<PAGE>
COMPASS CAPITAL FUNDS(SM)
THE EQUITY PORTFOLIOS/INVESTOR CLASSES
SUPPLEMENT TO PROSPECTUS DATED
JANUARY 1, 1997
The section "What Are The Expenses Of The Portfolios?" has been amended as
follows:
The following paragraph has been added after the expense table on page 7:
The Fund has been advised that effective June 1, 1997, the amount
of fees waived voluntarily by PAMG and the Portfolios'
administrators will be reduced with respect to the Large Cap
Value Equity, Large Cap Growth Equity, Small Cap Value Equity,
Small Cap Growth Equity, Select Equity and Balanced Portfolios.
This reduction in fee waivers will increase the total operating
expenses (after fee waivers) of these Portfolios' Investor Shares
to the following levels (expressed as a percentage of average net
assets): Large Cap Value Equity Portfolio, Investor A - 1.31%,
Investor B and Investor C - 2.06%; Large Cap Growth Equity
Portfolio, Investor A - 1.34%. Investor B and Investor C - 2.09%;
Small Cap Value Equity Portfolio, Investor A - 1.34%, Investor B
and Investor C - 2.10%; Small Cap Growth Equity Portfolio,
Investor A - 1.35%, Investor B and Investor C - 2.11%; Select
Equity Portfolio, Investor A - 1.33%, Investor B and Investor C -
2.08%; and Balanced Portfolio, Investor A - 1.31%, Investor B and
Investor C - 2.12%. PAMG and the Portfolios' administrators are
under no obligation to waive or continue waiving their fees.
The information in the Example on page 8 relating to the Large Cap Value
Equity, Large Cap Growth Equity, Small Cap Value Equity, Small Cap
Growth Equity, Select Equity and Balanced Portfolios has been replaced
with the following:
An investor in Investor Shares would pay the following expenses on a
$1,000 investment assuming (1) 5% annual return, (2) redemption at the end of
each time period and (3) with respect to Investor B Shares only, no redemption
at the end of each time period:
<TABLE>
<CAPTION>
=============================================================================================
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Large Cap Value Equity Portfolio
A Shares* $ 58 $ 85 $114 $196
B Shares (Redemption)** 56 102 133 219***
B Shares (No Redemption) 21 65 111 219***
C Shares 21 65 111 239
- ---------------------------------------------------------------------------------------------
Large Cap Growth Equity Portfolio
A Shares*
B Shares (Redemption)** 58 86 115 199
B Shares (No Redemption) 66 103 136 223***
C Shares 21 65 112 223***
21 65 112 242
- ---------------------------------------------------------------------------------------------
Small Cap Value Equity Portfolio
A Shares* 58 86 116 200
B Shares (Redemption)** 66 103 135 224***
B Shares (No Redemption) 21 66 113 224***
C Shares 21 66 113 243
- ---------------------------------------------------------------------------------------------
Small Cap Growth Equity Portfolio
A Shares* 58 88 116 200
B Shares (Redemption)** 66 103 135 224***
B Shares (No Redemption) 21 66 113 224***
C Shares 21 66 113 243
- ---------------------------------------------------------------------------------------------
Select Equity Portfolio
A Shares* 58 85 115 198
B Shares (Redemption)** 66 102 134 222***
B Shares (No Redemption) 21 65 112 222***
C Shares 21 65 112 241
- ---------------------------------------------------------------------------------------------
Balanced Portfolio
A Shares* 58 85 114 196
B Shares (Redemption)** 67 103 136 226***
B Shares (No Redemption) 22 66 114 226***
C Shares 22 66 114 245
==============================================================================================
</TABLE>
* Reflects the imposition of the maximum front-end sales charge at the
beginning of the period.
** Reflects the deduction of the deferred sales charge.
*** Based on the conversion of the Investor B Shares to Investor A Shares
after eight years.
<PAGE>
In addition to the compensation itemized in the expense table, institutions that
sell Portfolio shares and/or their salespersons may receive compensation for the
sale and distribution of shares or for services to the Portfolios. For
information regarding such compensation, see "What Is The Schedule Of Sales
Charges and Exemptions" in the Prospectus and "Investment Advisory,
Administration, Distribution and Servicing Arrangements" in the Statement of
Additional Information.
Fund Management
- ---------------
The section "Who Manages The Fund?" has been amended as follows:
The portfolio managers for the Large Cap Value Equity and Mid-Cap Value
Equity Portfolios are as follows:
Portfolio Portfolio Manager(s)
- --------- --------------------
Large Cap Value Equity Daniel B. Eagan; portfolio
manager with Provident
Capital Management, Inc.
("PCM") since 1995; director
of investment strategy at PNC
Asset Management Group, Inc.
during 1994 and 1995; prior
to 1994, served as senior
research consultant for
Mercer Investment Consulting;
Portfolio manager since
January 1997.
Mid-Cap Value Equity Daniel B. Eagan (see above).
Portfolio co-manager since
its inception.
Christian K. Stadlinger; Vice
President of PCM since July
1996; prior to joining PCM,
Portfolio Manager and
Research Analyst with Morgan
Stanley Asset Management;
Portfolio co-manager since
January 1997.
Administration Fees
- -------------------
The second sentence in the second paragraph under "Administrators" is changed to
reflect that PFPC and CDI are entitled to receive a combined administration fee,
computed daily and payable monthly, at the aggregate annual rate of 0.20% of the
first $500 million of average daily net assets allocated to the Investor Shares
of each Portfolio, 0.18% of the next $500 million of average daily net assets
allocated to the Investor Shares of each Portfolio and 0.16% of the average
daily net assets allocated to the Investor Shares of each Portfolio in excess of
$1 billion.
Sales Loads, Broker Reallowances and Placement Fees
- ---------------------------------------------------
The following schedule of sales charges for Investor A Share trades of
$1,000,000 and above is to be added to the schedules found under "What Is The
Schedule Of Sales Charges And Exemptions?" on pg. 46.
FOR ALL EQUITY PORTFOLIOS EXCEPT INDEX EQUITY PORTFOLIO:
<TABLE>
<CAPTION>
AMOUNT OF SALES CHARGE AS A % SALES CHARGE AS A % OF REALLOWANCE OR PLACEMENT FEES
TRANSACTION AT OF OFFERING PRICE* NET ASSET VALUE* TO DEALERS (AS A % OF OFFERING
OFFERING PRICE PRICE)**
(IN MILLIONS)
- -------------- -------------------- --------------------- ------------------------------
<S> <C> <C> <C>
$1 - 2 0.00% 0.00% 1.00%
$2 - 3 0.00% 0.00% 0.95%
$3 - 5 0.00% 0.00% 0.87%
$5 - 10 0.00% 0.00% 0.69%
$10 - 15 0.00% 0.00% 0.62%
$15 - 20 0.00% 0.00% 0.53%
$20 - 40 0.00% 0.00% 0.39%
<CAPTION>
INDEX EQUITY PORTFOLIO:
AMOUNT OF SALES CHARGE AS A % SALES CHARGE AS A % OF REALLOWANCE OR PLACEMENT FEES
TRANSACTION AT OF OFFERING PRICE* NET ASSET VALUE* TO DEALERS (AS A % OF
OFFERING PRICE OFFERING PRICE)**
(IN MILLIONS)
- -------------- -------------------- --------------------- ------------------------------
<S> <C> <C> <C>
$1 - 2 0.00% 0.00% 0.50%
$2 - 3 0.00% 0.00% 0.45%
$3 - 5 0.00% 0.00% 0.37%
$5 - 10 0.00% 0.00% 0.31%
$10 - 15 0.00% 0.00% 0.29%
$15 - 20 0.00% 0.00% 0.28%
$20 - 40 0.00% 0.00% 0.27%
</TABLE>
* There is no initial sales charge on purchase of $1,000,000 or more of
Investor A Shares; however, a contingent deferred sales charge of 1.00% will
be imposed on the lesser of the offering price or the net asset value of the
shares on the redemption date for shares redeemed within 18 months after
purchase.
** The Distributor may pay placement fees to dealers as shown on purchases of
Investor A Shares of $1,000,000 or more.
<PAGE>
Sales Charges and Exemptions
- ----------------------------
The section "What Is The Schedule Of Sales Charges And Exemptions?" has been
amended as follows:
The second sentence under the caption "Sales Charge Waivers -- Investor
A Shares" has been amended to reflect that registered investment
advisers, trust companies and bank trust departments exercising
discretionary investment authority with respect to amounts to be
invested in a Portfolio may purchase Investor A Shares without a sales
load, provided that the aggregate amount invested pursuant to this
exemption in Investor A Shares of Fund portfolios that would otherwise
be subject to front-end sales charges equals at least $250,000.
The following text replaces the paragraph under the sub-heading "Investor A
Shares-Qualified Plans."
Qualified Plans. In general, the sales charge (as a percentage of
offering price) payable by qualified employee benefit plans ("Qualified
Plans") having at least 20 employees eligible to participate in
purchases of Investor A Shares of the Portfolios aggregating less than
$500,000 will be 1.00%. No sales charge will apply to purchases by
Qualified Plans of Investor A Shares aggregating $500,000 and above. The
sales charge payable by Qualified Plans having less than 20 employees
eligible to participate in purchases of Investor A Shares of the
Portfolios aggregating less than $500,000 will be 2.50% (1.50% with
respect to shares of the Index Equity Portfolio). The above schedule
will apply to purchases by such Qualified Plans of Investor A Shares
aggregating $500,000 and above.
The Fund has established different waiver arrangements with respect to
the sales charge on Investor A Shares of the Portfolios for purchases
through certain Qualified Plans participating in programs whose sponsors
or administrators have entered into arrangements with the Fund. For
further information, see "Purchase and Redemption Information" in the
Statement of Additional Information.
The following is added to the end of the first paragraph under the sub-heading
"Exemptions from the Contingent Deferred Sales Charge--Investor B and Investor C
Shares."
The Fund also waives the contingent deferred sales charge on redemptions
of Investor B Shares of the Portfolios purchased through certain
Qualified Plans participating in programs whose sponsors or
administrators have entered into arrangements with the Fund. For further
information, see "Purchase and Redemption Information" in the Statement
of Additional Information.
Class Expenses
- --------------
The first sentence in the second paragraph under "How Is The Fund Organized?" is
replaced with the following:
Shares of each class bear their pro rata portion of all operating
expenses paid by a Portfolio, except transfer agency fees, certain
administrative/servicing fees and amounts payable under the Fund's
Distribution and Service Plan.
This Supplement is dated June 24, 1997.
<PAGE>
COMPASS CAPITAL FUNDS(SM)
THE BOND PORTFOLIOS/INVESTOR CLASSES
SUPPLEMENT TO PROSPECTUS DATED
JANUARY 1, 1997
Low Duration Bond Portfolio - Change in Investment Policies
- -----------------------------------------------------------
The investment policies of the Low Duration Bond Portfolio have been modified,
and the disclosure in the Prospectus has been changed as follows:
A. Credit Quality
--------------
The information on the credit quality concentration and minimum credit
quality for the Low Duration Bond Portfolio in the sections "What Are
The Differences Among The Portfolios?" and "What Additional Investment
Policies And Risks Apply?" are replaced with the following:
================================================================================
Portfolio Credit Quality Concentration Minimum Credit Quality
- --------------------------------------------------------------------------------
Low Duration Bond Investment Grade Spectrum B
================================================================================
Securities acquired by the Low Duration Bond Portfolio will
generally be rated investment grade at the time of purchase or, if
unrated, of comparable quality as determined by the Portfolio's
sub-adviser. The Low Duration Bond Portfolio may, however, invest in
non-investment grade fixed income or convertible securities when the
Portfolio's sub-adviser believes that the investment characteristics of
such securities make them desirable in light of the Portfolio's
investment objective and current portfolio mix, so long as under normal
market and economic conditions, (i) no more than 20% of the total assets
of the Portfolio are invested in non-investment grade securities and
(ii) such securities are rated "B" or higher at the time of purchase by
at least one major rating agency. Non-investment grade securities (those
that are rated "Ba" or lower by Moody's or "BB" or lower by S&P, Duff or
Fitch) are commonly referred to as "junk bonds." To the extent that the
securities acquired by the Low Duration Bond Portfolio are not rated
investment grade, there is a greater risk as to the timely repayment of
the principal on, and timely payment of interest or dividends with
respect to, such securities. Particular risks associated with
lower-rated securities are (a) the sensitivity of such securities to
interest rate and economic changes, (b) the lower degree of expected
protection of principal and interest payments, (c) the creditworthiness
of the issuers of such securities, (d) the relatively low trading market
liquidity for the securities, (e) the relative youth and growth of the
market for such securities, and (f) the impact that legislation may have
on the high yield bond market (and, in turn, on the Portfolio's net
asset value and investment practices). During an economic downturn or
substantial period of rising interest rates, leveraged issuers may
experience financial stress which would adversely affect their ability
to service their principal and interest payment obligations, to meet
projected business goals, and to obtain additional financing. An
economic downturn could also disrupt the market for lower-rated
securities and adversely affect the value of outstanding securities and
the ability of the issuers to repay principal and interest. If the
issuer of a security held by the Low Duration Bond Portfolio defaulted,
the Portfolio could incur additional expenses to seek recovery. Adverse
publicity and investor perceptions, whether or not they are based on
fundamental analysis, could also decrease the value and liquidity of
lower-rated securities held by the Portfolio, especially in a
thinly-traded market.
B. Foreign Investments
-------------------
<PAGE>
The Low Duration Bond Portfolio may invest up to 20% of its total
assets in debt securities of foreign issuers on either a currency hedged
or unhedged basis, and may hold from time to time various foreign
currencies pending investment or conversion into U.S. dollars. Some of
these instruments may have the characteristics of futures contracts. In
addition, the Low Duration Bond Portfolio may engage in foreign currency
exchange transactions to seek to protect against changes in the level of
future exchange rates which would adversely affect the portfolio's
performance. These investments and transactions involving foreign
securities, currencies, options (including options that relate to
foreign currencies), futures, hedging and cross-hedging are described
under the sub-sections captioned "Foreign Investments," "Interest Rate
and Currency Transactions" and "Options and Futures Contracts" under
"What Additional Investment Policies And Risks Apply?"
Fund Management
- ---------------
The section "Who Manages the Fund?" has been amended as follows:
The portfolio managers for the Core Bond and Managed Income Portfolios
are as follows:
Portfolio Portfolio Manager
- --------- -----------------
Core Bond Keith Anderson; Managing Director of BlackRock and
co-head of the portfolio management group since
1988; Mortgage securities and derivatives products
strategist at First Boston from 1987 to 1988; Vice
President and Portfolio Manager at Criterion
Investment Management Company from 1983 to 1987;
Mr. Anderson has participated in the management of
the Portfolio since its inception and has been
designated Portfolio co-manager since June 1997.
Robert Michele, CPA; Managing Director of BlackRock
since 1996; Director and Head of U.S. Fixed Income
Investments at CS First Boston Investment
Management Corporation from 1993 to 1995; Deputy
Manager and Senior Portfolio Manager at Brown
Brothers Harriman & Co. from 1985 to 1993; Mr.
Michele has participated in the management of the
Portfolio since 1995 and has been designated
Portfolio co-manager since June 1997.
Managed Income Keith Anderson and Robert Michele (see
above); Messrs. Anderson and Michele have
participated in the management of the Portfolio
since 1995 and have been designated Portfolio
co-managers since June 1997.
Administration Fees
- -------------------
The second sentence in the second paragraph under "Administrators" is changed to
reflect that PFPC and CDI are entitled to receive a combined administration fee,
computed daily and payable monthly, at the aggregate annual rate of 0.20% of the
first $500 million of average daily net assets allocated to the Investor Shares
of each Portfolio, 0.18% of the next $500 million of average daily net assets
allocated to the Investor Shares of each Portfolio and 0.16% of the average
daily net assets allocated to the Investor Shares of each Portfolio in excess of
$1 billion.
Sales Loads, Broker Reallowances and Placement Fees
- ---------------------------------------------------
The following schedule of sales charges for Investor A share trades of
$1,000,000 and above is to be added to the schedules found under "What Is The
Schedule Of Sales Charges And Exemptions?" beginning on pg. 46.
Low Duration Bond, 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:
<PAGE>
<TABLE>
<CAPTION>
Amount of Sales Charge as a % Sales Charge as a % of Reallowance or Placement Fees
Transaction at of Offering Price* Net Asset Value* to Dealers (as a % of Offering
Offering Price Price)**
(in millions)
- -------------- --------------------- ---------------------- -------------------------------
<S> <C> <C> <C>
$1 - 2 0.00% 0.00% 0.75%
$2 - 3 0.00% 0.00% 0.72%
$3 - 5 0.00% 0.00% 0.63%
$5 - 10 0.00% 0.00% 0.44%
$10 - 15 0.00% 0.00% 0.38%
$15 - 20 0.00% 0.00% 0.35%
$20 - 40 0.00% 0.00% 0.30%
<CAPTION>
Government Income, Managed Income and International Bond Portfolios:
Amount of Sales Charge as a % Sales Charge as a % of Reallowance or Placement Fees
Transaction at of Offering Price* Net Asset Value* to Dealers (as a % of
Offering Price Offering Price)**
(in millions)
- -------------- --------------------- ---------------------- -------------------------------
<S> <C> <C> <C>
$1 - 2 0.00% 0.00% 1.00%
$2 - 3 0.00% 0.00% 0.95%
$3 - 5 0.00% 0.00% 0.87%
$5 - 10 0.00% 0.00% 0.69%
$10 - 15 0.00% 0.00% 0.62%
$15 - 20 0.00% 0.00% 0.53%
$20 - 40 0.00% 0.00% 0.39%
</TABLE>
* There is no initial sales charge on purchase of $1,000,000 or more of
Investor A Shares; a contingent deferred sales charge of 1.00% will be
imposed on the lesser of the offering price or the net asset value of the
shares on the redemption date for shares redeemed within 18 months after
purchase.
** The Distributor may pay placement fees to dealers on purchase on Investor A
Shares of $1,000,000 or more.
Sales Charge Waivers
- --------------------
The section entitled "What Is The Schedule Of Sales Charges And Exemptions?" has
been amended as follows:
The second sentence under the caption "Sales Charge Waivers -- Investor
A Shares" has been amended to reflect that registered investment
advisers, trust companies and bank trust departments exercising
discretionary investment authority with respect to amounts to be
invested in a Portfolio may purchase Investor A Shares without a sales
load, provided that the aggregate amount invested pursuant to this
exemption in Investor A Shares of Fund portfolios that would otherwise
be subject to front-end sales charges equals at least $250,000.
The following text replaces the paragraph under the sub-heading "Investor A
Shares-Qualified Plans."
Qualified Plans. In general, the sales charge (as a percentage of
offering price) payable by qualified employee benefit plans ("Qualified
Plans") having at least 20 employees eligible to participate in
<PAGE>
purchases of Investor A Shares of the Portfolios aggregating less than
$500,000 will be 1.00%. No sales charge will apply to purchases by
Qualified Plans of Investor A Shares aggregating $500,000 and above. The
sales charge payable by Qualified Plans having less than 20 employees
eligible to participate in purchases of Investor A Shares of the
Portfolios aggregating less than $500,000 will be 2.50% (1.50% with
respect to shares of the Low Duration Bond Portfolio). The above
schedule will apply to purchases by such Qualified Plans of Investor A
Shares aggregating $500,000 and above.
The Fund has established different waiver arrangements with respect to
the sales charge on Investor A Shares of the Portfolios for purchases
through certain Qualified Plans participating in programs whose sponsors
or administrators have entered into arrangements with the Fund. For
further information, see "Purchase and Redemption Information" in the
Statement of Additional Information.
The following is added to the end of the first paragraph under the sub-heading
"Exemptions from the Contingent Deferred Sales Charge."
The Fund also waives the contingent deferred sales charge on redemptions
of Investor B Shares of the Portfolios purchased through certain
Qualified Plans participating in programs whose sponsors or
administrators have entered into arrangements with the Fund. For further
information, see "Purchase and Redemption Information" in the Statement
of Additional Information.
Class Expenses
- --------------
The first sentence in the second paragraph under "How Is The Fund Organized?" is
replaced with the following:
Shares of each class bear their pro rata portion of all operating
expenses paid by a Portfolio, except transfer agency fees, certain
administrative/servicing fees and amounts payable under the Fund's
Distribution and Service Plan.
This Supplement is dated June 24, 1997.
<PAGE>
COMPASS CAPITAL FUNDSSMCOMPASS CAPITAL FUNDS(SM)
THE BOND PORTFOLIOS/SERVICE CLASS
SUPPLEMENT TO PROSPECTUS DATED
JANUARY 1, 1997
Low Duration Bond Portfolio - Change in Investment Policies
- -----------------------------------------------------------
The investment policies of the Low Duration Bond Portfolio have been modified,
and the disclosure in the Prospectus has been changed as follows:
A. Credit Quality
--------------
The information on the credit quality concentration and minimum credit
quality for the Low Duration Bond Portfolio in the sections "What Are The
Differences Among The Portfolios?" and "What Additional Investment Policies
And Risks Apply?" are replaced with the following:
================================================================================
PORTFOLIO CREDIT QUALITY CONCENTRATION MINIMUM CREDIT QUALITY
- --------------------------------------------------------------------------------
Low Duration Bond Investment Grade Spectrum B
================================================================================
Securities acquired by the Low Duration Bond Portfolio will generally
be rated investment grade at the time of purchase or, if unrated, of
comparable quality as determined by the Portfolio's sub-adviser. The Low
Duration Bond Portfolio may, however, invest in non-investment grade fixed
income or convertible securities when the Portfolio's sub-adviser believes
that the investment characteristics of such securities make them desirable
in light of the Portfolio's investment objective and current portfolio mix,
so long as under normal market and economic conditions, (i) no more than
20% of the total assets of the Portfolio are invested in non-investment
grade securities and (ii) such securities are rated "B" or higher at the
time of purchase by at least one major rating agency. Non-investment grade
securities (those that are rated "Ba" or lower by Moody's or "BB" or lower
by S&P, Duff or Fitch) are commonly referred to as "junk bonds." To the
extent that the securities acquired by the Low Duration Bond Portfolio are
not rated investment grade, there is a greater risk as to the timely
repayment of the principal on, and timely payment of interest or dividends
with respect to, such securities. Particular risks associated with lower-
rated securities are (a) the sensitivity of such securities to interest
rate and economic changes, (b) the lower degree of expected protection of
principal and interest payments, (c) the creditworthiness of the issuers of
such securities, (d) the relatively low trading market liquidity for the
securities, (e) the relative youth and growth of the market for such
securities, and (f) the impact that legislation may have on the high yield
bond market (and, in turn, on the Portfolio's net asset value and
investment practices). During an economic downturn or substantial period
of rising interest rates, leveraged issuers may experience financial stress
which would adversely affect their ability to service their principal and
interest payment obligations, to meet projected business goals, and to
obtain additional financing. An economic downturn could also disrupt the
market for lower-rated securities and adversely affect the value of
outstanding securities and the ability of the issuers to repay principal
and interest. If the issuer of a security held by the Low Duration Bond
Portfolio defaulted, the Portfolio could incur additional expenses to seek
recovery. Adverse publicity and investor perceptions, whether or not they
are based on fundamental analysis, could also decrease the value and
liquidity of lower-rated securities held by the Portfolio, especially in a
thinly-traded market.
<PAGE>
B. Foreign Investments
-------------------
The Low Duration Bond Portfolio may invest up to 20% of its total
assets in debt securities of foreign issuers on either a currency hedged or
unhedged basis, and may hold from time to time various foreign currencies
pending investment or conversion into U.S. dollars. Some of these
instruments may have the characteristics of futures contracts. In
addition, the Low Duration Bond Portfolio may engage in foreign currency
exchange transactions to seek to protect against changes in the level of
future exchange rates which would adversely affect the Portfolio's
performance. These investments and transactions involving foreign
securities, currencies, options (including options that relate to foreign
currencies), futures, hedging and cross-hedging are described under the
sub-sections captioned "Foreign Investments," "Interest Rate and Currency
Transactions" and "Options and Futures Contracts" under "What Additional
Investment Policies And Risks Apply?"
Fund Management
- ---------------
The section "Who Manages the Fund?" has been amended as follows:
The portfolio managers for the Core Bond and Managed Income Portfolios are
as follows:
Portfolio Portfolio Manager
- --------- -----------------
Core Bond Keith Anderson; Managing Director of BlackRock and co-
head of the portfolio management group since 1988;
Mortgage securities and derivatives products strategist
at First Boston from 1987 to 1988; Vice President and
Portfolio Manager at Criterion Investment Management
Company from 1983 to 1987; Mr. Anderson has
participated in the management of the Portfolio since
its inception and has been designated Portfolio co-
manager since June 1997.
Robert Michele, CPA; Managing Director of
BlackRock since 1996; Director and Head of U.S. Fixed
Income Investments at CS First Boston Investment
Management Corporation from 1993 to 1995; Deputy
Manager and Senior Portfolio Manager at Brown Brothers
Harriman & Co. from 1985 to 1993; Mr. Michele has
participated in the management of the Portfolio since
1995 and has been designated Portfolio co-manager since
June 1997.
Managed Income Keith Anderson and Robert Michele (see above); Messrs.
Anderson and Michele have participated in the
management of the Portfolio since 1995 and have been
designated Portfolio co-managers since June 1997.
Administration Fees
- -------------------
The second sentence in the second paragraph under "Administrators" is changed to
reflect that PFPC and CDI are entitled to receive a combined administration fee,
computed daily and payable monthly, at the aggregate annual rate of 0.20% of the
first $500 million of average daily net assets allocated to the Service Shares
of each Portfolio, 0.18% of the next $500 million of average daily net assets
allocated to the Service Shares of each Portfolio and 0.16% of the average daily
net assets allocated to the Service Shares of each Portfolio in excess of $1
billion.
Class Expenses
- --------------
The first sentence in the second paragraph under "How Is The Fund Organized?" is
replaced with the following:
<PAGE>
Shares of each class bear their pro rata portion of all operating
expenses paid by a Portfolio, except transfer agency fees, certain
administrative/servicing fees and amounts payable under the Fund's
Distribution and Service Plan.
This Supplement is dated June 24, 1997.
<PAGE>
COMPASS CAPITAL FUNDS(SM)
THE BOND PORTFOLIOS/INSTITUTIONAL CLASS
SUPPLEMENT TO PROSPECTUS DATED
JANUARY 1, 1997
Low Duration Bond Portfolio - Change in Investment Policies
- -----------------------------------------------------------
The investment policies of the Low Duration Bond Portfolio have been modified,
and the disclosure in the Prospectus has been changed as follows:
A. Credit Quality
--------------
The information on the credit quality concentration and minimum credit
quality for the Low Duration Bond Portfolio in the sections "What Are
The Differences Among The Portfolios?" and "What Additional Investment
Policies And Risks Apply?" are replaced with the following:
================================================================================
PORTFOLIO CREDIT QUALITY CONCENTRATION MINIMUM CREDIT QUALITY
- --------------------------------------------------------------------------------
Low Duration Bond Investment Grade Spectrum B
================================================================================
Securities acquired by the Low Duration Bond Portfolio will
generally be rated investment grade at the time of purchase or, if
unrated, of comparable quality as determined by the Portfolio's
sub-adviser. The Low Duration Bond Portfolio may, however, invest in
non-investment grade fixed income or convertible securities when the
Portfolio's sub-adviser believes that the investment characteristics of
such securities make them desirable in light of the Portfolio's
investment objective and current portfolio mix, so long as under normal
market and economic conditions, (i) no more than 20% of the total assets
of the Portfolio are invested in non-investment grade securities and
(ii) such securities are rated "B" or higher at the time of purchase by
at least one major rating agency. Non-investment grade securities (those
that are rated "Ba" or lower by Moody's or "BB" or lower by S&P, Duff or
Fitch) are commonly referred to as "junk bonds." To the extent that the
securities acquired by the Low Duration Bond Portfolio are not rated
investment grade, there is a greater risk as to the timely repayment of
the principal on, and timely payment of interest or dividends with
respect to, such securities. Particular risks associated with
lower-rated securities are (a) the sensitivity of such securities to
interest rate and economic changes, (b) the lower degree of expected
protection of principal and interest payments, (c) the creditworthiness
of the issuers of such securities, (d) the relatively low trading market
liquidity for the securities, (e) the relative youth and growth of the
market for such securities, and (f) the impact that legislation may have
on the high yield bond market (and, in turn, on the Portfolio's net
asset value and investment practices). During an economic downturn or
substantial period of rising interest rates, leveraged issuers may
experience financial stress which would adversely affect their ability
to service their principal and interest payment obligations, to meet
projected business goals, and to obtain additional financing. An
economic downturn could also disrupt the market for lower-rated
securities and adversely affect the value of outstanding securities and
the ability of the issuers to repay principal and interest. If the
issuer of a security held by the Low Duration Bond Portfolio defaulted,
the Portfolio could incur additional expenses to seek recovery. Adverse
publicity and investor perceptions, whether or not they are based on
fundamental analysis, could also decrease the value and liquidity of
lower-rated securities held by the Portfolio, especially in a
thinly-traded market.
<PAGE>
B. Foreign Investments
-------------------
The Low Duration Bond Portfolio may invest up to 20% of its total
assets in debt securities of foreign issuers on either a currency hedged
or unhedged basis, and may hold from time to time various foreign
currencies pending investment or conversion into U.S. dollars. Some of
these instruments may have the characteristics of futures contracts. In
addition, the Low Duration Bond Portfolio may engage in foreign currency
exchange transactions to seek to protect against changes in the level of
future exchange rates which would adversely affect the Portfolio's
performance. These investments and transactions involving foreign
securities, currencies, options (including options that relate to
foreign currencies), futures, hedging and cross-hedging are described
under the sub-sections captioned "Foreign Investments," "Interest Rate
and Currency Transactions" and "Options and Futures Contracts" under
"What Additional Investment Policies And Risks Apply?"
Fund Management
- ---------------
The section "Who Manages the Fund?" has been amended as follows:
The portfolio managers for the Core Bond and Managed Income Portfolios
are as follows:
Portfolio Portfolio Manager
- --------- ----------------
Core Bond Keith Anderson; Managing Director of
BlackRock and co-head of the portfolio
management group since 1988; Mortgage
securities and derivatives products
strategist at First Boston from 1987 to
1988; Vice President and Portfolio Manager
at Criterion Investment Management Company
from 1983 to 1987; Mr. Anderson has
participated in the management of the
Portfolio since its inception and has been
designated Portfolio co-manager since June
1997.
Robert Michele, CPA; Managing Director of
BlackRock since 1996; Director and Head of
U.S. Fixed Income Investments at CS First
Boston Investment Management Corporation
from 1993 to 1995; Deputy Manager and Senior
Portfolio Manager at Brown Brothers Harriman
& Co. from 1985 to 1993; Mr. Michele has
participated in the management of the
Portfolio since 1995 and has been designated
Portfolio co-manager since June 1997.
Managed Income Keith Anderson and Robert Michele
(see above); Messrs. Anderson and Michele
have participated in the management of the
Portfolio since 1995 and have been
designated Portfolio co-managers since June
1997.
Administration Fees
- -------------------
The second sentence in the second paragraph under "Administrators" is changed to
reflect that PFPC and CDI are entitled to receive a combined administration fee,
computed daily and payable monthly, at the aggregate annual rate of 0.20% of the
first $500 million of average daily net assets allocated to the Institutional
Shares of each Portfolio, 0.18% of the next $500 million of average daily net
assets allocated to the Institutional Shares of each Portfolio and 0.16% of the
average daily net assets allocated to the Institutional Shares of each Portfolio
in excess of $1 billion.
<PAGE>
Class Expenses
- --------------
The first sentence in the second paragraph under "How Is The Fund Organized?" is
replaced with the following:
Shares of each class bear their pro rata portion of all operating
expenses paid by a Portfolio, except transfer agency fees, certain
administrative/servicing fees and amounts payable under the Fund's
Distribution and Service Plan.
Purchases by Customers of Broker-Dealers
- ----------------------------------------
The following paragraph has been added after the last paragraph in the section
entitled "How Are Shares Purchased And Redeemed?":
Shares of the Portfolios may be purchased by customers of
broker-dealers and agents which have established a servicing
relationship with the Fund on behalf of their customers. These
broker-dealers and agents may impose additional or different conditions
on the purchase or redemption of Portfolio shares by their customers and
may charge their customers transaction, account or other fees on the
purchase and redemption of Portfolio shares. Each broker-dealer or agent
is responsible for transmitting to its customers a schedule of any such
fees and information regarding any additional or different conditions
regarding purchases and redemptions. Shareholders who are customers of
such broker-dealers or agents should consult them for information
regarding these fees and conditions.
This Supplement is dated June 24, 1997.
<PAGE>
COMPASS CAPITAL FUNDS(SM)
SUPPLEMENT TO STATEMENT OF ADDITIONAL INFORMATION DATED
JANUARY 1, 1997 (AS PREVIOUSLY SUPPLEMENTED
FEBRUARY 14, 1997)
The section "Purchase and Redemption Information" has been amended as follows:
The following paragraphs are added after the second paragraph of text on
page 97:
The initial sales charge on Investor A Shares of the Non-Money
Market Portfolios will be waived on purchases through an eligible 401(k) plan
participating in a Merrill Lynch 401(k) Program (an "ML 401(k) Plan") if:
(i) the ML 401(k) Plan is recordkept on a daily valuation basis
by Merrill Lynch and, on the date the ML 401(k) Plan sponsor signs the
Merrill Lynch Recordkeeping Service Agreement, the ML 401(k) Plan has $3
million or more in assets invested in broker/dealer funds not advised or
managed by Merrill Lynch Asset Management, L.P. ("MLAM") that are made
available pursuant to a Services Agreement between Merrill Lynch and the
fund's principal underwriter or distributor and in funds advised or
managed by MLAM (collectively, the "Applicable Investments"); or
(ii) the ML 401(k) Plan is recordkept on a daily valuation basis
by an independent recordkeeper whose services are provided through a
contract or alliance arrangement with Merrill Lynch, and on the date the
ML 401(k) Plan sponsor signs the Merrill Lynch Recordkeeping Service
Agreement, the ML 401(k) Plan has $3 million or more in assets,
excluding money market funds, invested in Applicable Investments; or
(iii) the ML 401(k) Plan has 500 or more eligible employees, as
determined by the Merrill Lynch plan conversion manager, on the date the
ML 401(k) Plan sponsor signs the Merrill Lynch Recordkeeping Service
Agreement.
The following paragraphs are added after the third paragraph of text on
page 97:
The contingent deferred sales charge on redemptions of Investor B
Shares of the Non-Money Market Portfolios will be waived if the shares were
purchased through an ML 401(k) Plan if:
(i) the ML 401(k) Plan is recordkept on a daily valuation basis
by Merrill Lynch and, on the date the ML 401(k) Plan sponsor signs the
Merrill Lynch Recordkeeping Service Agreement, the ML 401(k) Plan has
less than $3 million in assets invested in Applicable Investments; or
(ii) the ML 401(k) Plan is recordkept on a daily valuation basis
by an independent recordkeeper whose services are provided through a
contract or alliance arrangement with Merrill Lynch, and on the date the
ML 401(k) Plan sponsor signs the Merrill Lynch Recordkeeping Service
Agreement, the ML 401(k) Plan has less than $3 million in assets,
excluding money market funds, invested in Applicable Investments; or
<PAGE>
(iii) the ML 401(k) Plan has less than 500 eligible employees, as
determined by the Merrill Lynch plan conversion manager, on the date the
ML 401(k) Plan sponsor signs the Merrill Lynch Recordkeeping Service
Agreement.
ML 401(k) Plans recordkept on a daily basis by Merrill Lynch or
an independent recordkeeper under a contract with Merrill Lynch that are
currently investing in Investor B shares of Non-Money Market Portfolios of the
Fund convert to Investor A shares once the ML 401(k) Plan has reached $5 million
invested in Applicable Investments. The ML 401(k) Plan will receive a plan-level
share conversion.
This Supplement is dated June 24, 1997
