,000 7.75%, Series 1996-CFL, Class F, 02/25/28 2,856,563
BBB 1,970 7.75%, Series 1996-CFL, Class E, 02/25/28 1,937,343
TVO SOUTHWEST,
A 4,500 9.38%, Series 1994-MF1, Class A2, 11/18/04 4,758,879
WHP COMMERCIAL MORTGAGE,
A 2,000 7.76%, Series 1995-C1, Class C, 07/20/25 2,016,733
------------
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES (COST $124,709,666) $124,961,979
SHORT-TERM INVESTMENTS 1.8%
FEDERAL HOME LOAN BANK DISCOUNT NOTES
2,300 6.50% DUE 04/1/97 (COST $2,300,000) 2,300,000
------------
TOTAL INVESTMENTS (COST $127,009,666) 100.0% $127,261,979
OTHER ASSETS IN EXCESS OF LIABILITIES 0.0% 37,286
--------------------
NET ASSETS 100.0% $127,299,265
====================
- ---------------------
</TABLE>
* USING THE HIGHER OF STANDARD & POOR'S, MOODY'S OR FITCH'S RATING.
# Principal amount of securities pledged as collateral of $2,500,000 on 333
net short U.S. Treasury Notes and 250 long U. S. Treasury Bonds future
contracts expiring June 1997. The value of such contracts on March 31, 1997
was $67,841,828, thereby resulting in an unrealized gain of $168,219.
See Notes to Financial Statements
2
<PAGE>
COMPASS CAPITAL FUNDS
THE MULTI-SECTOR MORTGAGE SECURITIES PORTFOLIO III
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $127,009,666) $127,261,979
Cash 103,006
Interest receivable 775,428
Other assets 5,933
------------
128,146,346
------------
LIABILITIES
Dividends payable 784,411
Accrued expenses payable 53,545
Futures margin payable 9,125
------------
847,081
------------
NET ASSETS $127,299,265
============
Net assets were comprised of :
Common stock, at par $ 125
Paid-in capital in excess of par 126,297,778
Accumulated net realized gain 578,415
Net unrealized appreciation 422,947
------------
Net assets $127,299,265
============
Net asset value per share $ 1,015.35
============
Total shares outstanding 125,375
============
- --------------------------------------------------------------------------------
See Notes to Financial Statements
3
<PAGE>
COMPASS CAPITAL FUNDS
THE MULTI-SECTOR MORTGAGE SECURITIES PORTFOLIO III
STATEMENTS OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
For the Period
10/1/96
through
3/31/97
-----------
INVESTMENT INCOME:
Interest $ 4,796,506
-----------
EXPENSES:
Investment advisory fee 157,862
Administration fee 145,233
Custodian fee 16,267
Transfer agent fee 19,193
Legal and audit 6,872
Printing 6,279
Registration fees 3,049
Trustees fees 1,371
Other 6,699
-----------
Total expenses 362,825
Less fees voluntarily waived (129,189)
-----------
Total expenses 233,636
-----------
Net investment income 4,562,870
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on:
Investment transactions 876,839
Futures contracts 5,666
-----------
882,505
-----------
Net change in unrealized appreciation on:
Investments 50,728
Futures contracts 98,125
-----------
148,853
-----------
Net gain on investments 1,031,358
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 5,594,228
===========
- --------------------------------------------------------------------------------
See Notes to Financial Statements
4
<PAGE>
COMPASS CAPITAL FUNDS
THE MULTI-SECTOR MORTGAGE SECURITIES PORTFOLIO III
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
For the Period For the Period For the Period For the Period
10/1/96 4/1/96 7/1/95 10/4/94*
through through through through
INCREASE (DECREASE) IN NET ASSETS: 3/31/97 9/30/96 3/31/96 6/30/95
----------- ----------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Operations:
Net investment income $ 4,562,870 $ 4,517,391 $ 6,730,980 $ 5,719,137
Net realized gain on investments 882,505 152,944 1,500,904 3,568,972
Net unrealized appreciation
(depreciation) on investments 148,853 (512,048) (2,710,415) 3,496,556
------------- ------------- ------------- -------------
Net increase in net assets resulting
from operations 5,594,228 4,158,287 5,521,469 12,784,665
------------- ------------- ------------- -------------
Distributions to shareholders from:
Net investment income (4,562,870) (4,517,391) (6,730,980) (5,719,137)
Net realized gain (1,202,447) -- (4,324,463) --
------------- ------------- ------------- -------------
(5,765,317) (4,517,391) (11,055,443) (5,719,137)
------------- ------------- ------------- -------------
Capital share transactions:
Proceeds from shares subscribed -- -- -- 100,000,000
Net asset value of shares issued
in reinvestment of
dividend distributions 5,732,317 4,527,992 10,293,458 5,719,137
------------- ------------- ------------- -------------
Total increase in net assets 5,561,228 4,168,888 4,759,484 112,784,665
------------- ------------- ------------- -------------
NET ASSETS:
Beginning of period 121,738,037 117,569,149 112,809,665 25,000
------------- ------------- ------------- -------------
End of period $ 127,299,265 $ 121,738,037 $ 117,569,149 $ 112,809,665
============= ============= ============= =============
- ------------------------------------------------------------------------------------------------------------
* Commencement of operations.
</TABLE>
See Notes to Financial Statements
5
<PAGE>
COMPASS CAPITAL FUNDS
THE MULTI-SECTOR MORTGAGE SECURITIES PORTFOLIO III
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT For the Period For the Period For the Period For the Period
THE PERIOD: 10/1/96 through 4/1/96 through 7/1/95 through 10/6/94 (a) through
3/31/97 9/30/96 3/31/96 6/30/95
--------------- -------------- -------------- -------------------
(Unaudited)
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 1,016.08 $ 1,019.41 $ 1,068.11 $ 1,000.00
----------- ----------- ----------- -----------
Net investment income (b) 37.12 38.33 61.37 55.81
Net realized and unrealized gain
(loss) on investments 9.13 (3.33) (9.06) 68.11
----------- ----------- ----------- -----------
Net increase from investment
operations 46.25 35.00 52.31 123.92
----------- ----------- ----------- -----------
Distributions from net investment
income (37.12) (38.33) (61.37) (55.81)
Distributions from net realized
capital gains (9.86) (39.64)
----------- ----------- ----------- -----------
Total dividends and distributions (46.98) (38.33) (101.01) (55.81)
----------- ----------- ----------- -----------
Net asset value, end of period $ 1,015.35 $ 1,016.08 $ 1,019.41 $ 1,068.11
=========== =========== =========== ===========
TOTAL RETURN 4.76% 3.53% 5.02% 12.78%
Ratios / Supplemental data
Net assets, end of period
(in thousands) $ 127,299 $ 121,738 $ 117,569 $ 112,810
Ratio of expenses to average
net assets (b) 0.37% 0.37% 0.37% 0.37%
Ratio of expenses to average
net assets (excluding waivers) 0.57% 0.51% 0.37% 0.45%
Ratio of net investment income to
average net assets (b) 7.23% 7.60% 7.77% 7.54%
Ratio of net investment income to
average net assets
(excluding waivers)(b) 7.02% 7.45% 7.76% 7.46%
Portfolio turnover 26% 24% 119% 215%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Commencement of investment operations.
(b) Annualized
See Notes to Financial Statements
6
<PAGE>
COMPASS CAPITAL FUNDS
THE MULTI-SECTOR MORTGAGE SECURITIES PORTFOLIO III
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
Compass Capital FundsSM (the "Fund") (formerly The PNC(R) 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 31 investment portfolios.
These financial statements relate to the Fund's Multi-Sector Mortgage Securities
Portfolio III (the "Portfolio"). The Portfolio is authorized to issue an
unlimited number of shares with a par value of $0.001.
As of March 31, 1997, 99.97% of the shares of capital stock of the
Portfolio are owned by Ameritech Pension/VEBA Fund.
The following is a summary of significant accounting policies followed
by the Fund.
SECURITIES VALUATION: The Fund values mortgage-backed, asset-backed and other
debt securities on the basis of current market quotations provided by dealers or
pricing services approved by the Fund's Board of Trustees. In determining the
value of a particular security, pricing services may use certain information
with respect to transactions in such securities, quotations from dealers, market
transactions in comparable securities, various relationships observed in the
market between securities, and calculated yield measures based on valuation
technology commonly employed in the market for such securities. Exchange-traded
options are valued at their last sales price as of the close of options trading
on the applicable exchanges. In the absence of a last sale, options are valued
at the average of the quoted bid and asked prices as of the close of business. A
futures contract is valued at the last sale price as of the close of the
commodities exchange on which it trades. Any securities or other assets for
which such current market quotations are not readily available are valued at
fair value as determined in good faith under procedures established by and under
the general supervision and responsibility of the Fund's Board of Trustees.
Short-term securities which mature in more than 60 days are valued at
current market quotations. Short-term securities which mature in 60 days or less
are valued at amortized cost, if their term to maturity from date of purchase
was 60 days or less, or by amortizing their value on the 61st day prior to
maturity, if their original term to maturity from date of purchase exceeded 60
days.
In connection with transactions in repurchase agreements, the Fund's
custodian takes possession of the underlying collateral securities, the value of
which at least equals the principal amount of the repurchase transaction,
including accrued interest. To the extent that any repurchase transaction
exceeds one business day, the value of the collateral is marked-to-market on a
daily basis to ensure the adequacy of the collateral. If the seller defaults and
the value of the collateral declines or if bankruptcy proceedings are commenced
with respect to the seller of the security, realization of the collateral by the
Fund may be delayed or limited.
FUTURES TRANSACTIONS: The Portfolio may enter into futures contracts subject to
certain limitations. Upon entering into a futures contract, the Portfolio is
required to deposit cash or pledge U.S. Government securities of an initial
margin. Subsequent payments, which are dependent on the daily fluctuations in
7
<PAGE>
the value of the underlying security or securities, are made or received by the
Portfolio each day (daily variation margin) and are recorded as unrealized gains
or losses until the contracts are closed. When the contracts are closed, the
Portfolio records a realized gain or loss equal to the difference between the
proceeds from (or cost of) the closing transaction and the Portfolio's basis in
the contracts. Risks of entering into futures contracts include the possibility
that there will not be a perfect price correlation between the futures contracts
and the underlying securities. Second, it is possible that a lack of liquidity
for futures contracts could exist in the secondary market, resulting in an
inability to close a futures position prior to its maturity date. Third, the
purchase of a futures contract involves the risk that the Portfolio could lose
more than the original margin deposit required to initiate a futures
transaction.
SECURITY TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Realized and unrealized gains or losses are
calculated on the identified cost basis. Interest income is recorded on the
accrual basis and the Fund accretes premium or amortizes discount on securities
purchased using the interest method.
TAXES: It is the Fund's intention to continue to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to shareholders. Therefore,
no federal income or excise tax provision is required.
DIVIDENDS TO SHAREHOLDERS: Dividends from net investment income are declared
daily and paid monthly. Net realized capital gains, if any, will be distributed
at least annually.
NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Pursuant to an Investment Advisory Agreement, BlackRock Financial
Management, Inc. ("BlackRock"), an indirect wholly-owned subsidiary of PNC Bank
Corp., serves as investment adviser to the Portfolio. For its advisory services,
BlackRock is entitled to receive fees, computed daily and paid monthly, at the
annual rate of .25% of the Portfolio's average daily net assets.
BlackRock may, at its discretion, waive all or any portion of its
advisory fee for the Portfolio and may reimburse the Portfolio for certain
operating expenses. For the six month period ended March 31, 1997, no advisory
fees were waived for the Portfolio.
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 the 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 the
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 the Portfolio. For the six month period
ended March 31, 1997, administration fees and waivers for the Portfolio were as
follows:
8
<PAGE>
GROSS NET
ADMINISTRATION ADMINISTRATION
FEE WAIVER FEE
-------------- ------ --------------
Multi-Sector Mortgage
Securities Portfolio III $145,233 $129,189 $16,044
In addition, PNC Bank, National Association serves as custodian for the
Portfolio. PFPC serves as transfer and dividend disbursing agent.
BlackRock voluntarily agreed to waive fees and reimburse expenses to the
extent necessary to cap the Portfolio's expenses (exclusive of advisory fees) at
no more than .12% of its average daily net assets for the six month period ended
March 31, 1997.
NOTE 3. PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term
investments and government securities, for the six month period ended March 31,
1997 were $33,610,170 and $28,780,145, respectively. Purchases and sales of
government securities for the six month period ended March 31, 1997 were
$2,684,277 and $2,690,742, respectively. The federal income tax basis of the
investments of the Portfolio at March 31, 1997 was $127,009,666 and,
accordingly, as of March 31, 1997 net unrealized appreciation for federal income
tax purposes aggregated $252,313 which $1,403,495 related to appreciated
securities and $1,151,182 related to depreciated securities.
NOTE 4. CAPITAL SHARES
Transactions in capital shares were as follows:
For the
Period For the For the For the
10/01/96 Period Period Period
Through 04/01/96 07/01/95 10/04/94*
03/31/97 Through Through Through
(Unaudited) 09/30/96 03/31/96 06/30/95
---------- -------- -------- --------
SHARES SUBSCRIBED ................ -- -- -- 100,000
Shares issued in connection with
the reinvestment of dividends
and distributions .............. 5,563 4,481 9,740 5,591
----- ----- ------- -------
5,563 4,481 9,740 105,591
Shares redeemed .................. -- -- -- --
----- ----- ------- -------
Net Increase ..................... 5,563 4,481 9,740 105,591
===== ===== ======= =======
* Commencement of operations.
9
<PAGE>
NOTE 5. MERGER
On September 28, 1995 and September 29, 1995, respectively, the Board of
Directors of The BFM Institutional Trust, Inc. ("BIT") and the Board of Trustees
of the Fund approved an asset purchase agreement between BIT and the Fund
providing for the acquisition by the Fund of all of the assets and liabilities
of the BIT Multi-Sector Mortgage Securities Portfolio III (the "BIT Predecessor
Portfolio") in exchange for shares of the Portfolio. At a special meeting of
shareholders held on December 20, 1995, the shareholders of the BIT Predecessor
Portfolio approved the asset purchase agreement. Pursuant to the asset purchase
agreement, on April 25, 1996, all of the assets and liabilities of the BIT
Predecessor Portfolio were transferred to the Fund in a tax-free exchange for
Institutional shares of the Portfolio. The details of this business combination
are set forth below.
The following table summarizes certain relevant information of the Fund
prior to and immediately after the above-referenced combination. The BIT
Predecessor Portfolio was the accounting survivor in this business combination,
and the Portfolio maintains all of the operating history of the BIT Predecessor
Portfolio.
<TABLE>
<CAPTION>
BFM Institutional Trust, Inc. The Compass Capital Funds
- ------------------------------------------------------------------ ------------------------------------------------------
Combined
Unrealized Shares Net Assets
Net Asset Appreciation New Issued in After NAV
Shares at Value at (Depreciation) Portfolio Business Business per
Fund Name 4/25/96 4/25/96 at 4/25/96 Name Combination Combination Share
- --------- -------- ------------ -------------- --------------- ----------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BFM Multi-Sector Compass Capital
Mortgage Portfolio III 116,079 $117,356,191 ($623,301) Multi-Sector
Mortgage
Portfolio III 116,079 $117,356,191 $1,011
</TABLE>
10
<PAGE>
COMPASS BOARD
INVESTMENT ADVISER
BlackRock Financial Management, Inc.
New York, NY 10154
CUSTODIAN
PNC Bank, National Association
Philadelphia, PA 19101
CO-ADMINISTRATOR AND TRANSFER AGENT
PFPC Inc.
Wilmington, DE 19809
CO-ADMINISTRATOR AND DISTRIBUTOR
Compass Distributors, Inc.
West Conshohocken, PA 19428
CO-ADMINISTRATOR
Compass Capital Group, Inc.
New York, NY 10154
COUNSEL
Drinker, Biddle & Reath, LLP
Philadelphia, PA 19107
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, L.L.P.
Philadelphia, PA 19103
This report is for shareholder
information. This is not a
prospectus intended for use in
the purchase or sale of Fund
shares.
Compass Capital Funds
103 Bellevue Parkway
Wilmington, DE 19809
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
