BOND PORTFOLIOS
ANNUAL
REPORT
TO SHAREHOLDERS
SEPTEMBER 30, 1997
[COMPASS GRAPHIC OMITTED]
COMPASS
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CAPITAL FUNDS
[LOGO OMITTED]
PURE INVESTMENT STYLE [SERVICE MARK]
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* NOT FDIC INSURED * MAY LOSE VALUE * NO BANK GUARANTEE *
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<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
BOND PORTFOLIOS
* LOW DURATION BOND * INTERNATIONAL BOND
* INTERMEDIATE GOVERNMENT * TAX-FREE INCOME
BOND * PENNSYLVANIA TAX-FREE
* INTERMEDIATE BOND INCOME
* CORE BOND * NEW JERSEY TAX-FREE
* GOVERNMENT INCOME INCOME
* MANAGED INCOME * OHIO TAX-FREE INCOME
- --------------------------------------------------------------------------------
TABLE OF
CONTENTS
PRESIDENT'S LETTER................................................. 1
PORTFOLIO SUMMARIES
LOW DURATION 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
NOTE ON PERFORMANCE INFORMATION.............................. 13
STATEMENT OF NET ASSETS/SCHEDULE OF INVESTMENTS.................... 15-47
INTERNATIONAL BOND STATEMENT OF NET ASSETS & LIABILITIES..... 36
TAX-FREE INCOME STATEMENT OF NET ASSETS & LIABILITIES........ 40
PORTFOLIO FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS..................................... 48-49
STATEMENTS OF CHANGES IN NET ASSETS.......................... 50-53
FINANCIAL HIGHLIGHTS......................................... 54-61
NOTES TO FINANCIAL STATEMENTS...................................... 62-76
REPORT OF INDEPENDENT ACCOUNTANTS.................................. 77
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<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
PRESIDENT'S LETTER
November 15, 1997
Dear Shareholder:
We are pleased to present the Annual Report for the Compass Capital Funds
for 1997, a year characterized by a bull market for equities and bonds and
strong performance by the Compass Capital Funds' portfolios.
Over the twelve month period ended September 30, 1997, the financial
markets exhibited remarkable strength. The stock market broke through to an
all-time high this year and overall was up nearly 38% (as measured by the S&P
500 Index), extending one of the longest bull markets in modern times yet
another year. At the same time, the bond market's performance reflected low
inflation and steady economic growth, producing returns for investors of over 8%
(as measured by the Lehman Brothers Aggregate Index).
Because we know how important it is for you to keep track of your
investments, we continue to work hard to make the Annual Report for the Compass
Capital Funds easy to read and understand. We have organized the pages into
individual summaries for all our funds, highlighting key portfolio management
activities for the year. Also included in each summary page is a performance
graph which shows how all classes of each portfolio performed versus its
benchmark.
Compass Capital's emphasis on Pure Investment Style[SERVICE MARK] has
continued to enable investors to receive actual returns on individual portfolios
that are consistent with their expectations. What's more, in our ongoing efforts
to develop quality investment products to meet virtually any individual need, we
have introduced three new funds since our 1996 Annual Report: Compass Capital
Mid-Cap Growth Equity, Compass Capital Mid-Cap Value Equity and Compass Capital
International Small Cap Equity Portfolios.
Compass Capital International Small Cap Equity Portfolio, which was
launched on September 26, 1997, seeks to provide strong growth potential and
diversification benefits by primarily investing in smaller companies domiciled
in industrialized foreign countries -- an asset class that is considered
undervalued by many analysts.
While it may be unrealistic to expect the same magnitude of gains in the
stock market as we have enjoyed in recent years, particularly in light of
October's global equity market volatility, we believe that equity markets can
continue to offer opportunities to disciplined investors. We also see strong
opportunities in fixed income products as we believe that historically low
inflation rates may enable bond or bond fund investors to earn strong
returns. Most importantly, we maintain our core belief - that a disciplined
investment strategy will best serve investors in their pursuit of long-term
investment goals.
Thank you for your confidence in Compass Capital Funds. We appreciate the
opportunity to help you achieve your long-term investment goals.
Sincerely,
/S/Karen H. Sabath
Karen H. Sabath
PRESIDENT, COMPASS CAPITAL GROUP, INC.
1
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
LOW DURATION BOND
PORTFOLIO
PORTFOLIO SUB-ADVISOR:
BLACKROCK FINANCIAL MANAGEMENT, INC.
TOTAL NET ASSETS (9/30/97):
$254.8 MILLION
PERFORMANCE BENCHMARK:
MERRILL LYNCH 1-3 YEAR TREASURY INDEX
INVESTMENT APPROACH:
THE PORTFOLIO PURCHASES PRIMARILY INVESTMENT GRADE FIXED INCOME SECURITIES
WITHIN A 3 TO 5 YEAR MATURITY RANGE. THE PORTFOLIO MAY ALSO INVEST UP TO 20% IN
NON-DOLLAR SECURITIES AND UP TO 20% IN BELOW INVESTMENT GRADE SECURITIES RATED
HIGHER THAN B. THE CREDIT QUALITY OF THE INDIVIDUAL SECURITIES IN THE PORTFOLIO
IS NOT NECESSARILY INDICATIVE OF THEIR PRICE SENSITIVITY.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
[BULLET] THE PORTFOLIO'S EXPOSURE TO MOST SECTORS OF THE RESIDENTIAL
MORTGAGE-BACKED SECURITY (MBS) MARKET WAS REDUCED. THE MANAGER CURRENTLY
BELIEVES THAT HIGHER PREPAYMENT LEVELS CAUSED BY LOWER INTEREST RATES MAY CAUSE
THIS SECTOR OF THE MORTGAGE MARKET TO UNDERPERFORM.
[BULLET] UTILIZING THE PORTFOLIO'S RECENTLY (MAY 1997) EXPANDED INVESTMENT
GUIDELINES, WHICH PERMITS THE PURCHASE OF BELOW AAA-RATED INVESTMENTS (AS WELL
AS NON-INVESTMENT GRADE CREDITS), THE MANAGER USED THE MBS PROCEEDS TO INCREASE
CORPORATE BOND AND COMMERCIAL MORTGAGE-BACKED SECURITY HOLDINGS.
[BULLET] DESPITE THE MANAGER'S GENERALLY POSITIVE VIEWS ON INTEREST RATES
AND INFLATION, THE PORTFOLIO ENDED THE PERIOD WITH A DURATION (INTEREST RATE
SENSITIVITY) SIMILAR TO THE BENCHMARK, REFLECTING A NEUTRAL NEAR-TERM VIEW OF
SHORT AND INTERMEDIATE MATURITY BONDS VERSUS LONGER DATED BONDS.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
LOW DURATION BOND PORTFOLIO AND THE MERRILL 1-3 YEAR TREASURY
INDEX FROM INCEPTION AND AT EACH FISCAL YEAR END.
[LINE GRAPH OMITTED]
[PLOT POINTS AS FOLLOWS]
BlackRock and Merrill 1-3 Year
Institutional Classes Service Class Investor A Class Investor B Class Investor C Class Treasury Index
<S> <C> <C> <C> <C> <C> <C>
7/17/92 $10,000 $10,000 $ 9,700 $10,000 $10,000 $10,000
6/30/93 10,464 10,464 10,150 10,468 10,468 10,658
6/30/94 10,709 10,709 10,388 10,709 10,709 10,829
6/30/95 11,519 11,519 11,173 11,516 11,516 11,666
3/31/96 12,017 12,008 11,643 11,994 11,994 12,180
9/30/96 12,345 12,312 11,928 12,287 12,287 12,506
12/31/96 12,607 12,564 12,167 12,525 12,525 12,743
3/31/97 12,665 12,613 12,208 12,545 12,545 12,828
6/30/97 12,938 12,876 12,457 12,777 12,777 13,110
9/30/97 13,196 13,122 12,690 12,861 12,991 13,367
</TABLE>
FOR PERIOD ENDING SEPTEMBER 30, 1997
AVERAGE ANNUAL TOTAL RETURN
1 Year 5 Year From Inception
BlackRock Class 6.93% 5.55% 5.48%
Institutional Class 6.89% 5.54% 5.47%
Service Class 6.57% 5.42% 5.35%
Investor A Class (Load Adjusted) 3.20% 4.72% 4.68%
Investor A Class (NAV) 6.39% 5.35% 5.30%
Investor B Class (Load Adjusted) 0.97% 4.80% 4.76%
Investor B Class (NAV) 5.73% 5.22% 5.17%
Investor C Class (Load Adjusted) 4.67% 5.22% 5.17%
Investor C Class (NAV) 5.73% 5.22% 5.17%
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 INCEPTION DATES OF THE PORTFOLIO'S SHARE
CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 7/17/92; SERVICE AND INVESTOR A
SHARES, 1/13/96; INVESTOR B SHARES, 11/18/96; AND INVESTOR C SHARES, 2/24/97;
AND BLACKROCK SHARES, 6/3/97. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 13
FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
2
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
INTERMEDIATE GOVERNMENT BOND
PORTFOLIO
PORTFOLIO SUB-ADVISOR:
BLACKROCK FINANCIAL MANAGEMENT, INC.
TOTAL NET ASSETS (9/30/97):
$152.6 MILLION
PERFORMANCE BENCHMARK:
LEHMAN BROTHERS 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 PORTFOLIO'S EXPOSURE TO MOST SECTORS OF THE RESIDENTIAL
MORTGAGE-BACKED SECURITY (MBS) MARKET WAS REDUCED. THE MANAGER CURRENTLY
BELIEVES THAT HIGHER PREPAYMENT LEVELS CAUSED BY LOWER INTEREST RATES MAY CAUSE
THIS SECTOR OF THE MORTGAGE MARKET TO UNDERPERFORM.
[BULLET] THE MANAGER USED THE MBS PROCEEDS TO INCREASE AAA-RATED COMMERCIAL
MORTGAGE-BACKED SECURITY AND FHA CONSTRUCTION LOAN HOLDINGS, WHICH OFFER A YIELD
PREMIUM OVER U.S. TREASURIES WHILE OFFERING STRONG CREDIT QUALITY.
[BULLET] DESPITE THE MANAGER'S GENERALLY POSITIVE VIEWS ON INTEREST RATES
AND INFLATION, THE PORTFOLIO ENDED THE PERIOD WITH A DURATION (INTEREST RATE
SENSITIVITY) SIMILAR TO THE BENCHMARK, REFLECTING A NEUTRAL NEAR-TERM VIEW OF
SHORT AND INTERMEDIATE MATURITY BONDS VERSUS LONGER DATED BONDS.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE INTERMEDIATE
GOVERNMENT BOND PORTFOLIO AND THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT INDEX
FROM INCEPTION AND AT EACH FISCAL YEAR END.
[LINE GRAPH OMITTED]
[PLOT POINTS AS FOLLOWS]
Lehman Intermediate
Institutional Class Service Class Investor A Class Investor B Class Investor C Class Government Index
<S> <C> <C> <C> <C> <C> <C>
4/20/92 $10,000 $10,000 $ 9,600 $10,000 $10,000 $10,000
9/30/92 10,714 10,714 10,285 10,714 10,714 10,746
9/30/93 11,452 11,447 10,989 11,447 11,447 11,567
9/30/94 11,099 11,069 10,620 11,062 11,062 11,393
9/30/95 12,240 12,172 11,678 12,167 12,167 12,605
9/30/96 12,831 12,722 12,189 12,698 12,698 13,229
12/31/96 13,153 13,032 12,480 12,982 12,982 13,535
3/31/97 13,150 13,019 12,463 12,939 12,939 13,531
6/30/97 13,517 13,374 12,796 13,284 13,284 13,910
9/30/97 13,867 13,709 13,110 13,450 13,586 14,266
</TABLE>
FOR PERIOD ENDING SEPTEMBER 30, 1997
AVERAGE ANNUAL TOTAL RETURN
1 Year 5 Year From Inception
Institutional Class 8.08% 5.29% 6.18%
Service Class 7.75% 5.05% 5.96%
Investor A Class (Load Adjusted) 3.30% 4.12% 5.10%
Investor A Class (NAV) 7.57% 4.97% 5.89%
Investor B Class (Load Adjusted) 1.99% 4.40% 5.36%
Investor B Class (NAV) 6.80% 4.82% 5.75%
Investor C Class (Load Adjusted) 5.73% 4.82% 5.75%
Investor C Class (NAV) 6.80% 4.82% 5.75%
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 INCEPTION DATES OF THE PORTFOLIO'S SHARE
CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 4/20/92; INVESTOR A SHARES,
5/11/92; SERVICE SHARES, 7/29/93; INVESTOR C SHARES, 10/8/96; AND INVESTOR B
SHARES, 10/11/96. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 13 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
3
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
INTERMEDIATE BOND
PORTFOLIO
PORTFOLIO SUB-ADVISOR:
BLACKROCK FINANCIAL MANAGEMENT, INC.
TOTAL NET ASSETS (9/30/97):
$349.1 MILLION
PERFORMANCE BENCHMARK:
LEHMAN BROTHERS 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 PORTFOLIO'S EXPOSURE TO MOST SECTORS OF THE RESIDENTIAL
MORTGAGE-BACKED SECURITY (MBS) MARKET WAS REDUCED. THE MANAGER CURRENTLY
BELIEVES THAT HIGHER PREPAYMENT LEVELS CAUSED BY LOWER INTEREST RATES MAY CAUSE
THIS SECTOR OF THE MORTGAGE MARKET TO UNDERPERFORM.
[BULLET] THE MANAGER USED THE MBS PROCEEDS TO INCREASE CORPORATE BOND,
COMMERCIAL MORTGAGE-BACKED SECURITY AND FHA CONSTRUCTION LOAN HOLDINGS, ALL OF
WHICH OFFER A YIELD PREMIUM OVER U.S. TREASURIES.
[BULLET] DESPITE THE MANAGER'S GENERALLY POSITIVE VIEWS ON INTEREST RATES
AND INFLATION, THE PORTFOLIO ENDED THE PERIOD WITH A DURATION (INTEREST RATE
SENSITIVITY) SIMILAR TO THE BENCHMARK, REFLECTING A NEUTRAL NEAR-TERM VIEW OF
SHORT AND INTERMEDIATE MATURITY BONDS VERSUS LONGER DATED BONDS.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE INTERMEDIATE
BOND PORTFOLIO AND THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE INDEX
FROM INCEPTION AND AT EACH FISCAL YEAR END.
[LINE GRAPH OMITTED]
[PLOT POINTS AS FOLLOWS]
Lehman Brothers Intermediate
Institutional Class Service Class Investor A Class Government/Corporate Index
<S> <C> <C> <C> <C>
9/17/93 $10,000 $10,000 $ 9,600 $10,021
9/30/93 10,010 10,010 9,610 10,010
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 11,526
12/31/96 11,530 11,422 10,940 11,809
3/31/97 11,524 11,409 10,921 11,707
6/30/97 11,865 11,738 11,244 12,052
9/30/97 12,187 12,048 11,535 12,377
</TABLE>
FOR PERIOD ENDING SEPTEMBER 30, 1997
AVERAGE ANNUAL TOTAL RETURN
1 Year From Inception
Institutional Class 8.40% 5.02%
Service Class 8.07% 4.72%
Investor A Class (Load Adjusted) 3.56% 3.57%
Investor A Class (NAV) 7.89% 4.62%
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 INCEPTION DATES OF THE PORTFOLIO'S SHARE
CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 9/17/93; SERVICE SHARES, 9/23/93;
AND INVESTOR A SHARES, 5/20/94. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 13
FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
4
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
CORE BOND
PORTFOLIO
PORTFOLIO SUB-ADVISOR:
BLACKROCK FINANCIAL MANAGEMENT, INC.
TOTAL NET ASSETS (9/30/97):
$572.0 MILLION
PERFORMANCE BENCHMARK:
LEHMAN BROTHERS 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 PORTFOLIO'S EXPOSURE TO THE RESIDENTIAL MORTGAGE-BACKED
SECURITY (MBS) PASS-THROUGH MARKET WAS SIGNIFICANTLY REDUCED. THE MANAGER
CURRENTLY BELIEVES THAT HIGHER PREPAYMENT LEVELS CAUSED BY LOWER INTEREST RATES
MAY CAUSE THIS SECTOR OF THE MORTGAGE MARKET TO UNDERPERFORM.
[BULLET] THE MANAGER USED THE MBS PROCEEDS TO INCREASE COMMERCIAL
MORTGAGE-BACKED SECURITY AND FHA CONSTRUCTION LOAN HOLDINGS, WHICH OFFER A YIELD
PREMIUM OVER U.S. TREASURIES.
[BULLET] THE PORTFOLIO ENDED THE PERIOD WITH A LONGER DURATION (INTEREST
RATE SENSITIVITY) THAN THE BENCHMARK, REFLECTING THE MANAGER'S POSITIVE VIEW ON
INTEREST RATES AND INFLATION.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE CORE BOND
PORTFOLIO AND THE LEHMAN BROTHERS AGGREGATE INDEX FROM INCEPTION AND AT EACH
FISCAL YEAR END.
[LINE GRAPH OMITTED]
[PLOT POINTS AS FOLLOWS]
BlackRock &
Institutional Classes Service Class Investor A Class Investor B Class Investor C Class Lehman Aggregate Index
<S> <C> <C> <C> <C> <C> <C>
12/09/92 $10,000 $10,000 $ 9,600 $10,000 $10,000 $10,000
9/30/93 10,687 10,687 10,260 10,687 10,687 11,010
9/30/94 10,617 10,617 10,192 10,617 10,617 10,605
9/30/95 11,935 11,935 11,457 11,935 11,935 12,265
3/31/96 12,423 12,399 11,900 12,396 12,396 12,329
9/30/96 12,726 12,706 12,181 12,881 12,881 12,980
12/31/96 13,161 13,141 12,598 13,281 13,281 13,120
3/31/97 13,124 13,095 12,553 13,204 13,204 13,007
6/30/97 13,563 13,523 12,958 13,604 13,604 13,484
9/30/97 14,002 13,950 13,362 13,723 14,003 13,932
</TABLE>
FOR PERIOD ENDING SEPTEMBER 30, 1997
AVERAGE ANNUAL TOTAL RETURN
1 Year From Inception
BlackRock Class 10.08% 7.26%
Institutional Class 10.03% 7.25%
Service Class 9.71% 7.15%
Investor A Class (Load Adjusted) 5.14% 6.18%
Investor A Class (NAV) 9.52% 7.08%
Investor B Class (Load Adjusted) 3.82% 6.16%
Investor B Class (NAV) 8.71% 6.83%
Investor C Class (Load Adjusted) 7.62% 6.83%
Investor C Class (NAV) 8.71% 6.83%
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 INCEPTION DATES OF THE PORTFOLIO'S SHARE
CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 12/9/92; SERVICE SHARES, 1/13/96;
INVESTOR A SHARES, 1/31/96; INVESTOR B SHARES, 3/18/96; AND INVESTOR C SHARES,
2/28/97; AND BLACKROCK SHARES, 5/1/97. SEE "NOTE ON PERFORMANCE INFORMATION" ON
PAGE 13 FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
5
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
GOVERNMENT INCOME
PORTFOLIO
PORTFOLIO SUB-ADVISOR:
BLACKROCK FINANCIAL MANAGEMENT, INC.
TOTAL NET ASSETS (9/30/97):
$20.5 MILLION
PERFORMANCE BENCHMARK:
LEHMAN BROTHERS MORTGAGE INDEX/MERRILL LYNCH 10-YEAR TREASURY 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 10 TO 15 YEARS.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
[BULLET] THE PORTFOLIO'S EXPOSURE TO THE RESIDENTIAL MORTGAGE-BACKED
SECURITY (MBS) PASS-THROUGH MARKET WAS SIGNIFICANTLY REDUCED. THE MANAGER
CURRENTLY BELIEVES THAT HIGHER PREPAYMENT LEVELS CAUSED BY LOWER INTEREST RATES
MAY CAUSE THIS SECTOR OF THE MORTGAGE MARKET TO UNDERPERFORM.
[BULLET] PROCEEDS OF THE MBS SALES WERE PRIMARILY REALLOCATED INTO U.S.
TREASURIES; HOWEVER, THE MANAGER INITIATED A SMALL POSITION IN GNMA CONSTRUCTION
LOANS, WHICH OFFER STRONG CREDIT AND YIELDS HIGHER THAN COMPARABLE MATURITY
TREASURIES.
[BULLET] THE PORTFOLIO ENDED THE PERIOD WITH A LONGER DURATION (INTEREST
RATE SENSITIVITY) THAN THE BENCHMARK, REFLECTING THE MANAGER'S POSITIVE VIEW ON
INTEREST RATES AND INFLATION.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
GOVERNMENT INCOME PORTFOLIO AND THE LEHMAN BROTHERS MORTGAGE INDEX/MERRILL LYNCH
10-YEAR TREASURY INDEX FROM INCEPTION AND AT EACH FISCAL YEAR END.
[LINE GRAPH OMITTED]
[PLOT POINTS AS FOLLOWS]
Lehman Brothers Mortgage Index/
Investor A Class Investor B Class Investor C Class Merrill Lynch 10 Year Treasury Index
<S> <C> <C> <C> <C>
10/3/94 $ 9,550 $10,000 $10,000 $10,000
9/30/95 10,914 11,350 11,350 11,537
9/30/96 11,400 11,768 11,768 12,108
12/31/96 11,748 12,103 12,103 12,497
3/31/97 11,721 12,053 12,053 12,368
6/30/97 12,179 12,502 12,502 12,502
9/30/97 12,595 12,454 12,906 12,906
</TABLE>
FOR PERIOD ENDING SEPTEMBER 30, 1997
AVERAGE ANNUAL TOTAL RETURN
1 Year From Inception
Investor A Class (Load Adjusted) 5.52% 7.99%
Investor A Class (NAV) 10.48% 9.66%
Investor B Class (Load Adjusted) 4.73% 7.43%
Investor B Class (NAV) 9.66% 8.90%
Investor C Class (Load Adjusted) 5.55% 8.90%
Investor C Class (NAV) 9.66% 8.90%
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 INCEPTION DATES OF THE PORTFOLIO'S SHARE
CLASSES WERE AS FOLLOWS: INVESTOR A AND INVESTOR B SHARES, 10/3/94; AND INVESTOR
C SHARES, 2/28/97. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 13 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
6
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
MANAGED INCOME
PORTFOLIO
PORTFOLIO SUB-ADVISOR:
BLACKROCK FINANCIAL MANAGEMENT, INC.
TOTAL NET ASSETS (9/30/97):
$819.7 MILLION
PERFORMANCE BENCHMARK:
LEHMAN BROTHERS AGGREGATE 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 PORTFOLIO'S EXPOSURE TO THE RESIDENTIAL MORTGAGE-BACKED
SECURITY (MBS) PASS-THROUGH MARKET WAS SIGNIFICANTLY REDUCED. THE MANAGER
CURRENTLY BELIEVES THAT HIGHER PREPAYMENT LEVELS CAUSED BY LOWER INTEREST RATES
MAY CAUSE THIS SECTOR OF THE MORTGAGE MARKET TO UNDERPERFORM.
[BULLET] THE MANAGER USED THE MBS PROCEEDS TO INCREASE COMMERCIAL
MORTGAGE-BACKED SECURITY AND FHA CONSTRUCTION LOAN HOLDINGS, WHICH OFFER A YIELD
PREMIUM OVER U.S. TREASURIES.
[BULLET] THE PORTFOLIO ENDED THE PERIOD WITH A LONGER DURATION (INTEREST
RATE SENSITIVITY) THAN THE BENCHMARK, REFLECTING THE MANAGER'S POSITIVE VIEW ON
INTEREST RATES AND INFLATION.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE MANAGED INCOME
PORTFOLIO AND THE LEHMAN BROTHERS AGGREGATE INDEX FROM INCEPTION AND AT EACH
FISCAL YEAR END.
[LINE GRAPH OMITTED]
[PLOT POINTS AS FOLLOWS]
Institutional Class Service Class Investor A Class Investor B Class Lehman Brothers Aggregate Index
<S> <C> <C> <C> <C> <C>
11/01/89 $10,000 $10,000 $ 9,550 $10,000 $10,000
9/30/90 10,380 10,380 9,913 10,380 10,397
9/30/91 11,910 11,910 11,374 11,910 12,059
9/30/92 13,316 13,316 12,717 13,315 13,574
9/30/93 14,935 14,940 14,263 14,939 14,928
9/30/94 14,148 14,104 13,440 14,077 14,445
9/30/95 16,025 15,935 15,153 15,870 16,477
9/30/96 16,718 16,580 15,735 16,481 17,281
12/31/96 17,278 17,124 16,243 17,013 17,800
3/31/97 17,228 17,062 16,177 16,944 17,701
6/30/97 17,848 17,663 16,740 17,533 18,351
9/30/97 18,432 18,228 17,267 18,075 18,960
</TABLE>
FOR PERIOD ENDING SEPTEMBER 30, 1997
AVERAGE ANNUAL TOTAL RETURN
1 Year 5 Year From Inception
Institutional Class 10.25% 6.72% 8.03%
Service Class 9.93% 6.48% 7.87%
Investor A Class (Load Adjusted) 4.76% 5.33% 7.14%
Investor A Class (NAV) 9.74% 6.30% 7.76%
Investor B Class (Load Adjusted) 4.73% 5.87% 7.76%
Investor B Class (NAV) 9.67% 6.30% 7.76%
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 INCEPTION DATES OF THE PORTFOLIO'S SHARE
CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 11/1/89; INVESTOR A SHARES,
2/5/92; AND SERVICE SHARES, 7/29/93. SEE "NOTE ON PERFORMANCE INFORMATION" ON
PAGE 13 FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED. THE
COMPARATIVE INDEX FROM PREVIOUS YEARS HAS CHANGED FROM THE SALOMON BROAD
INVESTMENT GRADE INDEX TO THE LEHMAN AGGREGATE TO MORE ACCURATELY REFLECT THE
TYPE OF HOLDINGS OF MANAGED INCOME.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
7
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
INTERNATIONAL BOND
PORTFOLIO
PORTFOLIO SUB-ADVISOR:
BLACKROCK FINANCIAL MANAGEMENT, INC.
TOTAL NET ASSETS (9/30/97):
$52.5 MILLION
PERFORMANCE BENCHMARK:
SALOMON NON-U.S. HEDGED WORLD GOVERNMENT BOND INDEX
INVESTMENT APPROACH:
PURSUES CURRENT INCOME CONSISTENT WITH THE PRESERVATION OF CAPITAL BY
INVESTING IN INVESTMENT GRADE INTERNATIONAL FIXED INCOME SECURITIES.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
[BULLET] THE MANAGER HAS MAINTAINED AN OVERWEIGHT POSITION IN THE DOLLAR
BLOC (CANADA, AUSTRALIA, NEW ZEALAND) DUE TO POSITIVE INFLATION ENVIRONMENTS IN
THOSE MARKETS DESPITE STRONG ECONOMIC GROWTH.
[BULLET] THE FUND HAS AN UNDERWEIGHT TO CORE EUROPE, WHICH HAS GENERALLY
LAGGED THE U.S. MARKET. WITHIN THIS MARKET, THE PORTFOLIO HAS FOCUSED ON THE
U.K. AND DENMARK, BOTH OF WHOSE MARKETS HAVE RESPONDED FAVORABLY TO POSITIVE
FISCAL NEWS.
[BULLET] THE MANAGER INCREASED JAPANESE EXPOSURE FROM SHORT TO
APPROXIMATELY EQUAL WITH THE BENCHMARK, WHICH ALLOWED THE FUND TO CAPTURE PRICE
INCREASES AND THE DECLINES IN JAPANESE BOND YIELDS TO YEAR-LOWS AT THE END OF
THE THIRD QUARTER.
<TABLE>
<CAPTION>
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.
[LINE GRAPH OMITTED]
[PLOT POINTS AS FOLLOWS]
Salomon Non-U.S. Hedged
Institutional Class Service Class Investor A Class Investor B Class World Government Bond Index
<S> <C> <C> <C> <C> <C>
07/01/91 $10,000 $10,000 $ 9,500 $10,000 $10,000
09/30/91 10,360 10,360 9,894 10,360 10,389
12/31/91 10,600 10,600 10,123 10,600 10,683
03/31/92 10,470 10,470 9,999 10,470 11,324
06/30/92 11,008 11,008 10,513 11,008 11,529
09/30/92 11,298 11,298 10,789 11,298 11,838
12/31/92 11,254 11,254 10,747 11,254 12,160
03/31/93 11,717 11,717 11,190 11,717 12,479
06/30/93 12,116 12,116 11,571 12,116 12,766
09/30/93 12,689 12,689 12,118 12,689 13,251
12/31/93 12,977 12,977 12,393 12,977 13,791
03/31/94 12,715 12,715 12,143 12,715 13,333
06/30/94 12,453 12,453 11,892 12,453 13,013
09/30/94 12,369 12,369 11,812 12,369 13,017
12/31/94 12,496 12,496 11,933 12,496 13,237
03/31/95 13,545 13,545 12,936 13,545 13,846
06/30/95 14,054 14,054 13,421 14,054 14,496
09/30/95 14,302 14,302 13,658 14,302 15,013
12/31/95 14,998 14,998 14,323 14,998 15,609
03/31/96 15,051 15,051 14,374 15,051 15,757
06/30/96 15,395 15,394 14,697 15,370 16,164
09/30/96 16,002 15,989 15,259 15,928 16,830
12/31/96 16,590 16,558 15,793 16,442 17,453
03/31/97 16,762 16,717 15,938 16,562 17,713
06/30/97 17,335 17,276 16,378 17,078 18,267
09/30/97 17,859 17,783 16,853 17,539 18,892
</TABLE>
FOR PERIOD ENDING SEPTEMBER 30, 1997
AVERAGE ANNUAL TOTAL RETURN
1 Year 5 Year From Inception
Institutional Class 11.59% 9.59% 9.71%
Service Class 11.23% 9.50% 9.64%
Investor A Class (Load Adjusted) 5.47% 8.33% 8.70%
Investor A Class (NAV) 11.02% 9.44% 9.59%
Investor B Class (Load Adjusted) 5.16% 8.75% 9.22%
Investor B Class (NAV) 10.11% 9.19% 9.39%
Investor C Class (Load Adjusted) 9.01% 9.19% 9.39%
Investor C Class (NAV) 10.11% 9.19% 9.39%
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 INCEPTION DATES OF THE PORTFOLIO'S SHARE
CLASSES WERE AS FOLLOWS: SERVICE SHARES, 7/1/91; INVESTOR BSHARES, 4/19/96;
INVESTOR A SHARES, 4/22/96; INSTITUTIONAL SHARES, 6/10/96; AND INVESTOR C
SHARES, 9/11/96. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 13 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
8
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
TAX-FREE INCOME
PORTFOLIO
PORTFOLIO SUB-ADVISOR:
BLACKROCK FINANCIAL MANAGEMENT, INC.
TOTAL NET ASSETS (9/30/97):
$74.7 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 MANAGER TO BE OF COMPARABLE
CREDIT QUALITY.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
[BULLET] THE MANAGER REMAINED FOCUSED ON OWNING HIGH GRADE (AAA- AND
AA-RATED) MUNICIPAL SECURITIES DUE TO RELATIVELY SMALL AMOUNT OF INCREMENTAL
YIELD AVAILABLE TO INVESTORS BY OWNING LOWER RATED (A-AND BBB-RATED) BONDS.
[BULLET] IN GENERAL, THE PORTFOLIO HAS AVOIDED PAR BONDS AND FOCUSED ON
BONDS TRADING AT EITHER A PREMIUM OR DISCOUNTED PRICE, WHICH THE MANAGER
BELIEVES OFFER MORE ATTRACTIVE TOTAL RETURN OPPORTUNITIES.
<TABLE>
<CAPTION>
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.
[LINE GRAPH OMITTED]
[PLOT POINTS AS FOLLOWS]
Institutional Class Service Class Investor A Class Investor B Class Investor C Class Lehman Municipal Bond Index
<S> <C> <C> <C> <C> <C> <C>
5/14/90 $10,000 $10,000 $ 9,600 $10,000 $10,000 $10,000
9/30/90 10,139 10,139 9,733 10,139 10,139 10,202
9/30/91 11,296 11,296 10,844 11,296 11,296 11,548
9/30/92 12,504 12,504 12,004 12,504 12,504 12,755
9/30/93 14,199 14,193 13,620 14,188 14,188 14,381
9/30/94 13,660 13,624 13,045 13,589 13,589 14,034
9/30/95 15,241 15,155 14,478 15,082 15,082 15,604
9/30/96 16,378 16,238 15,487 16,105 16,105 16,545
12/31/96 16,853 16,696 15,918 16,522 16,522 16,967
3/31/97 16,839 16,669 15,886 16,458 16,458 16,927
6/30/97 17,446 17,258 16,439 16,999 16,999 17,511
9/30/97 18,032 17,824 16,971 17,516 17,516 18,040
</TABLE>
FOR PERIOD ENDING SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
Taxable Taxable From Taxable
1 Year Equivalent* 5 Year Equivalent* Inception Equivalent*
------ ----------- ------ ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Institutional Class 10.09% 14.09% 7.60% 10.61% 8.31% 11.60%
Service Class 9.77% 13.64% 7.35% 10.26% 8.14% 11.36%
Investor A Class (Load Adjusted) 5.21% 7.27% 6.31% 8.81% 7.42% 10.36%
Investor A Class (NAV) 9.58% 13.37% 7.18% 10.02% 8.02% 11.20%
Investor B Class (Load Adjusted) 3.88% 5.42% 6.54% 9.13% 7.88% 11.00%
Investor B Class (NAV) 8.77% 12.24% 6.97% 9.73% 7.88% 11.00%
Investor C Class (Load Adjusted) 7.68% 10.72% 6.97% 9.73% 7.88% 11.00%
Investor C Class (NAV) 8.77% 12.24% 6.97% 9.73% 7.88% 11.00%
<FN>
*TAXABLE EQUIVALENT TOTAL RETURN IS BASED ON THE ANNUALIZED TOTAL RETURN AND A
FEDERAL TAX RATE OF 39.6%. IT REPRESENTS THE RETURN ON A TAXABLE INVESTMENT
NECESSARY TO EQUAL THE AFTER-TAX RETURN OF THE COMPASS CAPITAL TAX-FREE
INCOME PORTFOLIO.
</FN>
</TABLE>
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 INCEPTION DATES OF THE PORTFOLIO'S SHARE
CLASSES WERE AS FOLLOWS: INVESTOR A SHARES, 5/14/90; INSTITUTIONAL SHARES,
1/21/93; SERVICE SHARES, 7/29/93; INVESTOR BSHARES, 7/18/96; AND INVESTOR C
SHARES, 2/28/97. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 13 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
9
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
PENNSYLVANIA TAX-FREE INCOME
PORTFOLIO
PORTFOLIO SUB-ADVISOR:
BLACKROCK FINANCIAL MANAGEMENT, INC.
TOTAL NET ASSETS (9/30/97):
$100.8 MILLION
PERFORMANCE BENCHMARK:
LEHMAN LOCAL GENERAL OBLIGATION INDEX
INVESTMENT APPROACH:
SEEKS A HIGH LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL, 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 MANAGER
TO BE OF COMPARABLE CREDIT QUALITY.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
[BULLET] WHERE OPPORTUNITIES EXISTED, THE MANAGER SELECTIVELY TOOK
ADVANTAGE OF YIELD SPREADS BETWEEN HIGHER-RATED AND LOWER-RATED PENNSYLVANIA
MUNICIPAL BONDS. THE PORTFOLIO WILL LOOK TO REVERSE THESE TRADES WHEN THE
OPPORTUNITIES PRESENT THEMSELVES.
[BULLET] IN GENERAL, THE PORTFOLIO HAS AVOIDED PAR BONDS AND FOCUSED ON
BONDS TRADING AT EITHER A PREMIUM OR DISCOUNTED PRICE, WHICH THE MANAGER
BELIEVES OFFER MORE ATTRACTIVE TOTAL RETURN OPPORTUNITIES.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE PA TAX-FREE
INCOME PORTFOLIO AND LEHMAN LOCAL GO INDEX FROM INCEPTION AND AT EACH FISCAL
YEAR END.
[LINE GRAPH OMITTED]
[PLOT POINTS AS FOLLOWS]
Institutional Class Service Class Investor A Class Investor B Class Lehman Local GO Index
<S> <C> <C> <C> <C> <C>
12/01/92 $10,000 $10,000 $ 9,600 $10,000 $10,000
9/30/93 11,169 11,165 10,723 11,169 11,132
9/30/94 10,813 10,808 10,391 10,813 10,943
9/30/95 11,982 11,944 11,460 11,859 12,517
9/30/96 12,737 12,653 12,112 12,457 12,803
12/31/96 13,062 12,966 12,408 12,736 13,140
3/31/97 13,013 12,908 12,348 12,648 13,140
6/30/97 13,413 13,294 12,713 13,000 13,621
9/30/97 13,810 13,679 13,076 13,077 14,028
</TABLE>
FOR PERIOD ENDING SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
Taxable From Taxable
1 Year Equivalent* Inception Equivalent*
----- ----------- --------- -----------
<S> <C> <C> <C> <C>
Institutional Class 8.43% 12.00% 6.91% 9.84%
Service Class 8.10% 11.53% 6.69% 9.53%
Investor A Class (Load Adjusted) 3.59% 5.11% 5.70% 8.12%
Investor A Class (NAV) 7.95% 11.32% 6.60% 9.40%
Investor B Class (Load Adjusted) 2.30% 3.28% 5.48% 7.80%
Investor B Class (NAV) 7.12% 10.14% 6.14% 8.74%
<FN>
*TAXABLE EQUIVALENT TOTAL RETURN IS BASED ON THE ANNUALIZED TOTAL RETURN AND A
COMBINED FEDERAL AND STATE TAX RATE OF 47.4%. IT REPRESENTS THE RETURN ON A
TAXABLE INVESTMENT NECESSARY TO EQUAL THE AFTER-TAX RETURN OF THE COMPASS
CAPITAL PENNSYLVANIA TAX-FREE INCOME PORTFOLIO.
</FN>
</TABLE>
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 INCEPTION DATES OF THE PORTFOLIO'S SHARE
CLASSES WERE AS FOLLOWS: INSTITUTIONAL AND INVESTOR A SHARES, 12/1/92; SERVICE
SHARES, 7/29/93; AND INVESTOR B SHARES, 10/3/94. SEE "NOTE ON PERFORMANCE
INFORMATION" ON PAGE 13 FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS
CALCULATED.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
10
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
NEW JERSEY TAX-FREE INCOME
PORTFOLIO
PORTFOLIO SUB-ADVISOR:
BLACKROCK FINANCIAL MANAGEMENT, INC.
TOTAL NET ASSETS (9/30/97):
$86.9 MILLION
PERFORMANCE BENCHMARK:
LEHMAN LOCAL GENERAL OBLIGATION INDEX
INVESTMENT APPROACH:
SEEKS A HIGH LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL, 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 MANAGER
TO BE OF COMPARABLE CREDIT QUALITY.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
[BULLET] WHERE OPPORTUNITIES EXISTED, THE MANAGER SELECTIVELY TOOK
ADVANTAGE OF YIELD SPREADS BETWEEN HIGHER-RATED AND LOWER-RATED NEW JERSEY
MUNICIPAL BONDS. THE PORTFOLIO WILL LOOK TO REVERSE THESE TRADES WHEN THE
OPPORTUNITIES PRESENT THEMSELVES.
[BULLET] IN GENERAL, THE PORTFOLIO HAS AVOIDED PAR BONDS AND FOCUSED ON
BONDS TRADING AT EITHER A PREMIUM OR DISCOUNTED PRICE, WHICH THE MANAGER
BELIEVES OFFER MORE ATTRACTIVE TOTAL RETURN OPPORTUNITIES.
<TABLE>
<CAPTION>
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.
[LINE GRAPH OMITTED]
[PLOT POINTS AS FOLLOWS]
Service Class Investor A Class Investor B Class Lehman Local GO Index
<S> <C> <C> <C> <C>
07/01/91 $10,000 $ 9,600 $10,000 $10,000
02/28/92 10,802 10,370 10,802 10,500
02/28/93 12,247 11,757 12,247 12,329
02/28/94 12,882 12,367 12,882 12,939
02/28/95 13,074 12,551 13,074 13,161
01/31/96 14,427 13,850 14,427 14,573
09/30/96 14,449 13,848 14,401 14,785
12/31/96 14,810 14,189 14,728 14,848
03/31/97 14,772 14,145 14,656 14,848
06/30/97 15,185 14,534 15,031 15,391
09/30/97 15,623 14,946 15,429 15,851
</TABLE>
FOR PERIOD ENDING SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
Taxable Taxable From Taxable
1 Year Equivalent* 5 Year Equivalent* Inception Equivalent*
------ ----------- ------ ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Service Class 8.11% 11.84% 6.39% 9.33% 7.39% 10.79%
Investor A Class (Load Adjusted) 3.62% 5.28% 5.45% 7.96% 6.64% 9.69%
Investor A Class (NAV) 7.94% 11.59% 6.32% 9.23% 7.34% 10.71%
Investor B Class (Load Adjusted) 2.32% 3.39% 5.69% 8.31% 7.01% 10.23%
Investor B Class (NAV) 7.14% 10.42% 6.12% 8.93% 7.18% 10.48%
<FN>
*TAXABLE EQUIVALENT TOTAL RETURN IS BASED ON THE ANNUALIZED TOTAL RETURN AND A
COMBINED FEDERAL AND STATE TAX RATE OF 46%. IT REPRESENTS THE RETURN ON A
TAXABLE INVESTMENT NECESSARY TO EQUAL THE AFTER-TAX RETURN OF THE COMPASS
CAPITAL NEW JERSEY TAX-FREE INCOME PORTFOLIO.
</FN>
</TABLE>
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 INCEPTION DATES OF THE PORTFOLIO'S SHARE
CLASSES WERE AS FOLLOWS: SERVICE SHARES, 7/1/91; INVESTOR A SHARES, 1/26/96; AND
INVESTOR B SHARES, 7/2/96. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 13 FOR
FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
11
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
OHIO TAX-FREE INCOME
PORTFOLIO
PORTFOLIO SUB-ADVISOR:
BLACKROCK FINANCIAL MANAGEMENT, INC.
TOTAL NET ASSETS (9/30/97):
$11.6 MILLION
PERFORMANCE BENCHMARK:
LEHMAN LOCAL GENERAL OBLIGATION INDEX
INVESTMENT APPROACH:
SEEKS A HIGH LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL, 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 MANAGER
TO BE OF COMPARABLE CREDIT QUALITY.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
[BULLET] WHERE OPPORTUNITIES EXISTED, THE MANAGER SELECTIVELY TOOK
ADVANTAGE OF YIELD SPREADS BETWEEN HIGHER-RATED AND LOWER-RATED OHIO MUNICIPAL
BONDS. THE PORTFOLIO WILL LOOK TO REVERSE THESE TRADES WHEN THE OPPORTUNITIES
PRESENT THEMSELVES.
[BULLET] IN GENERAL, THE PORTFOLIO HAS AVOIDED PAR BONDS AND FOCUSED ON
BONDS TRADING AT EITHER A PREMIUM OR DISCOUNTED PRICE, WHICH THE MANAGER
BELIEVES OFFER MORE ATTRACTIVE TOTAL RETURN OPPORTUNITIES.
<TABLE>
<CAPTION>
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.
[LINE GRAPH OMITTED]
[PLOT POINTS AS FOLLOWS]
Institutional Class Service Class Investor A Class Investor B Class Lehman Local GO Index
<S> <C> <C> <C> <C> <C>
12/01/92 $10,000 $10,000 $ 9,600 $10,000 $10,000
09/30/93 10,910 10,907 10,474 10,910 11,232
09/30/94 10,493 10,469 10,073 10,493 10,943
09/30/95 11,621 11,565 11,133 11,503 12,104
09/30/96 12,333 12,234 11,761 12,063 12,803
12/31/96 12,644 12,533 12,043 12,330 13,141
03/31/97 12,611 12,490 11,997 12,260 13,140
06/30/97 13,001 12,867 12,355 12,600 13,621
09/30/97 13,385 13,238 12,706 12,676 14,028
</TABLE>
FOR PERIOD ENDING SEPTEMBER 30, 1997
AVERAGE ANNUAL TOTAL RETURN
Taxable From Taxable
1 Year Equivalent* Inception Equivalent*
------ ----------- --------- -----------
Institutional Class 8.53% 12.50% 6.22% 9.12%
Service Class 8.21% 12.04% 5.98% 8.77%
Investor A Class (Load Adjusted) 3.74% 5.48% 5.08% 7.45%
Investor A Class (NAV) 8.03% 11.77% 5.98% 8.77%
Investor B Class (Load Adjusted) 2.40% 3.52% 4.81% 7.05%
Investor B Class (NAV) 7.23% 10.60% 5.47% 8.02%
*TAXABLE EQUIVALENT TOTAL RETURN IS BASED ON THE ANNUALIZED TOTAL RETURN AND A
COMBINED FEDERAL AND STATE TAX RATE OF 46.6%. IT REPRESENTS THE RETURN ON A
TAXABLE INVESTMENT NECESSARY TO EQUAL THE AFTER-TAX RETURN OF THE COMPASS
CAPITAL OHIO TAX-FREE INCOME PORTFOLIO.
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 INCEPTION DATES OF THE PORTFOLIO'S SHARE
CLASSES WERE AS FOLLOWS: INSTITUTIONAL AND INVESTOR ASHARES, 12/1/92; SERVICE
SHARES, 7/29/93; AND INVESTOR B SHARES, 10/13/94. SEE "NOTE ON PERFORMANCE
INFORMATION" ON PAGE 13 FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS
CALCULATED.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
12
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
NOTE ON PERFORMANCE INFORMATION
The performance information above includes information for each class of
each Portfolio since the commencement of operations of the Portfolio, rather
than the date such class was introduced. Performance information for each class
introduced after the commencement of operations of a Portfolio is therefore
based on the performance history of a predecessor class or predecessor classes.
If a class of shares in a Portfolio (the "Subsequent Class") has more than one
predecessor class, the performance data predating the introduction of the
Subsequent Class is based initially on the performance of the Portfolio's first
operational predecessor class (the "Initial Class"); thereafter, the performance
of the Subsequent Class is based upon the performance of any other predecessor
class or classes which were introduced after the Initial Class and which had
total operating expenses more similar to those of the Subsequent Class. In the
case of Investor A, Investor B, Investor C and Service Shares, the performance
information for periods prior to their introduction dates has not been restated
to reflect the shareholder servicing and processing and/or distribution fees and
certain other expenses borne by these share classes which, if reflected, would
reduce the performance quoted. Accordingly, the performance information may be
used in assessing each Portfolio's performance history but does not reflect how
the distinct classes would have performed on a relative basis prior to the
introduction of these classes, which would require an adjustment to the ongoing
expenses.
Performance information is restated to reflect the current maximum
front-end sales charge (in the case of Investor A Shares) or the maximum
contingent deferred sales charge (in the case of Investor B and Investor C
Shares), and assumes the reinvestment of dividends and distributions. The
maximum front-end sales charges for Investor A Shares are as follows:
Intermediate Government Bond, Intermediate Bond, Core Bond, Tax-Free Income,
Pennsylvania Tax-Free Income, New Jersey Tax-Free Income and Ohio Tax-Free
Income Portfolios -- 4.00%; Government Income and Managed Income Portfolios --
4.50%; Low Duration Bond Portfolio -- 3.00%; and International Bond Portfolio--
5.00%. The maximum contingent deferred sales charge for Investor B Shares and
Investor C Shares of all of the Portfolios is 4.50% and 1.00%, respectively.
The performance information also reflects fee waivers that subsidize and
reduce the total operating expenses of each Portfolio. The Portfolios' returns
would have been lower if there were not such waivers. PAMG and the Portfolio's
Administrators are under no obligation to waive or continue waiving their fees.
Investment return and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
13
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
BOND REPORT
IMPORTANT TAX INFORMATION FOR SHAREHOLDERS OF THE COMPASS BOND PORTFOLIOS
During the fiscal year ended September 30, 1997, 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 ............. $ -- $0.0135
Core Bond Portfolio ..................... -- 0.0453
International Bond Portfolio ............ 0.0582 0.4336
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, 1997, 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 13.7%, Pennsylvania Tax-Free Income Portfolio 2.1%,
New Jersey Tax-Free Income Portfolio 6.0%, and Ohio Tax-Free Income Portfolio
9.3%.
In January 1998, 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 1997.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
STATEMENT OF NET ASSETS
LOW DURATION BOND PORTFOLIO
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
-------- -------- -----------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS -- 5.8%
Banco Internacional S.A.
5.89%** 07/16/01 $1,750 $ 1,749,621
Federal National Mortgage Association
6.29% 10/04/00 2,000 2,014,060
U.S. Treasury Notes
7.25%+ 02/15/98 3,000 3,019,350
6.25% 08/31/00 1,000 1,009,720
6.12%+ 09/30/00 1,000 1,006,090
6.37%+ 03/31/01 5,840 5,915,511
-------------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $14,703,749) 14,714,352
-------------
MORTGAGE PASS-THROUGHS -- 29.9%
Federal Home Loan Mortgage
Corporation
7.25% 10/03-06/08 150 151,096
8.25% 06/09-09/09 284 295,439
8.75% 01/01/13 197 208,276
8.00% 09/11-10/17 709 735,325
7.50% 04/01/22 342 349,889
6.50% 06/01/28 4,540 4,582,661
Federal Home Loan Mortgage
Corporation 5 Year
7.00%+ 05/00-11/00 2,692 2,714,251
Federal Home Loan Mortgage
Corporation Multi-Family
7.37% 03/01/06 158 159,685
Federal Home Loan Mortgage
Corporation 7 Year
8.00%+ 01/01/04 1,754 1,792,346
Federal National Mortgage Association
10 Year Balloon
6.00%+ 12/03-02/04 6,195 6,127,634
Federal National Mortgage Association
7.00%+ 06/01/04 4,397 4,433,698
6.50% 10/01/05 1,619 1,619,494
7.50%+ 04/01/09 2,615 2,668,596
8.50%+ 12/10-09/12 4,886 5,105,528
Federal National Mortgage Association 7 Year
7.00% 03/01/99 46 46,144
Federal National Mortgage Association
15 Year
7.50% 10/01/04 701 711,521
General Motors Acceptance
Corporation Grantor Trust, Series 97
7.46% 07/25/19 5,181 5,231,968
7.50% 10/10/19 5,850 5,947,272
General Motors Acceptance
Corporation Grantor Trust,
Series 97-A, Class A
7.13% 04/01/20 7,509 7,593,354
Government National Mortgage
Association
8.25%+ 01/15/09 5,840 6,101,936
MLCC Mortgage Investors, Inc.,
Series 96-B, Class A
6.05%** 07/15/21 4,348 4,369,481
Par
Maturity (000) Value
-------- ------- -----------
MORTGAGE PASS-THROUGHS (CONTINUED)
MLCC Mortgage Investors, Inc.,
Series 96-C, Class A
6.03%** 09/15/21 $6,944 $ 6,973,231
Salomon Brothers Mortgage
Securities VII, Series 96-6B, Class A1
6.00%** 10/30/97 1,644 1,641,067
Salomon Brothers Mortgage
Securities VII, Series 96-6G,
Class A1
5.90%** 04/15/23 1,426 1,423,994
Sequoia Mortgage Trust,
Series 97-1, Class A1
6.02%** 05/04/29 5,275 5,276,414
-------------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $76,081,996) 76,260,300
-------------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS -- 16.0%
Bear Sterns Mortgage Securities Inc.,
Series 96-6, Class A2
7.00% 11/20/26 5,218 5,222,892
CMC Securities Corporation II,
Series 93-2G, Class A1
7.19%** 11/25/23 4,000 4,013,563
Federal National Mortgage Association,
Series 93-155, Class PD
5.50% 12/25/14 1,500 1,492,989
Federal National Mortgage Association
11.50% 05/01/09 399 453,066
Federal National Mortgage Association
Grantor Trust, Series 96-T6, Class C
6.20% 02/26/01 6,273 6,222,082
Morgan Stanley Capital I,
Series 86-C, Class U4
9.00%** 11/01/06 168 168,166
Residential Accredit Loans, Inc.,
Series 97-QS7, Class A1
7.50% 07/25/27 1,893 1,915,172
Residential Asset Securitization Trust,
Series 97-A5, Class A3
7.12% 12/25/25 5,490 5,522,908
Residential Asset Securitization Trust,
Series 96-A8, Class A1
8.00% 12/25/26 2,565 2,611,214
Residential Asset Securitization Trust,
Series 97-A1, Class A1
7.00% 03/25/27 2,626 2,636,889
Residential Asset Securitization Trust,
Series 97-A3, Class A1
7.25% 05/25/27 182 182,927
Residential Asset Securitization Trust,
Series 97-A9, Class A1
7.25% 11/25/27 5,070 5,120,700
WIFC Mortgage Loan Trust,
Series 97, Class A1
7.25% 10/25/27 5,200 5,226,000
-------------
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $40,613,063) 40,788,568
-------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
STATEMENT OF NET ASSETS
LOW DURATION BOND PORTFOLIO (CONTINUED)
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
--------- -------- -----------
COMMERCIAL MORTGAGE-BACKED
SECURITIES -- 5.8%
Bosque Asset Corp.,
Series 97-1, Class A1
7.66% 06/05/02 $3,714 $ 3,732,866
J.P. Morgan Commercial Mortgage
Finance Corp., Series 97, Class D
6.60% 06/25/27 2,000 2,009,400
Structured Asset Securities Corp.,
Series 97-N1, Class A2
5.80%** 09/25/28 2,224 2,224,457
Structured Asset Securities Corp.,
Series 97-N1, Class D
6.15%** 09/25/28 4,000 4,000,000
Prudential Home Mortgage Securities
Inc., Series 94-19, Class A2
7.05% 05/25/24 2,927 2,952,112
-------------
TOTAL COMMERCIAL MORTGAGE-
BACKED SECURITIES
(Cost $14,876,114) 14,918,835
-------------
ASSET BACKED SECURITIES -- 49.8%
Aames Mortgage Trust, Series 97-C,
Class A1
5.85%** 09/15/27 4,000 4,003,750
AFC Mortgage Loan Trust,
Series 97-3, Class A2
5.85%** 09/27/27 4,000 4,000,000
Arcadia Automobile Receivables Trust,
Series 97-B, Class A4
6.50% 06/17/02 200 201,562
Arcadia Automobile Receivables Trust,
Series 97-C, Class A2
6.05% 11/15/00 3,800 3,809,500
Associates Manufactured Housing
Pass-Through, Series 96-1, Class A1
6.20% 03/27/03 1,189 1,190,821
Banc One Auto Grantor Trust,
Series 96-A, Class A
6.10% 10/15/02 2,042 2,046,551
Barnett Auto Trust, Series 97-A,
Class A3
6.03% 11/15/01 5,800 5,790,937
Chevy Chase Auto Receivables Trust,
Series 96-2, Class A
5.90% 07/15/03 3,272 3,267,234
Chevy Chase Auto Receivables Trust,
Series 97-3, Class A
6.20% 03/20/04 4,180 4,183,919
Contimortgage Home Equity Loan
Trust, Series 97-4, Class A1
6.37% 03/15/08 8,000 7,993,750
Contimortgage Home Equity Loan
Trust, Series 97-4, Class A2
6.27% 02/15/12 3,800 3,803,562
EQCC Home Equity Loan Trust,
Series 94-1, Class A
5.80% 03/15/09 2,470 2,433,702
Fifth Third Auto Grantor Trust,
Series 96-B, Class A
6.45% 03/15/02 1,758 1,765,895
Par
Maturity (000) Value
-------- ------- -----------
ASSET BACKED SECURITIES (CONTINUED)
Fifth Third Bank Asset Trust, Series 96,
Class A
6.20%++ 09/15/01 $2,464 $ 2,469,687
First Omni Bank Credit Card Master
Trust, Series 96-A, Class A
6.65% 09/15/03 2,860 2,898,431
First Security Auto Grantor Trust,
Series 97-A, Class A
6.30% 08/15/03 4,711 4,730,045
Ford Credit Auto Lease Trust,
Series 96-1, Class A
5.80% 05/15/99 4,744 4,736,412
General Motors Acceptance
Corporation Grantor Trust,
Series 95-A, Class A
7.15% 03/15/00 3,602 3,625,319
General Motors Acceptance
Corporation Grantor Trust,
Series 97-A, Class A
6.50% 04/15/02 4,089 4,107,621
Green Tree Financial Corp.,
Series 95-A, Class A
7.25% 07/15/05 4,096 4,086,767
Home Equity Loan Asset Backed
Certificates, Series 93-2, Class A3
4.65% 12/20/08 2,743 2,724,578
Honda Auto Receivables Grantor Trust,
Series 95-A, Class A
6.20% 12/15/00 2,571 2,577,362
IMC Home Equity loan Trust,
Series 97-5, Class A1
6.51% 02/20/06 4,260 4,263,328
MBNA Master Credit Card Trust,
Series 97-J, Class A
5.76%** 02/15/07 2,000 1,998,750
MMCA Automobile Trust,
Series 95-1, Class A
5.70% 11/15/00 142 141,837
NPC Health Care Receivables, Inc.,
Series 97-1, Class A
6.33% 07/01/00 2,500 2,500,781
Olympic Automobile Receivables Trust,
Series 97-A, Class A2
6.12% 08/15/00 4,217 4,218,482
People's Bank Credit Card Master
Trust, Series 97-2, Class A
5.78%** 04/15/05 3,000 3,000,000
Platinum Commercial Loan Master
Trust, Series 97-A, Class A2
5.88%** 09/20/06 4,600 4,600,000
Small Business Administration
Participation Certificates,
Series 97, Class A
6.35%** 03/15/17 2,815 2,821,752
SMS Student Loan Trust, Series 97-A,
Class A
5.96%** 10/25/25 3,200 3,142,500
Student Loan Marketing Association,
Series 97-3, Class A1
5.74%** 04/25/06 2,800 2,793,875
Student Loan Marketing Association,
Series 97-3, Class A2
5.78%** 10/25/10 4,300 4,279,844
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
STATEMENT OF NET ASSETS
LOW DURATION BOND PORTFOLIO (CONTINUED)
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
--------- -------- -----------
ASSET BACKED SECURITIES (CONTINUED)
The Money Store Business Loan
Backed Securities, Series 97-1,
Class A
6.40%** 04/15/28 $4,814 $ 4,838,555
The Money Store Business Loan Backed
Securities, Series 97-1, Class B
6.73%** 01/25/25 2,500 2,500,000
Toyota Auto Receivables Grantor Trust,
Series 97, Class A
6.45% 04/15/02 4,910 4,940,614
World Omni Automobile Lease
Securitization Trust,
Series 96-B, Class A3
6.25% 11/15/02 4,310 4,320,102
-------------
TOTAL ASSET BACKED SECURITIES
(Cost $126,644,104) 126,807,825
-------------
CORPORATE BONDS -- 9.3%
FINANCE -- 5.0%
American General Finance
7.45%++ 07/01/02 1,000 1,038,165
CIT Group Holdings
6.12% 09/01/98 500 501,206
International Lease Finance Corp.
6.87% 05/01/01 1,000 1,015,314
Lehman Brothers Holdings
7.00% 05/13/99 3,650 3,689,617
Salomon, Inc.
6.70% 07/05/00 4,000 4,037,134
Toyota Motor Credit Corp.
6.06%** 02/15/02 2,500 2,405,000
-------------
12,686,436
-------------
INDUSTRIAL -- 0.6%
Chrysler Financial Corp.
6.95% 03/25/02 1,000 1,019,896
Smithkline Beecham Corp.
6.62% 10/01/01 500 505,406
-------------
1,525,302
-------------
UTILITY -- 0.2%
Southern California Edison
5.60% 12/15/98 500 497,887
-------------
YANKEE -- 3.5%
Cadbury Schweppe
5.87% 12/01/98 300 299,236
Exp-Import Bank of Korea
7.12% 09/20/01 3,000 3,002,142
Nordbanken
6.31%** 10/25/01 150 150,225
SBC Glacier Finance LTD
5.87%** 09/10/04 5,550 5,549,133
-------------
9,000,736
-------------
TOTAL CORPORATE BONDS
(Cost $23,664,566) 23,710,361
-------------
TAXABLE MUNICIPAL BONDS -- 0.1%
New York City G.O. Series E
6.55% 08/01/00 200 201,500
-------------
(Cost $200,245)
Par
Maturity (000) Value
-------- ------- -----------
SHORT TERM INVESTMENTS -- 0.2%
Smith Barney Money Market Fund $ 490 $ 489,550
(Cost $489,550) ------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $297,273,387*) 116.9% 297,891,291
REVERSE REPURCHASE AGREEMENTS -- (12.4%)
Aubrey Lanston
(Agreement dated 09/17/97
to be repurchased at $1,771,280.
Collateralized by $1,750,000 U.S.
Treasury Notes, 7.25% due 02/15/98.
The value of the collateral is
$1,771,280.)
5.50% 10/01/97 $1,767 $ (1,771,280)
Aubrey Lanston
(Agreement dated 09/25/97 to be
repurchased at $4,224,836.
Collateralized by $4,050,000 U.S.
Treasury Notes, 6.375% due 03/31/01.
The value of the collateral
is $4,224,836.)
5.53% 10/07/97 4,217 (4,220,949)
Lehman Brothers
(Agreement dated 09/19/97 to be
repurchased at $1,631,987.
Collateralized by $1,600,000 U.S.
Treasury Notes, 6.125%
to 7.25% due 02/15/98 to 09/30/00.
The value of the collateral is
$1,631,987.)
5.50% 10/01/97 1,629 (1,631,987)
Lehman Brothers
(Agreement dated 09/30/97 to be
repurchased at $1,963,776.
Collateralized by $6,248,000 Federal
National Mortgage Association, 7.50%
due 04/01/09. The value of the
collateral is $1,963,776.)
5.78% 11/13/97 1,950 (1,950,313)
Paine Webber
(Agreement dated 09/25/97 to
be repurchased at $8,474,119.
Collateralized by $10,760,000
Government National Mortgage
Association, 8.00% to 8.25% due
09/15/08 to 01/15/09. The value of the
collateral is $8,474,119.)
5.65% 10/20/97 8,441 (8,448,949)
Paine Webber
(Agreement dated 09/23/97 to
be repurchased at $4,420,717.
Collateralized by $8,415,000 Federal
National Mortgage Association, 6.00%
due 01/01/04 to 02/01/04. The value of
the collateral is $4,420,717.)
5.65% 10/23/97 4,400 (4,405,524)
Paine Webber
(Agreement dated 09/18/97 to
be repurchased at $5,652,453.
Collateralized by $6,760,000 Federal
National Mortgage Association, 7.00% to
8.50% due 06/01/04 to 12/01/10. The
value of the collateral is $5,652,453.)
5.62% 11/17/97 5,600 (5,601,707)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
STATEMENT OF NET ASSETS
LOW DURATION BOND PORTFOLIO (CONCLUDED)
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
--------- -------- -----------
REVERSE REPURCHASE AGREEMENTS (CONTINUED)
Paine Webber
(Agreement dated 09/22/97 to
be repurchased at $3,516,261.
Collateralized by $4,900,000 Federal
Home Loan Mortgage Corporation, 7.00%
to 8.00% due 05/01/00 to 01/01/04. The
value of the collateral is $3,516,261.)
5.65% 11/20/97 $3,484 $ (3,488,922)
TOTAL REVERSE REPURCHASE AGREEMENTS
(Cost $31,519,631) (31,519,631)
------------
LIABILITIES IN EXCESS OF OTHER
ASSETS (4.5%) (11,544,347)
------ ------------
NET ASSETS (Applicable to 6,903,395
Blackrock shares, 10,359,147
Institutional shares, 8,376,407 Service
shares, 109,020 Investor A shares,
1,314 Investor B shares and 7,314
Investor C shares outstanding) 100.0% $254,827,313
====== ============
NET ASSET VALUE AND
REDEMPTION PRICE PER
BLACKROCK, INSTITUTIONAL,
SERVICE AND INVESTOR A SHARE
($254,741,954 / 25,747,969) $9.89
=====
OFFERING PRICE PER BLACKROCK,
INSTITUTIONAL AND SERVICE SHARE $9.89
=====
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($9.89 / .970) $10.20
=====
Value
------------
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE (SUBJECT TO A MAXIMUM
CONTINGENT DEFERRED SALES CHARGE OF 4.5%)
PER INVESTOR B SHARE
($12,996 / 1,314) $9.89
=====
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE (SUBJECT TO A MAXIMUM
CONTINGENT DEFERRED SALES CHARGE OF 1.0%)
PER INVESTOR C SHARE
($72,363 / 7,314) $9.89
=====
- ----------------------
* Also cost for Federal income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 761,027
Gross unrealized depreciation (143,123)
--------------
$ 617,904
==============
** Rates shown are the rates as of September 30, 1997.
+ Partial principal in the amount of $44,483,000 has been pledged
as collateral for reverse repurchase agreements.
++ Principal amount of securities pledged as collateral is $719,551
on 225 long U.S. Treasury Notes and 57 short U.S. Treasury Notes
futures contracts expiring December 1997. The value of such
contracts on September 30, 1997 was $52,862,672, thereby resulting
in an unrealized gain of $128,890.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
STATEMENT OF NET ASSETS
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
--------- -------- -----------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS -- 27.1%
Federal Home Loan Bank
5.40%** 10/01/97 $3,000 $ 2,988,750
Small Business Administration
Participation Certificates,
Series 96-20H, Class 1
7.25% 08/01/16 2,919 2,998,988
Small Business Administration
Participation Certificates,
Series 96-20J, Class 1
7.20% 10/01/16 1,675 1,715,955
Small Business Investment
Cos. Pass-Through, Series 96-P10A,
Class 1
6.67% 02/10/06 2,800 2,796,401
Small Business Investment Cos.
Pass-Through, Series 96-P10C,
Class 1
7.35% 08/01/06 2,500 2,586,692
U.S. Treasury Bonds
12.75% 11/15/10 3,840 5,413,363
13.87% 05/15/11 1,525 2,290,794
14.00% 11/15/11 1,400 2,145,500
U.S. Treasury Notes
5.87% 07/31/99 7,900 7,906,636
5.87% 09/30/99 1,000 999,250
#6.00% 08/15/00 9,525 9,558,908
-------------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $40,969,736) 41,401,237
-------------
MORTGAGE PASS-THROUGHS -- 27.2%
Federal Home Loan Mortgage
Corporation COFI ARM
6.13% 09/01/20 3,196 3,165,499
Federal Home Loan Mortgage
Corporation
7.00% 05/01/16 1,204 1,216,572
8.00% 06/01/17 1,480 1,529,528
6.50% 01/24-10/27 3,525 3,438,736
Federal Home Loan Mortgage
Corporation 15 Year
7.00% 05/01/02 308 308,410
Federal Housing Administration, USGI
7.46% 05/01/21 1,893 1,936,859
Federal National Mortgage Association
6.50% 10/01/05 1,184 1,184,406
8.50% 12/01/10 3,258 3,422,518
7.26% 01/25/11 2,000 2,066,250
Federal National Mortgage
Association Multi-Family
6.50% 10/25/03 4,277 4,299,474
6.08% 10/25/22 4,419 4,442,430
Federal National Mortgage
Association 10 Year
6.00% 11/03-02/04 3,966 3,921,348
Federal National Mortgage Association
Multi 10-Year
7.71% 12/01/18 2,259 2,367,386
Government National Mortgage
Association
7.00% 04/15/26 204 203,890
Merrill Lynch, Series 97-23
7.43% 12/01/21 4,279 4,367,211
Par
Maturity (000) Value
-------- ------- -----------
MORTGAGE PASS-THROUGHS (CONTINUED)
MLCC Mortgage Investors, Inc.,
Series 96-C, Class A
6.05%**++ 09/15/21 $3,646 $ 3,660,946
-------------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $41,185,211) 41,531,463
-------------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS -- 11.2%
Collateralized Mortgage Obligation
Trust, Series 36, Class A, (PO)
6.31%** 10/25/17 809 636,408
Community Program Loan Trust,
Series 87-A, Class A4
4.50% 10/01/18 4,318 3,800,928
Federal National Mortgage Association
Grantor Trust, Series 96-T, Class C
6.20% 02/26/01 1,845 1,830,024
Federal National Mortgage Association
Grantor Trust, Series 96T, Class D
6.72% 02/26/01 5,137 5,162,798
Federal National Mortgage Association
Grantor Trust, Series 96-T6, Class A
6.32% 10/25/00 2,756 2,746,528
Residential Asset Securitization Trust,
Series 97-A1, Class A1
7.00% 03/25/27 1,335 1,340,791
Residential Asset Securitization Trust,
Series 97-A3, Class A1
7.25% 05/25/27 1,543 1,554,881
-------------
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $17,056,442) 17,072,358
-------------
COMMERCIAL MORTGAGE-BACKED
SECURITIES -- 1.7%
General Motors Acceptance Corp.
Series 97-C1, Class X (IO)
8.26%** 07/15/27 11,825 1,215,752
Morgan Stanley Capital Corp.,
Series 97-HF1, Class A1
6.86% 07/15/29 1,387 1,407,311
-------------
TOTAL COMMERCIAL MORTGAGE-
BACKED SECURITIES
(Cost $2,608,420) 2,623,063
-------------
ASSET BACKED SECURITIES -- 27.7%
American Express Credit Account
Master Trust, Series 97-1, Class A
6.50% 04/15/05 3,000 3,015,469
Arcadia Automobile Receivables Trust,
Series 97-B, Class A-4
6.50% 06/17/02 1,500 1,511,719
Associates Manufactured Housing
Pass-Through, Series 96-1, Class A1
6.20% 03/15/27 1,072 1,074,074
Chevy Chase Auto Receivables Trust,
Series 97-3, Class A
6.20% 03/20/04 1,490 1,491,397
Contimortgage Home Equity Loan
Trust, Series 97-4, Class A
6.44% 12/15/12 1,450 1,441,391
First USA Credit Card Master Trust,
Series 94-4, Class A
5.87% 08/15/03 3,000 3,023,906
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
STATEMENT OF NET ASSETS
INTERMEDIATE GOVERNMENT BOND PORTFOLIO (CONCLUDED)
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
--------- -------- -----------
ASSET BACKED SECURITIES (CONTINUED)
First USA Credit Card Master Trust,
Series 94-6, Class A
6.03%** 10/15/97 $2,700 $ 2,720,672
First USA Credit Card Master Trust,
Series 97-6, Class A
6.42%** 03/17/05 2,840 2,853,756
First Home Mortgage Acceptance Corp.,
Series 97-B, Class A
6.85% 09/01/19 1,475 1,490,441
General Motors Acceptance Corp.
7.43% 12/01/21 1,632 1,664,404
Green Tree Financial Corp.,
Series 95-7, Class A2
6.15% 11/15/26 1,245 1,247,122
Green Tree Financial Corp.,
Series 95-8, Class A5
6.90% 12/15/26 800 812,125
Green Tree Financial Corp.,
Series 96-7, Class A1
6.00% 10/15/27 899 899,234
Green Tree Home Improvement Loan
Trust, Series 97-C, Class HEA2
6.38% 08/15/27 1,600 1,607,000
HFC Home Equity Loan Asset Backed
Certificates, Series 93-1, Class A3
4.75% 05/20/08 336 334,476
National Premier Financial, Series 97-1,
Class A
6.81% 07/01/01 2,300 2,320,125
Old Stone Credit Corp. Home Equity
Trust, Series 93-2, Class A1
6.02% 06/15/08 1,975 1,959,727
Platinum Commercial Loan Master Trust,
Series 97-ARS, Class A2
5.89%** 09/20/06 2,700 2,700,000
Security Pacific Home Equity Loan,
Series 91-1, Class B
8.85% 05/15/98 1,899 1,918,621
SMS Student Loan Trust, Series 97-A,
Class A
5.76%** 10/27/25 1,500 1,473,047
Standard Credit Card Master Trust,
Series 95-6, Class A
6.75% 06/07/00 1,500 1,508,203
The Money Store Home Equity Trust,
Series 94-A, Class A2
5.25% 02/15/16 1,338 1,318,491
The Money Store Home Equity Trust,
Series 95-A, Class A8
8.12% 06/15/15 1,277 1,320,418
Union Acceptance Corp., Series 96-A,
Class A
5.40% 04/07/03 2,527 2,505,461
-------------
TOTAL ASSET BACKED SECURITIES
(Cost $42,111,556) 42,211,279
-------------
TAXABLE MUNICIPAL BONDS -- 2.1%
New Jersey Econ. Devel. Auth. Pension
Obligation Bond, Series 97, Class B
6.62% 02/15/02 1,527 1,165,162
Stanislaus County, CA, Pension
Obligation, Series 95
7.15% 08/15/13 2,000 2,040,000
-------------
TOTAL TAXABLE MUNICIPAL BONDS
(Cost $3,148,745) 3,205,162
-------------
Par
Maturity (000) Value
-------- ------- -----------
SHORT TERM INVESTMENTS -- 1.3%
Federal Home Loan Bank Discount Notes
6.00%** 10/01/97 $1,900 $ 1,900,000
Smith Barney Money Market Fund 59 58,594
-------------
TOTAL SHORT TERM INVESTMENTS
(Cost $1,958,594) 1,958,594
-------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $149,038,704*) 98.3% 150,003,156
OTHER ASSETS IN EXCESS
OF LIABILITIES 1.7% 2,589,572
------ -------------
NET ASSETS (Applicable to 9,556,151
Institutional shares, 4,998,928 Service
shares, 531,600 Investor A shares, 2,765
Investor B shares and 5,043 Investor
C shares outstanding) 100.0% $152,592,728
====== =============
NET ASSET VALUE AND REDEMPTION
PRICE PER INSTITUTIONAL, SERVICE
AND INVESTOR A SHARE
($152,513,787 / 15,086,679) $10.11
======
OFFERING PRICE PER INSTITUTIONAL
AND SERVICE SHARE $10.11
======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($10.11 / .960) $10.53
======
NET ASSET VALUE, OFFERING PRICE
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 4.5%) PER
INVESTOR B SHARE
($27,960 / 2,765) $10.11
======
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 1.0%) PER
INVESTOR C SHARE
($50,981 / 5,043) $10.11
======
- ------------------------
* Also cost for Federal income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 1,155,925
Gross unrealized depreciation (191,473)
-------------
$ 964,452
=============
** Rates shown are the rates as of September 30, 1997.
# Total or partial securities on loan.
++ Principal amount of securities pledged as collateral is $306,184
on 59 long U.S. Treasury Notes and 12 long U.S. Treasury Bond
futures contracts expiring December 1997. The value of such
contracts on September 30, 1997 was $7,880,750, thereby resulting
in an unrealized gain of $79,563.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
STATEMENT OF NET ASSETS
INTERMEDIATE BOND PORTFOLIO
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
-------- ------- -----------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS -- 8.8%
Federal Home Loan Bank Notes
5.40%** 10/27/97 $2,000 $ 1,992,500
Small Business Administration
Participation Certificates,
Series 92-20H, Class 1
7.40%** 08/01/12 4,055 4,182,786
Small Business Administration
Participation Certificates,
Series 96-20H, Class 1
7.25%** 08/01/16 3,893 3,998,650
Small Business Investment Cos.
Pass-Through, Series 96-P10A,
Class 1
6.67%** 02/10/06 3,100 3,096,016
Small Business Investment Cos.
Pass-Through, Series 96-P10C,
Class 1
7.35% 08/10/06 3,000 3,104,030
U.S. Treasury Bonds
13.87%+ 05/15/11 1,650 2,478,564
14.00%+ 11/15/11 5,200 7,969,000
U.S. Treasury Notes
6.37%+ 03/31/01 1,050 1,063,576
6.25% 02/15/07 2,880 2,894,112
-------------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $30,357,339) 30,779,234
-------------
MORTGAGE PASS-THROUGHS -- 17.7%
Federal Home Loan Mortgage Corporation
9.00% 06/01/21 1,189 1,265,248
6.50%+ 02/01/25 4,607 4,494,493
7.00% 10/01/25 1,697 1,693,414
Federal Home Loan Mortgage
Corporation, Series 5550
8.00%+ 09/01/18 6,688 6,921,823
Federal Home Loan Mortgage
Corporation 15 Year
8.50% 10/15/98 48 50,172
9.00% 12/01/01 170 176,941
9.50% 01/01/05 426 443,343
Federal Housing Administration,
USGI, Series 2056
7.46% 05/01/21 3,425 3,504,793
Federal National Mortgage Association
8.00%+ 03/01/08 4,124 4,265,149
7.50% 05/09-10/10 4,803 4,920,217
8.50%+ 12/01/10 4,594 4,826,628
Federal National Mortgage
Association Multi-Family
6.50% 10/25/03 1,800 1,806,750
7.26% 01/25/11 2,000 2,066,250
Federal National Mortgage
Association 10 Year
6.00% 01/04-02/04 7,238 7,156,463
Federal National Mortgage Association
15 Year
9.50% 03/01/05 18 19,008
General Motors Acceptance Corp.
7.43% 12/01/21 4,487 4,577,103
Merrill Lynch, Series 97-23
7.43% 12/01/21 9,969 10,190,099
MLCC Mortgage Investors, Inc.,
Series 96-C, Class A
6.06%**++ 09/15/21 1,302 1,307,481
Par
Maturity (000) Value
--------- -------- -----------
MORTGAGE PASS-THROUGHS (CONTINUED)
Salomon Brothers Mortgage
Securities VII, Series 96-6B,
Class A1
6.03%** 04/15/23 $1,121 $ 1,118,910
Salomon Brothers Mortgage
Securities VII, Series 96-6G,
Class A1
5.93%** 04/15/23 1,000 998,714
-------------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $61,147,743) 61,802,999
-------------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS -- 16.0%
Community Program Loan Trust,
Series 87-A, Class A4
4.50% 10/01/18 4,606 4,054,324
Federal Home Loan Mortgage
Corporation, Series T-2, Class A
7.00% 01/25/21 2,059 2,056,701
Federal National Mortgage Association
Grantor Trust, Series 96-T6, Class C
6.20%+ 02/26/01 7,472 7,411,598
Federal National Mortgage Association
Grantor Trust, Series 96-T6, Class A
6.32%+ 10/25/00 5,703 5,683,500
Federal National Mortgage Association,
Series 274, Class 1 (PO)
6.50% 10/01/25 1,272 1,001,565
Federal National Mortgage Association,
Series 280, Class 1 (PO)
5.06%+ 12/25/24 1,885 1,465,888
Federal National Mortgage Association,
Series 89-16, Class B (PO)
5.65%+ 03/25/19 1,668 1,306,799
Federal National Mortgage Association
Grantor Trust, Series 96-T6 Class D
6.72%+ 02/26/01 8,714 8,757,477
Residential Accredit Loans, Inc,
Series 95-QS1, Class A1
7.25% 10/25/27 6,400 6,446,000
Residential Asset Securitization Trust,
Series 96-A8, Class A1
8.00%+ 12/25/26 3,093 3,148,816
Residential Asset Securitization Trust,
Series 97-A1, Class A1
7.00% 03/25/27 3,116 3,128,512
Residential Asset Securitization Trust,
Series 97-A3, Class A1
7.25% 05/25/27 3,535 3,562,301
Residential Asset Securitization Trust,
Series 97-A9, Class A1
7.25% 11/25/27 7,610 7,686,100
-------------
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $55,246,119) 55,709,581
-------------
CORPORATE BONDS -- 29.4%
FINANCE -- 9.4%
American Savings Bank
6.62% 02/15/06 1,350 1,320,681
Bank of Boston
6.46%** 06/15/27 3,300 3,273,187
Bear Stearns Capital
7.00% 01/15/27 3,300 3,337,125
Chase Manhattan Corp.
6.62% 01/15/98 1,000 1,002,647
Crestar Capital Trust I
8.16% 12/15/26 2,700 2,794,500
Crestar Financial Corp.
8.25% 07/15/02 1,800 1,918,656
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
STATEMENT OF NET ASSETS
INTERMEDIATE BOND PORTFOLIO (CONTINUED)
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
--------- -------- -----------
CORPORATE BONDS (CONTINUED)
FINANCE (CONTINUED)
Equitable Surplus
6.95% 12/01/05 $1,000 $ 1,007,102
Finova Capital Corp.
7.12% 05/17/04 1,650 1,685,089
Ikon Capital Resources
6.93% 06/07/99 2,400 2,429,257
J.P. Morgan & Co.
5.99%** 02/15/12 2,500 2,403,750
Meridian Bancorp.
6.62% 06/15/00 1,500 1,515,413
National City Capital Trust I
6.75% 06/01/99 3,600 3,629,151
Paine Webber, Inc.
7.87% 02/15/03 1,500 1,577,526
Salomon, Inc.
8.90% 02/15/00 500 527,865
U.S. Bancorp
6.02%** 11/15/99 4,300 4,303,711
-------------
32,725,660
-------------
INDUSTRIAL -- 4.6%
Anixter, Inc.
8.00% 09/17/03 2,750 2,859,377
ERAC USA Finance Co.
6.95% 03/01/04 3,500 3,525,950
ITT Corp.
6.75% 11/15/03 3,000 2,959,319
News America Holdings
8.50% 02/15/05 3,000 3,245,917
RJR Nabisco, Inc.
6.70% 06/15/02 2,400 2,411,568
6.85% 06/15/05 300 300,615
7.05% 07/15/07 450 454,268
Texaco Capital Co.
9.00% 12/15/99 500 530,625
-------------
16,287,639
-------------
UTILITY -- 4.3%
CSW Energy
6.87% 10/01/01 3,000 3,029,857
Mobile Energy Services, L.L.C.
8.66% 01/01/17 474 505,348
PECO Energy Co.
5.62% 11/01/01 3,075 2,987,616
Pennsylvania Power & Light
9.25% 10/01/19 3,100 3,268,640
Potomac Capital Investment
Management
7.05% 10/02/01 2,550 2,590,633
Texas Utilities Electric Co.
7.37% 08/01/01 2,500 2,581,250
-------------
14,963,344
-------------
YANKEE -- 11.1%
Crown Cork & Seal, S.A.
6.75% 12/15/03 3,000 3,016,620
Export-Import Bank Korea
7.12% 09/20/01 3,900 3,902,784
Korea Development Bank
7.37% 09/17/04 1,520 1,530,675
Korea Electric Power
7.00% 10/01/02 505 502,903
Korea Export - Import Bank
7.10% 03/15/07 745 750,602
London Life Insurance Co.
6.87% 09/15/05 1,000 1,004,934
Nordbanken
6.31%** 10/25/01 3,050 3,054,575
Quebec Province
9.00% 05/08/01 2,150 2,324,563
Republic of Colombia
7.62% 02/15/07 3,325 3,266,283
Par
Maturity (000) Value
-------- ------- -----------
CORPORATE BONDS (CONTINUED)
YANKEE (CONTINUED)
SBC Glacier Finance LTD
5.90% 09/10/04 $7,450 $ 7,448,836
#Swedbank
7.50% 09/11/12 1,000 1,003,000
Telefonica De Argentina
11.87% 11/01/04 1,675 2,020,681
Tenaga Nasional Berhad
7.62% 04/29/07 3,150 3,179,906
Transport de Gas
7.75% 12/23/98 600 605,344
Vattenfall Treasury
6.00% 06/10/98 5,200 5,199,964
-------------
38,811,670
-------------
TOTAL CORPORATE BONDS
(Cost $101,884,826) 102,788,313
-------------
ASSET BACKED SECURITIES -- 37.9%
American Express Credit Account
Master Trust, Series 97-1, Class A
6.50% 04/15/05 6,000 6,030,937
Arcadia Automobile Receivables Trust,
Series 97-B, Class A-4
6.50% 06/17/02 2,100 2,116,406
Associates Manufactured Housing
Pass-Through, Series 96-1, Class A1
6.20% 12/01/98 1,492 1,494,364
Associates Manufactured Housing
Pass-Through, Series 96-1, Class B1
8.00% 02/01/14 2,500 2,575,391
Chevy Chase Auto Receivables Trust,
Series 97-1, Class A
6.50% 10/15/03 3,357 3,378,192
Chevy Chase Auto Receivables Trust,
Series 97-3, Class A
6.20% 03/20/04 3,360 3,363,150
Contimortgage Home Equity Loan Trust,
Series 97-4, Class A1
6.37% 03/15/08 10,000 9,992,187
Contimortgage Home Equity Loan Trust,
Series 97-4, Class A2
6.27% 02/15/12 3,000 3,002,812
Contimortgage Home Equity Loan Trust,
Series 97-4, Class A5
6.44% 12/15/12 3,300 3,280,406
Discover Card Master Trust I,
Series 94-2, Class A
6.00%** 10/16/04 950 957,422
EQCC Home Equity Loan Trust,
Series 94-1, Class A
5.80% 03/15/09 3,062 3,016,984
Fifth Third Auto Grantor Trust,
Series 96-B, Class A
6.45% 03/15/02 4,043 4,061,558
Fifth Third Bank Asset Trust,
Series 96, Class A
6.20% 09/15/01 3,091 3,098,335
First Home Mortgage Acceptance Corp.,
Series 97-B, Class A
6.85% 09/01/19 3,390 3,425,489
First USA Credit Card Master Trust,
Series 97-6, Class A
6.42% 03/17/05 6,540 6,571,678
Fleet Finance Home Equity Trust,
Series 91-2, Class B
8.65% 10/15/06 1,350 1,369,406
Ford Credit Auto Lease Trust,
Series 96-1, Class A
5.80% 05/15/99 4,941 4,933,762
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
STATEMENT OF NET ASSETS
INTERMEDIATE BOND PORTFOLIO (CONTINUED)
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
--------- -------- -----------
ASSET BACKED SECURITIES (CONTINUED)
Green Tree Financial Corp.,
Series 94-A, Class A
6.90% 02/15/04 $ 845 $ 848,120
Green Tree Financial Corp.,
Series 94-B, Class A
7.85% 07/15/04 2,655 2,684,823
Green Tree Financial Corp.,
Series 95-8, Class A5
6.90% 12/15/26 1,600 1,624,250
Green Tree Financial Corp.,
Series 95-A, Class A
7.25% 07/15/05 5,090 5,078,409
Green Tree Financial Corp.,
Series 96-10, Class B1
7.24% 03/15/07 2,900 2,925,375
Green Tree Financial Corp.,
Series 96-7, Class A6
7.65% 10/15/27 1,800 1,862,437
Green Tree Financial Corp.,
Series 96-9, Class B1
7.65% 12/20/27 2,400 2,481,750
HFC Home Equity Loan Asset Backed
Certificates, Series 93-1, Class A3
4.75% 05/20/08 648 645,479
MBNA Master Credit Card Trust,
Series 97-J, Class A
5.76%** 02/15/07 5,500 5,496,563
Mellon Bank Home Equity Loan Trust,
Series 96-1, Class B2
6.07%** 04/15/26 3,500 3,506,563
MMCA Automobile Trust, Series 95-1,
Class A
5.70% 11/15/00 937 936,123
Olympic Automobile Receivables Trust,
Series 97-A, Class A2
6.12% 08/15/00 3,930 3,930,859
Platinum Commercial Loan Master Trust,
Series 97-A, Class A2
5.88% 09/20/06 6,175 6,175,000
Puget Power Conservation
Grantor Trust, Series 97-1
6.23% 07/11/02 3,100 3,093,219
Security Pacific Home Equity Loan,
Series 91-1, Class B
8.85% 05/15/98 3,165 3,197,701
Student Loan Marketing Association,
Series 97-3, Class A1
5.80%** 04/25/06 4,050 4,041,141
Student Loan Marketing Association,
Series 97-3, Class CTFS
5.96%** 10/25/12 4,250 4,204,844
SMS Student Loan Trust,
Series 1997, Class A
5.96%** 10/25/25 4,000 3,928,125
The Money Store Home Equity Trust,
Series 94-A, Class A2
5.25% 02/15/16 3,210 3,164,378
The Money Store Home Equity Trust,
Series 95-A, Class A8
8.12% 06/15/15 3,802 3,929,815
Union Acceptance Corp.,
Series 96-A, Class A
5.40% 04/07/03 2,603 2,580,625
World Omni Automobile Lease
Securitization Trust, Series 96-A, Class A2
6.55% 06/25/02 3,190 3,218,129
-------------
TOTAL ASSET BACKED SECURITIES
(Cost $131,900,749) 132,222,207
-------------
Par
Maturity (000) Value
-------- ------- -----------
COMMERCIAL MORTGAGE-BACKED
SECURITIES -- 9.3%
Amresco Residential Securities
Mortgage Loan Trust, Series 96-1,
Class A
8.10% 04/26/26 $2,133 $ 2,048,878
Bosque Asset Corp., Series 97-1,
Class A1
7.66% 06/05/02 3,714 3,732,866
CBA Mortgage Corp., Series 93-C1,
Class B
7.76%** 12/25/03 1,000 1,016,094
GMAC Commercial Mortgage
Securities Inc, Series 97-C1,
Class X (IO)
8.26% 07/15/27 27,180 2,794,444
J.P. Morgan Commercial Mortgage
Finance Corp., Series 97, Class D
6.60%** 06/25/27 4,000 4,018,800
Merrill Lynch Mortgage Investors, Inc.,
Series 95-C1, Class C
7.54%** 05/25/15 1,200 1,236,217
Morgan Stanley Capital Corp.,
Series 97-HF1, Class A1
6.86% 07/15/29 3,221 3,266,973
NYC Mortgage Loan Trust,
Series 96, Class A1
6.75% 06/25/06 4,775 4,799,992
Resolution Trust Corp.,
Series 93-C3, Class D
7.10% 12/25/24 1,998 2,000,515
Structured Asset Securities Corp.,
Series 97-N1, Class A2
5.80%** 09/25/28 1,483 1,482,971
Structured Asset Securities Corp.,
Series 97-N1, Class D
6.15%** 09/25/28 6,000 6,000,000
-------------
TOTAL COMMERCIAL MORTGAGE-
BACKED SECURITIES
(Cost $32,242,112) 32,397,750
-------------
TAXABLE MUNICIPAL BONDS -- 1.3%
New Jersey Econ. Devel. Auth.
6.94% 02/15/05 2,900 1,805,134
New York City G.O. Series E
6.55% 08/01/00 2,900 2,921,750
-------------
TOTAL TAXABLE MUNICIPAL BONDS
(Cost $4,653,992) 4,726,884
-------------
SHORT TERM INVESTMENTS -- 0.2%
Smith Barney Money Market Fund
(Cost $572,681) 573 572,681
----- -------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $418,005,561*) 120.6% 420,999,649
REVERSE REPURCHASE AGREEMENTS -- (19.0%)
Aubrey Lanston
(Agreement dated 09/29/97
to be repurchased at $388,923.
Collateralized by $250,000 U.S.
Treasury Bonds, 13.875% due 05/15/11.
The value of the collateral is
$388,923.)
5.63% 10/07/97 388 (388,559)
Aubrey Lanston
(Agreement dated 09/25/97 to be
repurchased at $1,460,437.
Collateralized by $1,400,000 U.S.
Treasury Notes, 6.375% due
03/31/01. The value of the
collateral is $1,460,437.)
5.53% 10/07/97 1,458 (1,459,094)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
STATEMENT OF NET ASSETS
INTERMEDIATE BOND PORTFOLIO (CONCLUDED)
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
-------- ------- -----------
REVERSE REPURCHASE AGREEMENTS (CONTINUED)
Aubrey Lanston
(Agreement dated 09/25/97
to be repurchased at $8,250,681.
Collateralized by $5,200,000 U.S.
Treasury Bonds, 14.0% due 11/15/11. The
value of the collateral is $8,250,681.)
5.53% 10/07/97 $ 8,236 $ (8,243,090)
Lehman Brothers
(Agreement dated 09/22/97 to be
repurchased at $1,091,033.
Collateralized by $700,000 U.S.
Treasury Bonds, 13.875% due
05/15/11. The value of the
collateral is $1,091,033.)
5.48% 10/02/97 1,089 (1,090,867)
Lehman Brothers
(Agreement dated 09/25/97
to be repurchased at $857,556.
Collateralized by $550,000 U.S.
Treasury Bonds, 13.875% due 05/15/11.
The value of the collateral is
$857,556.)
5.59% 10/02/97 857 (857,423)
Lehman Brothers
(Agreement dated 09/30/97
to be repurchased at $2,581,752.
Collateralized by $8,890,000 Federal
National Mortgage Association Bonds,
Series 89-16, Class B, 5.65% due
03/25/19 and $1,850,000 Federal
National Mortgage Association Strip
Notes, Series 280, Class B, 5.06% due
12/25/24. The value of the collateral
is $2,581,752.)
5.00% 10/16/97 2,575 (2,575,422)
Lehman Brothers
(Agreement dated 09/29/97 to be
repurchased at $6,028,000.
Collateralized by $6,725,000
Federal National Mortgage
Association Grantor Trust,
Series 96-T6, Class A Bonds
6.725% due 02/26/01.
The value of the collateral
is $6,028,600.)
5.59% 10/29/97 6,000 (6,001,907)
Lehman Brothers
(Agreement dated 09/30/97
to be repurchased at $12,806,839.
Collateralized by $6,208,019 Federal
National Mortgage Association Grantor
Trust , Series 96-T6, Class A Bonds
6.325% due 10/25/00 and $8,100,000
Federal National Mortgage Association
Bonds 6.20% due 02/26/01. The value of
the collateral is $12,767,864.)
5.78% 11/13/97 12,717 (12,719,042)
Paine Webber
(Agreement dated 09/18/97 to be
repurchased at $3,772,853.
Collateralized by $3,900,000
Federal Housing Administration
Pools, 8.0% due 01/15/09.
The value of the collateral
is $3,772,853.)
5.65% 10/20/97 3,754 (3,761,660)
Par
Maturity (000) Value
-------- ------- -----------
REVERSE REPURCHASE AGREEMENTS (CONTINUED)
Paine Webber
(Agreement dated 09/29/97 to be
repurchased at $13,410,176.
Collateralized by $14,500,000
Federal Home Loan Mortgage
Corp. 8.0% due 09/01/09 and
$58,000,000 Federal National
Mortgage Association 6.0% to
7.50% due 01/01/04 to 05/01/09 .
The value of the collateral
is $13,410,176.)
5,68% 10/29/97 $13,347 $(13,351,212)
Paine Webber
(Agreement dated 09/12/97 to
be repurchased at $13,069,952.
Collateralized by $14,581,114 Federal
National Mortgage Association 8.00% to
8.50% due 03/01/08 to 12/01/10 and
$4,943,371 Federal Home Loan Mortgage
Corp. 6.50% due 02/01/25. The value of
the collateral is $13,069,952.)
5.68% 11/13/97 12,944 (12,982,598)
Paine Webber
(Agreement dated 09/18/97 to be
repurchased at $2,763,783.
Collateralized by $10,249,990 Federal
Home Loan Mortgage Corp. 8.00% due
09/01/18. The value of the
collateral is $2,763,783.)
5.65% 11/17/97 2,738 (2,743,586)
-------------
TOTAL REVERSE REPURCHASE AGREEMENTS
(Cost $66,174,460) (66,174,460)
LIABILITIES IN EXCESS OF
OTHER ASSETS (1.6%) (5,684,218)
------ -------------
NET ASSETS (Applicable to 31,154,355
Institutional shares, 5,513,846 Service
shares, and 117,568 Investor A
shares outstanding) 100.0% $ 349,140,971
====== =============
NET ASSET VALUE AND REDEMPTION
PRICE PER INSTITUTIONAL, SERVICE
AND INVESTOR A SHARE
($349,140,971 / 36,785,769) $9.49
=====
OFFERING PRICE PER INSTITUTIONAL
AND SERVICE SHARE $9.49
=====
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($9.49 / .960) $9.89
=====
- ----------------------
* Also cost for Federal income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 3,529,228
Gross unrealized depreciation (535,140)
-------------
$ 2,994,088
=============
** Rates shown are the rates as of September 30, 1997.
# Total or partial securities on loan.
+ Partial principal in the amount of $73,154,123 has been pledged
as collateral for reverse repurchase agreements.
++ Principal amount of securities pledged as collateral of $502,105
on 32 long U.S. Treasury Bonds futures contracts expiring
December 1997. The value of such contracts on September 30, 1997
was $3,524,000, thereby resulting in an unrealized gain of
$46,000.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
STATEMENT OF NET ASSETS
CORE BOND PORTFOLIO
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
-------- ------- -----------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 35.4%
Small Business Administration
Participation Certificates,
Series 97-20B, Class 1
7.10% 02/01/17 $ 2,589 $ 2,636,927
Small Business Administration
Participation Certificates,
Series 96-20J, Class 1
7.20% 10/01/16 59 60,563
Small Business Administration
Participation Certificates,
Series 92-20H, Class 1
7.40% 08/01/12 243 250,967
Small Business Investment Cos.
Pass-Through, Series 97-P10C,
Class 1
6.85% 08/01/07 5,500 5,599,724
Small Business Investment Cos.
Pass-Through, Series 97-P10A,
Class 1
7.08% 02/10/07 2,000 2,039,064
Small Business Investment Cos.
Pass-Through, Series 95-P10C,
Class 1
7.35% 08/10/05 398 410,854
Small Business Investment Cos.
Pass-Through, Series 96-P10C,
Class 1
7.35% 08/10/06 3,350 3,466,167
U.S. Treasury Bonds
12.75% 11/15/10 240 338,335
13.87% 05/15/11 50 75,108
14.00% 11/15/11 150 229,875
12.50% 08/15/14 650 979,699
#6.50% 11/15/26 36,479 36,761,709
#6.62% 02/15/27 18,150 18,588,502
#6.37%+ 08/15/27 12,540 12,480,685
U.S. Treasury Notes
6.37% 04/30/99 175 176,619
6.25% 05/31/99 620 624,501
#5.87% 11/15/99 8,870 8,878,869
#6.00%+ 08/15/00 44,275 44,432,615
6.50% 05/31/02 1,610 1,640,863
#6.25% 06/30/02 31,570 31,875,282
#6.25% 08/31/02 7,940 8,012,809
7.00% 07/15/06 230 242,613
6.50% 10/15/06 9,650 9,861,045
#6.25% 02/15/07 3,050 3,066,866
#6.12% 08/15/07 9,495 9,504,590
-------------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $200,041,802) 202,234,851
-------------
MORTGAGE PASS-THROUGHS -- 8.7%
Federal Home Loan Mortgage
Corporation
8.00% 11/01/15 124 129,010
7.00% 03/01/25 849 847,538
7.50%+ 01/26-08/27 5,052 5,143,823
Federal Home Loan Mortgage
Corporation 15 Year
7.50%+ 05/12-07/12 6,366 6,520,158
Federal National Mortgage
Association Multi-Family
6.50% 10/25/03 100 100,375
Par
Maturity (000) Value
-------- ------- -----------
MORTGAGE PASS-THROUGHS (CONTINUED)
Federal National Mortgage Association
7.50% 09/01/10 $ 196 $ 199,913
8.00% 05/01/22 172 177,842
9.00% 06/01/24 424 450,990
Government National Mortgage
Association 1 Year CMT ARM
5.50%** 07/27-08/27 7,421 7,413,996
Government National Mortgage
Association
8.50% 04/15/17 405 424,709
7.00% 01/23-12/23 7,922 7,927,525
6.50% 12/23-04/24 2,971 2,907,115
7.50% 02/97-07/27 16,877 17,172,429
Government National Mortgage
Association Project Loan
9.00% 10/15/24 478 499,269
-------------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $49,259,889) 49,914,692
-------------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS -- 9.2%
Community Program Loan Trust,
Series 87-A, Class A4
4.50% 10/01/18 9,451 8,319,810
Federal Home Loan Mortgage Corp.,
Series 96, Class PM (IO)
7.50% 06/15/27 2,531 1,098,785
Federal National Mortgage Association,
Series 280, Class 1 (PO)
5.00% 12/25/24 1,301 1,011,842
Federal National Mortgage Association,
Series 274, Class 1 (PO)
7.00% 10/01/25 1,087 856,107
Federal National Mortgage Association,
Series 96-54, Class A (PO)
6.50% 04/25/21 1,971 1,632,092
Federal National Mortgage Association,
Series 97, Class PJ(IO)
7.50% 07/18/27 11,250 5,139,844
Federal National Mortgage Association,
Series 97, Class QG(IO)
7.50% 10/18/26 2,500 1,075,000
Independent National Mortgage Corp.,
Series 95-U,Class A1
7.25% 01/25/26 2,339 2,352,022
Merrill Lynch, Series 97-23
7.43% 12/01/21 419 428,155
MLCC Mortgage Investors, Inc.,
Series 96-C, Class A
6.06% 09/15/21 3,038 3,050,788
Residential Accredit Loans Inc.,
Series 97-QS10, Class A1
7.25% 10/25/27 10,300 10,374,031
Residential Accredit Loans Inc.,
Series 97-QS7, Class A1
7.50% 07/25/27 4,708 4,763,377
Residential Asset Securitization Trust,
Series 97-A7, Class A1
7.50% 09/25/27 5,706 5,771,798
Salomon Brothers Mortgage
Securities VI, Series 87-1 (IO)
7.00% 04/20/07 3,382 1,037,950
Salomon Brothers Mortgage
Securities VI, Series 87-1 (PO)
7.00% 02/17/17 3,382 2,617,072
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
STATEMENT OF NET ASSETS
CORE BOND PORTFOLIO (CONTINUED)
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
-------- ------- -----------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS (CONTINUED)
Salomon Brothers Mortgage
Securities VI, Series 87-2 (IO)
6.00% 03/06/17 $ 2,467 $ 757,204
Salomon Brothers Mortgage
Securities VI, Series 87-2 (PO)
4.95% 03/06/17 2,378 1,840,042
Salomon Brothers Mortgage Securities,
Series 87-3, Class A (PO)
5.00% 10/23/17 576 444,429
Salomon Brothers Mortgage Securities,
Series 87-3, Class B (IO)
5.00% 10/23/17 575 203,557
------------
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $52,329,033) 52,773,905
-------------
COMMERCIAL MORTGAGE-BACKED
SECURITIES -- 6.8%
Chase Commercial Mortgage Securities
Corp., Series 97-1, Class X (IO)
8.69% 07/15/27 35,291 3,021,816
CS First Boston Mortgage Corp.,
Series 97-C1, Class AX (IO)
8.60% 06/20/29 49,513 5,678,473
DLJ Mortgage Acceptance Corp.,
Series 97-CF1, Class A
7.60% 05/15/30 2,000 2,117,257
First Boston Mortgage Securities
Corp., Series 93-M1, Class A
6.75% 09/25/06 117 117,535
First Union-Lehman Brothers
Commercial Mortgage 1
7.38% 04/18/29 4,350 4,587,370
GMAC Commercial Mortgage
Securities, Series 97, Class X (IO)
8.26% 07/15/27 44,365 4,561,277
Goldman Sachs Mortgage Securities
Corp. II
7.41% 02/15/27 2,841 2,942,012
J.P. Morgan Commercial Mortgage
Finance Corp., Series 96-C3 Class A1
7.33% 04/25/28 1,923 1,990,400
Merrill Lynch Mortgage Investors, Inc.,
Series 95-C3, Class A
6.78% 12/26/25 273 275,837
Merrill Lynch Mortgage Investors, Inc.,
Series 96-C1, Class A3
7.42% 04/25/28 3,000 3,121,440
Midland Royalty Acceptance Corp.,
Series 96-C, Class A
7.23% 12/15/26 3,800 3,931,265
Structured Asset Securities Corp.,
Series 96-CFL, Class X1 (IO)
12.60% 02/25/28 23,327 1,215,560
Structured Asset Securities Corp.,
Series 97-N1, Class D
6.15%** 09/25/28 5,600 5,600,000
-------------
TOTAL COMMERCIAL MORTGAGE-
BACKED SECURITIES
(Cost $38,278,680) 39,160,242
-------------
PROJECT LOANS -- 6.5%
Federal Housing Adminisration, Elton
Home, Construction Loan Collateral
9.25% 10/30/36 3,052 3,324,758
Par
Maturity (000) Value
-------- -------- -----------
PROJECT LOANS (CONTINUED)
Federal Housing Administration,
East Point Chelsea,
Construction Loan Collateral
10.25% 05/01/33 $ 98 $ 105,845
Federal Housing Administration,
Northfield Commons,
Construction Loan Committment
7.90% 09/01/37 7,304 7,610,797
Federal Housing Administration,
Northfield Commons,
Construction Loan Collateral
7.90% 09/01/37 415 432,027
Federal Housing Administration,
University Park Apartments,
Construction Loan Collateral
7.87% 12/01/37 5,918 6,150,166
Federal Housing Administration,
University Park Apartments,
Construction Loan Committment
7.87% 10/01/37 1,307 1,358,069
Federal Housing Administration,
Village Green,
Construction Loan Collateral
8.25% 09/01/34 5,254 5,537,568
General Motors Acceptance Corp.
7.43% 12/01/21 408 416,686
Huntoon Paige, Series 97-B FHA
7.31% 10/01/24 6,864 7,000,975
Reilly Mortgage Securities
6.89% 11/18/11 5,091 5,040,029
-------------
TOTAL PROJECT LOANS
(Cost $37,147,021) 36,976,920
-------------
ASSET BACKED SECURITIES -- 23.0%
Amresco Residential Securities
Mortgage Loan Trust, Series 96-1,
Class A
8.10% 04/26/26 2,133 2,048,808
Associates Manufactured Housing
Pass-Through, Series 96-1, Class B1
8.00% 02/01/14 2,815 2,899,890
Banc One Auto Grantor Trust,
Series 97-A, Class A
6.27%++ 11/20/03 5,455 5,476,220
Barnett Auto Trust Series 1997,
Class A2
5.92% 07/15/00 4,900 4,900,000
Chase Manhattan Grantor Trust,
Series 96-B, Class A
6.61% 09/16/02 4,384 4,413,431
CIT Group Securitization Corp.,
Series 95-2, Class B
7.65% 05/15/26 300 294,516
Contimortgage Home Equity Loan Trust,
Series 97-4, Class A1
6.37% 03/15/08 10,000 9,992,187
Copelco Capital Funding Corp.,
Series 97-A, Class A3
6.27% 04/20/05 2,645 2,655,745
Discover Card Master Trust I,
Series 92-B, Class A
6.80% 06/16/00 3,744 3,752,041
Discover Card Master Trust I,
Series 94-2, Class A
6.00%** 10/15/04 10,000 10,078,125
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
STATEMENT OF NET ASSETS
CORE BOND PORTFOLIO (CONTINUED)
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
-------- -------- -----------
ASSET BACKED SECURITIES (CONTINUED)
Discover Card Master Trust I,
Series 96-4, Class A
6.01%** 10/16/13 $ 4,675 $ 4,744,394
FMAC LN Receivables, Series 97,
Class A
6.85% 09/01/19 6,145 6,209,330
GE Capital Mortgage Services,
Series 97-HE1, Class A4
7.78% 03/25/27 1,666 1,726,913
Green Tree Financial Corp.,
Series 93-1, Class A
6.90% 04/15/18 400 404,750
Green Tree Financial Corp.,
Series 93-3, Class B
6.85% 10/15/18 4,000 $3,980,000
Green Tree Financial Corp.,
Series 93-4, Class A
6.60% 01/15/19 600 602,625
Green Tree Financial Corp.,
Series 94-5, Class A
7.95% 11/15/19 400 417,375
Green Tree Financial Corp.,
Series 94-B, Class A
7.85% 07/15/04 190 191,773
Green Tree Financial Corp.,
Series 95-7, Class B1
7.35% 11/15/26 600 611,250
Green Tree Financial Corp.,
Series 95-A, Class A
7.25% 07/15/05 6,415 6,400,599
Green Tree Financial Corp.,
Series 96-2, Class B2
7.90% 04/15/27 3,650 3,773,187
Green Tree Financial Corp.,
Series 96-6, Class B2
8.35% 09/15/27 1,900 2,035,078
Green Tree Financial Corp.,
Series 97-2, Class B
7.56% 04/15/27 5,000 5,142,187
Green Tree Financial Corp.,
Series 97-3, Class A7
7.64% 01/15/15 4,200 4,380,469
Green Tree Financial Corp.,
Series 97-3, Class B2
8.03% 07/15/28 2,400 2,519,250
Green Tree Financial Corp.,
Series 97-4, Class A
7.36% 09/15/27 5,000 5,084,375
Green Tree Home Improvement
Loan Trust, Series 94-D, Class M
9.05% 01/15/15 700 767,922
Honda Auto Receivables Grantor Trust,
Series 97-A, Class A
5.85% 02/15/03 3,726 3,720,124
Mellon Bank Home Equity Loan Trust,
Series 96-1, Class B2
6.10%** 04/15/26 5,200 5,209,750
Merrill Lynch Mortgage Investors, Inc.,
Series 92-D, Class A
7.75% 07/15/17 300 303,703
Mid-State Trust, Series 6, Class A4
7.79% 07/01/25 1,132 1,163,818
Mid-State Trust, Series 1, Class A1
7.34% 07/01/35 2,952 3,024,976
Nissan Auto Receivable Grantor Trust,
Series 95-A, Class A
6.10% 08/15/01 1,423 1,424,081
Par
Maturity (000) Value
-------- -------- -----------
ASSET BACKED SECURITIES (CONTINUED)
Puget Power Conservation Grantor
Trust, Series 97-1
6.23% 07/11/02 $ 4,700 $ 4,689,719
Standard Credit Card Master Trust,
Series 95-6, Class A
6.75% 06/07/00 2,201 2,213,037
Student Loan Marketing Association,
Series 97-3, Class A2
5.78%** 10/25/10 6,000 5,971,875
Student Loan Marketing Association,
Series 97-3
5.96%** 10/25/12 2,500 2,473,437
The Money Store Home Equity Trust,
Series 95-A, Class A8
8.12% 06/15/15 1,886 1,949,188
The Money Store Home Equity Trust,
Series 94-A, Class A2
5.25% 02/15/16 3,745 3,691,775
-------------
TOTAL ASSET BACKED SECURITIES
(Cost $130,334,038) 131,337,923
-------------
CORPORATE BONDS -- 20.6%
FINANCE -- 7.5%
BT Capital Trust B
7.90% 01/15/27 2,425 2,443,111
Crestar Capital Trust I
8.16% 12/15/26 2,900 3,001,500
Crestar Financial Corp.
8.25% 07/15/02 400 426,368
Equitable Life Assurance Society
7.70% 12/01/15 250 259,348
Finova Capital Corp.
7.12% 05/17/04 150 153,190
HSBC America Capital II
8.38% 05/15/27 4,500 4,711,646
J.P. Morgan & Co.
6.92%** 02/15/12 100 96,150
Liberty Mutual Co.
8.50% 05/15/25 300 334,990
Meditrust
7.37% 07/15/00 350 357,825
Mellon Capital II
7.99% 01/15/27 2,700 2,762,030
Merrill Lynch & Co.
6.47% 06/27/00 4,200 4,226,051
Metropolitan Life Insurance Co.
6.30% 11/01/03 400 392,529
National City Capital Trust I
6.75% 06/01/99 2,700 2,721,864
Principal Mutual
7.87% 03/01/24 3,650 3,724,233
Riggs Capital Trust
8.62% 12/31/26 5,000 5,113,574
Safeco Capital Trust
8.07% 07/15/37 2,800 2,825,913
Salomon, Inc.
6.70% 12/01/98 450 453,230
6.70% 07/05/00 5,200 5,248,274
#Zurich Capital Trust
8.37% 06/01/27 3,600 3,813,996
-------------
43,065,822
-------------
INDUSTRIAL -- 3.9%
ERAC USA Finance Co.
6.95% 03/01/04 5,100 5,137,813
Ford Motor Credit Corp.
8.00% 06/15/02 1,000 1,065,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
STATEMENT OF NET ASSETS
CORE BOND PORTFOLIO (CONCLUDED)
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
-------- ------- -----------
CORPORATE BONDS (CONTINUED)
INDUSTRIAL (CONTINUED)
GMAC Pass-Through Trust
6.50% 01/17/00 $ 2,800 $ 2,814,725
Hilton Hotels Corp.
7.37% 06/01/02 60 61,305
ITT Corp.
6.75% 11/15/03 3,390 3,344,030
7.37% 11/15/15 800 771,468
News America Holdings
8.50% 02/15/05 2,400 2,596,734
RJR Nabisco, Inc.
7.55% 06/15/15 3,175 3,270,881
Time Warner
6.10% 12/30/01 3,500 3,416,074
-------------
22,478,030
-------------
UTILITY -- 0.6%
Pennsylvania Power & Light
9.25% 10/01/19 200 210,880
Texas Utilities Capital Trust
8.17% 01/30/37 2,750 2,805,920
Texas Utilities Electric Co.
7.37% 08/01/01 125 129,062
-------------
3,145,862
-------------
YANKEE -- 8.6%
BGB Finance
6.62% 12/30/99 5,500 5,557,970
Crown Cork & Seal
6.75% 12/15/03 200 201,108
#Korea Development Bank
6.50% 11/15/02 2,065 2,018,358
Korea Export - Import Bank
7.12% 09/20/01 5,100 5,103,641
7.10% 03/15/07 1,195 1,203,985
Perez Companc S.A.
8.12% 07/15/07 2,250 2,261,250
Poland
3.00%** 10/27/24 7,165 4,325,869
Republic of Colombia
7.62% 02/15/07 4,900 4,813,469
Republic of South Africa
8.37% 10/17/06 4,919 5,198,891
SBC Class 97-1
5.90%** 09/10/04 5,700 5,699,109
Swedbank
7.50%** 11/01/06 2,800 2,865,718
#7.50%** 09/11/12 2,800 2,808,400
Telefonica De Argentina
11.87% 11/01/04 2,100 2,533,391
Vattenfall Treasury
6.00% 06/10/98 4,295 4,294,970
-------------
48,886,129
-------------
TOTAL CORPORATE BONDS
(Cost $116,315,597) 117,575,843
-------------
TAXABLE MUNICIPAL BONDS -- 1.7%
New Jersey Economic Development Authority
6.80% 02/15/05 200 124,492
7.09% 06/30/11 4,185 1,687,852
7.56% 02/15/16 10,100 2,834,160
7.59% 02/15/17 3,575 934,362
7.21% 02/15/18 5,500 1,341,229
7.62% 02/15/20 6,265 1,327,240
7.62% 02/15/21 2,660 528,116
Par
Maturity (000) Value
-------- ------- -----------
TAXABLE MUNICIPAL BONDS (CONTINUED)
7.63% 02/15/22 $ 3,735 $ 695,233
7.63% 02/15/23 1,415 247,045
-------------
TOTAL TAXABLE MUNICIPAL BONDS
(Cost $8,947,057) 9,719,729
-------------
SHORT TERM INVESTMENTS -- 0.0%
Smith Barney Money Market Fund
(Cost $237,903) 238 237,903
-------------
TOTAL INVESTMENTS IN
SECURITIES
(Cost $632,888,020*) 111.9% 639,932,008
LIABILITIES IN EXCESS OF OTHER
ASSETS (Including $61,279,309 of
reverse repurchase agreements payable) (11.9%) (67,963,758)
------ -------------
NET ASSETS (Applicable to 4,902,593
Blackrock shares, 40,090,668
Institutional shares, 12,456,164 Service
shares, 248,559 Investor A shares,
539,231 Investor B shares and 13,083
Investor C shares outstanding) 100.0% $ 571,968,250
------ -------------
NET ASSET VALUE AND REDEMPTION
PRICE PER BLACKROCK,
INSTITUTIONAL, SERVICE, AND
INVESTOR A SHARE
($566,544,625 / 57,697,984) $9.82
=====
OFFERING PRICE PER BLACKROCK,
INSTITUTIONAL AND SERVICE SHARE $9.82
=====
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($9.82 / .960) $10.23
======
NET ASSET VALUE, OFFERING PRICE
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 4.5%)
PER INVESTOR B SHARE
($5,295,151 / 539,231) $9.82
=====
NET ASSET VALUE, OFFERING PRICE
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 1.0%)
PER INVESTOR C SHARE
($128,474 / 13,083) $9.82
=====
- -----------------------
* Also cost for Federal income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 7,799,847
Gross unrealized depreciation (755,859)
-------------
$ 7,043,988
=============
** Rates shown are the rates as of September 30, 1997.
# Total or partial securities on loan.
+ Partial principal in the amount of $61,225,000 has been pledged
as collateral for reverse repurchase agreements.
++ Principal amount of securities pledged as collateral of
$2,509,725 on 432 short U.S. Treasury Bonds futures contracts
expiring December 1997. The value of such contracts on September
30, 1997 was $48,409,500, thereby resulting in an unrealized gain
of $347,250.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
STATEMENT OF NET ASSETS
GOVERNMENT INCOME PORTFOLIO
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
-------- ------- -----------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS -- 68.3%
Federal Home Loan Bank Notes
5.40%** 10/01/97 $ 500 $ 498,125
Small Business Administration
Participation Certificates,
Series 96-20I, Class 1
7.70% 09/01/16 290 304,634
Small Business Administration
Participation Certificates,
Series 96-20J, Class 1
7.20% 10/01/16 444 454,223
U.S. Treasury Bonds
7.00% 05/13/26 500 498,281
6.50% 11/15/26 730 735,657
#6.62% 02/15/27 335 343,094
#6.37%+ 08/15/27 1,390 1,383,425
U.S. Treasury Notes
6.25% 03/31/99 1,250 1,259,212
6.37% 05/15/00 900 911,034
6.00%+ 08/15/00 2,500 2,508,900
6.50% 05/31/02 255 259,888
#6.25%+ 06/30/02 2,950 2,978,526
#6.25% 08/31/02 280 282,568
7.00% 07/15/06 470 495,775
6.50% 10/15/06 250 255,468
6.25%+ 02/15/07 850 854,700
-------------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $13,919,917) 14,023,510
-------------
MORTGAGE PASS-THROUGHS -- 62.0%
Federal Home Loan Mortgage
Corporation 15 Year
7.00%++ 08/10-05/12 3,214 3,246,748
Federal Home Loan Mortgage
Corporation
9.00% 06/01/21 705 755,799
7.50%+ 11/25-07/27 3,915 3,986,343
Federal National Mortgage
Association 15 Year
7.00% 08/10-12/11 561 566,332
Government National Mortgage
Association
6.50% 12/15/23 382 373,365
7.50% 12/15/25 966 983,180
8.50% 06/26-04/27 2,690 2,815,679
-------------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $12,555,179) 12,727,446
-------------
Par
Maturity (000) Value
-------- ------- -----------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS -- 5.0%
Federal National Mortgage Association,
Series 96-54, Class A (PO)
5.85% 04/25/21 $ 461 $ 381,993
Salomon Brothers Mortgage
Securities VI, Series 87-1 (IO)
5.00% 04/20/07 586 179,729
Salomon Brothers Mortgage
Securities VI, Series 87-1 (PO)
5.92% 02/17/17 586 453,165
-------------
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $1,023,242) 1,014,887
-------------
ASSET BACKED SECURITIES -- 1.4%
Chase Manhattan Grantor Trust,
Series 96-B, Class A
6.61% 09/15/0 135 135,798
Chevy Chase Auto Receivables Trust,
Series 96-2, Class A
5.90% 07/15/03 150 150,218
-------------
TOTAL ASSET BACKED SECURITIES
(Cost $273,526) 286,016
-------------
PROJECT LOANS -- 1.0%
Excelsior II Apartments, Construction
Loan Committment
8.04% 02/01/39 185 192,785
Excelsior II Apartments, Construction
Loan Collateral
8.04% 02/01/39 15 15,407
-------------
TOTAL PROJECT LOANS
(Cost $211,913) 208,192
-------------
SHORT TERM INVESTMENTS -- 2.5%
Smith Barney Money Market Fund
(Cost $517,904) 518 517,904
-------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $28,501,681*) 140.2% 28,777,955
REVERSE REPURCHASE
AGREEMENTS -- (40.6%)
Aubrey Lanston
(Agreement dated 09/25/97 to be
repurchased at $1,743,675.
Collateralized by $1,700,000 U.S.
Treasury Notes, 6.25% due 06/30/02.
The value of the collateral
is $1,743,675.)
5.25% 10/08/97 1,740 (1,741,898)
Aubrey Lanston
(Agreement dated 09/25/97 to be
repurchased at $864,339.
Collateralized by $850,000 U.S.
Treasury Notes, 6.25% due 02/15/07.
The value of the collateral
is $864,339.)
5.10% 10/08/97 863 (863,483)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
STATEMENT OF NET ASSETS
GOVERNMENT INCOME PORTFOLIO (CONCLUDED)
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
-------- ------- -----------
REVERSE REPURCHASE
AGREEMENTS (CONTINUED)
Lehman Brothers
(Agreement dated 09/19/97 to be
repurchased at $2,425,459.
Collateralized by $2,400,000 U.S.
Treasury Notes, 6.0% due 08/15/00.
The value of the collateral
is $2,425,459.)
5.10% 10/02/97 $2,421 $ (2,425,116)
Lehman Brothers
(Agreement dated 09/29/97 to be
repurchased at $931,722.
Collateralized by $925,000 U.S.
Treasury Bonds, 6.375% due 08/15/27.
The value of the collateral
is $931,722.)
5.20% 10/06/97 931 (931,050)
Paine Webber
(Agreement dated 09/11/97 to be
repurchased at $2,373,228.
Collateralized by $2,417,971 Federal
Home Loan Mortgage Corporation
Notes, 7.50% due 07/01/27. The value
of the collateral is $2,373,228.)
5.65% 10/14/97 2,361 (2,368,401)
-------------
TOTAL REVERSE REPURCHASE
AGREEMENTS
(Cost $8,329,948) (8,329,948)
OTHER ASSETS IN EXCESS
OF LIABILITIES 0.4% 72,728
------- -------------
NET ASSETS (Applicable to 464,801
Investor A shares, 1,410,448
Investor B shares, and 80,950 Investor C
shares outstanding) 100.0% $ 20,520,735
======= =============
Value
---------
NET ASSET VALUE AND REDEMPTION
PRICE PER INVESTOR A SHARE
($4,875,820 / 464,801) $10.49
======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($10.49 / .955) $10.98
======
NET ASSET VALUE, OFFERING PRICE
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 4.5%) PER
INVESTOR B SHARE
($14,795,749 / 1,410,448) $10.49
======
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 1.0%) PER
INVESTOR C SHARE
($849,166 / 80,950) $10.49
======
- ----------------------
* Also cost for Federal income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 316,833
Gross unrealized depreciation (40,559)
-------------
$ 276,274
=============
** Rates shown are the rates as of September 30, 1997.
# Total or partial securities on loan.
+ Partial principal in the amount of $8,292,971 has been pledged as
collateral for reverse repurchase agreements.
++ Principal amount of securities pledged as collateral of $112,957
on 3 long U.S. Treasury Bonds and 16 short U.S. Treasury Notes
futures contracts expiring December 1997. The value of such
contracts on September 30, 1997 was $2,064,344, thereby resulting
in an unrealized gain of $344.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
STATEMENT OF NET ASSETS
MANAGED INCOME PORTFOLIO
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
-------- ------- -----------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS -- 48.1%
Federal Home Loan Bank Notes
5.40%** 04/27/98 $ 8,000 $ 7,970,000
Small Business Administration
Participation Certificates,
Series 96-20
6.95% 11/10/16 9,766 9,891,043
Small Business Administration
Participation Certificates,
Series 96-20B, Class 1
6.37% 02/01/16 4,189 4,119,121
Small Business Administration
Participation Certificates,
Series 97-20B, Class 1
7.10% 02/01/17 1,972 2,009,087
Small Business Administration
Participation Certificates,
Series 97-20F, Class 1
7.20% 06/01/17 2,250 2,303,375
Small Business Administration
Participation Certificates,
Series 97-20G, Class 1
6.85% 07/01/17 13,000 13,072,530
Small Business Investment Cos.
Pass-Through, Series 96-P10C,
Class 1
7.35%** 08/10/06 8,700 9,001,688
U.S. Treasury Bonds
6.50%+ 11/15/2 19,630 19,782,131
#6.62%+ 02/15/27 23,549 24,117,941
#6.37%+ 08/15/27 38,410 38,228,317
U.S. Treasury Notes
6.25% 03/31/99 1,820 1,833,413
6.25% 05/31/99 7,900 7,957,354
6.00% 06/30/99 2,035 2,042,448
5.87%+ 11/15/99 38,000 38,037,996
6.37%+ 05/15/00 53,520 54,176,184
6.00%+ 08/15/00 37,425 37,558,229
6.62% 03/31/02 5,800 5,938,793
6.62% 04/30/02 5,000 5,119,199
6.50% 05/31/02 18,095 18,441,879
6.25% 06/30/02 9,900 9,995,733
#6.25% 08/31/02 11,765 11,872,884
7.25% 08/15/04 750 798,187
7.00% 07/15/06 1,750 1,845,970
#6.50% 10/15/06 20,275 20,718,414
6.25%+ 02/15/07 21,010 21,126,183
6.62% 05/15/07 2,800 2,893,184
#6.00%+ 08/15/07 23,550 23,573,785
-------------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $392,187,584) 394,425,068
-------------
MORTGAGE PASS-THROUGHS -- 19.0%
Federal Home Loan Mortgage
Corporation 15 Year
6.50% 03/01/11 239 237,129
7.50% 01/10-05/12 22,079 22,623,740
Par
Maturity (000) Value
-------- ------- -----------
MORTGAGE PASS-THROUGHS (CONTINUED)
Federal Home Loan Mortgage
Corporation
9.00% 09/20-06/21 $ 4,016 $ 4,305,854
7.50% 02/23-08/27 14,548 14,811,952
7.00% 09/25-09/27 10,374 10,354,658
Federal National Mortgage
Association 15 Year
7.00% 10/10-05/12 3,238 3,271,812
Federal National Mortgage Association
7.00% 12/01/25 3,278 3,267,080
Government National Mortgage
Association 1 Year CMT ARM
5.45% 07/20/27 2,966 2,956,704
Government National Mortgage
Association
9.50% 12/15/16 2,068 2,228,316
9.00% 06/16-04/20 2,315 2,467,145
8.50% 12/19-09/21 728 762,438
7.00% 07/25-03/26 15,768 15,777,775
7.50% 01/23-07/27 29,542 30,058,527
6.50% 12/23-05/27 43,259 42,326,266
-------------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $152,834,948) 155,449,396
-------------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS -- 5.1%
Community Program Loan Trust,
Series 87-A, Class A4
4.50% 10/01/18 12,833 11,297,204
Federal National Mortgage Association,
Series 274, Class 1 (PO)
6.42% 10/01/25 6,521 5,135,114
Federal National Mortgage Association,
Series 280, Class 1 (PO)
5.10% 12/25/24 2,325 1,808,151
Federal National Mortgage Association,
Series 96-56, Class E (PO)
5.00% 04/25/23 1,855 1,207,770
Residential Accredit Loans, Inc.,
Series 97-QS10, Class A1
7.25% 10/25/27 12,900 12,992,719
Residential Asset Securitization Trust,
Series 97-A7, Class A1
7.50% 09/25/27 8,827 8,928,855
-------------
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $41,043,661) 41,369,813
-------------
ASSET BACKED SECURITIES -- 17.5%
Associates Manufactured Housing
Pass-Through, Series 96-1,
Class B1
8.00% 03/15/27 1,500 1,545,234
Banc One Auto Grantor Trust,
Series 97-A, Class A
6.27% 11/20/03 8,601 8,634,173
CIT Group Securitization Corp.,
Series 95-2, Class B
7.65% 05/15/26 3,950 3,877,789
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
STATEMENT OF NET ASSETS
MANAGED INCOME PORTFOLIO (CONTINUED)
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
-------- ------- -----------
ASSET BACKED SECURITIES (CONTINUED)
Copelco Capital Funding Corp.,
Series 97-A, Class A3
6.27% 04/20/05 $ 4,555 $ 4,573,505
Daimler-Benz Vehicle Trust,
Series 96, Class A
5.85% 07/20/03 11,217 11,217,256
Discover Card Master Trust I,
Series 94-2, Class A
6.00%** 10/15/97 5,000 5,039,063
Equicon Home Equity Loan Trust,
Series 93-1, Class I (IO)
4.66% 02/18/13 15,081 398,233
Equivantage Home Equity Loan Trust,
Series 96-1, Class A
6.55% 10/25/25 3,265 3,240,021
First Chicage Master Trust II,
Series 92-E, Class A
6.25% 08/15/99 3,997 3,990,392
Green Tree Financial Corp.,
Series 94-B, Class A
7.85% 07/15/04 1,235 1,248,443
Green Tree Financial Corp.,
Series 95-7, Class B1
7.35% 11/15/26 3,925 3,998,594
Green Tree Financial Corp.,
Series 95-A, Class A
7.25% 07/15/05 6,023 6,009,952
Green Tree Financial Corp.,
Series 96-2, Class B2
7.90% 04/15/27 2,500 2,584,375
Green Tree Financial Corp.,
Series 96-5, Class A6
7.75% 07/15/27 7,450 7,841,125
Green Tree Financial Corp.,
Series 96-5, Class A7
8.25% 07/15/27 5,184 5,615,730
Green Tree Financial Corp.,
Series 96-6, Class B2
8.35% 09/15/27 2,875 3,079,421
Green Tree Financial Corp.,
Series 96-7, Class A6
7.65% 10/15/27 4,725 4,888,898
Green Tree Financial Corp.,
Series 96-8, Class B1
7.95% 01/01/05 3,000 3,138,750
Green Tree Financial Corp.,
Series 97-1, Class B1
7.23% 03/02/28 7,300 7,409,500
Green Tree Financial Corp.,
Series 97-2, Class A7
7.62% 04/15/27 5,067 5,274,430
Green Tree Financial Corp.,
Series 97-3, Class B2
8.03% 07/15/28 3,800 3,988,813
Green Tree Home Improvement
Loan Trust, Series 96-C, Class HIB1
7.75% 06/15/21 4,450 4,553,602
Green Tree Home Improvement
Loan Trust; Series 97-A, Class Hem2
7.90% 03/15/28 5,150 5,364,852
Honda Auto Receivables Grantor Trust,
Series 97-A, Class A
5.85% 02/15/03 5,868 5,859,195
Par
Maturity (000) Value
-------- ------- -----------
ASSET BACKED SECURITIES (CONTINUED)
Mellon Bank Home Equity Loan Trust,
Series 96-1, Class B2
6.07%** 04/15/26 $ 5,000 $ 5,009,375
Nissan Auto Receivable Grantor Trust,
Series 95-A, Class A
6.10% 08/15/01 4,528 4,529,740
Puget Power Conservation
Grantor Trust, Series 97-1
6.23% 07/11/02 7,120 7,104,425
Railcar Leasing LLC, Series 1,
Class A1
6.75% 07/15/06 12,219 12,405,680
The Money Store Home Equity,
Series 97-C
7.35% 02/15/24 1,075 1,065,594
-------------
TOTAL ASSET BACKED SECURITIES
(Cost $141,850,499) 143,486,160
-------------
CORPORATE BONDS -- 25.9%
FINANCE -- 11.2%
Allmerica Financial Corp.
7.62% 10/15/25 2,900 2,972,009
Barnett Capital Trust I
8.06% 12/01/26 3,540 3,647,632
BT Capital Trust B
7.90% 01/15/27 7,175 7,228,586
Equitable Life
7.70% 12/01/15 3,500 3,630,867
Finova Capital Corp.
7.12% 05/17/04 8,300 8,476,510
7.40% 05/06/06 4,350 4,510,844
Household International Corp.
6.00% 03/15/99 5,000 5,000,000
HSBC America Capital II
8.38% 05/15/27 7,500 7,852,743
Keycorp Institute Capital-A
7.82% 12/01/26 7,301 7,310,876
Liberty Mutual Co.
8.50%++ 05/15/25 4,250 4,745,685
Mellon Capital II
7.99% 01/15/27 6,350 6,495,884
Merrill Lynch & Co.
6.47% 06/27/00 8,200 8,250,862
Metropolitan Life Insurance Co.
6.30% 11/01/03 3,950 3,876,220
Paine Webber, Inc.
6.31% 07/22/99 5,000 5,004,177
Safeco Corporation
6.87% 07/15/07 4,200 4,208,888
Salomon, Inc.
8.90% 02/15/00 2,500 2,639,323
U.S. Bancorp (PAT)
6.02%** 11/15/99 5,400 5,404,660
U.S. Bancorp Capital I
8.27% 12/15/26 600 631,238
-------------
91,887,004
-------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
STATEMENT OF NET ASSETS
MANAGED INCOME PORTFOLIO (CONTINUED)
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
-------- ------- -----------
CORPORATE BONDS (CONTINUED)
INDUSTRIAL -- 7.2%
Burlington Industries
7.25% 09/15/05 $2,000 $ 1,980,563
ERAC USA Finance Co.
6.95% 03/01/04 4,250 4,281,511
Federal Express
7.60% 07/01/47 2,750 2,811,266
GMAC Pass-Through Trust
6.50% 01/17/00 5,050 5,076,558
Ikon Capital Resources
6.93% 06/07/99 7,300 7,388,991
ITT Corp.
6.75% 11/15/03 8,395 8,281,160
7.37% 11/15/15 855 824,506
7.75% 11/15/25 5,150 4,927,033
RJR Nabisco, Inc.
6.85% 06/15/05 5,550 5,561,383
7.05% 07/15/07 1,950 1,976,813
7.55% 06/15/15 5,350 5,511,563
Time Warner Entertainment
7.25% 09/01/08 2,755 2,785,174
Time Warner
6.10% 12/30/01 7,300 7,124,955
-------------
58,531,476
-------------
UTILITY -- 1.0%
CSW Energy
6.87% 10/01/01 2,250 2,272,393
Mobile Energy Services, L.L.C.
8.66% 01/01/17 2,038 2,172,995
Pennsylvania Power & Light Co.
9.37% 07/01/21 1,000 1,090,000
Texas Utilities Electric Co.
7.87% 04/01/24 2,925 2,991,524
-------------
8,526,912
-------------
YANKEE -- 6.5%
Banco Santiago S.A.
7.00% 07/18/07 5,320 5,295,786
BGB Finance (Ireland)
6.62% 12/30/99 8,000 8,084,320
Fairfax Financial
8.30% 04/15/26 4,400 4,722,731
Israel Electric Corp., LTD
7.87% 12/15/26 2,900 3,001,942
London Life Insurance Co.
6.87% 09/15/05 3,000 3,014,802
Pan American Beverages Co.
7.25% 07/01/09 2,800 2,823,214
Reliance Industries
9.37% 10/01/97 2,470 2,671,580
Republic of Colombia
7.62% 02/15/07 8,000 7,858,725
SBC Glacier Finance Ltd.,
Series 1997-2A
5.90%** 09/10/06 8,000 7,998,750
Telefonica De Argentina
11.87% 11/01/04 5,475 6,604,913
Vattenfall Treasury
6.00% 06/10/98 1,100 1,099,992
-------------
53,176,755
-------------
TOTAL CORPORATE BONDS
(Cost $207,657,693) 212,122,147
-------------
Par
Maturity (000) Value
-------- ------- -----------
TAXABLE MUNICIPAL BONDS -- 0.9%
Los Angeles County Taxable
Pension Obligation
6.97% 06/30/08 $ 3,855 $ 3,893,550
New Jersey Economic Development
Authority
7.21% 02/15/18 14,500 3,535,969
-------------
TOTAL TAXABLE MUNICIPAL BONDS
(Cost $7,341,048) 7,429,519
-------------
COMMERCIAL MORTGAGE-BACKED
SECURITIES -- 3.0%
CS First Boston Mortgage Securities
Corp., Series 95-AEW1, Class C
7.45% 11/25/27 2,000 2,025,313
J.P. Morgan Commercial Mortgage
Finance Corp., Series 96-C3,
Class A1
7.33% 04/25/28 2,404 2,488,000
Merrill Lynch Mortgage Investors, Inc.,
Series 96-C1, Class A3
7.42% 04/25/28 5,500 5,722,640
Merrill Lynch Mortgage Investors, Inc.,
Series 95-C, Class D
7.94%** 05/25/15 2,200 2,302,029
Merrill Lynch Mortgage Investors, Inc.,
Series 96-C1, Class A2
7.24% 04/25/28 4,713 4,860,160
Morgan Stanley, Series 95, Class D
8.25% 08/15/27 1,000 1,063,281
Structured Asset Securities Corp.,
Series 97-N1, Class C
6.13% 09/25/28 6,000 6,000,000
-------------
TOTAL COMMERCIAL MORTGAGE-
BACKED SECURITIES
(Cost $23,849,296) 24,461,423
-------------
PROJECT LOANS -- 4.2%
Federal Housing Authority,
Audobon Villas,
Construction Loan Collateral
8.12% 07/31/36 4,767 4,998,591
Federal Housing Authority,
Audobon Villas,
Construction Loan Committment
8.12% 07/31/36 508 532,944
Federal Housing Authority,
Huntoon Paige,
Construction Loan Collateral
7.31% 10/01/24 10,445 10,653,658
Federal Housing Authority,
Lakeland Nursing,
Construction Loan Collateral
7.87% 12/01/34 4,980 5,184,910
Federal Housing Authority,
University Park Apartments,
Construction Loan Collateral
7.87% 10/01/37 3,475 3,612,002
Federal Housing Authority,
University Park Apartments,
Construction Loan Committment
7.87% 10/01/37 1,053 1,094,343
Federal Housing Authority,
Village Green,
Construction Loan Collateral
8.25% 09/01/34 4,979 5,247,711
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
STATEMENT OF NET ASSETS
MANAGED INCOME PORTFOLIO (CONCLUDED)
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
-------- ------- -----------
PROJECT LOANS (CONTINUED)
Federal Housing Authority, Whittier
Rehab At Westborough,
Construction Loan Collateral
8.12% 02/28/37 $ 2,139 $ 2,232,657
Federal Housing Authority, Whittier
Rehab At Westborough,
Construction Loan Committment
8.12% 02/28/37 1,018 1,062,475
-------------
TOTAL PROJECT LOANS
(Cost $33,486,491) 34,619,291
-------------
SHORT TERM INVESTMENTS -- 1.2%
Federal Home Loan Mortgage
Corp. Discount Notes
6.05% 10/01/97 9,980 9,980,000
Smith Barney Money Market Fund 29 29,286
-------------
TOTAL SHORT TERM INVESTMENTS
(Cost $10,009,286) 10,009,286
-------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $1,010,260,506*) 124.9% 1,023,372,103
REVERSE REPURCHASE
AGREEMENTS -- (24.5%)
Aubrey Lanston
(Agreement dated 09/18/97
to be repurchased at 55,297,136.
Collateralized by $53,520,000 U.S.
Treasury Notes, 6.375% due 05/15/00.
The value of the collateral is
$55,297,136.)
5.25% 10/01/97 55,193 (55,297,136)
Aubrey Lanston
(Agreement dated 09/26/97
to be repurchased at $21,978,295.
Collateralized by $21,800,000 U.S.
Treasury Notes, 6.125% due 08/15/07.
The value of the collateral is
$21,978,295.)
4.85% 10/01/97 21,964 (21,978,295)
Aubrey Lanston
(Agreement dated 09/26/97
to be repurchased at $6,244,882.
Collateralized by $6,025,000 U.S.
Treasury Bonds, 6.625% due 02/15/27.
The value of the collateral is
$6,244,882.)
5.20% 10/06/97 6,236 (6,240,379)
Aubrey Lanston
(Agreement dated 09/25/97
to be repurchased at $15,253,039.
Collateralized by $15,000,000 U.S.
Treasury Notes, 6.25% due 02/15/07.
The value of the collateral is
$15,253,039.)
5.10% 10/08/97 15,255 (15,237,941)
Aubrey Lanston
(Agreement dated 09/25/97 to
be repurchased at $20,131,033.
Collateralized by $19,700,000 U.S.
Treasury Notes, 5.875% due
11/15/99. The value of the
collateral is $20,131,033.)
5.53% 10/15/97 20,069 (20,087,872)
Lehman Brothers
(Agreement dated 09/29/97 to
be repurchased at $28,707,122.
Collateralized by $28,500,000 U.S.
Treasury Notes, 6.375% due
08/15/27. The value of the
collateral is $28,707,122.)
5.20% 10/06/97 28,678 (28,686,410)
Par
Maturity (000) Value
-------- ------- -----------
REVERSE REPURCHASE
AGREEMENTS (CONTINUED)
Lehman Brothers
(Agreement dated 09/19/97
to be repurchased at
$37,821,996. Collateralized by
$37,425,000 U.S. Treasury Notes,
6.00% due 08/15/00. The value of
the collateral is $37,821,996.)
5.10% 10/02/97 $37,752 $ (37,816,648)
Lehman Brothers
(Agreement dated 09/22/97
to be repurchased at
$15,064,210. Collateralized by
$14,500,000 U.S. Treasury Bonds,
6.50% due 11/15/26. The value of
the collateral is $15,064,210.)
5.44% 10/01/97 15,044 (15,064,210)
-------------
TOTAL REVERSE REPURCHASE
AGREEMENTS
(Cost $200,408,891) (200,408,891)
LIABILITIES IN EXCESS OF
OTHER ASSETS (0.4%) (3,254,941)
------ -------------
NET ASSETS (Applicable to 51,630,340
Institutional shares, 25,634,309 Service
shares, 1,463,584 Investor A shares and
44,966 Investor B shares outstanding) 100.0% $ 819,708,271
====== =============
NET ASSET VALUE AND REDEMPTION
PRICE PER INSTITUTIONAL,
SERVICE, AND INVESTOR A SHARE
($819,240,345 / 78,728,233) $10.41
======
OFFERING PRICE PER INSTITUTIONAL
AND SERVICE SHARE $10.41
======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($10.41 / .955) $10.90
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 4.5%) PER
INVESTOR B SHARE
($467,926 / 44,966) $10.41
======
- ---------------------
* Also cost for Federal income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 13,776,051
Gross unrealized depreciation (664,454)
-------------
$ 13,111,597
=============
** Rates shown are the rates as of September 30, 1997.
# Total or partial securities on loan.
+ Partial principal in the amount of $200,497,713 has been pledged
as collateral for reverse repurchase agreements.
++ Principal amount of securities pledged as collateral of $
3,405,727 on 1,453 Short U.S. Treasury Notes and 353 Short U.S.
Treasury Bonds futures contracts expiring December 1997. The
value of such contracts on September 30, 1997 was $200,705,906,
thereby resulting in an unrealized loss of $3,533,375.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
34
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
SCHEDULE OF INVESTMENTS
INTERNATIONAL BOND PORTFOLIO
Par**
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
-------- ------- -----------
FOREIGN BONDS -- 86.7%
CANADA -- 8.6%
Canada Trust Company Mortgage
5.63% 01/01/02 2,424 $1,770,404
Government of Canada
7.25% 06/01/07 3,000 2,412,071
-------------
4,182,475
-------------
DENMARK -- 6.4%
Danske Kredit
7.00% 10/01/29 10,000 1,456,107
Kingdom of Denmark
8.00% 05/15/03 10,000 1,670,407
-------------
3,126,514
-------------
FRANCE -- 8.0%
Government of France
5.50% 04/25/07 2,000 2,185,124
5.50% 10/25/07 10,000 1,688,776
-------------
3,873,900
-------------
GERMANY -- 17.1%
Bundesobligation
5.25% 02/21/01 3,500 2,024,992
Federal Republic of Germany
6.00% 01/04/07 6,190 3,624,440
Treuhandanstalt
7.75% 10/01/02 4,200 2,671,539
-------------
8,320,971
-------------
ITALY -- 3.6%
Bayerische Vereinsbank
9.65% 08/04/00 2,740,000 1,756,003
-------------
JAPAN -- 18.8%
Federal Home Loan Mortgage
Association
2.12% 10/09/07 300,000 2,481,893
Government of Japan
6.70% 09/20/01 200,000 2,016,408
International Bond For Reconstruction
& Development
5.25% 03/20/02 250,000 2,435,620
Kingdom of Belgium
6.87% 07/09/01 220,000 2,212,853
-------------
9,146,774
-------------
NETHERLANDS -- 3.1%
Dutch Government
5.75% 02/15/07 3,000 1,535,052
-------------
SPAIN -- 4.7%
Government of Spain
11.30% 01/15/02 280,000 2,305,380
-------------
SWEDEN -- 3.8%
Kingdom of Sweden
10.25% 05/05/00 12,400 1,830,336
-------------
Par**
Maturity (000) Value
-------- ------- -----------
FOREIGN BONDS (CONTINUED)
UNITED KINGDOM -- 12.6%
Abbey National Treasury Services
8.00% 04/02/03 600 $ 1,014,351
Bayerische Landesbank Girozentrale
7.87% 12/07/06 1,100 1,906,190
Halifax Building Society PLC
6.50% 02/16/04 450 712,706
United Kingdom Treasury
9.00% 10/13/08 1,300 2,502,277
-------------
6,135,524
-------------
TOTAL FOREIGN BONDS
(Cost $41,690,872) 42,212,929
-------------
UNITED STATES CORPORATE BONDS -- 4.6%
FINANCE -- 1.6%
Korea Development Bank
7.37% 09/17/04 750 762,767
-------------
UTILITY -- 3.0%
Korea Electric Power
7.00% 10/01/02 250 248,962
Telefonica De Argentina SA
11.87% 11/01/04 1,000 1,206,265
-------------
1,455,227
-------------
TOTAL UNITED STATES CORPORATE BONDS
(Cost $2,185,367) 2,217,994
-------------
SHORT TERM INVESTMENTS -- 8.7%
Federal Home Loan Mortgage
Corp. Discount Notes (Cost $4,250,000)
6.05% 10/01/97 4,250 4,250,000
-------------
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $48,126,239*) $ 48,680,923
=============
- ------------------------
* Also cost for Federal income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 637,496
Gross unrealized depreciation (82,812)
-------------
$ 554,684
=============
** In local currency.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
35
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
STATEMENT OF ASSETS AND LIABILITIES
INTERNATIONAL BOND PORTFOLIO
SEPTEMBER 30, 1997
ASSETS
Investments at value (Cost $48,126,239) ..................... $48,680,923
Cash denominated in foreign currencies (Cost $2,050,644) .... 2,055,556
Cash ........................................................ 39,352
Interest receivable ......................................... 1,042,005
Investments sold receivable ................................. 15,771,454
Capital shares sold receivable .............................. 141,966
Futures collatera1 1 ........................................ 200,000
Futures margin receivable ................................... 69,633
Net unrealized appreciation on
forward foreign currency contracts ........................ 262,899
Prepaid expenses ............................................ 19,395
-----------
TOTAL ASSETS ......................................... 68,283,183
-----------
LIABILITIES
Investments purchased payable ............................... 15,144,619
Capital shares redeemed payable ............................. 74,532
Accrued expenses payable .................................... 29,131
Futures margin payable ...................................... 176
Net unrealized depreciation on
forward foreign currency contracts ........................ 336,155
Distributions payable ....................................... 211,714
-----------
TOTAL LIABILITIES .................................... 15,796,327
-----------
NET ASSETS (Applicable to 3,954,769 Institutional shares,
612,560 Service shares, 92,713 Investor A shares,
89,426 Investor B shares and 43,295 Investor C
shares outstanding) ......................................... $52,486,856
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER INSTITUTIONAL SHARE ($43,310,302 / 3,954,769) ........... $10.95
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SERVICE SHARE ($6,707,841 / 612,560) .................... $10.95
======
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($1,015,272 / 92,713) .................. $10.95
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($10.95 / 0.950) ............................................ $11.53
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($979,314 / 89,426) .................... $10.95
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($474,127 / 43,295) .................... $10.95
======
- ----------------
1 Segregated cash of $200,000 on 5 long Tokyo Stock Exchange 10-Year Japanese
Government Bond and 10 long Life Italian Government Bond futures contracts
expiring December 1997. The value of such contracts on September 30, 1997 was
$6,628,823, thereby resulting in an unrealized gain of $114,983.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
36
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
SCHEDULE OF INVESTMENTS
TAX-FREE INCOME PORTFOLIO
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
-------- ------- -----------
MUNICIPAL BONDS -- 91.5%
ALABAMA -- 2.0%
Courtland Ind. Dev. Rev., Champion
Int. Corp. Proj., Ser. 92
7.20% 12/01/13 $ 500 $ 555,625
Mobile G.O., Ser. 96
5.00% 02/15/16 1,000 978,750
-------------
1,534,375
-------------
ARIZONA -- 0.3%
Phoenix G.O., Ser. 92
6.37% 07/01/13 200 217,250
-------------
CALIFORNIA -- 6.4%
California Hsg. Fin. Agcy. Rev.,
Home Mtg. Proj., Ser. 93C
5.65% 08/01/14 2,000 2,040,000
M-S-R Pub. Pwr. Agy. Rev.,
San Juan Proj., Ser. 97G
5.37% 07/01/14 2,850 2,903,437
-------------
4,943,437
-------------
COLORADO -- 3.3%
Arapahoe Cnty. Cap. Imp.
Trust Fund Rev., Ser. 86
7.16% 08/31/04 900 653,625
Denver City & Cnty. Aprt. Rev.,
Ser. 91D
7.00% 11/15/25 1,000 1,066,588
Denver City & Cnty. Aprt. Rev.,
Ser. 92C
6.75% 11/15/13 500 540,552
Jefferson Cnty. Sch. Dist. G.O.,
Ser. 92
6.00% 12/15/12 300 325,500
-------------
2,586,265
-------------
FLORIDA -- 3.2%
Florida Dept. of Trans. G.O., Ser. 91
6.25% 07/01/07 400 431,000
Santa Rosa Bay Bldg. Auth. Rev.,
Ser. 96
6.25% 07/01/28 2,000 2,070,000
-------------
2,501,000
-------------
GEORGIA -- 1.6%
Georgia G.O., Ser. 92B
6.30% 03/01/10 310 353,400
Georgia Mun. Elec. Auth. Rev.,
Ser. 92B
6.12% 01/01/14 400 423,500
Gwinnett Cnty. G.O., Ser. 92
6.00% 01/01/10 400 428,000
-------------
1,204,900
-------------
ILLINOIS -- 1.1%
Chicago Res. Mtg. Rev., Ser. 92B
7.00% 10/01/09 710 309,737
Winnebago & Boone Cnty. G.O.,
Sch. Dist. No. 205, Ser. 92C
5.90% 02/01/05 500 541,875
-------------
851,612
-------------
Par
Maturity (000) Value
-------- ------- -----------
MUNICIPAL BONDS (CONTINUED)
INDIANA -- 1.4%
Indianapolis Int. Apt. Auth. Rev.,
Fed. Exp. Corp. Proj., Ser. 94
7.10% 01/15/17 $1,000 $1,115,000
-------------
KANSAS -- 1.1%
Johnson Cnty. G.O., Internal Insp.
Ser. 92A
6.00% 09/01/07 400 427,500
Kansas Dept. of Trans. Rev., Ser. 94A
6.00% 09/01/12 400 420,000
-------------
847,500
-------------
MARYLAND -- 2.3%
Baltimore Port Fac. Rev., E.I.
du Pont Co. Proj., Ser. 84A
6.50% 10/01/11 100 109,375
Maryland Energy Fin. Admin. Sld. Wst.
Disp. Rev., Rsc. Rec. Imps., Ser. 96
6.45% 12/01/16 1,500 1,629,375
-------------
1,738,750
-------------
MICHIGAN -- 1.5%
Greater Detroit Res. Rec.
Auth. Rev., Ser. 93A
6.25% 12/13/08 1,000 1,136,250
-------------
MINNESOTA -- 0.9%
Southern Minnesota Mun. Pwr. Agcy.
Sply. Sys. Rev., Ser. 86C
5.00% 01/01/17 750 725,625
-------------
MISSISSIPPI -- 1.1%
Jackson Cnty. Pol. Ctrl. Rev.,
Chevron USA Inc. Proj., Ser. 93
3.75%** 10/01/97 850 850,000
-------------
MISSOURI -- 2.7%
Lake of the Ozarks Cnty. Rev.,
Mo. Bdg. Sys. Proj., Ser. 96
6.25% 12/01/16 2,000 2,072,500
-------------
NEW JERSEY -- 6.5%
Middletown Twp. Bd. of Ed. G.O.,
Ser. 97
5.80% 08/01/21 1,000 1,037,500
New Jersey Econ. Dev. Auth.
Cap. Aprt. Rev., Ser. 97A
5.10% 07/01/08 2,500 1,481,250
New Jersey State Trans. Trust
Fund Auth. Syst. Rev., Ser. 96B
5.25% 06/15/15 1,000 1,001,250
South Jersey Port Corp. Rev.,
Mar. Term., Ser. 93
5.60% 01/01/23 1,500 1,515,000
-------------
5,035,000
-------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
37
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
SCHEDULE OF INVESTMENTS
TAX-FREE INCOME PORTFOLIO (CONTINUED)
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
-------- ------- -----------
MUNICIPAL BONDS (CONTINUED)
NEW YORK -- 14.3%
New York City G.O., Ser. 95A
6.00% 08/01/05 $1,000 $ 1,071,250
New York City G.O., Ser. 96A
6.00% 08/01/05 1,000 1,072,500
New York City G.O., Ser. 96D
5.60% 11/01/05 1,000 1,067,500
New York City Ind. Dev. Agcy.,
Terminal One Group Assn. Proj.,
Rev., Ser. 94
6.00% 01/01/08 360 382,950
6.00% 01/01/19 500 519,375
New York St. Loc. Govt. Asst.
Corp. Rev., Ser. 93D
5.45% 04/01/23 2,000 1,875,000
New York St. Hsg. Fin. Agcy. Rev.,
Ser. 96A
6.37% 11/01/04 2,000 2,165,000
New York St. Loc. Govt. Asst. Corp.
Rev., Ser. 93C
5.00% 04/01/21 2,000 1,872,500
New York St. Urb. Dev. Corp. Rev.,
Ser. 93
5.62% 01/01/07 1,000 1,058,750
-------------
11,084,825
-------------
NORTH CAROLINA -- 4.9%
North Carolina Eastern Mun. Pwr.
Agcy. Rev., Ser. 93B
6.00% 01/01/22 2,000 2,095,000
North Carolina Mun. Pwr. Agcy. Rev.,
Catawba Elec. Proj., Ser. 88
7.50% 01/01/17 1,350 1,388,772
North Carolina Mun. Pwr. Agcy. Rev.,
Catawba Elec. Proj., Ser. 92A
6.00% 01/01/10 300 331,875
-------------
3,815,647
-------------
OHIO -- 2.9%
Cleveland-Cuyahoga Cnty. Port
Auth. Rev. Ser. 97
6.00% 03/01/07 750 754,688
Columbus Refuse Coal,
Fired Plant 5-E-L, G.O., Ser. 91
6.62% 09/15/01 150 163,688
Ohio St. Higher Ed. Fac. Rev.,
Univ. Dayton Proj., Ser. 97
5.35% 12/01/07 1,000 1,006,250
Ohio Wtr. Dev. Auth. Rev.,
Clean Wtr. Proj., Ser. 92
5.65% 12/01/05 300 320,250
-------------
2,244,876
-------------
OREGON -- 0.4%
Portland Swr. Sys. Rev., Ser. 92A
6.00% 10/01/12 300 328,875
-------------
Par
Maturity (000) Value
-------- ------- -----------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA -- 16.1%
Altoona City Auth. Wtr. Rev., Ser. 97
5.00% 11/01/19 $2,000 $ 1,917,500
Beaver Cnty. G.O., Ser. 96A
5.75% 10/01/15 1,000 1,040,000
Delaware Cnty. Auth. Rev.,
Mercy Hlth. Corp. Proj., Ser. 96
5.75% 12/15/20 2,400 2,403,000
Montgomery Cnty. Higher Ed. & Hlth.
Auth. Rev., Holy Redeemer
Hosp. Proj., Ser. 97A
5.25% 10/01/23 3,000 2,932,500
Philadelphia Mun. Auth. Rev.,
Ser. 93D
6.12% 07/15/08 1,000 1,091,250
Pennsylvania G.O., Ser. 96
5.37% 05/15/09 1,000 1,042,500
Tredyffrin Township G.O., Ser. 96
5.25% 11/15/21 2,000 2,007,500
-------------
12,434,250
-------------
RHODE ISLAND -- 0.6%
Rhode Isl& St. Hlth. & Ed. Bldg.
Corp. Rev., Ser. 96
5.50% 05/15/16 500 506,250
-------------
SOUTH CAROLINA -- 1.2%
Piedmont Mun. Pwr. Agcy. Elec.
Rev. Ser. 85B
6.25% 01/01/18 500 523,750
South Carolina Pub. Ser. Auth. Rev.,
Santee Cooper Proj., Ser. 91D
6.50% 07/01/14 100 107,875
Spartanburg Wtr. Rev., Ser. 93
6.20% 06/01/09 15 16,331
Spartanburg Wtr. Rev., Ser. 92
6.20% 06/01/09 285 304,238
-------------
952,194
-------------
SOUTH DAKOTA -- 0.7%
South Dakota Lease Rev.,
Tran. Cert., Ser. 93A
6.37% 09/01/05 500 556,875
-------------
TENNESSEE -- 3.4%
Tennesse Hsg. Dev. Agcy. Rev.,
Ser. 97-3A
5.23% 01/01/06 4,000 2,620,000
-------------
TEXAS -- 4.4%
Brazos River Auth. Pol. Ctrl. Rev. Coll.,
Texas Util. Elec. Co. Proj., Ser. 89
8.25% 01/01/19 1,000 1,061,250
Matagorda Cnty. Nav. Dist. #1 Rev.,
Ser. 89B
7.70% 02/01/19 700 721,273
Sabine River Auth. Pol. Ctrl. Rev.,
Texas Util. Elec. Proj., Ser. 90B
8.25% 10/01/20 1,000 1,107,500
University of Texas, Univ. Rev.,
Ser. 91A
7.00% 08/15/07 500 556,650
-------------
3,446,673
-------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
38
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
SCHEDULE OF INVESTMENTS
TAX-FREE INCOME PORTFOLIO (CONCLUDED)
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
-------- ------- -----------
MUNICIPAL BONDS (CONTINUED)
UTAH -- 0.2%
Salt Lake City Hosp. Rev., Ser. 88A
8.12% 05/15/15 $ 100 $ 123,125
-----------
VERMONT -- 1.4%
Vermont G.O., Pub. & Sch.
Imp. Proj., Ser. 90A
6.75% 02/01/08 1,000 1,077,500
-----------
VIRGINIA -- 1.3%
Hampton G.O., Ser. 95
6.00% 01/15/08 400 436,500
Virginia Hsg. Dev. Auth. Rev.,
Commonwealth Mtg. Proj.,
Ser. 95A-1
6.70% 07/01/05 500 536,875
-----------
973,375
-----------
WASHINGTON -- 3.9%
Seattle Met. Mun. G.O., Ser. 93
5.40% 01/01/08 1,000 1,036,250
Washington St. G.O., Ser. 96A
5.37% 07/01/21 2,000 2,007,500
-----------
3,043,750
-----------
WISCONSIN -- 0.4%
Milwaukee Met. Swr. Dist. G.O.,
Ser. 92A
6.12% 10/01/03 250 272,500
-----------
TOTAL MUNICIPAL BONDS
(Cost $68,209,061) 70,840,179
-----------
SHORT TERM INVESTMENTS -- 8.5%
Maricopa Cnty. Pol. Ctrl. Corp. Rev.,
Arizona Pub. Svc. Proj.,
Ser. 94 FRDD
3.75%** 05/01/29 3,000 3,000,000
New York City Mun. Wtr. Fin. Auth.,
Wtr. & Swr. Sys. Rev.,
Ser. 94G FRDD
3.80%** 10/01/97 300 300,000
Orange Cnty. Wtr. Dist. Rev.,
Ser. 90B FRDD
3.70%** 08/15/15 100 100,000
Perry Cnty. Pol. Ctrl. Rev.,
Leaf River Forest Proj.,
Ser. 92 FRDD
3.80%** 10/01/97 800 800,000
Tustin Imp. Bd. Rev., Ser. 96 FRDD
3.65%** 09/02/13 200 200,000
Smith Barney Tax-Free Money
Market Fund 2,214 2,214,487
-----------
TOTAL SHORT TERM INVESTMENTS
(Cost $6,614,487) 6,614,487
-----------
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $74,823,548*) $77,454,666
===========
- -------------------
* Also cost for Federal income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $2,646,501
Gross unrealized depreciation (15,383)
----------
$2,631,118
==========
** Rates shown are the rates as of September 30, 1997, 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.
39
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
STATEMENT OF ASSETS AND LIABILITIES
TAX-FREE INCOME PORTFOLIO
SEPTEMBER 30, 1997
ASSETS
Investments at value (Cost $74,823,548) ..................... $77,454,666
Interest receivable ......................................... 1,035,820
Investments sold receivable ................................. 1,951,024
Capital shares sold receivable .............................. 3,897,333
Prepaid expenses ............................................ 19,005
-----------
TOTAL ASSETS ......................................... 84,357,848
-----------
LIABILITIES
Investments purchased payable ............................... 9,363,929
Accrued expenses payable .................................... 71,332
Distributions payable ....................................... 268,847
-----------
TOTAL LIABILITIES .................................... 9,704,108
-----------
NET ASSETS (Applicable to 830,687 Institutional shares,
5,183,945 Service shares, 487,696 Investor A shares,
and 81,621 Investor B shares and 28 Investor C
shares outstanding) ......................................... $74,653,740
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER INSTITUTIONAL SHARE ($9,419,037 / 830,687) .............. $11.34
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SERVICE SHARE ($58,779,218 / 5,183,945) ................. $11.34
======
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($5,529,698 / 487,696) ................. $11.34
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($11.34 / 0.960) ............................................ $11.81
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($925,473 / 81,621) .................... $11.34
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($314 / 28) ............................ $11.34
======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
40
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
-------- ------- -----------
MUNICIPAL BONDS -- 98.0%
PENNSYLVANIA -- 97.7%
Allegheny Cnty. Higher Ed. Bldg.
Auth. Rev., Duquesne Univ. Proj.
5.00% 03/01/21 $1,000 $ 955,000
Allegheny Cnty. G.O., Ser. 91C-38
6.20% 09/01/01 250 267,812
Allegheny Cnty. Hosp. Dev. Auth. Rev.,
Children's Hosp. Proj., Ser. 90A
7.00% 07/01/06 500 521,505
Allegheny Cnty. Res. Fin. Auth. Mtg.
Rev., Single Fam. Mtg. Proj.,
Ser. 94Y
6.25% 05/01/17 345 363,975
Altoona Auth. Wtr. Rev., Ser. 97
5.00% 11/01/19 5,000 4,793,750
Beaver Cnty. G.O., Ser. 96A
5.80% 10/01/17 3,500 3,622,500
Bethlehem Area Sch. Dist. G.O.,
Ser. 97
5.50% 09/01/05 1,000 1,060,000
Cambria Cnty. Unltd. Tax G.O.,
Ser. 91
8.25% 06/01/00 385 410,025
Cambria Twp. Wtr. Auth. Ind. Rev.,
Ser. 93A
6.00% 12/01/02 1,000 1,040,000
Central Bucks Sch. Dist. Unltd.
Tax G.O., Ser. 94A
6.70% 11/15/09 500 563,750
Chester Cnty. Unltd. Tax G.O.
Ser. 91
6.70% 12/15/04 385 419,169
Coatesville Sch. Dist. G.O., Ser. 97
5.12% 04/01/17 2,050 2,019,250
Crawford Central Sch. Dist.
Unltd. Tax G.O., Ser. 95
5.75% 02/15/11 1,585 1,656,325
Dauphin Cnty. Pinnacle Gen.
Auth. Hlth. Sys. Rev.
5.50% 05/15/17 2,000 2,025,000
Dauphin Cnty. Gen. Auth. Rev.,
A-F Sch. Dist. Pooled Fin. Prog.,
Ser. 86
5.50% 06/01/07 550 550,302
6.85% 06/01/09 800 863,000
Deer Lakes Sch. Dist. Unltd.
Tax G.O., Ser. 95
6.35% 01/15/14 1,000 1,070,000
6.45% 01/15/19 1,300 1,386,125
Delaware Cnty. Auth. Rev., Mercy Hlth.
Corp. Proj., Ser. 96
5.75% 12/15/20 3,000 3,003,750
Delaware Cnty. Mem. Hosp.
Auth. Rev., Ser. 95
5.50% 08/15/19 3,000 3,011,250
Erie Cnty. Prison Auth. Lease Rev.,
Ser. 91
6.25% 11/01/01 500 537,500
Erie Higher Ed. Bldg. Auth. Coll. Rev.,
Mercyhurst Coll. Proj., Ser. 93A
5.75% 03/15/13 3,000 3,045,000
Par
Maturity (000) Value
-------- ------- -----------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Harrisburg Auth. Lease Rev., Ser. 91
6.50% 06/01/04 $ 500 $ 540,000
Indiana Cnty. Indl. Dev. Auth. Poll.
Ctrl. Rev., N. Y. St. Elec. & Gas
Corp., Ser. 95A MBIA
6.00% 06/01/06 1,000 1,093,750
Lancaster Cnty. Hosp. Auth. Rev.,
Hlth. Center-Masonic Homes Proj.,
Ser. 94
5.30% 11/15/08 500 508,125
Lebanon Cnty. Hosp. Auth. Rev.,
Good Samaritan Hosp. Proj., Ser. 93
5.55% 11/15/04 355 366,981
Ligonier Valley Sch. Dist. Unltd.
Tax G.O., Ser. 94
5.65% 03/01/14 2,000 2,052,500
Montgomery Cnty. Hghr. Ed. & Hlth.
Auth. Rev., Beaver Coll., Ser. 96
5.75% 04/01/12 1,690 1,753,375
Moon Twp. Wtr. & Swr. Auth. Rev.,
Ser. 94
6.70% 12/01/19 1,000 1,056,250
New Garden Twp. Swr. Auth. Rev.,
Ser. 91
7.00% 03/01/15 420 454,125
Northampton Cnty. Hghr. Ed. Auth.
Rev., Moravian Coll., Ser. 94
6.10% 07/01/12 1,950 2,086,500
Northampton Cnty. Ind. Dev. Auth.
Poll. Ctrl. Rev., Met. Ed. Co. Proj.,
Ser. 95A
6.10% 07/15/21 1,000 1,057,500
Northumberland Cnty. Auth.
Comwlth. Lease Rev., Ser. 91
6.25% 10/15/09 2,500 2,687,500
Parkland Sch. Dist. Rev., Ser. 96
5.75% 09/01/14 2,910 3,015,487
Pennsbury Sch. Dist. Unltd.
Tax G.O., Ser. 94
6.65% 08/15/09 685 774,906
Pennsylvania Comwlth. Tpke. Rev.,
Ser. 91L
6.50% 06/01/04 445 483,381
Pennsylvania Convention Ctr. Rev.,
Ser. 94A
6.60% 09/01/09 1,000 1,117,500
Pennsylvania Fin. Auth. Rev. Mun.
Cap. Imp. Proj.,Ser. 93
6.60% 11/01/09 3,260 3,541,175
Pennsylvania Hghr. Ed. Fac.
Auth. Rev., Duquesne Univ.,
Ser. 91C
6.75% 04/01/20 1,000 1,062,500
Pennsylvania Hghr. Ed. Fac.
Auth. Rev., Philadelphia Coll.
of Textiles & Science, Ser. 93
5.15% 02/01/04 1,230 1,231,538
Pennsylvania Hsg. Fin. Agcy. Rev.,
Single Fam. Mtg., Ser. 56a
6.05% 10/01/16 2,500 2,600,000
Pennsylvania Hsg. Fin. Agcy. Rev.,
Single Fam. Mtg., Ser. 1994-39B
6.87% 10/01/24 1,500 1,620,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
41
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
-------- ------- -----------
UNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Pennsylvania Hsg. Fin. Agcy. Rev.,
Ser. 92
6.40% 07/01/12 $ 500 $ 526,875
Pennsylvania Ifra. Invest. Auth. Rev.,
Pennvest Proj., Ser. 94
6.00% 09/01/06 1,930 2,132,650
Pennsylvania Ifra. Invest. Auth. Rev.,
Pennvest Proj., Ser. 90B
6.80% 09/01/10 2,000 2,230,000
Pennsylvania Intrgov. Coop. Auth.
Spec. Tax Rev., City of Philadelphia
Fdg. Prog., Ser. 94
7.00% 06/15/04 500 572,500
Pennsylvania Intrgov. Coop. Auth.
Spec. Tax Rev., City of Philadelphia
Fdg. Prog., Ser. 93
5.75% 06/15/15 1,000 1,015,000
Pennsylvania St. Hghr. Ed. Fac. Rev.,
Susquehanna Univ., Ser. 90
6.90% 03/01/02 750 766,943
Pennsylvania St. Indl. Dev. Auth. Rev.
6.75% 07/01/03 1,000 1,121,250
Pennsylvania St. Pub. Sch. Bldg.
Auth. Rev., Mid Valley Sch.
Dist. Proj., Ser. 92D
6.25% 01/01/07 500 545,625
Pennsylvania St. Tpke., Oil Franchise
Tax Rev., Ser. 94A
5.87% 12/01/08 500 540,000
Pennsylvania St. Tpke. Rev.,
Ser. 92P
6.00% 12/01/09 500 539,375
Pennsylvania Unltd. Tax G.O.,
Ser. 94A
6.50% 11/01/05 250 274,375
Philadelphia Prk. Auth. Rev., Ser. 97
5.40% 09/01/15 1,000 1,010,000
Philadelphia Auth. for Ind. Dev. Rev.,
Nat. Bd. of Med. Examiners Proj.,
Ser. 92
6.75% 05/01/12 500 542,500
Philadelphia G.O., Ser. 94B
5.90% 11/15/09 2,600 2,804,750
Philadelphia Mun. Auth. Rev.,
Ser. 93D
6.12% 07/15/08 500 545,625
Philadelphia Mun. Auth. Rev.,
Ser. 93A
5.62% 11/15/14 2,600 2,652,000
Philadelphia Sch. Dist., Ser. A.
6.25% 09/01/04 1,000 1,101,250
Philadelphia Sch. Dist. Unltd.
Tax G.O., Ser. 91A
6.70% 07/01/99 250 260,938
Philadelphia Wtr. & Waste Wtr. Rev.,
Ser. 93
5.50% 06/15/07 1,250 1,340,625
Par
Maturity (000) Value
-------- ------- -----------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Philadelphia Wtr. & Waste Wtr. Rev.,
Ser. 95
6.75% 08/01/03 $ 500 $ 560,625
Philadelpia Sch. Dist., Ser. A
5.00% 04/01/05 1,000 1,023,750
Pittsburgh G.O., Ser. 95A
5.25% 03/01/11 1,000 1,016,250
Pottstown Borough Auth. Swr. Rev.
5.50% 11/01/16 1,560 1,575,600
Ringgold Sch. Dist. Rev., Ser. 95
6.20% 02/01/19 500 535,000
Riverside Beaver Cnty. Sch. Dist.
5.50% 02/15/17 1,500 1,513,125
Schuylkill Redev. Auth. Lease Rev.,
Ser. 91A
7.12% 06/01/13 1,250 1,387,500
Southeastern Trans. Auth. Spec. Rev.
5.37% 03/01/17 1,500 1,501,875
Southeastern Trans. Auth. Spec. Rev.,
Ser. 95A
5.87% 03/01/09 1,230 1,319,175
Tredyffrin Township G.O., Ser. 96
5.25% 11/15/21 2,000 2,007,500
Westmoreland Cnty. Ind. Dev.
Auth. Rev., Westmoreland
Hlth. Sys. Proj., Ser. 93A
6.00% 07/01/11 200 213,000
Wilson Penn Sch. Dist. G.O.,
Ser. 97
5.50% 05/15/14 1,440 1,476,000
5.50% 05/15/17 1,500 1,524,375
-------------
98,464,137
-------------
PUERTO RICO -- 0.3%
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 91P
6.75% 07/01/03 250 273,125
-------------
TOTAL MUNICIPAL BONDS
(Cost $94,850,399) 98,737,262
-------------
SHORT TERM INVESTMENTS -- 5.5%
Delaware Cnty. IDA Apt. Fac.,
UPS Proj., Ser. 85 FRDD
3.80%** 10/01/97 1,100 1,100,000
Unita Cnty. Pol. Ctl. Rev.,
Ser. 92 FRDD
3.75%** 12/01/22 200 200,000
Smith Barney Tax-Free
Money Market Fund 4,165 4,164,656
Vanguard Tax-Exempt Money Fund 100 100,000
-------------
TOTAL SHORT TERM INVESTMENTS
(Cost $5,564,656) 5,564,656
-------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
42
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONCLUDED)
AS OF SEPTEMBER 30, 1997 Value
-----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $100,415,055*) 103.5% $104,301,918
LIABILITIES IN EXCESS OF
OTHER ASSETS (3.5%) (3,510,938)
------ -------------
NET ASSETS (Applicable to 474,182
Institutional shares, 4,678,402 Service
shares, 3,054,223 Investor A shares and
1,150,124 Investor B shares outstanding) 100.0% $ 100,790,980
====== =============
NET ASSET VALUE AND REDEMPTION
PRICE PER INSTITUTIONAL, SERVICE
AND INVESTOR A SHARE
($88,402,193 / 8,206,807) $10.77
======
OFFERING PRICE PER INSTITUTIONAL
AND SERVICE SHARE $10.77
======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($10.77 / .960) $11.22
======
NET ASSET VALUE, OFFERING PRICE
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 4.5%) PER
INVESTOR B SHARE
($12,388,787 / 1,150,124) $10.77
======
- --------------------
* Also cost for Federal income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 3,889,522
Gross unrealized depreciation (2,659)
-------------
$ 3,886,863
=============
** Rates shown are the rates as of September 30, 1997, 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.
43
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
STATEMENT OF NET ASSETS
NEW JERSEY TAX-FREE INCOME PORTFOLIO
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
-------- ------- -----------
MUNICIPAL BONDS -- 97.5%
NEW JERSEY -- 89.5%
Absecon Bd. of Ed. G.O., Ser. 92
5.62% 12/15/02 $ 770 $ 788,241
Brick Township Mun. Util. Auth. Rev.,
Ser. 77
6.75% 12/01/16 1,000 1,172,500
Brigantine G.O., Ser. 92
6.25% 08/01/03 730 799,350
Cherry Hill Township G.O.,
Ser. 92
6.00% 06/01/06 500 535,625
Dover Township G.O., Ser. 92
6.00% 10/15/03 1,000 1,095,000
Delaware River Joint Toll Bdg. Rev.,
Ser. 92
6.25% 07/01/12 1,400 1,480,500
Edison Township G.O., Ser. 91
6.50% 06/01/04 500 556,875
Essex Cnty. Imp. Auth. Lease Rev.,
Jail & Yth. Hsg. Proj., Ser. 94
6.90% 12/01/14 500 584,375
Essex Cnty. Util. Auth. Sol. Wste.
Rev., Ser. 96
5.75% 04/01/05 2,000 2,152,500
Knowlton Township Bd. of Ed. G.O.,
Ser. 91
6.60% 08/15/11 169 196,251
Lacey Township Wtr. Auth. Rev.,
Ser. 93
6.00% 12/01/12 1,000 1,073,750
Mercer Cnty. Imp. Rev., Hamilton
Bd. of Ed. Proj., Ser. 92
5.90% 06/01/03 500 533,125
Mercer Cnty. Imp. Rev., Hamilton
Lease Proj. Ser. 93
5.25% 12/15/14 1,000 1,006,250
Middlesex Cnty. Import Auth. Rev.,
Ser. 96
5.80% 09/15/13 1,000 1,032,500
Morristown G.O., Ser. 95
6.40% 08/01/14 500 563,125
New Jersey Econ. Dev. Auth. Rev.,
St. Barnabas Medical Ctr. Proj.,
Ser. 97A
5.63% 07/01/23 4,000 980,000
New Jersey Econ. Dev. Auth. Rev.,
Invamed Inc. Proj., Ser. 95
6.00% 07/01/06 300 316,875
6.10% 07/01/07 200 211,250
New Jersey Econ. Dev. Auth. Rev.,
Mkt. Trans. Fac. Proj., Ser. 94
5.87% 07/01/11 4,000 4,270,000
New Jersey Econ. Dev. Auth. Rev.,
Performing Arts Ctr. Proj., Ser. 96C
5.75% 06/15/08 3,000 3,251,250
New Jersey Econ. Dev. Auth. Rev.,
Trenton OFC Complex Proj., Ser. 89
6.62% 06/15/01 1,050 1,132,687
New Jersey Econ. Dev. Auth. Rev.,
W.Y. Hldg. Co. Proj., Ser. 95
5.95% 06/01/05 865 897,437
New Jersey Ed. Auth. Rev.,
Rowan Coll. Proj., Ser. 96
5.87% 07/01/16 2,185 2,313,369
Par
Maturity (000) Value
-------- ------- -----------
MUNICIPAL BONDS (CONTINUED)
NEW JERSEY (CONTINUED)
New Jersey Hlth. Care Fac. Fin.
Auth. Rev., Cathederal.
Hlth. Ctr. Proj., Ser. 90
7.25% 02/15/21 $1,000 $1,088,750
New Jersey Hlth. Care Fac. Fin.
Auth. Rev., St. Josephs Hosp.
Ctr. Proj., Ser. 96
5.60% 07/01/07 4,000 4,240,000
New Jersey St. G.O., Ser. 92D
5.90% 02/15/08 3,000 3,228,750
6.00% 02/15/11 2,000 2,240,000
New Jersey St. Hsg. & Mtg. Fin.
Agcy. Rev., Ser. 92A
6.70% 05/01/05 500 537,500
6.70% 11/01/05 1,000 1,075,000
6.95% 11/01/13 750 808,125
New Jersey St. Hwy. Auth. Rev.,
Gard. St. Pkwy. Proj., Ser. 92
6.00% 01/01/05 1,350 1,446,187
6.20% 01/01/10 750 839,062
6.25% 01/01/14 500 527,500
New Jersey St. Tpke. Auth. Rev.,
Ser. 91A
6.90% 01/01/14 970 974,481
New Jersey St. Tpke. Auth. Rev.,
Ser. 91C
6.25% 01/01/10 1,350 1,439,438
6.50% 01/01/16 500 558,125
New Jersey St. Trans. Auth. Rev.,
Ser. 95A
5.50% 06/15/11 1,500 1,556,250
New Jersey St. Trans. Trust Fund Rev.,
Ser. 96B
5.25% 06/15/15 3,000 3,003,750
New Jersey Wstwtr. Rev., Ser. 89B
7.00% 05/15/04 950 1,005,813
New Jersey Wstwtr. Treatment
Trust Rev., Ser. 96C
6.25% 05/15/03 2,500 2,728,125
6.25% 05/15/06 3,000 3,345,000
Newark Bd. of Ed. G.O., Ser. 94
5.87% 12/15/13 1,000 1,050,000
North Bergen Township G.O.,
Ser. 92
5.90% 08/15/01 500 530,000
North Hudson Swr. Auth. Rev.,
Ser. 96
6.00% 08/01/05 1,000 1,100,000
North Jersey Wtr. Sply. Rev.,
Wanaque Nth. Proj., Ser. 91A
6.50% 11/15/06 510 562,913
Northwest Bergen Cnty. Rev.,
Ser. 92
5.90% 07/15/06 755 819,175
Ocean Cnty. Util. Auth. Rev.,
Ser. 95A
6.30% 01/01/12 1,005 1,086,656
Passaic Valley Wtr. Comm.
Sply. Rev., Ser. 92A
5.95% 12/15/02 500 538,125
Point Pleasant G.O., Ser. 95
5.70% 12/01/03 500 533,750
Port Auth. N.Y. & N.J. Rev., Ser. 95
5.75% 11/01/09 3,275 3,438,750
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
44
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
STATEMENT OF NET ASSETS
NEW JERSEY TAX-FREE INCOME PORTFOLIO (CONCLUDED)
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
-------- ------- -----------
MUNICIPAL BONDS (CONTINUED)
NEW JERSEY (CONTINUED)
Port Auth. N.Y. & N.J. Spl. Oblig. Rev.,
JFK Intl. Air Term. Proj., Ser. 97
6.25% 12/01/09 $3,000 $ 3,375,000
5.75% 12/01/22 2,105 2,154,994
South Jersey Port. Corp. N.J.
Rev., Ser. 93
5.60% 01/01/23 1,500 1,515,000
Warren Cnty. Pol. Ctrl. Fin. Auth.
Rev., Ser. 92B
5.70% 12/01/03 500 538,125
Weehawken Township G.O.,
Ser.92
6.15% 07/01/04 350 378,875
West Windsor Plainsboro Township
Bd. of Ed. G.O., Ser. 93
5.80% 03/15/06 1,000 1,076,250
Winslow Township Tax G.O.,
Ser.92
6.40% 10/01/05 870 959,175
Woodbridge Township G.O.,
Ser. 92
6.05% 08/15/05 500 538,125
-------------
77,779,604
-------------
PUERTO RICO -- 8.0%
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 94S
6.12% 07/01/08 1,000 1,127,500
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 94T
5.50% 07/01/20 2,250 2,224,688
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 97AA
5.25% 07/01/16 1,000 1,008,750
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 97BB
5.50% 07/01/09 1,500 1,605,000
Puerto Rico Pub. Bldgs. Auth. Rev.,
Ser. 97B
5.00% 07/01/15 1,000 988,750
-------------
6,954,688
-------------
TOTAL MUNICIPAL BONDS
(Cost $80,321,597) 84,734,292
-------------
Par
(000) Value
------- -----------
SHORT TERM INVESTMENTS -- 1.2%
Smith Barney Tax Free
Money Market Fund
(Cost $1,045,481) $1,045 $ 1,045,481
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $81,367,078*) 98.7% 85,779,773
OTHER ASSETS IN EXCESS
OF LIABILITIES 1.3% 1,131,696
------ ------------
NET ASSETS (Applicable to 7,258,965
Service shares, 132,824 Investor A
shares and 65,824 Investor B shares
outstanding) 100.0% $ 86,911,469
====== ============
NET ASSET VALUE AND REDEMPTION
PRICE PER SERVICE AND
INVESTOR A SHARE
($86,144,344 / 7,391,789) $11.65
======
OFFERING PRICE PER SERVICE
SHARE $11.65
======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($11.65 / .960) $12.14
======
NET ASSET VALUE, OFFERING PRICE
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 4.5%) PER
INVESTOR B SHARE
($767,125 / 65,824) $11.65
======
- ------------------------
* Also cost for Federal income tax purposes. The gross unrealized
appreciation on a tax basis is $4,412,695.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
45
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
STATEMENT OF NET ASSETS
OHIO TAX-FREE INCOME PORTFOLIO
Par
AS OF SEPTEMBER 30, 1997 Maturity (000) Value
-------- ------- -----------
MUNICIPAL BONDS -- 99.7%
OHIO -- 94.5%
Akron Swr. Sys. Rev., Ser. 96
5.87% 12/01/16 $500 $523,750
Brunswick G.O., Ser. 94
6.30% 12/01/05 210 227,062
Butler Cnty. Hosp. Fac. Rev.,
Middletown Reg. Hosp., Ser. 91
6.75% 11/15/03 50 55,437
Cleveland Apt. Sys. Rev., Ser. 94B
5.70% 01/01/04 150 160,312
Cleveland Packaging Fac. Rev.,
Ser. 96
6.00% 09/15/06 500 553,750
Cleveland-Cuyahoga Cnty. Port
Auth. Rev., Ser. 97
6.00% 03/01/07 500 503,125
Columbus Mun. Apt. Auth. Rev.
Port Columbus Int. Apt. Ser. 94A
6.00% 01/01/04 150 161,250
Columbus Public Imps., Ser. 93
5.35% 09/15/06 600 632,250
Cuyahoga Cnty. Hosp. Rev., Ser. 96
6.00% 01/15/05 500 540,625
Fairfield City Sch. Dist. G.O., Ser. 94
7.45% 12/01/14 300 370,125
Kings Loc. Sch. Dist. G.O., Ser. 94
7.60% 12/01/05 200 231,500
Loveland City Sch. Dist. G.O.,
Ser. 92
6.65% 12/01/02 145 158,050
Lucas Cnty. G.O., Ser. 96
6.00% 12/01/05 500 550,625
Medina G.O., Ser. 86
7.25% 12/01/03 50 57,437
North Royalton City Sch. Dist. G.O.,
Ser. 94
6.62% 12/01/06 100 115,375
Northwestern Loc. Sch. Dist. G.O.
Wayne & Ashland Cntys., Ser. 94
7.20% 12/01/10 300 368,250
Ohio G.O., Ser. 95
6.00% 08/01/05 225 249,469
Ohio Hsg Fin. Agcy.,
Wind River Proj. Ser. A
5.55% 11/01/18 250 250,313
Ohio Hsg. Fin. Agcy. Rev.
Res. Mort., Ser. 94B-2
6.35% 09/01/04 150 156,375
Ohio Pfc. Higher Ed. Rev.,
Ser. 92II-A
5.50% 12/01/07 400 416,500
Ohio St. Bldg. Data Ctr. Rev.,
Ser. 93A
5.90% 10/01/07 450 489,938
Ohio St. Higher Ed. Fac. Comm. Rev.
Ohio Dominican Coll., Ser. 94
6.62% 12/01/04 250 268,125
Ohio St. Tpke. Rev., Ser. 96
6.00% 02/15/05 400 437,000
Par
Maturity (000) Value
-------- ------- -----------
MUNICIPAL BONDS (CONTINUED)
OHIO (CONTINUED)
Ohio St. Wtr. Dev. Auth. Rev.
Steel-Cargill North Star
Broken Hill Proj., Ser. 95
6.30% 09/01/20 $500 $ 536,875
Olentangy Loc. Sch. Dist. G.O.,
Ser. 95A
6.00% 12/01/08 225 244,969
Olentangy Loc. Sch. Dist. G.O.,
Ser. 97
5.05% 12/01/09 350 355,250
Orrville Ohio Elec. Sys. Rev.
5.00% 12/01/13 500 491,250
Student Loan Funding Corp. Rev.
Cincinnati, Ser. 93A
5.75% 08/01/03 65 67,438
Summit Cnty. Hosp. Rev. Cuyahoga
Falls Gen. Hosp. Proj., Ser. 94
6.65% 07/01/14 200 209,750
Toledo G.O., Ser. 96
6.00% 12/01/06 500 553,125
Univ. of Toledo Gen. Rec. Rev.,
Ser. 92A
5.90%++ 06/01/20 425 436,688
Westlake G.O., Ser. 96
6.40% 12/01/08 500 575,000
-------------
10,946,988
-------------
MISSISSIPPI -- 0.9%
Jackson Cnty. PCR Chevron
U.S.A. Inc. Proj., Ser. 92 FRDD
3.75% 10/01/97 100 100,000
-------------
PUERTO RICO -- 4.3%
Puerto Rico Elec. Pwr. Auth.,
Ser. 97CC
5.00% 07/01/10 500 503,750
-------------
TOTAL MUNICIPAL BONDS
(Cost $11,073,155) 11,550,738
-------------
SHORT TERM INVESTMENTS -- 1.4%
Cuyahoga Cnty. Hosp. Imp. Rev.
Univ. Hosp. of Cleveland Proj.,
Ser. 95 FRDD
3.85%** 01/01/16 100 100,000
Smith Barney Tax Free
Money Market Fund 59 59,300
-------------
TOTAL SHORT TERM INVESTMENTS
(Cost $159,300) 159,300
-------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $11,132,455*) 101.1% 11,710,038
LIABILITIES IN EXCESS OF
OTHER ASSETS (1.1%) (124,890)
-------------
NET ASSETS (Applicable to 88,385
Institutional shares, 706,586
Service shares, 248,893
Investor A shares and 59,227
Investor B shares outstanding) 100.0% $ 11,585,148
====== =============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
46
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
STATEMENT OF NET ASSETS
OHIO TAX-FREE INCOME PORTFOLIO (CONCLUDED)
AS OF SEPTEMBER 30, 1997 Value
-------------
NET ASSET VALUE AND REDEMPTION
PRICE PER INSTITUTIONAL, SERVICE
AND INVESTOR A SHARE
($10,963,136 / 1,043,864) $10.50
======
OFFERING PRICE PER INSTITUTIONAL
AND SERVICE SHARE $10.50
======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($10.50 / .960) $10.94
======
NET ASSET VALUE, OFFERING PRICE
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 4.5%) PER
INVESTOR B SHARE
($622,012 / 59,227) $10.50
======
- -----------------------
* Also cost for Federal income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 579,867
Gross unrealized depreciation (2,284)
-----------
$ 577,583
===========
** Rates shown are the rates as of September 30, 1997, and the
maturities shown are the longer of the next interest readjustment
date or the date the principal amount can be recovered through
demand.
++ Principal amount of securities pledged as collateral of $102,750
on 5 short U.S. Treasury Bonds futures contracts expiring
December 1997. The value of such contracts on September 30, 1997
was $576,406, thereby resulting in an unrealized loss of $10,625.
INVESTMENT ABBREVIATIONS
ARM Adjustable Rate Mortgage
CMT Constant Maturity Treasury
FRDD Floating Rate Daily Demand
G.O. General Obligations
IO Interest Only
PO Prinicipal Only
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
47
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
INTERMEDIATE
LOW DURATION GOVERNMENT INTERMEDIATE CORE GOVERNMENT MANAGED
BOND BOND BOND BOND INCOME INCOME
FOR THE YEAR ENDED SEPTEMBER 30, 1997 PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest .............................. $15,007,154 $10,108,667 $23,306,039 $30,195,206 $1,534,266 $57,170,876
----------- ----------- ----------- ----------- ---------- -----------
Expenses:
Investment advisory fee ............... 1,117,051 771,571 1,626,805 2,046,336 84,992 3,766,487
Administration fee .................... 513,843 354,923 746,330 944,235 39,096 1,681,925
Custodian fee ......................... 57,028 44,600 86,396 104,534 18,194 201,184
Transfer agent fee .................... 99,473 55,360 94,333 158,463 31,936 253,407
Service fees .......................... 254,637 146,725 144,380 376,760 51,803 637,004
Distribution fees ..................... 4,428 23,426 4,184 28,405 113,084 48,271
Legal and audit ....................... 67,808 11,956 18,575 36,430 1,072 64,362
Printing .............................. 23,236 24,547 17,874 31,298 1,578 124,702
Registration fees and expenses ........ 29,959 37,403 51,406 27,291 32,593 65,036
Trustees' fees and officer's salary ... 4,941 3,735 6,121 6,637 335 16,203
Other ................................. 35,334 29,657 37,241 56,743 18,266 95,308
----------- ----------- ----------- ----------- ---------- -----------
2,207,738 1,503,903 2,833,645 3,817,132 392,949 6,953,889
Less fees voluntarily waived and
expenses reimbursed ................. (739,583) (480,952) (944,110) (1,178,717) (122,714) (1,887,057)
----------- ----------- ----------- ----------- ---------- -----------
Total operating expenses ......... 1,468,155 1,022,951 1,889,535 2,638,415 270,235 5,066,832
----------- ----------- ----------- ----------- ---------- -----------
Interest expense ......................... 881,383 180,735 1,451,493 1,788,979 186,487 2,667,010
----------- ----------- ----------- ----------- ---------- -----------
Total expenses ................... 2,349,538 1,203,686 3,341,028 4,427,394 456,722 7,733,842
----------- ----------- ----------- ----------- ---------- -----------
Net investment income .................... 12,657,616 8,904,981 19,965,011 25,767,812 1,077,544 49,437,034
----------- ----------- ----------- ----------- ---------- -----------
Realized and unrealized gain (loss) on
investments and foreign
currency transactions:
Net realized gain (loss) from:
Investment transactions ............. 1,615,869 1,478,439 1,787,860 9,157,934 362,403 11,760,645
Futures contracts ................... (56,942) 25,284 94,703 (3,396,690) (90,842) 1,159,733
Foreign currency transactions and
forward foreign currency
contracts ........................ -- -- -- -- -- --
Change in unrealized appreciation
(depreciation) from:
Investments ......................... 433,149 1,543,475 3,721,555 7,435,353 250,440 15,014,174
Futures ............................. 130,369 93,411 42,786 760,102 12,350 (3,412,999)
Foreign currency transactions and
forward foreign currency
contracts ........................ -- -- -- -- -- --
----------- ----------- ----------- ----------- ---------- -----------
Net gain on investments and
foreign currency transactions ......... 2,122,445 3,140,609 5,646,904 13,956,699 534,351 24,521,553
----------- ----------- ----------- ----------- ---------- -----------
Net increase in net assets resulting
from operations ....................... $14,780,061 $12,045,590 $25,611,915 $39,724,511 $1,611,895 $73,958,587
=========== =========== =========== =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
PENNSYLVANIA NEW JERSEY OHIO
INTERNATIONAL TAX-FREE TAX-FREE TAX-FREE TAX-FREE
BOND INCOME INCOME INCOME INCOME
FOR THE YEAR ENDED SEPTEMBER 30, 1997 PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest .............................. $2,655,083 $3,155,269 $4,936,633 $4,715,374 $576,119
---------- ---------- ---------- ---------- --------
Expenses:
Investment advisory fee ............... 249,099 281,147 447,047 433,484 53,745
Administration fee .................... 97,478 129,328 205,642 199,403 24,723
Custodian fee ......................... 52,916 15,017 16,515 22,095 13,660
Transfer agent fee .................... 16,370 24,584 63,621 48,447 7,418
Service fees .......................... 23,670 128,354 157,164 257,536 22,312
Distribution fees ..................... 4,973 22,597 217,530 7,108 14,048
Legal and audit ....................... 2,788 5,550 10,053 13,173 2,196
Printing .............................. 5,101 8,225 14,092 16,109 2,029
Registration fees and expenses ........ 29,959 35,258 12,074 7,990 2,542
Trustees' fees and officer's salary ... 1,371 1,110 2,133 937 218
Other ................................. 5,085 11,385 15,368 10,426 9,732
---------- ---------- ---------- ---------- --------
488,810 662,555 1,161,239 1,016,708 152,623
Less fees voluntarily waived and
expenses reimbursed ................. (43,664) (198,616) (272,965) (274,482) (54,946
---------- ---------- ---------- ---------- --------
Total operating expenses ......... 445,146 463,939 888,274 742,226 97,677
---------- ---------- ---------- ---------- --------
Interest expense ......................... 1,190 -- -- -- --
---------- ---------- ---------- ---------- --------
Total expenses ................... 446,336 463,939 888,274 742,226 97,677
---------- ---------- ---------- ---------- --------
Net investment income .................... 2,208,747 2,691,330 4,048,359 3,973,148 478,442
---------- ---------- ---------- ---------- --------
Realized and unrealized gain (loss) on
investments and foreign
currency transactions:
Net realized gain (loss) from:
Investment transactions ............. 529,416 953,947 671,291 110,203 38,374
Futures contracts ................... 160,946 10,415 -- 44,180 7,395
Foreign currency transactions and
forward foreign currency
contracts ........................ 1,745,658 -- -- -- --
Change in unrealized appreciation
(depreciation) from:
Investments ......................... 198,333 1,610,054 2,210,503 2,731,365 325,032
Futures ............................. 114,978 -- -- -- (10,597)
Foreign currency transactions and
forward foreign currency
contracts ........................ (279,079) -- -- -- --
---------- ---------- ---------- ---------- --------
Net gain on investments and
foreign currency transactions ......... 2,470,252 2,574,416 2,881,794 2,885,748 360,204
---------- ---------- ---------- ---------- --------
Net increase in net assets resulting
from operations ....................... $4,678,999 $5,265,746 $6,930,153 $6,858,896 $838,646
========== ========== ========== ========== ========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
48 & 49
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
STATEMENT OF CASH FLOWS
GOVERNMENT INCOME PORTFOLIO
FOR THE YEAR ENDED SEPTEMBER 30, 1997
Operating Activities
Investment income received .................................... $ 1,427,074
Operating expenses paid ....................................... (431,195)
-----------
Net increase in cash from operating activities ................... 995,879
Investing Activities
Purchases of long-term investments ............................ (95,469,384)
Proceeds from disposition of long-term portfolio investment ... 88,593,216
Net purchases of short-term investments ....................... (517,904)
-----------
Net decrease in cash from investing activities ................... (7,394,072)
Financing Activities
Cash dividends paid ........................................... (1,092,545)
Net borrowing related to reverse repurchase agreements ........ 2,426,191
Net proceeds related to capital stock transactions ............ 5,001,017
-----------
Net increase in cash from financing activities ................... 6,334,663
-----------
Net decrease in cash ............................................. (63,530)
Cash at beginning of year ........................................ 63,530
-----------
Cash at end of year .............................................. $ --
===========
Net increase in net assets resulting from operations ............. $ 1,611,895
Adjustments:
Increase in dividend and interest receivable .................. (107,192)
Increase in accrued expenses .................................. 8,436
Decrease in prepaid expenses .................................. 17,091
Net realized and changes in unrealized gain on investment ........ (534,351)
-----------
Total adjustments ................................................ (616,016)
-----------
NET INCREASE IN CASH FROM OPERATING ACTIVITIES ................... $ 995,879
===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
50
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
COMPASS CAPITAL FUNDS [LOGO OMITTED]
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LOW DURATION INTERMEDIATE GOVERNMENT
BOND PORTFOLIO BOND PORTFOLIO
---------------------------------------------- ---------------------------
FOR THE YEAR FOR THE PERIOD FOR THE PERIOD FOR THE YEAR FOR THE
ENDED 4/1/96 THROUGH 7/1/95 THROUGH ENDED YEAR ENDED
9/30/97 9/30/96 3/31/96 9/30/97 9/30/96
------------ ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income......................... $ 12,657,616 $ 6,116,432 $ 3,918,728 $ 8,904,981 $ 10,996,883
Net realized gain (loss) on investment,
futures and foreign currency
related transactions....................... 1,558,927 (1,541,367) 1,395,164 1,503,723 (1,515,018)
Net unrealized gain (loss) on investment,
futures and foreign currency
related transactions....................... 563,518 1,327,995 (3,644,972) 1,636,886 (709,452)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations.................. 14,780,061 5,903,060 1,668,920 12,045,590 8,772,413
------------ ------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income:
BlackRock Shares.............................. (811,188) -- -- -- --
Institutional Shares.......................... (7,000,339) (2,376,647) (1,842,630)1 (5,867,247) (7,708,808)
Service Shares................................ (4,542,121) (3,508,349) (2,026,179) (2,729,498) (2,611,126)
Investor A Shares............................. (52,116) (21,906) (5,132) (312,753) (401,159)
Investor B Shares............................. (1,130) -- -- (1,207) --
Investor C Shares............................. (1,370) -- -- (912) --
------------ ------------ ------------ ------------ ------------
Total distribution from net
investment income.......................... (12,408,264) (5,906,902) (3,873,941) (8,911,617) (10,721,093)
------------ ------------ ------------ ------------ ------------
In excess of net investment income:
BlackRock Shares.............................. -- -- -- -- --
Institutional Shares.......................... -- -- (164,529)1 -- --
Service Shares................................ -- -- -- -- --
Investor A Shares............................. -- -- -- -- --
Investor B Shares............................. -- -- -- -- --
Investor C Shares............................. -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Total distribution in excess of
net investment income...................... -- -- (164,529) -- --
------------ ------------ ------------ ------------ ------------
Net realized gains:
BlackRock Shares.............................. -- -- -- -- --
Institutional Shares.......................... -- -- (58,282)1 -- --
Service Shares................................ -- -- -- -- --
Investor A Shares............................. -- -- -- -- --
Investor B Shares............................. -- -- -- -- --
Investor C Shares............................. -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Total distributions from net realized gains... -- -- (58,282) -- --
------------ ------------ ------------ ------------ ------------
Total distributions to shareholders........... (12,408,264) (5,906,902) (4,096,752) (8,911,617) (10,721,093)
------------ ------------ ------------ ------------ ------------
Capital share transactions......................... 23,961,267 (6,733,602) 193,173,293 (30,250,028) (12,741,291)
------------ ------------ ------------ ------------ ------------
Total increase (decrease) in net assets....... 26,333,064 (6,737,444) 190,745,461 (27,116,055) (14,689,971)
------------ ------------ ------------ ------------ ------------
Net assets:
Beginning of period........................... 228,494,249 235,231,693 44,486,232 179,708,783 194,398,754
------------ ------------ ------------ ------------ ------------
End of period................................. $254,827,313 $228,494,249 $235,231,693 $152,592,728 $179,708,783
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE CORE
BOND PORTFOLIO BOND PORTFOLIO
--------------------------- ----------------------------------------------
FOR THE YEAR FOR THE FOR THE YEAR FOR THE PERIOD FOR THE PERIOD
ENDED YEAR ENDED ENDED 4/1/96 THROUGH 7/1/95 THROUGH
9/30/97 9/30/96 9/30/97 9/30/96 3/31/96
------------ ------------ ------------ -------------- --------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income......................... $ 19,965,011 $ 13,162,932 $ 25,767,812 $ 8,860,584 $ 4,622,227
Net realized gain (loss) on investment,
futures and foreign currency
related transactions....................... 1,882,563 (214,582) 5,761,244 (2,823,109) 6,070,648
Net unrealized gain (loss) on investment,
futures and foreign currency
related transactions....................... 3,764,341 (2,064,229) 8,195,455 555,399 (14,061,504)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations.................. 25,611,915 10,884,121 39,724,511 6,592,874 (3,368,629)
------------ ------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income:
BlackRock Shares.............................. -- -- (869,439) -- --
Institutional Shares.......................... (16,909,305) (10,531,863) (16,945,454) (3,574,577) (1,906,399)1
Service Shares................................ (2,846,163) (2,326,763) (7,314,612) (5,178,248) (2,729,527)
Investor A Shares............................. (59,232) (45,490) (61,926) (5,121) (228)
Investor B Shares............................. -- -- (160,271) (15,457) (58)
Investor C Shares............................. -- -- (2,213) -- --
------------ ------------ ------------ ------------ ------------
Total distribution from net
investment income.......................... (19,814,700) (12,904,116) (25,353,915) (8,773,403) (4,636,212)
------------ ------------ ------------ ------------ ------------
In excess of net investment income:
BlackRock Shares.............................. -- -- -- -- --
Institutional Shares.......................... -- -- -- -- --
Service Shares................................ -- -- -- -- --
Investor A Shares............................. -- -- -- -- --
Investor B Shares............................. -- -- -- -- --
Investor C Shares............................. -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Total distribution in excess of
net investment income...................... -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net realized gains:
BlackRock Shares.............................. -- -- -- -- --
Institutional Shares.......................... (349,958) (519,741) (900,868) -- (880,411)1
Service Shares................................ (69,712) (125,660) (548,738) -- --
Investor A Shares............................. (1,658) (2,393) (2,549) -- --
Investor B Shares............................. -- -- (10,003) -- --
Investor C Shares............................. -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Total distributions from net realized gains... (421,328) (647,794) (1,462,158) -- (880,411)
------------ ------------ ------------ ------------ ------------
Total distributions to shareholders........... (20,236,028) (13,551,910) (26,816,073) (8,773,403) (5,516,623)
------------ ------------ ------------ ------------ ------------
Capital share transactions......................... 89,558,760 94,529,679 277,409,859 (13,073,874) 273,598,804
------------ ------------ ------------ ------------ ------------
Total increase (decrease) in net assets....... 94,934,647 91,861,890 290,318,297 (15,254,403) 264,713,552
------------ ------------ ------------ ------------ ------------
Net assets:
Beginning of period........................... 254,206,324 162,344,434 281,649,953 296,904,356 32,190,804
------------ ------------ ------------ ------------ ------------
End of period................................. $349,140,971 $254,206,324 $571,968,250 $281,649,953 $296,904,356
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT MANAGED
INCOME PORTFOLIO INCOME PORTFOLIO
------------------------- ----------------------------
FOR THE YEAR FOR THE FOR THE YEAR FOR THE
ENDED YEAR ENDED ENDED YEAR ENDED
9/30/97 9/30/96 9/30/97 9/30/96
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income............................ $ 1,077,544 $ 832,981 $ 49,437,034 $ 40,383,826
Net realized gain (loss) on investment,
futures and foreign currency
related transactions.......................... 271,561 (45,167) 12,920,378 (5,088,235)
Net unrealized gain (loss) on investment,
futures and foreign currency
related transactions.......................... 262,790 (273,071) 11,601,175 (8,196,267)
----------- ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations..................... 1,611,895 514,743 73,958,587 27,099,324
----------- ----------- ------------ ------------
Distributions to shareholders from:
Net investment income:
BlackRock Shares................................. -- -- -- --
Institutional Shares............................. -- -- (35,140,503) (30,992,031)
Service Shares................................... -- -- (13,614,074) (8,387,287)
Investor A Shares................................ (281,858) (213,995) (746,570) (669,888)
Investor B Shares................................ (803,601) (595,251) (939) --
Investor C Shares................................ (9,876) -- -- --
----------- ----------- ------------ ------------
Total distribution from net
investment income............................. (1,095,335) (809,246) (49,502,086) (40,049,206)
----------- ----------- ------------ ------------
In excess of net investment income:
BlackRock Shares................................. -- -- -- --
Institutional Shares............................. -- -- -- --
Service Shares................................... -- -- -- --
Investor A Shares................................ -- -- -- --
Investor B Shares................................ -- -- -- --
Investor C Shares................................ -- -- -- --
----------- ----------- ------------ ------------
Total distribution in excess of
net investment income......................... -- -- -- --
----------- ----------- ------------ ------------
Net realized gains:
BlackRock Shares................................. -- -- -- --
Institutional Shares............................. -- -- -- (4,581,107)
Service Shares................................... -- -- -- (1,264,449)
Investor A Shares................................ (5,470) (81,209) -- (119,989)
Investor B Shares................................ (17,978) (277,151) -- --
Investor C Shares................................ -- -- -- --
----------- ----------- ------------ ------------
Total distributions from net realized gains...... (23,448) (358,360) -- (5,965,545)
----------- ----------- ------------ ------------
Total distributions to shareholders.............. (1,118,783) (1,167,606) (49,502,086) (46,014,751)
----------- ----------- ------------ ------------
Capital share transactions............................ 5,257,723 2,245,029 54,242,164 187,954,362
----------- ----------- ------------ ------------
Total increase (decrease) in net assets.......... 5,750,835 1,592,166 78,698,665 169,038,935
----------- ----------- ------------ ------------
Net assets:
Beginning of period.............................. 14,769,900 13,177,734 741,009,606 571,970,671
----------- ----------- ------------ ------------
End of period.................................... $20,520,735 $14,769,900 $819,708,271 $741,009,606
=========== =========== ============ ============
<FN>
- ----------------
1 Institutional 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.
52 & 53
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
COMPASS CAPITAL FUNDS [LOGO OMITTED]
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL TAX-FREE
BOND PORTFOLIO INCOME PORTFOLIO
------------------------------------------------ --------------------------
FOR THE YEAR FOR THE PERIOD FOR THE PERIOD FOR THE YEAR FOR THE
ENDED 2/1/96 THROUGH 3/1/95 THROUGH ENDED YEAR ENDED
9/30/97 9/30/96 1/31/96 9/30/97 9/30/96
------------ -------------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income.......................... $ 2,208,747 $ 1,389,531 $ 2,371,030 $ 2,691,330 $ 1,949,604
Net realized gain (loss) on investment,
futures and foreign currency
related transactions........................ 2,436,020 1,752,946 3,937,543 964,362 (15,719)
Net unrealized gain (loss) on investment,
futures and foreign currency
related transactions........................ 34,232 (1,158,595) 863,732 1,610,054 (1,509)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations................... 4,678,999 1,983,882 7,172,305 5,265,746 1,932,376
----------- ----------- ----------- ----------- -----------
Distributions to shareholders from:
Net investment income:
BlackRock Shares............................... -- -- -- -- --
Institutional Shares........................... (4,304,959) (348,627) -- (441,451) (377,242)
Service Shares................................. (986,122) (602,036) (3,221,772)1 (2,039,202) (1,297,915)
Investor A Shares.............................. (39,266) (978) -- (230,762) (268,319)
Investor B Shares.............................. (24,272) (633) -- (14,013) (78)
Investor C Shares.............................. (8,314) (14) -- (7) --
----------- ----------- ----------- ----------- -----------
Total distribution from net
investment income........................... (5,362,933) (952,288) (3,221,772) (2,725,435) (1,943,554)
----------- ----------- ----------- ----------- -----------
In excess of net investment income:
BlackRock Shares............................... -- -- -- -- --
Institutional Shares........................... -- -- -- -- --
Service Shares................................. -- -- -- -- --
Investor A Shares.............................. -- -- -- -- --
Investor B Shares.............................. -- -- -- -- --
Investor C Shares.............................. -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total distribution in excess of
net investment income....................... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net realized gains:
BlackRock Shares............................... -- -- -- -- --
Institutional Shares........................... (1,349,956) -- -- -- --
Service Shares................................. (338,728) -- -- -- --
Investor A Shares.............................. (8,738) -- -- -- --
Investor B Shares.............................. (5,334) -- -- -- --
Investor C Shares.............................. (2,081) -- -- -- --
----------- ----------- ----------- ----------- -----------
Total distributions from net realized gains.... (1,704,837) -- -- -- --
----------- ----------- ----------- ----------- -----------
Total distributions to shareholders............ (7,067,770) (952,288) (3,221,772) (2,725,435) (1,943,554)
----------- ----------- ----------- ----------- -----------
Capital share transactions.......................... 15,826,437 390,815 (11,980,752) 22,719,262 37,830,177
----------- ----------- ----------- ----------- -----------
Total increase (decrease) in net assets........ 13,437,666 1,422,409 (8,030,219) 25,259,573 37,818,999
----------- ----------- ----------- ----------- -----------
Net assets:
Beginning of period............................ 39,049,190 37,626,781 45,657,000 49,394,167 11,575,168
----------- ----------- ----------- ----------- -----------
End of period.................................. $52,486,856 $39,049,190 $37,626,781 $74,653,740 $49,394,167
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
PENNSYLVANIA TAX-FREE NEW JERSEY TAX-FREE
INCOME PORTFOLIO INCOME PORTFOLIO
--------------------------- ---------------------------------------------
FOR THE YEAR FOR THE FOR THE YEAR FOR THE PERIOD FOR THE PERIOD
ENDED YEAR ENDED ENDED 2/1/96 THROUGH 3/1/95 THROUGH
9/30/97 9/30/96 9/30/97 9/30/96 1/31/96
------------ ----------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income.......................... $ 4,048,359 $ 3,585,054 $ 3,973,148 $ 2,730,257 $ 3,947,696
Net realized gain (loss) on investment,
futures and foreign currency
related transactions........................ 671,291 (125,976) 154,383 (794,672) 366,047
Net unrealized gain (loss) on investment,
futures and foreign currency
related transactions........................ 2,210,503 564,065 2,731,365 (1,956,552) 5,294,882
------------ ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations................... 6,930,153 4,023,143 6,858,896 (20,967) 9,608,625
------------ ----------- ----------- ----------- -----------
Distributions to shareholders from:
Net investment income:
BlackRock Shares............................... -- -- -- -- --
Institutional Shares........................... (228,163) (179,824) -- -- --
Service Shares................................. (1,835,040) (1,340,668) (3,840,942) (2,881,377) (3,798,344)2
Investor A Shares.............................. (1,633,868) (1,875,997) (42,517) (15,162) (1)
Investor B Shares.............................. (373,390) (210,626) (15,000) (271) --
Investor C Shares.............................. -- -- -- -- --
------------ ----------- ----------- ----------- -----------
Total distribution from net
investment income........................... (4,070,461) (3,607,115) (3,898,459) (2,896,810) (3,798,345)
------------ ----------- ----------- ----------- -----------
In excess of net investment income:
BlackRock Shares............................... -- -- -- -- --
Institutional Shares........................... -- -- -- -- --
Service Shares................................. -- -- -- -- --
Investor A Shares.............................. -- -- -- -- --
Investor B Shares.............................. -- -- -- -- --
Investor C Shares.............................. -- -- -- -- --
------------ ----------- ----------- ----------- -----------
Total distribution in excess of
net investment income....................... -- -- -- -- --
------------ ----------- ----------- ----------- -----------
Net realized gains:
BlackRock Shares............................... -- -- -- -- --
Institutional Shares........................... -- -- -- -- --
Service Shares................................. -- -- -- -- --
Investor A Shares.............................. -- -- -- -- --
Investor B Shares.............................. -- -- -- -- --
Investor C Shares.............................. -- -- -- -- --
------------ ----------- ----------- ----------- -----------
Total distributions from net realized gains.... -- -- -- -- --
------------ ----------- ----------- ----------- -----------
Total distributions to shareholders............ (4,070,461) (3,607,115) (3,898,459) (2,896,810) (3,798,345)
------------ ----------- ----------- ----------- -----------
Capital share transactions.......................... 14,020,773 20,804,503 (5,049,556) (6,071,841) (4,677,074)
------------ ----------- ----------- ----------- -----------
Total increase (decrease) in net assets........ 16,880,465 21,220,531 (2,089,119) (8,989,618) 1,133,206
------------ ----------- ----------- ----------- -----------
Net assets:
Beginning of period............................ 83,910,515 62,689,984 89,000,588 97,990,206 96,857,000
------------ ----------- ----------- ----------- -----------
End of period.................................. $100,790,980 $83,910,515 $86,911,469 $89,000,588 $97,990,206
============ =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
OHIO TAX-FREE
INCOME PORTFOLIO
---------------------------
FOR THE YEAR FOR THE
ENDED YEAR ENDED
9/30/97 9/30/96
------------ ----------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income.......................... $ 478,442 $ 435,219
Net realized gain (loss) on investment,
futures and foreign currency
related transactions........................ 45,769 (25,177)
Net unrealized gain (loss) on investment,
futures and foreign currency
related transactions........................ 314,435 103,074
----------- ----------
Net increase (decrease) in net assets
resulting from operations................... 838,646 513,116
----------- ----------
Distributions to shareholders from:
Net investment income:
BlackRock Shares............................... -- --
Institutional Shares........................... (35,296) (16,530)
Service Shares................................. (310,363) (266,806)
Investor A Shares.............................. (118,178) (144,228)
Investor B Shares.............................. (15,202) (4,383)
Investor C Shares.............................. -- --
----------- ----------
Total distribution from net
investment income........................... (479,039) (431,947)
----------- ----------
In excess of net investment income:
BlackRock Shares............................... -- --
Institutional Shares........................... -- --
Service Shares................................. -- --
Investor A Shares.............................. -- --
Investor B Shares.............................. -- --
Investor C Shares.............................. -- --
----------- ----------
Total distribution in excess of
net investment income....................... -- --
----------- ----------
Net realized gains:
BlackRock Shares............................... -- --
Institutional Shares........................... -- --
Service Shares................................. -- --
Investor A Shares.............................. -- --
Investor B Shares.............................. -- --
Investor C Shares.............................. -- --
----------- ----------
Total distributions from net realized gains.... -- --
----------- ----------
Total distributions to shareholders............ (479,039) (431,947)
----------- ----------
Capital share transactions.......................... 1,445,504 939,853
----------- ----------
Total increase (decrease) in net assets........ 1,805,111 1,021,022
----------- ----------
Net assets:
Beginning of period............................ 9,780,037 8,759,015
----------- ----------
End of period.................................. $11,585,148 $9,780,037
=========== ==========
<FN>
- ----------------
1 Service Shares includes 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.
54 & 55
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
COMPASS CAPITAL FUNDS [LOGO OMITTED]
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH 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
FOR THE PERIOD ENDED OF PERIOD INCOME AND UNREALIZED) INCOME INCOME GAINS GAINS
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------
LOW DURATION BOND PORTFOLIO
- ---------------------------
BLACKROCK CLASS
6/3/97 1 through 9/30/97 $ 9.82 $0.19 $0.07 $(0.19) $ -- $ -- $ --
INSTITUTIONAL CLASS
9/30/97 $ 9.79 $0.58 $0.08 $(0.56) $ -- $ -- $ --
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
9/30/97 $ 9.79 $0.54 $0.09 $(0.53) $ -- $ -- $ --
4/1/96 through 9/30/96 9.79 0.26 (0.01) (0.25) -- -- --
1/12/96 1 through 3/31/96 9.91 0.11 (0.12) (0.11) -- -- --
INVESTOR A CLASS
9/30/97 $ 9.79 $0.52 $0.09 $(0.51) $ -- $ -- $ --
4/1/96 through 9/30/96 9.79 0.25 (0.01) (0.24) -- -- --
1/12/96 1 through 3/31/96 9.91 0.10 (0.12) (0.10) -- -- --
INVESTOR B CLASS
11/18/96 1 through 9/30/97 $ 9.86 $0.41 -- $(0.38) $ -- $ -- $ --
INVESTOR C CLASS
2/24/97 1 through 9/30/97 $ 9.87 $0.26 $0.02 $(0.26) $ -- $ -- $ --
- --------------------------------------
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
- --------------------------------------
INSTITUTIONAL CLASS
9/30/97 $ 9.92 $0.59 $0.19 $(0.59) $ -- $ -- $ --
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) --
SERVICE CLASS
9/30/97 $ 9.92 $0.56 $0.19 $(0.56) $ -- $ -- $ --
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
9/30/97 $ 9.92 $0.54 $0.19 $(0.54) $ -- $ -- $ --
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) --
INVESTOR B CLASS
10/11/96 1 through 9/30/97 $ 9.98 $0.45 $0.13 $(0.45) $ -- $ -- $ --
INVESTOR C CLASS
10/8/96 1 through 9/30/97 $ 9.98 $0.45 $0.13 $(0.45) $ -- $ -- $ --
- ---------------------------
INTERMEDIATE BOND PORTFOLIO
- ---------------------------
INSTITUTIONAL CLASS
9/30/97 $ 9.32 $0.58 $0.17 $(0.58) $ -- $ -- $ --
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
9/30/97 $ 9.32 $0.55 $0.17 $(0.55) $ -- $ -- $ --
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
9/30/97 $ 9.32 $0.53 $0.17 $(0.53) $ -- $ -- $ --
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>
NET NET RATIO OF EXPENSES
ASSET ASSETS RATIO OF TO AVERAGE RATIO OF NET
VALUE END OF EXPENSES TO NET ASSETS INVESTMENT INCOME
END OF TOTAL PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET
FOR THE PERIOD ENDED PERIOD RETURN (000) ASSETS WAIVERS) ASSETS
===============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------
LOW DURATION BOND PORTFOLIO
- ---------------------------
BLACKROCK CLASS
6/3/97 1 through 9/30/97 $ 9.89 2.68% $ 68,300 0.40%2,5 0.73%2 6.58%2
INSTITUTIONAL CLASS
9/30/97 $ 9.89 6.89% $102,490 0.55%5 0.88% 6.14%
4/1/96 through 9/30/96 9.79 2.70 135,686 0.55 2,5 0.83 2 5.72 2
7/1/95 through 3/31/96 9.79 4.25 52,843 0.63 2,5 0.83 2 5.25 2
6/30/95 9.83 6.99 44,486 0.57 1.05 6.08
6/30/94 9.71 2.33 31,265 0.57 1.02 4.70
7/17/92 1 through 6/30/93 9.96 4.63 51,611 0.56 2 0.66 2 5.32 2
SERVICE CLASS
9/30/97 $ 9.89 6.57% $ 82,873 0.85%5 1.18% 5.86%
4/1/96 through 9/30/96 9.79 2.54 91,870 0.85 2,5 1.13 2 5.40 2
1/12/96 1 through 3/31/96 9.79 (0.11) 181,670 0.85 2,5 1.05 2 5.25 2
INVESTOR A CLASS
9/30/97 $ 9.89 6.39%3 $ 1,079 1.02%5 1.35% 5.72%
4/1/96 through 9/30/96 9.79 2.46 3 938 1.02 2,5 1.30 2 5.20 2
1/12/96 1 through 3/31/96 9.79 (0.15)3 719 1.01 2,5 1.21 2 4.94 2
INVESTOR B CLASS
11/18/96 1 through 9/30/97 $ 9.89 4.31%4 $ 13 1.73%2,5 2.06%2 4.96%2
INVESTOR C CLASS
2/24/97 1 through 9/30/97 $ 9.89 2.91%4 $ 72 1.72%2,5 2.05%2 5.00%2
- --------------------------------------
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
- --------------------------------------
INSTITUTIONAL CLASS
9/30/97 $10.11 8.08% $ 96,605 0.55%6 0.86% 6.00%
9/30/96 9.92 4.82 126,312 0.53 6 0.83 6.03
9/30/95 10.02 10.28 134,835 0.42 6 0.79 5.94
9/30/94 9.64 (3.08) 128,974 0.40 0.80 5.48
9/30/93 10.60 6.88 137,065 0.73 0.81 5.23
SERVICE CLASS
9/30/97 $10.11 7.75% $ 50,535 0.85%6 1.16% 5.70%
9/30/96 9.92 4.51 47,494 0.83 6 1.13 5.73
9/30/95 10.02 9.99 49,762 0.69 6 1.06 5.67
9/30/94 9.64 (3.31) 60,812 0.65 1.05 5.30
7/29/93 1 through 9/30/93 10.60 2.30 15,035 0.67 2 0.75 2 5.14 2
INVESTOR A CLASS
9/30/97 $10.11 7.57%3 $ 5,374 1.02%6 1.33% 5.54%
9/30/96 9.92 4.36 3 5,903 0.95 6 1.25 5.64
9/30/95 10.03 9.98 3 9,802 0.70 6 1.07 5.67
9/30/94 9.64 (3.36)3 8,508 0.65 1.05 5.24
9/30/93 10.60 6.84 3 7,666 0.76 0.84 5.19
INVESTOR B CLASS
10/11/96 1 through 9/30/97 $10.11 5.94%4 $ 28 1.77%2,6 2.08%2 4.75%2
INVESTOR C CLASS
10/8/96 1 through 9/30/97 $10.11 5.94%4 $ 51 1.71%2,6 2.02%2 4.57%2
- ---------------------------
INTERMEDIATE BOND PORTFOLIO
- ---------------------------
INSTITUTIONAL CLASS
9/30/97 $ 9.49 8.40% $295,709 0.53%7 0.82% 6.63%
9/30/96 9.32 5.10 207,909 0.53 7 0.83 6.27
9/30/95 9.43 10.76 124,979 0.47 7 0.81 6.18
9/30/94 9.05 (3.52) 71,896 0.45 0.88 5.54
9/17/93 1 through 9/30/93 10.01 0.10 56,713 0.45 2 0.84 2 4.72 2
SERVICE CLASS
9/30/97 $ 9.49 8.07% $ 52,316 0.83%7 1.12% 6.32%
9/30/96 9.32 4.79 45,362 0.83 7 1.13 5.98
9/30/95 9.43 10.46 36,718 0.74 7 1.09 5.90
9/30/94 9.05 (3.80) 35,764 0.70 1.13 5.33
9/23/93 1 through 9/30/93 10.01 0.20 91 0.70 2 1.09 2 4.35 2
INVESTOR A CLASS
9/30/97 $ 9.49 7.89%3 $ 1,116 1.00%7 1.29% 6.14%
9/30/96 9.32 4.74 3 935 0.97 7 1.27 5.83
9/30/95 9.43 10.35 3 647 0.76 7 1.11 5.89
5/20/94 1 through 9/30/94 9.05 0.31 3 87 0.85 2 1.28 2 5.35 2
</TABLE>
<TABLE>
<CAPTION>
RATIO OF NET
INVESTMENT INCOME
TO AVERAGE
NET ASSETS PORTFOLIO
(EXCLUDING TURNOVER
FOR THE PERIOD ENDED WAIVERS) RATE
===========================================================
<S> <C> <C>
- ---------------------------
LOW DURATION BOND PORTFOLIO
- ---------------------------
BLACKROCK CLASS
6/3/97 1 through 9/30/97 6.25%2 371%
INSTITUTIONAL CLASS
9/30/97 5.81% 371%
4/1/96 through 9/30/96 5.45 2 228
7/1/95 through 3/31/96 5.05 2 185
6/30/95 5.60 586
6/30/94 4.25 455
7/17/92 1 through 6/30/93 5.22 2 513
SERVICE CLASS
9/30/97 5.53% 371%
4/1/96 through 9/30/96 5.13 2 228
1/12/96 1 through 3/31/96 5.05 2 185
INVESTOR A CLASS
9/30/97 5.39% 371%
4/1/96 through 9/30/96 4.92 2 228
1/12/96 1 through 3/31/96 4.74 2 185
INVESTOR B CLASS
11/18/96 1 through 9/30/97 4.63%2 371%
INVESTOR C CLASS
2/24/97 1 through 9/30/97 4.67%2 371%
- --------------------------------------
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
- --------------------------------------
INSTITUTIONAL CLASS
9/30/97 5.69% 291%
9/30/96 5.73 580
9/30/95 5.57 247
9/30/94 5.08 9
9/30/93 5.15 80
SERVICE CLASS
9/30/97 5.39% 291%
9/30/96 5.43 580
9/30/95 5.30 247
9/30/94 4.90 9
7/29/93 1 through 9/30/93 5.06 2 80
INVESTOR A CLASS
9/30/97 5.23% 291%
9/30/96 5.35 580
9/30/95 5.30 247
9/30/94 4.84 9
9/30/93 5.11 80
INVESTOR B CLASS
10/11/96 1 through 9/30/97 4.44%2 291%
INVESTOR C CLASS
10/8/96 1 through 9/30/97 4.26%2 291%
- ---------------------------
INTERMEDIATE BOND PORTFOLIO
- ---------------------------
INSTITUTIONAL CLASS
9/30/97 6.34% 321%
9/30/96 5.97 670
9/30/95 5.84 262
9/30/94 5.11 92
9/17/93 1 through 9/30/93 4.33 2 4
SERVICE CLASS
9/30/97 6.03% 321%
9/30/96 5.67 670
9/30/95 5.55 262
9/30/94 4.90 92
9/23/93 1 through 9/30/93 3.96 2 4
INVESTOR A CLASS
9/30/97 5.85% 321%
9/30/96 5.53 670
9/30/95 5.55 262
5/20/94 1 through 9/30/94 4.92 2 92
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
56 & 57
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
COMPASS CAPITAL FUNDS [LOGO OMITTED]
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH 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
FOR THE PERIOD ENDED OF PERIOD INCOME AND UNREALIZED) INCOME INCOME GAINS GAINS
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------
CORE BOND PORTFOLIO
- -------------------
BLACKROCK CLASS
5/1/97 1 through 9/30/97 $ 9.57 $0.26 $0.24 $(0.25) $ -- $ -- $ --
INSTITUTIONAL CLASS
9/30/97 $ 9.55 $0.62 $0.26 $(0.61) $ -- $ -- $ --
4/1/96 through 9/30/96 9.61 0.30 (0.06) (0.30) -- -- --
7/1/95 though 3/31/96 9.85 0.47 (0.07) (0.47) -- (0.17) --
6/30/95 9.36 0.62 0.50 (0.62) -- (0.01) --
6/30/94 10.37 0.55 (0.60) (0.55) -- (0.41) --
12/9/92 1 through 6/30/93 10.00 0.32 0.37 (0.32) -- -- --
SERVICE CLASS
9/30/97 $ 9.55 $0.59 $0.26 $(0.58) $ -- $ -- $ --
4/1/96 through 9/30/96 9.61 0.30 (0.07) (0.29) -- -- --
1/12/96 1 through 3/31/96 9.91 0.11 (0.30) (0.11) -- -- --
INVESTOR A CLASS
9/30/97 $ 9.55 $0.58 $0.26 $(0.57) $ -- $ -- $ --
4/1/96 through 9/30/96 9.61 0.28 (0.06) (0.28) -- -- --
1/31/96 1 through 3/31/96 9.99 0.08 (0.38) (0.08) -- -- --
INVESTOR B CLASS
9/30/97 $ 9.55 $0.51 $0.26 $(0.50) $ -- $ -- $ --
4/1/96 through 9/30/96 9.61 0.26 (0.07) (0.25) -- -- --
3/18/96 1 through 3/31/96 9.58 0.01 0.03 (0.01) -- -- --
INVESTOR C CLASS
2/28/97 1 through 9/30/97 $ 9.64 $0.29 $0.17 $(0.28) $ -- $ -- $ --
- ---------------------------
GOVERNMENT INCOME PORTFOLIO
- ---------------------------
INVESTOR A CLASS
9/30/97 $10.20 $0.73 $0.30 $(0.74) $ -- $ -- $ --
9/30/96 10.68 0.68 (0.22) (0.66) -- (0.28) --
10/3/94 1 though 9/30/95 10.00 0.55 0.68 (0.55) -- -- --
INVESTOR B CLASS
9/30/97 $10.20 $0.66 $0.30 $(0.67) $ -- $ -- $ --
9/30/96 10.68 0.60 (0.21) (0.59) -- (0.28) --
10/3/94 1 through 9/30/95 10.00 0.50 0.68 (0.50) -- -- --
INVESTOR C CLASS
2/28/97 1 through 9/30/97 $10.30 $0.37 $0.20 $(0.38) $ -- $ -- $ --
- ------------------------
MANAGED INCOME PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
9/30/97 $10.09 $0.68 $0.32 $(0.68) $ -- $ -- $ --
9/30/96 10.38 0.64 (0.21) (0.62) -- (0.10) --
9/30/95 9.79 0.65 0.60 (0.65) (0.01) -- --
9/30/94 11.17 0.64 (1.21) (0.64) (0.02) (0.14) (0.01)
9/30/93 10.74 0.67 0.56 (0.67) -- (0.13) --
SERVICE CLASS
9/30/97 $10.09 $0.66 $0.31 $(0.65) $ -- $ -- $ --
9/30/96 10.38 0.61 (0.20) (0.60) -- (0.10) --
9/30/95 9.79 0.63 0.60 (0.63) (0.01) -- --
9/30/94 11.17 0.59 (1.18) (0.62) (0.02) (0.14) (0.01)
7/29/93 1 through 9/30/93 10.96 0.11 0.21 (0.11) -- -- --
INVESTOR A CLASS
9/30/97 $10.09 $0.65 $0.31 $(0.64) $ -- $ -- $ --
9/30/96 10.38 0.59 (0.20) (0.58) -- (0.10) --
9/30/95 9.79 0.60 0.60 (0.60) (0.01) -- --
9/30/94 11.18 0.57 (1.19) (0.60) (0.02) (0.14) (0.01)
9/30/93 10.74 0.66 0.57 (0.66) -- (0.13) --
INVESTOR B CLASS
7/15/97 1 through 9/30/97 $10.39 $0.09 $0.02 $(0.09) $ -- $ -- $ --
- ----------------------------
INTERNATIONAL BOND PORTFOLIO
- ----------------------------
INSTITUTIONAL CLASS
9/30/97 $11.71 $0.78 $0.42 $(1.47) $ -- $(0.49) $ --
6/10/96 1 through 9/30/96 11.37 0.21 0.30 (0.17) -- -- --
</TABLE>
<TABLE>
<CAPTION>
NET NET RATIO OF EXPENSES
ASSET ASSETS RATIO OF TO AVERAGE RATIO OF NET
VALUE END OF EXPENSES TO NET ASSETS INVESTMENT INCOME
END OF TOTAL PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET
FOR THE PERIOD ENDED PERIOD RETURN (000) ASSETS WAIVERS) ASSETS
================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
- -------------------
CORE BOND PORTFOLIO
- -------------------
BLACKROCK CLASS
5/1/97 1 through 9/30/97 $ 9.82 5.30% $ 48,139 0.40%2,8 0.69%2 6.70%2
INSTITUTIONAL CLASS
9/30/97 $ 9.82 10.03% $393,657 0.55%8 0.85% 6.81%
4/1/96 through 9/30/96 9.55 2.55 162,626 0.55 2,8 0.84 2 6.75 2
7/1/95 though 3/31/96 9.61 3.93 64,707 0.66 2,8 0.91 2 5.89 2
6/30/95 9.85 11.79 32,191 0.55 1.75 6.62
6/30/94 9.36 (0.69) 12,507 0.55 2.65 5.61
12/9/92 1 through 6/30/93 10.37 6.88 7,803 0.55 2 2.44 2 5.57 2
SERVICE CLASS
9/30/97 $ 9.82 9.71% $122,308 0.85%8 1.14% 6.59%
4/1/96 through 9/30/96 9.55 2.40 117,207 0.85 2,8 1.14 2 6.33 2
1/12/96 1 through 3/31/96 9.61 (1.90) 232,040 0.85 2,8 1.10 2 5.46 2
INVESTOR A CLASS
9/30/97 $ 9.82 9.52%3 $ 2,441 1.01%8 1.30% 6.31%
4/1/96 through 9/30/96 9.55 2.36 3 320 1.02 2,8 1.31 2 6.29 2
1/31/96 1 through 3/31/96 9.61 (2.96)3 80 1.02 2,8 1.27 2 5.43 2
INVESTOR B CLASS
9/30/97 $ 9.82 8.71%4 $ 5,295 1.75%8 2.04% 5.61%
4/1/96 through 9/30/96 9.55 1.98 4 1,497 1.72 2,8 2.01 2 5.68 2
3/18/96 1 through 3/31/96 9.61 (0.33)4 77 1.77 2,8 2.02 2 4.71 2
INVESTOR C CLASS
2/28/97 1 through 9/30/97 $ 9.82 4.82%4 $ 128 1.74%2,8 2.03%2 5.41%2
- ---------------------------
GOVERNMENT INCOME PORTFOLIO
- ---------------------------
INVESTOR A CLASS
9/30/97 $10.49 10.48%3 $ 4,876 1.02%9 1.74% 8.02%
9/30/96 10.20 4.43 3 3,651 0.91 9 1.67 8.59
10/3/94 1 though 9/30/95 10.68 14.27 3 2,990 0.37 2,9 1.81 2 6.89 2
INVESTOR B CLASS
9/30/97 $10.49 9.66%4 $ 14,796 1.77%9 2.49% 7.26%
9/30/96 10.20 3.68 4 11,119 1.64 9 2.40 7.81
10/3/94 1 through 9/30/95 10.68 13.52 4 10,188 1.05 2,9 2.50 2 6.17 2
INVESTOR C CLASS
2/28/97 1 through 9/30/97 $10.49 5.64%4 $ 849 1.70%2,9 2.42%2 7.11%2
- ------------------------
MANAGED INCOME PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
9/30/97 $10.41 10.25% $537,260 0.58%10 0.83% 6.99%
9/30/96 10.09 4.33 564,744 0.58 0.81 6.17
9/30/95 10.38 13.27 443,148 0.57 0.77 6.44
9/30/94 9.79 (5.27) 395,060 0.55 0.77 6.11
9/30/93 11.17 12.13 341,791 0.74 0.78 6.25
SERVICE CLASS
9/30/97 $10.41 9.93% $266,750 0.88%10 1.13% 6.76%
9/30/96 10.09 4.05 165,073 0.88 1.11 5.87
9/30/95 10.38 12.97 116,846 0.85 1.05 6.14
9/30/94 9.79 (5.49) 67,655 0.80 1.02 5.95
7/29/93 1 through 9/30/93 11.17 2.93 15,322 0.80 2 0.84 2 5.83 2
INVESTOR A CLASS
9/30/97 $10.41 9.74%3 $ 15,230 1.05%10 1.30% 6.54%
9/30/96 10.09 3.83 3 11,193 1.05 1.29 5.67
9/30/95 10.38 12.74 3 11,977 1.05 1.25 5.96
9/30/94 9.79 (5.76)3 10,921 1.00 1.22 5.66
9/30/93 11.18 12.13 3 7,252 0.84 0.88 6.09
INVESTOR B CLASS
7/15/97 1 through 9/30/97 $10.41 1.35%4 $ 468 1.31%2,10 1.56%2 4.68%2
- ----------------------------
INTERNATIONAL BOND PORTFOLIO
- ----------------------------
INSTITUTIONAL CLASS
9/30/97 $10.95 11.59% $ 43,310 0.98%11 1.08% 5.28%
6/10/96 1 through 9/30/96 11.71 4.48 30,882 0.92 2 1.32 2 6.28 2
</TABLE>
RATIO OF NET
INVESTMENT INCOME
TO AVERAGE
NET ASSETS PORTFOLIO
(EXCLUDING TURNOVER
FOR THE PERIOD ENDED WAIVERS) RATE
===========================================================
- -------------------
CORE BOND PORTFOLIO
- -------------------
BLACKROCK CLASS
5/1/97 1 through 9/30/97 6.41%2 441%
INSTITUTIONAL CLASS
9/30/97 6.52% 441%
4/1/96 through 9/30/96 6.45 2 308
7/1/95 though 3/31/96 5.64 2 723
6/30/95 5.43 435
6/30/94 3.51 722
12/9/92 1 through 6/30/93 3.68 2 354
SERVICE CLASS
9/30/97 6.31% 441%
4/1/96 through 9/30/96 6.04 2 308
1/12/96 1 through 3/31/96 5.21 2 723
INVESTOR A CLASS
9/30/97 6.02% 441%
4/1/96 through 9/30/96 6.00 2 308
1/31/961 through 3/31/96 5.19 2 723
INVESTOR B CLASS
9/30/97 5.32% 441%
4/1/96 through 9/30/96 5.39 2 308
3/18/96 1 through 3/31/96 4.46 2 723
INVESTOR C CLASS
2/28/97 1 through 9/30/97 5.12%2 441%
- ---------------------------
GOVERNMENT INCOME PORTFOLIO
- ---------------------------
INVESTOR A CLASS
9/30/97 7.30% 393%
9/30/96 7.83 434
10/3/94 1 though 9/30/95 5.44 2 258
INVESTOR B CLASS
9/30/97 6.54% 393%
9/30/96 7.05 434
10/3/94 1 through 9/30/95 4.72 2 258
INVESTOR C CLASS
2/28/97 1 through 9/30/97 6.39%2 393%
- ------------------------
MANAGED INCOME PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
9/30/97 6.74% 428%
9/30/96 5.95 638
9/30/95 6.24 203
9/30/94 5.89 61
9/30/93 6.21 72
SERVICE CLASS
9/30/97 6.51% 428%
9/30/96 5.65 638
9/30/95 5.94 203
9/30/94 5.73 61
7/29/93 1 through 9/30/93 5.79 2 72
INVESTOR A CLASS
9/30/97 6.29% 428%
9/30/96 5.44 638
9/30/95 5.76 203
9/30/94 5.44 61
9/30/93 6.05 72
INVESTOR B CLASS
7/15/97 1 through 9/30/97 4.43%2 428%
- ----------------------------
INTERNATIONAL BOND PORTFOLIO
- ----------------------------
INSTITUTIONAL CLASS
9/30/97 5.18% 272%
6/10/96 1 through 9/30/96 5.88 2 108
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
58 & 59
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
COMPASS CAPITAL FUNDS [LOGO OMITTED]
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH 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
FOR THE PERIOD ENDED OF PERIOD INCOME AND UNREALIZED) INCOME INCOME GAINS GAINS
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
SERVICE CLASS
9/30/97 $11.71 $1.36 $(0.19) $(1.44) $ -- $(0.49) $ --
2/1/96 through 9/30/96 11.39 0.89 (0.29) (0.28) -- -- --
3/1/95 through 1/31/96 10.52 0.62 1.13 (0.88) -- -- --
2/28/95 10.75 0.62 (0.48) (0.13) -- (0.24) --
2/28/94 10.76 0.65 0.46 (0.90) -- (0.22) --
2/28/93 10.21 0.52 0.47 (0.30) -- (0.14) --
INVESTOR A CLASS
9/30/97 $11.71 $1.10 $(0.05) $(1.42) $ -- $(0.49) $ --
4/22/96 1 through 9/30/96 11.37 0.26 0.32 (0.24) -- -- --
INVESTOR B CLASS
9/30/97 $11.71 $1.06 -- $(1.33) $ -- $(0.49) $ --
4/19/96 1 through 9/30/96 11.36 0.22 0.33 (0.20) -- -- --
INVESTOR C CLASS
9/30/97 $11.71 $1.15 $(0.09) $(1.33) $ -- $(0.49) $ --
9/11/96 1 through 9/30/96 11.58 0.02 0.12 (0.01) -- -- --
- -------------------------
TAX-FREE INCOME PORTFOLIO
- -------------------------
INSTITUTIONAL CLASS
9/30/97 $10.84 $0.56 $0.51 $(0.57) $ -- $ -- $ --
9/30/96 10.61 0.49 0.28 (0.54) -- -- --
9/30/95 10.04 0.53 0.59 (0.53) -- (0.02) --
9/30/94 11.31 0.53 (0.93) (0.53) -- (0.34) --
1/21/93 1 through 9/30/93 10.61 0.42 0.70 (0.42) -- -- --
SERVICE CLASS
9/30/97 $10.84 $0.53 $0.50 $(0.53) $ -- $ -- $ --
9/30/96 10.61 0.51 0.23 (0.51) -- -- --
9/30/95 10.04 0.50 0.59 (0.50) -- (0.02) --
9/30/94 11.31 0.51 (0.93) (0.51) -- (0.34) --
7/29/93 1 through 9/30/93 10.97 0.09 0.34 (0.09) -- -- --
INVESTOR A CLASS
9/30/97 $10.84 $0.50 $0.51 $(0.51) $ -- $ -- $ --
9/30/96 10.61 0.45 0.21 (0.43) -- -- --
9/30/95 10.04 0.48 0.59 (0.48) -- (0.02) --
9/30/94 11.31 0.48 (0.93) (0.48) -- (0.34) --
9/30/93 10.60 0.55 0.83 (0.55) -- (0.12) --
INVESTOR B CLASS
9/30/97 $10.84 $0.44 $0.49 $(0.43) $ -- $ -- $ --
7/18/96 1 through 9/30/96 10.74 0.08 0.10 (0.08) -- -- --
INVESTOR C CLASS
2/28/97 1 through 9/30/97 $11.04 $0.28 $0.27 $(0.25) $ -- $ -- $ --
- --------------------------------------
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
- --------------------------------------
INSTITUTIONAL CLASS
9/30/97 $10.44 $0.53 $0.33 $(0.53) $ -- $ -- $ --
9/30/96 10.33 0.52 0.12 (0.53) -- -- --
9/30/95 9.82 0.52 0.51 (0.52) -- -- --
9/30/94 10.70 0.53 (0.85) (0.53) -- (0.03) --
12/1/92 1 through 9/30/93 10.00 0.39 0.73 (0.39) -- (0.03) --
SERVICE CLASS
9/30/97 $10.44 $0.50 $0.33 $(0.50) $ -- $ -- $ --
9/30/96 10.33 0.50 0.11 (0.50) -- -- --
9/30/95 9.82 0.50 0.51 (0.50) -- -- --
9/30/94 10.70 0.51 (0.85) (0.51) -- (0.03) --
7/29/93 1 through 9/30/93 10.43 0.09 0.28 (0.09) -- (0.01) --
INVESTOR A CLASS
9/30/97 $10.44 $0.48 $0.33 $(0.48) $ -- $ -- $ --
9/30/96 10.33 0.48 0.11 (0.48) -- -- --
9/30/95 9.82 0.48 0.51 (0.48) -- -- --
9/30/94 10.70 0.52 (0.85) (0.52) -- (0.03) --
12/1/92 1 through 9/30/93 10.00 0.42 0.73 (0.42) -- (0.03) --
INVESTOR B CLASS
9/30/97 $10.44 $0.40 $0.33 $(0.40) $ -- $ -- $ --
9/30/96 10.33 0.40 0.11 (0.40) -- -- --
10/3/94 1 through 9/30/95 9.82 0.42 0.51 (0.42) -- -- --
</TABLE>
<TABLE>
<CAPTION>
NET NET RATIO OF EXPENSES
ASSET ASSETS RATIO OF TO AVERAGE RATIO OF NET
VALUE END OF EXPENSES TO NET ASSETS INVESTMENT INCOME
END OF TOTAL PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET
FOR THE PERIOD ENDED PERIOD RETURN (000) ASSETS WAIVERS) ASSETS
==============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
SERVICE CLASS
9/30/97 $10.95 11.23% $ 6,708 1.29%11 1.39% 5.02%
2/1/96 through 9/30/96 11.71 5.39 7,836 1.09 2 1.20 2 3.82 2
3/1/95 through 1/31/96 11.39 16.79 37,627 1.23 2 1.23 2 5.62 2
2/28/95 10.52 1.50 45,657 1.24 1.24 5.96
2/28/94 10.75 10.24 46,888 1.38 1.38 6.00
2/28/93 10.76 9.55 38,257 1.30 1.30 6.31
INVESTOR A CLASS
9/30/97 $10.95 11.02%3 $ 1,015 1.42%11 1.52% 4.49%
4/22/96 1 through 9/30/96 11.71 5.13 3 176 1.45 2 1.86 2 5.29 2
INVESTOR B CLASS
9/30/97 $10.95 10.11%4 $ 979 2.12%2,11 2.22% 3.65%
4/19/96 1 through 9/30/96 11.71 4.90 4 136 2.09 2 2.492 4.61 2
INVESTOR C CLASS
9/30/97 $10.95 10.13%4 $ 474 2.11%11 2.21% 3.57%
9/11/96 1 through 9/30/96 11.71 1.24 4 19 1.53 2 1.93 2 2.79 2
- -------------------------
TAX-FREE INCOME PORTFOLIO
- -------------------------
INSTITUTIONAL CLASS
9/30/97 $11.34 10.09% $ 9,419 0.55% 0.90% 5.07%
9/30/96 10.84 7.45 8,350 0.55 0.89 5.10
9/30/95 10.61 11.54 271 0.52 1.30 5.19
9/30/94 10.04 (3.77) 132 0.50 1.73 4.97
1/21/93 1 through 9/30/93 11.31 10.72 675 0.50 2 1.28 2 5.14 2
SERVICE CLASS
9/30/97 $11.34 9.77% $58,779 0.85% 1.20% 4.76%
9/30/96 10.84 7.14 36,161 0.85 1.18 4.88
9/30/95 10.61 11.24 4,713 0.80 1.57 4.92
9/30/94 10.04 (4.02) 2,109 0.75 1.98 4.75
7/29/93 1 through 9/30/93 11.31 3.92 634 0.71 2 1.49 2 4.99 2
INVESTOR A CLASS
9/30/97 $11.34 9.58%3 $ 5,530 1.02% 1.37% 4.60%
9/30/96 10.84 6.94 3 4,873 1.04 1.37 4.67
9/30/95 10.61 10.99 3 6,591 1.00 1.78 4.74
9/30/94 10.04 (4.19)3 6,972 0.95 2.18 4.53
9/30/93 11.31 13.48 3 7,831 0.57 1.36 5.06
INVESTOR B CLASS
9/30/97 $11.34 8.77%4 $ 926 1.75% 2.10% 3.65%
7/18/96 1 through 9/30/96 10.84 1.72 4 10 1.65 2 1.98 2 3.84 2
INVESTOR C CLASS
2/28/97 1 through 9/30/97 $11.34 5.02%4 $ -- 1.70%2 2.05%2 3.95%2
- --------------------------------------
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
- --------------------------------------
INSTITUTIONAL CLASS
9/30/97 $10.77 8.43% $ 5,108 0.55% 0.86% 4.97%
9/30/96 10.44 6.29 3,609 0.55 0.85 5.01
9/30/95 10.33 10.81 2,092 0.52 0.84 5.23
9/30/94 9.82 (2.96) 639 0.39 0.99 5.27
12/1/92 1 through 9/30/93 10.70 11.69 256 0.09 2 0.97 2 5.19 2
SERVICE CLASS
9/30/97 $10.77 8.10% $50,395 0.85% 1.16% 4.67%
9/30/96 10.44 5.97 34,297 0.85 1.15 4.74
9/30/95 10.33 10.51 13,815 0.79 1.11 5.04
9/30/94 9.82 (3.20) 11,518 0.55 1.15 4.97
7/29/93 1 through 9/30/93 10.70 3.54 3,894 0.34 2 0.01 2 4.90 2
INVESTOR A CLASS
9/30/97 $10.77 7.95%3 $32,900 0.97% 1.30% 4.54%
9/30/96 10.44 5.81 3 38,031 1.00 1.30 4.58
9/30/95 10.33 10.30 3 42,775 0.98 1.30 4.88
9/30/94 9.82 (3.06)3 46,563 0.41 1.01 5.06
12/1/92 1 through 9/30/93 10.70 11.69 3 35,934 0.07 2 0.95 2 5.19 2
INVESTOR B CLASS
9/30/97 $10.77 7.12%4 $12,388 1.76% 2.07% 3.73%
9/30/96 10.44 5.04 4 7,974 1.74 2.03 3.81
10/3/94 1 through 9/30/95 10.33 9.69 4 4,008 1.57 2 1.89 2 4.07 2
</TABLE>
RATIO OF NET
INVESTMENT INCOME
TO AVERAGE
NET ASSETS PORTFOLIO
(EXCLUDING TURNOVER
FOR THE PERIOD ENDED WAIVERS) RATE
===========================================================
SERVICE CLASS
9/30/97 4.92% 272%
2/1/96 through 9/30/96 3.72 2 108
3/1/95 through 1/31/96 5.62 2 159
2/28/95 5.96 131
2/28/94 6.00 128
2/28/93 6.31 115
INVESTOR A CLASS
9/30/97 4.39% 272%
4/22/96 1 through 9/30/96 4.88 2 108
INVESTOR B CLASS
9/30/97 3.55% 272%
4/19/96 1 through 9/30/96 4.21 2 108
INVESTOR C CLASS
9/30/97 3.47% 272%
9/11/96 1 through 9/30/96 2.38 2 108
- -------------------------
TAX-FREE INCOME PORTFOLIO
- -------------------------
INSTITUTIONAL CLASS
9/30/97 4.72% 262%
9/30/96 4.78 268
9/30/95 4.41 92
9/30/94 3.74 40
1/21/93 1 through 9/30/93 4.36 2 71
SERVICE CLASS
9/30/97 4.41% 262%
9/30/96 4.56 268
9/30/95 4.15 92
9/30/94 3.52 40
7/29/93 1 through 9/30/93 4.21 2 71
INVESTOR A CLASS
9/30/97 4.25% 262%
9/30/96 4.35 268
9/30/95 3.96 92
9/30/94 3.30 40
9/30/93 4.27 71
INVESTOR B CLASS
9/30/97 3.30% 262%
7/18/96 1 through 9/30/96 3.51 2 268
INVESTOR C CLASS
2/28/97 1 through 9/30/97 3.60%2 262%
- --------------------------------------
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
- --------------------------------------
INSTITUTIONAL CLASS
9/30/97 4.66% 97%
9/30/96 4.72 119
9/30/95 4.91 66
9/30/94 4.67 30
12/1/92 1 through 9/30/93 4.31 2 40
SERVICE CLASS
9/30/97 4.36% 97%
9/30/96 4.44 119
9/30/95 4.72 66
9/30/94 4.37 30
7/29/93 1 through 9/30/93 4.02 2 40
INVESTOR A CLASS
9/30/97 4.23% 97%
9/30/96 4.29 119
9/30/95 4.56 66
9/30/94 4.46 30
12/1/92 1 through 9/30/93 4.31 2 40
INVESTOR B CLASS
9/30/97 3.42% 97%
9/30/96 3.51 119
10/3/94 1 through 9/30/95 3.75 2 66
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
60 & 61
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
COMPASS CAPITAL FUNDS [LOGO OMITTED]
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH 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
FOR THE PERIOD ENDED OF PERIOD INCOME AND UNREALIZED) INCOME INCOME GAINS GAINS
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------
NEW JERSEY TAX-FREE INCOME PORTFOLIO
- ------------------------------------
SERVICE CLASS
9/30/97 $11.27 $0.52 $0.37 $(0.51) $ -- $ -- $ --
2/1/96 through 9/30/96 11.61 0.73 (0.32) (0.75) -- -- --
3/1/95 through 1/31/96 10.94 0.46 0.65 (0.44) -- -- --
2/28/95 11.31 0.51 (0.36) (0.51) -- (0.01) --
2/28/94 11.30 0.54 0.04 (0.54) -- (0.03) --
2/28/93 10.46 0.52 0.85 (0.53) -- -- --
INVESTOR A CLASS
9/30/97 $11.27 $0.51 $0.37 $(0.50) $ -- $ -- $ --
2/1/96 through 9/30/96 11.61 0.34 (0.34) (0.34) -- -- --
1/26/96 1 through 1/31/96 11.54 -- 0.07 -- -- -- --
INVESTOR B CLASS
9/30/97 $11.27 $0.41 $0.38 $(0.41) $ -- $ -- $ --
7/2/96 1 through 9/30/96 11.15 0.09 0.12 (0.09) -- -- --
- ------------------------------
OHIO TAX-FREE INCOME PORTFOLIO
- ------------------------------
INSTITUTIONAL CLASS
9/30/97 $10.15 $0.51 $0.34 $(0.50) $ -- $ -- $ --
9/30/96 10.05 0.50 0.10 (0.50) -- -- --
9/30/95 9.60 0.55 0.45 (0.55) -- -- --
9/30/94 10.53 0.53 (0.91) (0.53) -- (0.02) --
12/1/92 1 through 9/30/93 10.00 0.36 0.53 (0.36) -- -- --
SERVICE CLASS
9/30/97 $10.15 $0.47 $0.35 $(0.47) $ -- $ -- $ --
9/30/96 10.05 0.48 0.10 (0.48) -- -- --
9/30/95 9.60 0.52 0.45 (0.52) -- -- --
9/30/94 10.53 0.49 (0.91) (0.49) -- (0.02) --
7/29/93 1 through 9/30/93 10.24 0.09 0.29 (0.09) -- -- --
INVESTOR A CLASS
9/30/97 $10.15 $0.45 $0.35 $(0.45) $ -- $ -- $ --
9/30/96 10.05 0.46 0.10 (0.46) -- -- --
9/30/95 9.60 0.52 0.45 (0.52) -- -- --
9/30/94 10.53 0.53 (0.91) (0.53) -- (0.02) --
12/1/92 1 through 9/30/93 10.00 0.36 0.53 (0.36) -- -- --
INVESTOR B CLASS
9/30/97 $10.15 $0.37 $0.35 $(0.37) $ -- $ -- $ --
9/30/96 10.05 0.38 0.10 (0.38) -- -- --
10/13/94 1 through 9/30/95 9.58 0.42 0.47 (0.42) -- -- --
</TABLE>
<TABLE>
<CAPTION>
NET NET RATIO OF EXPENSES
ASSET ASSETS RATIO OF TO AVERAGE RATIO OF NET
VALUE END OF EXPENSES TO NET ASSETS INVESTMENT INCOME
END OF TOTAL PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET
FOR THE PERIOD ENDED PERIOD RETURN (000) ASSETS WAIVERS) ASSETS
===============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------
NEW JERSEY TAX-FREE INCOME PORTFOLIO
- ------------------------------------
SERVICE CLASS
9/30/97 $11.65 8.11% $ 84,596 0.85% 1.17% 4.59%
2/1/96 through 9/30/96 11.27 0.15 88,077 0.85 2 1.17 2 4.44 2
3/1/95 through 1/31/96 11.61 10.35 97,976 0.88 2 0.90 2 4.43 2
2/28/95 10.94 1.49 96,857 0.79 0.87 4.71
2/28/94 11.31 5.18 111,354 0.38 0.86 4.75
2/28/93 11.30 13.48 47,169 0.48 1.04 5.04
INVESTOR A CLASS
9/30/97 $11.65 7.94%3 $ 1,548 1.02% 1.34% 4.41%
2/1/96 through 9/30/96 11.27 (0.01)3 894 1.01 2 1.33 2 4.29 2
1/26/96 1 through 1/31/96 11.61 0.63 3 14 1.02 2 1.36 2 2.79 2
INVESTOR B CLASS
9/30/97 $11.65 7.14%4 $ 767 1.74% 2.06% 3.60%
7/2/96 1 through 9/30/96 11.27 2.04 4 30 1.74 2 2.06 2 3.48 2
- ------------------------------
OHIO TAX-FREE INCOME PORTFOLIO
- ------------------------------
INSTITUTIONAL CLASS
9/30/97 $10.50 8.53% $ 928 0.55% 1.06% 4.80%
9/30/96 10.15 6.12 409 0.51 1.10 4.96
9/30/95 10.05 10.75 200 0.12 1.19 5.61
9/30/94 9.60 (3.75) 127 0.10 1.49 5.16
12/1/92 1 through 9/30/93 10.53 9.10 1,676 0.08 2 2.59 2 4.99 2
SERVICE CLASS
9/30/97 $10.50 8.21% $ 7,421 0.85% 1.36% 4.51%
9/30/96 10.15 5.80 6,377 0.79 1.38 4.69
9/30/95 10.05 10.45 5,150 0.39 1.46 5.39
9/30/94 9.60 (4.00) 4,428 0.35 1.74 5.06
7/29/93 1 through 9/30/93 10.53 3.68 907 0.32 2 2.83 2 4.71 2
INVESTOR A CLASS
9/30/97 $10.50 8.03%3 $ 2,614 1.02% 1.53% 4.35%
9/30/96 10.15 5.66 3 2,833 0.91 1.50 4.57
9/30/95 10.05 10.46 3 3,303 0.38 1.45 5.42
9/30/94 9.60 (3.75)3 3,825 0.10 1.49 5.18
12/1/92 1 through 9/30/93 10.53 9.10 3 2,386 0.07 2 2.58 2 4.90 2
INVESTOR B CLASS
9/30/97 $10.50 7.23%4 $ 622 1.75% 2.26% 3.52%
9/30/96 10.15 4.87 4 161 1.66 2.26 3.80
10/13/94 1 through 9/30/95 10.05 9.33 4 106 1.17 2 2.25 2 4.48 2
</TABLE>
<TABLE>
<CAPTION>
RATIO OF NET
INVESTMENT INCOME
TO AVERAGE
NET ASSETS PORTFOLIO
(EXCLUDING TURNOVER
FOR THE PERIOD ENDED WAIVERS) RATE
=============================================================
<S> <C> <C>
- ------------------------------------
NEW JERSEY TAX-FREE INCOME PORTFOLIO
- ------------------------------------
SERVICE CLASS
9/30/97 4.27% 77%
2/1/96 through 9/30/96 4.13 2 109
3/1/95 through 1/31/96 4.41 2 26
2/28/95 4.63 28
2/28/94 4.27 12
2/28/93 4.48 16
INVESTOR A CLASS
9/30/97 4.09% 77%
2/1/96 through 9/30/96 3.98 2 109
1/26/96 1 through 1/31/96 2.45 2 26
INVESTOR B CLASS
9/30/97 3.28% 77%
7/2/96 1 through 9/30/96 3.16 2 109
- ------------------------------
OHIO TAX-FREE INCOME PORTFOLIO
- ------------------------------
INSTITUTIONAL CLASS
9/30/97 4.29% 87%
9/30/96 4.37 136
9/30/95 4.54 63
9/30/94 3.77 61
12/1/92 1 through 9/30/93 2.48 2 36
SERVICE CLASS
9/30/97 4.00% 87%
9/30/96 4.10 136
9/30/95 4.31 63
9/30/94 3.67 61
7/29/93 1 through 9/30/93 2.20 2 36
INVESTOR A CLASS
9/30/97 3.84% 87%
9/30/96 3.98 136
9/30/95 4.35 63
9/30/94 3.79 61
12/1/92 1 through 9/30/93 2.39 2 36
INVESTOR B CLASS
9/30/97 3.01% 87%
9/30/96 3.21 136
10/13/94 1 through 9/30/95 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 Including interest expense, the ratios for BlackRock, Investor B and Investor C would have been 1.01%, 2.19%, and 2.23%,
respectively, for the period ended September 30, 1997, the Institutional, Service, and Investor A would have been 0.92%, 1.24%,
and 1.42%, respectively, for the period ended September 30, 1997, and 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.
6 Including interest expense, ratios for the Investor B and Investor C would have been 1.90% and 1.78%, respectively, for the
period ended September 30, 1997, the Institutional, Service and Investor A would have been 0.67%, 0.97%, and 1.14%, respectively,
for the period ended September 30, 1997, and 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.
7 Including interest expense, ratios for the Institutional, Service and Investor A would have been 0.98%, 1.27%, and 1.44%,
respectively for the period ended September 30, 1997, and 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.
8 Including interest expense, ratios for the BlackRock and Investor C would have been 0.56% and 1.93%, for the period ended
September 30, 1997, the Institutional, Service, Investor A, and Investor B would have been 0.84%, 1.35%, 1.36%, and 2.17%
respectively, for the period ended September 30, 1997, and 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.
9 Including interest expense, ratios for the Investor C would have been 3.24%, for the period ended September 30, 1997, Investor A
and Investor B would have been 1.41%, and 2.14%, respectively, for the period ended September 30, 1997, 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.
10 Including interest expense, ratios for the Institutional, Service, Investor A and Investor B would have been 0.92%, 1.27%,
1.41% and 2.14%, respectively, for the period ended September 30, 1997. For the periods prior to October 1, 1996, interest
income was presented net of interest expense.
11 Including interest expense, ratios for the Institutional, Service, Investor A, Investor B and Investor C would have been 0.98%,
1.30%, 1.42%, 2.12% and 2.11%, respectively, for the period ended September 30, 1997. For the periods prior to October 1, 1996,
interest income was presented net of interest expense.
</FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
62 & 63
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS
Compass Capital Funds[SERVICE MARK] ("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 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 six
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
- -------------------------------------------------------------------------------------------------------------------
BlackRock Institutional Service Investor A
- -------------------------------------------------------------------------------------------------------------------
Contractual Actual Contractual Actual Contractual Actual Contractual Actual
Fees Fees(4) Fees Fees(4) Fees(1) Fees(4) Fees(2) Fees(4)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Low Duration Bond None None None None 0.30% 0.30% 0.50% 0.40%
Intermediate Government Bond N/A N/A None None 0.30% 0.30% 0.50% 0.40%
Intermediate Bond N/A N/A None None 0.30% 0.30% 0.50% 0.40%
Core Bond None None None None 0.30% 0.30% 0.50% 0.40%
Government Income N/A N/A None None 0.30% N/A 0.50% 0.40%
Managed Income N/A N/A None None 0.30% 0.30% 0.50% 0.40%
International Bond N/A N/A None None 0.30% 0.30% 0.50% 0.40%
Tax-Free Income N/A N/A None None 0.30% 0.30% 0.50% 0.40%
Pennsylvania Tax-Free Income N/A N/A None None 0.30% 0.30% 0.50% 0.40%
New Jersey Tax-Free Income N/A N/A None None 0.30% 0.30% 0.50% 0.40%
Ohio Tax-Free Income N/A N/A None None 0.30% 0.30% 0.50% 0.40%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Portfolio Share Classes
- ------------------------------------------------------------------------
Investor B Investor C
- ------------------------------------------------------------------------
Contractual Actual Contractual Actual
Fees(3) Fees(4) Fees(3) Fees(4)
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Low Duration Bond 1.15% 1.15% 1.15% 1.15%
Intermediate Government Bond 1.15% 1.15% 1.15% 1.15%
Intermediate Bond 1.15% N/A 1.15% N/A
Core Bond 1.15% 1.15% 1.15% 1.15%
Government Income 1.15% 1.15% 1.15% 1.15%
Managed Income 1.15% 1.15% 1.15% N/A
International Bond 1.15% 1.15% 1.15% 1.15%
Tax-Free Income 1.15% 1.15% 1.15% 1.15%
Pennsylvania Tax-Free Income 1.15% 1.15% 1.15% N/A
New Jersey Tax-Free Income 1.15% 1.15% 1.15% N/A
Ohio Tax-Free Income 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, 1997.
</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.
64
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
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, 1997, 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 1997 GAIN/(LOSS)
- --------- ------------------------- ------------ ------------ -----------
10/14/97 New Zealand Dollar ..... $1,328,000 $1,319,534 $(8,466)
10/14/97 Canadian Dollar ........ 1,137,509 1,144,314 6,805
---------- ---------- -------
$2,465,509 $2,463,848 $(1,661)
========== ========== =======
65
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
UNREALIZED
VALUE AT FOREIGN
SETTLEMENT CURRENCY CONTRACT SEPTEMBER 30, EXCHANGE
DATE SOLD AMOUNT 1997 GAIN/(LOSS)
- ---------- --------------------------------------------------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
10/14/97 New Zealand Dollar ...................................... $ 1,319,078 $ 1,319,534 $ (456)
10/14/97 Canadian Dollar ......................................... 5,276,530 5,287,021 (10,491)
11/24/97 Danish Krone ............................................ 3,159,851 3,169,088 (9,237)
11/24/97 German Deutsche Mark .................................... 8,725,212 8,750,746 (25,534)
10/14/97 European Currency Unit .................................. 2,170,000 2,220,800 (50,800)
10/14/97 French Franc ............................................ 1,752,044 1,771,626 (19,582)
11/24/97 Great British Pound ..................................... 7,067,900 7,060,437 7,463
10/14/97 Spanish Peso ............................................ 2,313,956 2,412,598 (98,642)
11/24/97 Swedish Krone ........................................... 1,884,056 1,887,475 (3,419)
10/14/97 Italian Lira ............................................ 1,632,920 1,737,921 (105,001)
11/12/97 Japanese Yen ............................................ 9,339,388 9,090,757 248,631
11/24/97 Netherland Guild ........................................ 1,574,447 1,578,974 (4,527)
----------- ----------- ---------
$46,215,382 $46,286,977 $ (71,595)
=========== =========== =========
</TABLE>
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.
The Compass Capital Government Income Portfolio's average daily balance of
reverse repurchase agreements outstanding during the year ended September 30,
1997 was approximately $3,370,847 at a weighted average interest rate of
approximately 5.38%. The maximum amount of reverse repurchase agreements
outstanding at month-end during the year ended September 30, 1997 was
$10,106,304 as of August 31, 1997 which was 33.5% of total assets. The amount of
reverse repurchase agreements outstanding at September 30, 1997 was $8,329,948,
which was 28.0% of total assets. The average daily balance of reverse repurchase
agreements for all other Portfolios was less than 10% of average total assets
for the year.
FUTURES TRANSACTIONS -- The Fund invests in financial futures contracts
solely for the purpose of hedging its existing portfolio securities, or
securities that the Fund intends to purchase, against fluctuations in fair value
caused by changes in prevailing market interest rates. Certain Portfolios 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 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 a Portfolio could lose more than the original margin deposit required to
initiate a futures transaction.
66
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
OPTION SELLING/PURCHASING -- The Fund invests in financial options
contracts solely for the purpose of hedging its existing portfolio securities,
or securities that the Fund intends to purchase, against fluctuations in fair
value caused by changes in prevailing market interest rates. When the Fund sells
or purchases an option, an amount equal to the premium received or paid by the
Fund is recorded as a liability or an asset and is subsequently adjusted to the
current market value of the option written or purchased. Premiums received or
paid from writing or purchasing options which expire unexercised are treated by
the Fund on the expiration date as realized gains or losses. The difference
between the premium and the amount paid or received on effecting a closing
purchase or sale transaction, including brokerage commissions, is also treated
as a realized gain or loss. If an option is exercised, the premium paid or
received is added to the cost of the purchase or proceeds from the sale in
determining whether the Fund has realized a gain or a loss on investment
transactions. The Fund as writer of an option, may have no control over whether
the underlying securities may be sold (call) or purchased (put) and as a result
bears the market risk of an unfavorable change in the price of the security
underlying the written option. There were no options held by the Portfolios at
September 30, 1997.
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.
There were no mortgage dollar rolls held by the Portfolios at September 30,
1997.
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, 1997, is as
follows:
<TABLE>
<CAPTION>
VALUE OF
MARKET VALUE OF COLLATERAL
PORTFOLIO SECURITIES LOANED RECEIVED
--------- ----------------- -------------
<S> <C> <C>
Intermediate Government Bond Portfolio ... $ 9,558,908 $ 9,822,656
Intermediate Bond Portfolio .............. 200,600 208,000
Core Bond Portfolio ...................... 102,377,834 106,096,616
Government Income Portfolio .............. 2,350,549 2,427,263
Managed Income Portfolio ................. 56,853,262 58,922,403
</TABLE>
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.
67
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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"), served 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. Morgan Grenfell Investment Services
Limited ("Morgan Grenfell") serves as sub-adviser of the International Bond
Portfolio prior to December 31, 1996. 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:
<TABLE>
<CAPTION>
EACH PORTFOLIO
EXCEPT THE INTERNATIONAL INTERNATIONAL
BOND PORTFOLIO BOND PORTFOLIO
------------------------ -------------------------
INVESTMENT INVESTMENT
AVERAGE DAILY NET ASSETS ADVISORY FEE ADVISORY FEE
------------------------------- ------------------------ -------------------------
<S> <C> <C>
first $1 billion ............. .500% .550%
$1 billion - $2 billion ...... .450 .500
$2 billion - $3 billion ...... .425 .475
greater than $3 billion ...... .400 .450
</TABLE>
PAMG may, at its discretion, waive all or any portion of its advisory fee
for any Portfolio. For the year ended September 30, 1997, advisory fees and
waivers for each Portfolio were as follows:
<TABLE>
<CAPTION>
GROSS NET ADVISORY
ADVISORY FEE WAIVER FEE
------------ ---------- -------------
<S> <C> <C> <C>
Low Duration Bond Portfolio .................. $1,117,051 $ 507,015 $ 610,036
Intermediate Government Bond Portfolio ....... 771,571 308,628 462,943
Intermediate Bond Portfolio .................. 1,626,805 650,722 976,083
Core Bond Portfolio .......................... 2,046,336 990,358 1,055,978
Government Income Portfolio .................. 84,992 84,527 465
Managed Income Portfolio ..................... 3,766,487 1,129,946 2,636,541
International Bond Portfolio ................. 249,099 11,073 238,026
Tax-Free Income Portfolio .................... 281,147 123,004 158,143
Pennsylvania Tax-Free Income Portfolio ....... 447,047 178,819 268,228
New Jersey Tax-Free Income Portfolio ......... 433,484 179,069 254,415
Ohio Tax-Free Income Portfolio ............... 53,745 43,390 10,355
</TABLE>
PAMG pays BlackRock fees for its 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 and .19% of assets in excess of $1 billion.
68
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
PFPC, CCG and CDI may, at their discretion, voluntarily waive all or any
portion of their administration fees for any Portfolio. For the year ended
September 30, 1997, administration fees and waivers for each Portfolio were as
follows:
<TABLE>
<CAPTION>
GROSS NET
ADMINISTRATION ADMINISTRATION
FEE WAIVER FEE
-------------- --------- ---------------
<S> <C> <C> <C>
Low Duration Bond Portfolio ................... $ 513,843 $ 232,568 $ 281,275
Intermediate Government Bond Portfolio ........ 354,923 172,324 182,599
Intermediate Bond Portfolio ................... 746,330 293,388 452,942
Core Bond Portfolio ........................... 944,235 188,359 755,876
Government Income Portfolio ................... 39,096 38,187 909
Managed Income Portfolio ...................... 1,681,925 757,111 924,814
International Bond Portfolio .................. 97,478 32,591 64,887
Tax-Free Income Portfolio ..................... 129,328 75,612 53,716
Pennsylvania Tax-Free Income Portfolio ........ 205,642 94,146 111,496
New Jersey Tax-Free Income Portfolio .......... 199,403 95,413 103,990
Ohio Tax-Free Income Portfolio ................ 24,723 11,556 13,167
</TABLE>
In addition, PNC Bank serves as custodian for each of the Fund's
Portfolios. PFPC serves as transfer and dividend disbursing agent.
Under the Fund's Distribution and Service Plan (the "Plan"), Investor
Shares of the Portfolios bear the expense of payments ("distribution fees") made
to CDI, as the Fund's distributor (the "Distributor"), or affiliates of PNC
Bank, for distribution and sales support services. Under the Plan, the Fund has
entered into service arrangements with Service Organizations (including PNC Bank
and its affiliates) with respect to each class of Investor Shares and Service
Shares. Refer to the fee table in the "Notes to Financial Statements" for fee
information.
(C) PURCHASES AND SALES OF SECURITIES
For the year ended September 30, 1997, purchases and sales of securities,
other than short-term and government securities, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
--------------- ---------------
<S> <C> <C>
Low Duration Bond Portfolio ........................ $ 635,073,679 $ 417,173,497
Intermediate Government Bond Portfolio ............. 222,841,035 187,633,793
Intermediate Bond Portfolio ........................ 786,935,336 508,848,117
Core Bond Portfolio ................................ 871,796,324 660,139,466
Government Income Portfolio ........................ 65,984,602 69,057,748
Managed Income Portfolio ........................... 2,280,967,592 2,290,116,459
International Bond Portfolio ....................... 110,314,280 100,840,727
Tax-Free Income Portfolio .......................... 169,311,952 147,405,366
Pennsylvania Tax-Free Income Portfolio ............. 88,417,668 72,754,157
New Jersey Tax-Free Income Portfolio ............... 66,010,814 72,373,643
Ohio Tax-Free Income Portfolio ..................... 9,990,480 8,724,151
</TABLE>
For the year ended September 30, 1997, purchases and sales of government
securities were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
-------------- --------------
<S> <C> <C>
Low Duration Bond Portfolio ........................ $ 380,882,642 $ 474,277,893
Intermediate Government Bond Portfolio ............. 223,931,699 258,746,396
Intermediate Bond Portfolio ........................ 564,733,994 629,392,106
Core Bond Portfolio ................................ 1,309,689,081 1,236,091,861
Government Income Portfolio ........................ 27,708,755 16,481,193
Managed Income Portfolio ........................... 1,866,441,608 1,551,829,354
International Bond ................................. 2,749,805 2,742,813
</TABLE>
69
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(D) CAPITAL SHARES
Transactions in capital shares for each period were as follows:
<TABLE>
<CAPTION>
LOW DURATION BOND PORTFOLIO
-------------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD 4/1/96 FOR THE PERIOD 7/1/95
9/30/97 THROUGH 9/30/96 THROUGH 3/31/96
---------------------------- ----------------------------- ----------------------------
SHARES VALUE SHARES VALUE SHARES VALUE
----------- ------------ ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Prior Class
Exchanged in merger ......... -- $ -- -- $ -- (5,134,946) $(50,925,592)
Shares sold ................. -- -- -- -- 2,933,108 28,958,863
Shares issued in reinvestment
of dividends ............. -- -- -- -- 86,191 850,722
Shares redeemed ............. -- -- -- -- (2,408,838) (23,680,688)
----------- ------------ ------------ ------------- ----------- ------------
-- -- -- -- (4,524,485) (44,796,695)
BlackRock Class
Shares sold ................. 6,966,004 68,669,680 -- -- -- --
Shares issued in reinvestment
of dividends ............. 16,200 159,941 -- -- -- --
Shares redeemed ............. (78,809) (778,946) -- -- -- --
----------- ------------ ------------ ------------- ----------- ------------
6,903,395 68,050,675 -- -- -- --
Institutional Class
Exchanged in merger ......... -- -- -- -- 5,134,946 50,887,316
Shares sold ................. 9,541,701 93,935,828 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 ............. 158,388 1,558,102 23,549 229,714 10,535 104,431
Shares redeemed ............. (13,193,893) (129,934,032) (791,967) (7,725,214) (1,106,898) (11,157,065)
----------- ------------ ------------ ------------- ----------- ------------
(3,493,804) (34,440,102) 8,457,398 82,456,732 5,395,553 53,386,624
Service Class
Shares sold ................. 1,132,716 11,157,805 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 ............. 42,765 420,674 57,731 564,224 50,924 503,581
Shares redeemed ............. (2,178,583) (21,443,691) (25,900,305) (252,860,371) (1,376,331) (13,627,909)
----------- ------------ ------------ ------------- ----------- ------------
(1,003,102) (9,865,212) (9,170,024) (89,406,669) 18,549,533 183,855,538
Investor A Class
Shares sold ................. 85,589 842,196 53,769 523,653 39,732 397,522
Shares issued in merger ..... -- -- -- -- 34,465 337,269
Shares issued in reinvestment
of dividends ............. 4,534 44,601 1,958 19,101 301 2,975
Shares redeemed ............. (76,835) (756,077) (33,479) (326,419) (1,014) (9,940)
----------- ------------ ------------ ------------- ----------- ------------
13,288 130,720 22,248 216,335 73,484 727,826
Investor B Class
Shares sold ................. 5,749 56,680 -- -- -- --
Shares issued in reinvestment
of dividends ............. 103 1,011 -- -- -- --
Shares redeemed ............. (4,538) (44,639) -- -- -- --
----------- ------------ ------------ ------------- ----------- ------------
1,314 13,052 -- -- -- --
Investor C Class
Shares sold ................. 9,115 89,854 -- -- -- --
Shares issued in reinvestment
of dividends ............. 67 659 -- -- -- --
Shares redeemed ............. (1,868) (18,379) -- -- -- --
----------- ------------ ------------ ------------- ----------- ------------
7,314 72,134 -- -- -- --
----------- ------------ ------------ ------------- ----------- ------------
Net increase (decrease) .......... 2,428,405 $23,961,267 (690,378) $ (6,733,602) 19,494,085 $193,173,293
=========== ============ ============ ============= =========== ============
</TABLE>
70
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
--------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
9/30/97 9/30/96
----------------------------- ------------------------------
SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ......................... 2,452,390 $ 24,490,535 3,580,617 $ 35,995,887
Service Class ............................... 1,283,146 12,844,383 1,372,028 13,740,362
Investor A Class ............................ 105,820 1,057,798 140,064 1,399,514
Investor B Class ............................ 2,685 26,800 -- --
Investor C Class ............................ 5,048 50,676 -- --
Shares issued in reinvestment of dividends:
Institutional Class ......................... 9,190 91,949 322,528 3,252,027
Service Class ............................... -- -- 89,356 901,214
Investor A Class ............................ 30,294 303,064 36,588 366,222
Investor B Class ............................ 80 805 -- --
Investor C Class ............................ 5 48 -- --
Shares redeemed:
Institutional Class ......................... (5,632,607) (56,411,658) (4,630,262) (46,321,923)
Service Class ............................... (1,069,763) (10,707,605) (1,641,252) (16,487,300)
Investor A Class ............................ (199,281) (1,996,720) (559,603) (5,587,294)
Investor B Class ............................ -- -- -- --
Investor C Class ............................ (10) (103) -- --
---------- ------------ ---------- ------------
Net decrease ..................................... (3,013,003) $(30,250,028) (1,289,936) $(12,741,291)
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND PORTFOLIO
--------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
9/30/97 9/30/96
----------------------------- ------------------------------
SHARES VALUE SHARES VALUE
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ......................... 14,078,950 $132,363,271 12,073,053 $113,370,659
Service Class ............................... 2,188,370 20,573,260 2,319,939 21,815,444
Investor A Class ............................ 69,283 651,172 57,644 541,668
Shares issued in reinvestment of dividends:
Institutional Class ......................... 37,056 348,956 483,706 4,588,719
Service Class ............................... 5,459 51,427 91,490 867,920
Investor A Class ............................ 6,270 58,868 4,611 43,286
Shares redeemed:
Institutional Class ......................... (5,264,514) (49,462,645) (3,508,326) (32,933,287)
Service Class ............................... (1,546,069) (14,477,894) (1,439,046) (13,480,000)
Investor A Class ............................ (58,329) (547,655) (30,508) (284,730)
---------- ------------ ---------- ------------
Net increase ..................................... 9,516,476 $ 89,558,760 10,052,563 $ 94,529,679
========== ============ ========== ============
</TABLE>
71
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
CORE BOND PORTFOLIO
-----------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD 4/1/95 FOR THE PERIOD 7/1/95
9/30/97 THROUGH 9/30/96 THROUGH 3/31/96
--------------------------- --------------------------- ---------------------------
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
Shares issued in reinvestment
of dividends ............. -- -- -- -- 196,492 1,955,692
Shares redeemed ............. -- -- -- -- (260,446) (2,606,563)
---------- ------------ ---------- ------------ ---------- ------------
-- -- -- -- (3,267,452) (31,984,207)
BlackRock Class
Shares sold ................. 4,934,301 47,586,434 -- -- -- --
Shares issued in reinvestment
of dividends ............. 33,880 329,429 -- -- -- --
Shares redeemed ............. (65,588) (637,357) -- -- -- --
---------- ------------ ---------- ------------ ---------- ------------
4,902,593 47,278,506 -- -- -- --
Institutional Class
Exchanged in merger ......... -- -- -- -- 4,700,542 46,582,367
Shares sold ................. 29,299,878 283,017,326 15,972,754 151,512,501 2,616,796 25,552,564
Shares issued in reinvestment
of dividends ............. 347,674 3,360,503 119,442 1,135,289 27,377 269,114
Shares redeemed ............. (6,587,896) (63,633,339) (5,791,581) (54,781,902) (614,318) (6,135,169)
---------- ------------ ---------- ------------ ---------- ------------
23,059,656 222,744,490 10,300,615 97,865,888 6,730,397 66,268,876
Service Class
Shares sold ................. 3,045,187 29,223,563 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 ............. 92,333 893,766 54,759 522,688 40,334 396,628
Shares redeemed ............. (2,955,892) (28,624,306) (36,205,585) (344,905,834) (1,895,903) (18,771,943)
---------- ------------ ---------- ------------ ---------- ------------
181,628 1,493,023 (11,859,873) (112,593,894) 24,134,409 239,155,782
Investor A Class
Shares sold ................. 245,580 2,363,831 41,711 395,732 9,091 87,910
Shares issued in reinvestment
of dividends ............. 4,335 41,932 285 2,706 4 40
Shares redeemed ............. (34,859) (336,574) (16,852) (159,534) (736) (7,068)
---------- ------------ ---------- ------------ ---------- ------------
215,056 2,069,189 25,144 238,904 8,359 80,882
Investor B Class
Shares sold ................. 448,413 4,335,426 155,168 1,476,084 8,051 77,471
Shares issued in reinvestment
of dividends ............. 9,931 96,069 311 2,944 -- --
Shares redeemed ............. (75,937) (732,254) (6,705) (63,800) -- --
---------- ------------ ---------- ------------ ---------- ------------
382,407 3,699,241 148,774 1,415,228 8,051 77,471
Investor C Class
Shares sold ................. 13,310 127,658 -- -- -- --
Shares issued in reinvestment
of dividends ............. 99 955 -- -- -- --
Shares redeemed ............. (326) (3,203) -- -- -- --
---------- ------------ ---------- ------------ ---------- ------------
13,083 125,410 -- -- -- --
Net increase (decrease) .......... 28,754,423 $277,409,859 (1,385,340) $(13,073,874) 27,613,764 $273,598,804
========== ============ ========== ============ ========== ============
</TABLE>
72
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
<TABLE>
<CAPTION>
GOVERNMENT INCOME PORTFOLIO
-----------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
9/30/97 9/30/96
-------------------------------- ---------------------------------
SHARES VALUE SHARES VALUE
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Shares sold:
Investor A Class .............................. 256,567 $ 2,652,913 182,347 $ 1,897,315
Investor B Class .............................. 477,835 4,941,586 262,359 2,723,489
Investor C Class .............................. 88,341 918,353 -- --
Shares issued in reinvestment of dividends:
Investor A Class .............................. 26,197 270,290 25,834 269,474
Investor B Class .............................. 46,827 483,160 50,171 524,556
Investor C Class .............................. 1 10 -- --
Shares redeemed:
Investor A Class .............................. (176,033) (1,818,482) (130,085) (1,347,617)
Investor B Class .............................. (204,745) (2,114,414) (176,000) (1,822,188)
Investor C Class .............................. (7,392) (75,693) -- --
-------- ----------- -------- -----------
Net increase ....................................... 507,598 $ 5,257,723 214,626 $ 2,245,029
======== =========== ======== ===========
</TABLE>
<TABLE>
<CAPTION>
MANAGED INCOME PORTFOLIO
-------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
9/30/97 9/30/96
---------------------------------- ----------------------------------
SHARES VALUE SHARES VALUE
-------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ............................ 12,846,748 $131,687,832 17,536,625 $178,831,880
Service Class ................................. 15,408,052 157,786,790 8,904,551 91,416,793
Investor A Class .............................. 7,443,166 76,236,917 305,441 3,146,031
Investor B Class .............................. 45,930 477,672 -- --
Shares issued in reinvestment of dividends:
Institutional Class ........................... 155,258 1,590,301 1,660,070 17,311,187
Service Class ................................. 20,375 211,674 354,837 3,702,327
Investor A Class .............................. 63,378 649,112 66,577 684,743
Investor B .................................... 8 82 -- --
Shares redeemed:
Institutional Class ........................... (17,364,305) (178,134,379) (5,901,770) (60,385,014)
Service Class ................................. (6,160,521) (63,050,157) (4,151,437) (42,503,459)
Investor A Class .............................. (7,152,716) (73,203,528) (416,188) (4,250,126)
Investor B Class .............................. (972) (10,152) -- --
----------- ------------ ---------- ------------
Net increase ....................................... 5,304,401 $ 54,242,164 18,358,706 $187,954,362
=========== ============ ========== ============
</TABLE>
73
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL BOND PORTFOLIO
---------------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD 2/1/96 FOR THE PERIOD 3/1/95
9/30/97 THROUGH 9/30/96 THROUGH 1/31/96
------------------------------ ----------------------------- -------------------------------
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 ................. 1,142,937 12,421,898 2,641,656 30,118,521 -- --
Shares issued in reinvestment
of dividends .............. 365,395 3,942,629 1,056 12,134 -- --
Shares redeemed ............. (191,333) (2,081,160) (4,942) (56,751) -- --
--------- ----------- ---------- ------------ ---------- ------------
1,316,999 14,283,367 2,637,770 30,073,904 -- --
Service Class
Exchanged in merger ......... -- -- -- -- -- --
Shares sold ................. 139,912 1,531,711 3,506,950 39,736,225 -- --
Shares issued in reinvestment
of dividends .............. 75,424 813,694 7,479 84,539 -- --
Shares redeemed ............. (272,100) (2,923,532) (6,146,919) (69,828,926) -- --
--------- ----------- ---------- ------------ ---------- ------------
(56,764) (578,127) (2,632,490) (30,008,162) -- --
Investor A Class
Shares sold ................. 78,318 840,293 15,076 173,354 -- --
Shares issued in reinvestment
of dividends .............. 3,381 36,474 21 244 -- --
Shares redeemed ............. (4,003) (42,834) (80) (921) -- --
--------- ----------- ---------- ------------ ---------- ------------
77,696 833,933 15,017 172,677 -- --
Investor B Class
Shares sold ................. 80,871 868,230 11,631 133,879 -- --
Shares issued in reinvestment
of dividends .............. 1,498 16,166 17 196 -- --
Shares redeemed ............. (4,522) (49,857) (69) (795) -- --
--------- ----------- ---------- ------------ ---------- ------------
77,847 834,539 11,579 133,280 -- --
Investor C Class
Shares sold ................. 41,760 454,009 1,643 19,116 -- --
Shares issued in reinvestment
of dividends .............. 518 5,582 -- -- -- --
Shares redeemed ............. (626) (6,866) -- -- -- --
--------- ----------- ---------- ------------ ---------- ------------
41,652 452,725 1,643 19,116 -- --
--------- ----------- ---------- ------------ ---------- ------------
Net increase (decrease) .......... 1,457,430 $15,826,437 33,519 $ 390,815 (1,039,302) $(11,980,752)
========= =========== ========== ============ ========== ============
</TABLE>
74
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
<TABLE>
<CAPTION>
TAX-FREE INCOME PORTFOLIO
------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
9/30/97 9/30/96
--------------------------------- -----------------------------------
SHARES VALUE SHARES VALUE
-------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ........................... 404,008 $ 4,442,500 1,048,619 $11,425,325
Service Class ................................. 2,510,940 27,987,671 3,210,017 34,310,198
Investor A Class .............................. 92,510 1,034,677 32,034 350,965
Investor B Class .............................. 85,030 942,339 931 10,000
Investor C Class .............................. 28 300 -- --
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 ........................... 359 4,016 104 1,120
Service Class ................................. 7,475 82,630 11,741 126,791
Investor A Class .............................. 17,898 197,486 18,717 201,428
Investor B Class .............................. 741 8,241 -- --
Investor C Class .............................. -- 6 -- --
Shares redeemed:
Institutional Class ........................... (344,261) (3,736,207) (303,674) (3,221,356)
Service Class ................................. (671,498) (7,387,745) (2,906,457) (31,020,750)
Investor A Class .............................. (72,411) (800,770) (222,266) (2,396,426)
Investor B Class .............................. (5,081) (55,882) -- --
Investor C Class .............................. -- -- -- --
--------- ----------- ---------- -----------
Net increase ....................................... 2,025,738 $22,719,262 3,467,237 $37,830,177
========= =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
9/30/97 9/30/96
--------------------------------- -----------------------------------
SHARES VALUE SHARES VALUE
-------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ........................... 359,752 $ 3,785,471 437,476 $ 4,614,807
Service Class ................................. 2,241,265 23,779,002 2,874,431 29,852,257
Investor A Class .............................. 339,479 3,583,613 334,060 3,474,285
Investor B Class .............................. 515,026 5,456,963 423,077 4,400,686
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 ................................. 6,366 67,558 3,966 41,263
Investor A Class .............................. 135,984 1,435,832 139,571 1,458,004
Investor B Class .............................. 21,169 223,692 11,556 120,479
Shares redeemed:
Institutional Class ........................... (231,245) (2,448,673) (294,414) (3,067,917)
Service Class ................................. (854,225) (9,016,968) (2,608,165) (27,050,410)
Investor A Class .............................. (1,063,741) (11,260,693) (973,547) (10,132,270)
Investor B Class .............................. (149,836) (1,585,024) (59,032) (614,065)
---------- ----------- ---------- ------------
Net increase ....................................... 1,319,994 $14,020,773 1,965,816 $ 20,804,503
========== =========== ========== ============
</TABLE>
75
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
NEW JERSEY TAX-FREE INCOME PORTFOLIO
-----------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD 2/1/96 FOR THE PERIOD 3/1/95
9/30/97 THROUGH 9/30/96 THROUGH 3/31/96
--------------------------- --------------------------- ---------------------------
SHARES VALUE SHARES VALUE SHARES VALUE
----------- ----------- ---------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Prior Class
Exchanged in merger ......... -- $ -- -- $ -- (8,451,862) $(94,366,666)
Shares sold ................. -- -- -- -- 790,370 8,844,324
Shares issued in reinvestment
of dividends ............. -- -- -- -- 122,048 1,368,581
Shares redeemed ............. -- -- -- -- (1,317,562) (14,786,239)
----------- ----------- ---------- ------------- ---------- ------------
-- -- -- -- (8,857,006) (98,940,000)
----------- ----------- ---------- ------------- ---------- ------------
Service Class
Exchanged in merger ......... -- -- -- -- 8,451,862 94,366,666
Shares sold ................. 1,278,806 14,808,210 8,219,826 92,127,639 75,252 843,989
Shares issued in reinvestment
of dividends ............. 109,148 1,247,035 84,899 959,061 -- --
Shares redeemed ............. (1,945,268) (22,445,678) (8,927,137) (100,070,903) (83,191) (962,039)
----------- ----------- ---------- ------------- ---------- ------------
(557,314) (6,390,433) (622,412) (6,984,203) 8,443,923 94,248,616
----------- ----------- ---------- ------------- ---------- ------------
Investor A Class
Shares sold ................. 67,377 778,355 112,810 1,272,555 1,237 14,310
Shares issued in reinvestment
of dividends ............. 3,271 37,397 1,001 11,231 -- --
Shares redeemed ............. (17,148) (196,030) (35,724) (401,424) -- --
----------- ----------- ---------- ------------- ---------- ------------
53,500 619,722 78,087 882,362 1,237 14,310
----------- ----------- ---------- ------------- ---------- ------------
Investor B Class
Shares sold ................. 68,828 786,661 5,376 60,000 -- --
Shares issued in reinvestment
of dividends ............. 971 11,145 -- -- -- --
Shares redeemed ............. (6,663) (76,651) (2,688) (30,000) -- --
----------- ----------- ---------- ------------- ---------- ------------
63,136 721,155 2,688 30,000 -- --
----------- ----------- ---------- ------------- ---------- ------------
Net decrease ..................... (440,678) $(5,049,556) (541,637) $ (6,071,841) (411,846) $ (4,677,074)
========== =========== ========== ============= ========== ============
</TABLE>
<TABLE>
<CAPTION>
OHIO TAX-FREE INCOME PORTFOLIO
-----------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
9/30/97 9/30/96
--------------------------------- ---------------------------------
SHARES VALUE SHARES VALUE
-------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ......................... 72,824 $ 749,554 23,824 $ 242,825
Service Class ............................... 169,110 1,742,076 392,400 3,988,131
Investor A Class ............................ 17,880 185,594 19,356 195,385
Investor B Class ............................ 51,355 526,826 4,892 49,500
Shares issued in reinvestment of dividends:
Institutional Class ......................... 10 101 290 2,930
Service Class ............................... 0 0 250 2,521
Investor A Class ............................ 10,837 111,485 12,671 128,646
Investor B Class ............................ 738 7,599 355 3,600
Shares redeemed:
Institutional Class ......................... (24,696) (251,354) (3,750) (38,068)
Service Class ............................... (90,540) (931,224) (276,903) (2,814,297)
Investor A Class ............................ (58,809) (605,214) (81,490) (821,320)
Investor B Class ............................ (8,704) (89,939) -- --
------- ---------- -------- -----------
Net increase ..................................... 140,005 $1,445,504 91,895 $939,853
======= ========== ======== ===========
</TABLE>
76
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
(E) AT SEPTEMBER 30, 1997, NET ASSETS CONSISTED OF:
<TABLE>
<CAPTION>
LOW INTERMEDIATE
DURATION GOVERNMENT INTERMEDIATE CORE
BOND BOND BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Capital paid-in ................................. $257,159,049 $155,237,130 $344,649,006 $560,468,322
Undistributed net investment income ............. 107,465 79,917 198,280 636,317
Accumulated net realized gain (loss) on
investment transactions
and futures contracts ......................... (3,187,474) (3,768,708) 1,254,342 3,470,430
Net unrealized appreciation (depreciation)
on investment transactions
and futures contracts ......................... 748,273 1,044,389 3,039,343 7,393,181
------------ ------------ ------------ ------------
$254,827,313 $152,592,728 $349,140,971 $571,968,250
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT MANAGED INTERNATIONAL TAX-FREE
INCOME INCOME BOND INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Capital paid-in ................................. $20,055,579 $805,680,815 $49,431,500 $71,966,098
Undistributed net investment income ............. -- -- 468,155 --
Distributions in excess of net
investment income ............................. (28,428) (554,490) -- (22,136)
Accumulated net realized gain on
investment transactions, future contracts
and foreign exchange contracts ................ 216,881 4,995,578 2,064,800 78,660
Net unrealized appreciation on investment
transactions, future contracts and
foreign exchange contracts .................... 276,703 9,586,368 522,401 2,631,118
----------- ------------ ----------- -----------
$20,520,735 $819,708,271 $52,486,856 $74,653,740
=========== ============ =========== ===========
</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 ................................. $ 98,417,478 $83,141,529 $11,339,798
Undistributed net investment income ............. -- 74,689 2,675
Distributions in excess of net
investment income ............................. (22,102) -- --
Accumulated net realized gain (loss) on
investment transactions and
futures contracts ............................. (1,491,259) (717,444) (324,309)
Net unrealized appreciation on investment
transactions and futures contracts ............ 3,886,863 4,412,695 566,984
------------ ----------- -----------
$100,790,980 $86,911,469 $11,585,148
============ =========== ===========
</TABLE>
(F) CAPITAL LOSS CARRYOVERS
At September 30, 1997, capital loss carryovers were available to offset
possible future realized capital gains as follows: $2,954,478 in the Low
Duration Portfolio which expire in the year 2004, $3,689,145 in the Intermediate
Government Bond Portfolio which expire in the year 2004, $1,465,940 in the
Pennsylvania Tax-Free Income Portfolio which expire in the year 2004, $774,073
in the New Jersey Tax-Free Income Portfolio which expire in the year 2005 and
$334,935 in the Ohio Tax-Free Income Portfolio which expire in the year 2004.
77
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 THE 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
- -------------------------- ------------- ------------- ------
Low Duration 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.
78
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF THE COMPASS CAPITAL FUNDS:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the International Bond and Tax-Free Income
Portfolios of the Compass Capital Funds ("the Fund"), and the statements of net
assets of the Low Duration Bond (formerly known as the Short Government Bond
Portfolio), Intermediate Government Bond, Intermediate Bond, Core Bond,
Government Income, Managed Income, Pennsylvania Tax-Free Income, New Jersey
Tax-Free Income and Ohio Tax-Free Income Portfolios of the Compass Capital Funds
as of September 30, 1997, and the related statement of operations for the year
then ended, the statement of cash flows for the year then ended for the
Government Income portfolio, 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. The financial highlights for the year
ended June 30, 1995 and each of the prior periods presented of the Low Duration
Bond and Core Bond Portfolios, formerly the BFM Institutional Trust Short
Duration and Core Fixed Income Portfolios (the "BFM Funds"), respectively were
audited by other auditors, whose report dated August 7, 1995 expressed an
unqualified opinion thereon.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
September 30, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Compass Capital Funds (Low Duration 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, 1997, the results of their
operations for the year then ended, and cash flows for the year then ended for
the Government Income portfolio, and 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 (except for the year ended June 30,
1995 and prior periods for the BFM Funds which have been audited by other
auditors), in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
November 14, 1997
79
<PAGE>
[LOGO OMITTED] COMPASS CAPITAL FUNDS
Investment Adviser
PNC Asset Management Group, Inc.
Philadelphia, Pennsylvania 19103
Sub-Adviser -- Low Duration Bond
Portfolio, Intermediate Government Bond
Portfolio, Intermediate Bond Portfolio,
Core Bond Portfolio, Government Income
Portfolio, Managed Income Portfolio,
International Bond 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
Custodian
PNC Bank, National Association
Philadelphia, Pennsylvania 19103
Co-Administrator and Transfer Agent
PFPC Inc.
Wilmington, Delaware 19809
Co-Administrator and Distributor
Compass Distributors, Inc.
West Conshohocken, Pennsylvania 19428
Co-Administrator
Compass Capital Group, Inc.
New York, New York 10154
Counsel
Simpson, Thacher & Bartlett
New York, New York 10017
(A partnership which includes professional
corporations)
Independent Accountants
Coopers & Lybrand, L.L.P.
Philadelphia, Pennsylvania 19103
<PAGE>
COMPASS CAPITAL FUNDS [LOGO OMITTED]
FUND SPECTRUM
COMPASS CAPITAL FUNDS IS A LEADING MUTUAL FUND COMPANY CURRENTLY MANAGING IN
EXCESS OF $13 BILLION IN 31 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.[SERVICE MARK]
STOCK PORTFOLIOS
Large Cap Value Equity International Equity
Large Cap Growth Equity International Small Cap Equity
Mid-Cap Value Equity International Emerging Markets
Mid-Cap Growth Equity Select Equity
Small Cap Value Equity Index Equity
Small Cap Growth Equity
STOCK & BOND PORTFOLIO
Balanced
BOND PORTFOLIOS
Low Duration 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
SHAREHOLDER PRIVILEGES
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 $1,000.
RETIREMENT PLANS
Shareholders may make investments in conjunction with individual IRA accounts or
rollover IRAs.
GENERAL INFORMATION ABOUT THE COMPASS FUNDS
If you would like additional reports or have questions regarding any of the 31
Compass Capital Funds, please call 1-888-4COMPASS.
(1) Compass Capital Funds reserves the right to modify or terminate the exchange
privileges at any time.
<PAGE>
COMPASS
CAPITAL FUNDS
[LOGO OMITTED]
PURE INVESTMENT STYLE [SERVICE MARK]
P.O. Box 8907
Wilmington, DE 19899
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 THE PRINCIPAL AMOUNT
INVESTED.
SR 9/30/97-BP
