FOUNTAIN SQUARE COMMERCIAL PAPER FUND
INVESTMENT SHARES
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FOUNTAIN SQUARE FUNDS
PROSPECTUS
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FIFTH THIRD BANK
INVESTMENT ADVISER
Cusip 350756300
9052205A-R (9/95)
65-0922
FOUNTAIN SQUARE COMMERCIAL PAPER FUND
(A PORTFOLIO OF FOUNTAIN SQUARE FUNDS)
INVESTMENT SHARES
PROSPECTUS
The Investment Shares of Fountain Square Commercial Paper Fund (the "Fund")
offered by this prospectus represent interests in a diversified portfolio of
securities which is one of a series of investment portfolios in Fountain Square
Funds (the "Trust"), an open-end management investment company (a mutual fund).
The Fund is a money market fund which invests in money market instruments,
consisting primarily of commercial paper, to achieve current income consistent
with stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF FIFTH
THIRD BANK, ARE NOT ENDORSED OR GUARANTEED BY FIFTH THIRD BANK, AND ARE NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. THE FUND ATTEMPTS TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE NO ASSURANCE THAT THE
FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in Investment Shares of the Fund. Keep this prospectus for future
reference.
The Fund has also filed a Combined Statement of Additional Information for Trust
Shares and Investment Shares, dated September 30, 1995, with the Securities and
Exchange Commission. The information contained in the Combined Statement of
Additional Information is incorporated by reference into this prospectus. You
may request a copy of the Combined Statement of Additional Information free of
charge, obtain other information or make inquiries about the Fund by writing to
the Fund or calling (513) 744-8888 in Cincinnati or toll-free (800) 334-0483.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated September 30, 1995
TABLE OF CONTENTS
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SUMMARY OF FUND EXPENSES 1
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FINANCIAL HIGHLIGHTS--INVESTMENT SHARES 2
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GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
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Investment Objective 3
Investment Policies 3
Acceptable Investments 3
Variable Rate Demand Notes 4
Bank Instruments 4
Short-Term Credit Facilities 5
Ratings 5
Credit Enhancement 5
Demand Features 5
Repurchase Agreements 5
When-Issued and Delayed Delivery
Transactions 5
Concentration of Investments 6
Investment Limitations 6
Regulatory Compliance 6
FOUNTAIN SQUARE FUNDS INFORMATION 7
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Management of the Trust 7
Board of Trustees 7
Investment Adviser 7
Advisory Fees 7
Adviser's Background 7
Distribution of Investment Shares 7
Distribution Plan 8
Other Payments to Financial Institutions 8
Administration of the Fund 9
Administrative Services 9
Custodian, Transfer Agent, and
Dividend Disbursing Agent 9
Independent Auditors 9
NET ASSET VALUE 10
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INVESTING IN INVESTMENT SHARES 10
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Share Purchases 10
Through Fifth Third Securities 10
Minimum Investment Required 10
What Shares Cost 11
Certificates and Confirmations 11
Dividends 11
Capital Gains 11
EXCHANGES 11
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REDEEMING INVESTMENT SHARES 12
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Through Fifth Third Securities 12
By Telephone 12
By Mail 13
Receiving Payment 13
Accounts with Low Balances 14
SHAREHOLDER INFORMATION 14
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Voting Rights 14
Massachusetts Law 14
EFFECT OF BANKING LAWS 15
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TAX INFORMATION 15
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Federal Income Tax 15
PERFORMANCE INFORMATION 16
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OTHER CLASSES OF SHARES 16
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FINANCIAL STATEMENTS 17
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REPORT OF INDEPENDENT AUDITORS 26
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ADDRESSES 27
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SUMMARY OF FUND EXPENSES
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<TABLE>
<S> <C>
INVESTMENT SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)..... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)........................................... None
Contingent Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, as applicable)........................................... None
Redemption Fees (as a percentage of amount redeemed, if applicable)............. None
Exchange Fee.................................................................... None
ANNUAL INVESTMENT SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)................................................ 0.32%
12b-1 Fee (after waiver)(2)..................................................... 0.00%
Other Expenses(3)............................................................... 0.17%
Total Investment Shares Operating Expenses(4)............................... 0.49%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver by the
investment adviser. The adviser can terminate this voluntary waiver at any time
at its sole discretion. The maximum management fee is 0.40%.
(2) The 12b-1 fee has been reduced to reflect the voluntary waiver by the
distributor. The distributor can terminate this voluntary waiver at any time at
its sole discretion. The maximum 12b-1 fee is 0.35%.
(3) Other expenses have been reduced to reflect the voluntary waiver of its fee
by the custodian.
(4) Total Operating Expenses would have been 0.93% absent the voluntary waivers
by the investment adviser, distributor and custodian.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE INVESTMENT SHARES WILL
BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE
VARIOUS COSTS AND EXPENSES, SEE "FOUNTAIN SQUARE FUNDS INFORMATION" AND
"INVESTING IN INVESTMENT SHARES." Wire-transferred redemptions of less than
$10,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
------- -------- -------- ---------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return and (2) redemption at the end
of each time period. The Fund charges no redemption fees for
Investment Shares............................................ $5 $16 $27 $62
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FOUNTAIN SQUARE COMMERCIAL PAPER FUND
FINANCIAL HIGHLIGHTS--INVESTMENT SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young LLP, Independent Auditors, on
page 26.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
---------------------------------
1995 1994 1993*
------- ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
- ------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------
Net investment income 0.05 0.03 0.03
- ------------------------------------------------------ ------ ------ ------
LESS DISTRIBUTIONS
- ------------------------------------------------------
Distributions to shareholders from net investment
income (0.05) (0.03) (0.03)
- ------------------------------------------------------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
- ------------------------------------------------------ ------ ------ ------
TOTAL RETURN** 5.25% 3.02% 2.70%
- ------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------
Expenses 0.49% 0.49% 0.48%(b)
- ------------------------------------------------------
Net investment income 5.12% 2.97% 2.69%(b)
- ------------------------------------------------------
Expense waiver/reimbursement(a) 0.44% 0.45% 0.47%(b)
- ------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------
Net assets, end of period (000 omitted) $10,169 $6,147 $4,714
- ------------------------------------------------------
</TABLE>
* Reflects operations for the period from August 11, 1992 (date of initial
public investment) to July 31, 1993.
** Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
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The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 15, 1988. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. As of the date of this prospectus, the Board of
Trustees ("Trustees") have established two classes of shares of the Fund, known
as Trust Shares and Investment Shares. This prospectus relates only to the
Investment Shares ("Shares") of the Fund.
Investment Shares are designed for investors who are not clients of the Trust
Department of The Fifth Third Bank ("Fifth Third Bank") and its affiliates as a
convenient means of accumulating an interest in a professionally managed,
diversified portfolio limited to money market instruments, consisting primarily
of commercial paper, maturing in 13 months or less. A minimum initial investment
of $1,000 is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income consistent with stability
of principal. The investment objective cannot be changed without approval of
shareholders. While there is no assurance that the Fund will achieve its
investment objective, it endeavors to do so by following the investment policies
described in this prospectus.
INVESTMENT POLICIES
The Fund pursues this investment objective by investing exclusively in a
portfolio of money market instruments maturing in 13 months or less, with at
least 65% of its assets invested in commercial paper. The average maturity of
the money market instruments in the Fund's portfolio, computed on a dollar
weighted basis, will be 90 days or less.
Unless indicated otherwise, the investment policies may be changed by the
Trustees without the approval of shareholders. Shareholders will be notified
before any material changes in these policies become effective.
ACCEPTABLE INVESTMENTS. The Fund invests in high quality money market
instruments that are either rated in the highest short-term rating category by
nationally recognized statistical rating organizations ("NRSROs") or of
comparable quality to securities having such ratings. Examples of these
instruments include, but are not limited to:
- domestic issues of corporate debt obligations, including variable rate
demand notes;
- commercial paper (including Canadian Commercial Paper and Europaper);
- certificates of deposit, demand and time deposits, bankers' acceptances
and other instruments issued by domestic and foreign banks and other
deposit institutions ("Bank Instruments");
- short-term credit facilities, such as demand notes;
- obligations issued or guaranteed as to payment of principal and interest
by the U.S. government or one of its agencies or instrumentalities
("Government Securities"); and
- other money market instruments.
The Fund invests only in instruments denominated and payable in U.S. dollars.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term
corporate debt instruments that have variable or floating interest rates
and provide the Fund with the right to tender the security for repurchase
at its stated principal amount plus accrued interest. Such securities
typically bear interest at a rate that is intended to cause the securities
to trade at par. The interest rate may float or be adjusted at regular
intervals (ranging from daily to annually), and is normally based on a
published interest rate or interest rate index. Most variable rate demand
notes allow the Fund to demand the repurchase of the security on not more
than seven days prior notice. Other notes only permit the Fund to tender
the security at the time of each interest rate adjustment or at other fixed
intervals. See "Demand Features." The Fund treats variable rate demand
notes as maturing on the later of the date of the next interest adjustment
or the date on which the Fund may next tender the security for repurchase.
The Staff of the Securities and Exchange Commission has taken the position
that variable rate demand notes are not commercial paper; although the Fund
disagrees with this determination, variable rate demand notes will not be
included in the 65% of Fund assets which will be invested in commercial
paper. In the event that the Staff of the Securities and Exchange
Commission changes its position on this matter, the Fund may include
variable rate demand notes in the 65% minimum commercial paper investment
without notifying shareholders.
BANK INSTRUMENTS. The Fund only invests in Bank Instruments either issued
by an institution having capital, surplus and undivided profits over $100
million or insured by the Bank Insurance Fund ("BIF") or the Savings
Association Insurance Fund ("SAIF"). Bank Instruments may include
Eurodollar Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit
("Yankee CDs") and Eurodollar Time Deposits ("ETDs"). The Fund will treat
securities credit enhanced with a bank's letter of credit as Bank
Instruments.
ECDs, ETDs, Yankee CDs, and Europaper are subject to different risks than
domestic obligations of domestic banks or corporations. Examples of these
risks include international, economic and political developments, foreign
governmental restrictions that may adversely affect the payment of
principal or interest, foreign withholdings or other taxes on interest
income, difficulties in obtaining or enforcing a judgment against the
issuing entity, and the possible impact of interruptions in the flow of
international currency transactions. Different risks may also exist for
ECDs, ETDs, and Yankee CDs because the banks issuing these instruments, or
their domestic or foreign branches, are not necessarily subject to the same
regulatory requirements that apply to domestic banks, such as reserve
requirements, loan limitations, examinations, accounting, auditing, and
recordkeeping, and the public availability of information. These factors
will be carefully considered by the Fund's adviser in selecting investments
for the Fund.
SHORT-TERM CREDIT FACILITIES. Demand notes are short-term borrowing
arrangements between a corporation and an institutional lender (such as the
Fund) payable upon demand by either party. The notice period for demand
typically ranges from one to seven days, and the party may demand full or
partial payment. The Fund may also enter into, or acquire participations
in, short-term revolving credit facilities with corporate borrowers. Demand
notes and other short-term credit arrangements usually provide for floating
or variable rates of interest.
RATINGS. An NRSRO's highest rating category is determined without regard for
sub-categories and gradations. For example, securities rated A-1 or A-1+ by
Standard & Poor's Ratings Group ("S&P"), Prime-1 by Moody's Investors Service,
Inc. ("Moody's"), or F-1 (+ or -) by Fitch Investors Service, Inc. ("Fitch") are
all considered rated in the highest short-term rating category. The Fund will
follow applicable regulations in determining whether a security rated by more
than one NRSRO can be treated as being in the highest short-term rating
category; currently such securities must be rated by two NRSROs in their highest
rating category. See "Regulatory Compliance."
CREDIT ENHANCEMENT. The Fund may acquire securities that have been credit
enhanced by a guaranty, letter of credit or insurance. The Fund typically
evaluates the credit quality and ratings of credit enhanced securities based
upon the financial condition and ratings of the party providing the credit
enhancement (the "credit enhancer"), rather than the issuer. Generally, the Fund
will not treat credit enhanced securities as having been issued by the credit
enhancer for diversification purposes. However, under certain circumstances,
applicable regulations may require the Fund to treat the securities as having
been issued by both the issuer and the credit enhancer. The bankruptcy,
receivership or default of the credit enhancer will adversely affect the quality
and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to puts and
standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period (usually
seven days) following a demand by the Fund. The demand feature may be issued by
the issuer of the underlying securities, a dealer in the securities or by
another third party, and may not be transferred separately from the underlying
security. The Fund uses these arrangements to provide the Fund with liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership or default by the issuer of the demand
feature, or a default on the underlying security or other event that terminates
the demand feature before its exercise, will adversely affect the liquidity of
the underlying security. Demand features that are exercisable even after a
payment default on the underlying security may be treated as a form of credit
enhancement.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell U.S. government
securities or certificates of deposit to the Fund and agree at the time of sale
to repurchase them at a mutually agreed upon time and price within one year from
the date of acquisition.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase U.S.
government securities on a when-issued or delayed delivery basis. These
transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause the Fund to miss a price or yield
considered to be
advantageous. Settlement dates may be a month or more after entering into these
transactions, and the market values of the securities purchased may vary from
the purchase prices. Accordingly, the Fund may pay more or less than the market
value of the securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the Fund's adviser
deems it appropriate to do so. In addition, the Fund may enter into transactions
to sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
CONCENTRATION OF INVESTMENTS. The Fund will invest at least 65% of its total
assets in commercial paper and in excess of 25% of the Fund's assets will be
comprised of commercial paper issued by finance companies unless the Fund is in
a temporary defensive position as a result of economic conditions. Concentration
of the Fund's portfolio in such obligations may entail additional risks which
are not encountered by funds with more diversified portfolios.
INVESTMENT LIMITATIONS
The Fund will not:
- borrow money except, under certain circumstances, the Fund may borrow up
to one-third of the value of its total assets; or
- with respect to 75% of the value of its total assets, invest more than 5%
of its total assets in securities of one issuer (except repurchase
agreements collateralized by U.S. government securities and U.S.
government obligations). The remaining 25% of its total assets may be
invested in a single issuer if the investment adviser believes such a
strategy to be prudent.
The above investment limitations cannot be changed without shareholder approval.
As a matter of investment practice, which can be changed by the Trustees without
shareholder approval, the Fund will not invest more than 10% of its net assets
in securities which are illiquid, including repurchase agreements providing for
settlement in more than seven days after notice.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in this
prospectus and its Combined Statement of Additional Information, in order to
comply with applicable laws and regulations, including the provisions of and
regulations under the Investment Company Act of 1940, as amended. In particular,
the Fund will comply with the various requirements of Rule 2a-7, which regulates
money market mutual funds. For example, with limited exceptions, Rule 2a-7
prohibits the investment of more than 5% of the Fund's total assets in the
securities of any one issuer, although the Fund's investment limitation only
requires such 5% diversification with respect to 75% of its assets. The Fund
will invest more than 5% of its assets in any one issuer only under
circumstances permitted by Rule 2a-7. The Fund will also determine the effective
maturity of its investments, as well as its ability to consider a security as
having received the requisite short-term ratings by NRSROs, according to Rule
2a-7. The Fund may change these operational policies to reflect changes in the
laws and regulations without the approval of its shareholders.
FOUNTAIN SQUARE FUNDS INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust,
investment decisions for the Fund are made by Fifth Third Bank, the Fund's
investment adviser (the "Adviser"), subject to direction by the Trustees. The
Adviser continually conducts investment research and supervision for the Fund
and is responsible for the purchase or sale of portfolio instruments, for which
it receives an annual fee from the Fund.
ADVISORY FEES. The Adviser receives an annual investment advisory fee
equal to .40 of 1% of the Fund's average daily net assets. The Adviser has
undertaken to waive up to the amount of the advisory fee, for operating
expenses in excess of limitations established by certain states. The
Adviser may voluntarily choose to waive a portion of its fee or reimburse
the Fund for certain other expenses of the Fund, but reserves the right to
terminate such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Fifth Third Bank, an Ohio state chartered bank, is a
wholly-owned subsidiary of Fifth Third Bancorp, a bank holding company
organized under the laws of Ohio. Fifth Third Bank is a commercial bank
offering a wide range of banking services to its customers. As of July 31,
1995, Fifth Third Bank and its affiliates managed assets in excess of $7.8
billion on a discretionary basis and provided custody services for
additional assets in excess of $67.2 billion.
Fifth Third Bank has managed pools of commingled funds since 1953.
Currently, the Trust and Investment Division manages 14 such pools with
total assets of over $1.11 billion. Fifth Third Bank has managed mutual
funds since 1988.
As part of its regular banking operations, Fifth Third Bank may make loans
to public companies. Thus, it may be possible, from time to time, for the
Fund to hold or acquire the securities of issuers which are also lending
clients of Fifth Third Bank. The lending relationship will not be a factor
in the selection of securities.
DISTRIBUTION OF INVESTMENT SHARES
Until December 1, 1995, Federated Securities Corp. serves as the principal
distributor for shares of the Fund. It is a Pennsylvania corporation organized
on November 14, 1969, and is the distributor for a number of investment
companies. Federated Securities Corp., a subsidiary of Federated Investors, is
located at Federated Investors Tower, Pittsburgh, PA 15222-3779.
Effective December 1, 1995, BISYS Fund Services L.P. will serve as the
distributor for the Trust. BISYS Fund Services L.P. is wholly-owned by BISYS
Group, Inc., 150 Clove Road, Little Falls, NJ 07424, a publicly owned company
engaged in information processing and recordkeeping services to and through
banking and other financial organizations.
DISTRIBUTION PLAN. Pursuant to the provisions of a distribution plan adopted in
accordance with Rule 12b-1 (the "Plan"), under the Investment Company Act of
1940, the Fund will pay to the distributor an amount computed at an annual rate
of up to 0.35% of the average daily net asset value of the Shares to finance any
activity which is principally intended to result in the sale of Shares subject
to the Plan.
The distributor may from time to time and for such periods as it deems
appropriate, voluntarily reduce its compensation under the Plan to the extent
the expenses attributable to the Shares exceed such lower expense limitation as
the distributor may, by notice to the Trust, voluntarily declare to be
effective.
The distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers to provide
sales and/or administrative services as agents for their clients or customers
who beneficially own Shares. Administrative services may include, but are not
limited to, the following functions: providing office space, equipment,
telephone facilities, and various personnel including clerical, supervisory, and
computer as necessary or beneficial to establish and maintain shareholder
accounts and records; processing purchase and redemption transactions and
automatic investments of client account cash balances; answering routine client
inquiries regarding the Fund; assisting clients in changing dividend options;
account designations, and addresses; and providing such other services as the
Fund reasonably requests.
Financial institutions will receive fees from the distributor based upon Shares
owned by their clients or customers. The schedules of such fees and the basis
upon which such fees will be paid will be determined from time to time by the
distributor.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. The distributor, the Adviser, or
their affiliates may also offer to pay a fee from their own assets to financial
institutions as financial assistance for providing substantial marketing and
sales support. The support may include initiating customer accounts, providing
sales literature, or participating in sales, educational and training seminars
(including those held at recreational facilities). Such assistance will be
predicated upon the amount of shares the financial institution sells or may sell
and/or upon the type and nature of sales or marketing support furnished by the
financial institution. Any payments made by the distributor may be reimbursed by
the Adviser or its affiliates.
The Glass-Steagall Act limits the ability of a depository institution (such as a
commercial bank or a savings and loan association) to become an underwriter or
distributor of most securities. In the event the Glass-Steagall Act is deemed to
prohibit depository institutions from acting in the administrative capacities
described above or should Congress relax current restrictions on depository
institutions, the Trustees will consider appropriate changes in the
administrative services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Until December 1, 1995, Federated Administrative
Services, a subsidiary of Federated Investors, provides the Fund with certain
administrative personnel and services necessary to operate the Fund, such as
legal and accounting services. Federated Administrative Services provides these
at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
- --------------------- ----------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
on assets in excess of $750
.075 of 1% million
</TABLE>
The administrative fee received during any fiscal year shall be at least $50,000
per Fund. Federated Administrative Services may choose voluntarily to waive a
portion of its fee at any time.
Effective December 1, 1995, BISYS Fund Services L.P. will serve as the
administrator. The administrator generally assists in all aspects of the Trust's
administration and operation including providing the Funds with certain
administrative personnel and services necessary to operate the Funds, such as
legal and accounting services. BISYS Fund Services L.P. provides these at an
annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY NET
ADMINISTRATIVE FEE ASSETS OF THE TRUST
- ------------------- ------------------------------------
<S> <C>
.10% of the first $1 billion
.08% of the next $1 billion
.07% in excess of $2 billion
</TABLE>
The administrator may periodically waive all or a portion of its administrative
fee which will cause the yield of a Fund to be higher than it would otherwise be
in the absence of such a waiver.
Effective December 1, 1995, pursuant to a separate agreement with BISYS Fund
Services L.P., Fifth Third Bank performs sub-administration services on behalf
of the Fund including providing certain administrative personnel and services
necessary to operate the Fund for which it receives a fee from BISYS Fund
Services L.P. computed daily and paid periodically calculated at an annual rate
of 0.025% of average daily net assets.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Fifth Third Bank,
Cincinnati, Ohio, is custodian for the securities and cash of the Fund, transfer
agent for the shares of the Fund, and dividend disbursing agent for the Fund.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Ernst & Young
LLP, Pittsburgh, Pennsylvania.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The net asset value
per share is determined by adding the interest of the Shares in the value of all
securities and other assets of the Fund, subtracting the interest of the Shares
in the liabilities of the Fund and those attributable to Shares, and dividing
the remainder by the total number of Shares outstanding. The Fund cannot
guarantee that its net asset value will always remain at $1.00 per Share.
INVESTING IN INVESTMENT SHARES
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange and the Federal
Reserve Bank of Cleveland are open for business. Customers of Fifth Third
Securities may purchase Investment Shares through Fifth Third Securities. All
other investors should purchase Investment Shares directly from the distributor.
In connection with the sale of Investment Shares, the distributor may from time
to time offer certain items of nominal value to a shareholder or investor. The
Fund reserves the right to reject any purchase request. Purchases through Fifth
Third Bank may not be available to investors in all states.
THROUGH FIFTH THIRD SECURITIES. A customer of Fifth Third Securities may
telephone Fifth Third Securities at (513) 744-8888 in Cincinnati or toll-free
(800) 334-0483 to place an order to purchase Investment Shares. All other
investors must place their purchase orders through the distributor. Texas
residents must purchase Shares through Federated Securities Corp. at
1-800-358-2801 until December 1, 1995. Effective December 1, 1995, Texas
residents must contact BISYS Fund Services L.P. at 1-800-554-3862.
Payment may be made to the Fund either by check or federal funds. Orders are
considered received after payment by check is converted into federal funds and
received by Fifth Third Bank. This is normally the next business day after Fifth
Third Bank receives the check. When payment is made with federal funds, the
order is considered received when federal funds are received by Fifth Third
Bank. Federal funds should be wired to Fifth Third Bank as follows: ABA No. 042
000 314 Fifth Third Cincinnati. Attention: Fountain Square Funds Department; For
Credit to: (shareholder name and account number); For Further Credit to:
Fountain Square Commercial Paper Fund -- Investment Shares. Investors not
purchasing through Fifth Third Bank should consult their financial institutions
for wiring instructions.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund by an investor is $1,000. Subsequent
investments must be in amounts of at least $50. For customers of Fifth Third
Bank, an institutional investor's minimum investment will be calculated by
combining all accounts it maintains with Fifth Third Bank and investments in the
Fund.
The minimum investment requirements do not apply with respect to accounts that
have been established to automatically invest cash accumulations in the Fund.
Investors participating in such arrangements may be charged separate fees by the
financial institution that provides this service, and should read this
prospectus along with their financial institution's agreement or other
literature relating to this service.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. The Fund does not impose a sales charge.
The net asset value is determined at 4:00 p.m. (Cincinnati time), Monday through
Friday, except on: (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; or (iii) the following
holidays: New Year's Day, Martin Luther King Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans' Day,
Thanksgiving Day, and Christmas Day.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Fifth Third Bank maintains a share account for
each shareholder of record. Share certificates are not issued.
Detailed statements that include account balances, information on each purchase
or redemption, and a report of dividends paid during the month are sent to each
shareholder monthly and will serve as confirmations of all transactions in the
shareholder's account for the statement period.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends will be reinvested on
payment dates in additional Shares unless cash payments are requested by writing
to the Fund or Fifth Third Bank, as appropriate. Share purchase orders received
by Fifth Third Bank before 12:00 noon (Cincinnati time) earn dividends that day.
CAPITAL GAINS
If the Fund experiences capital gains, it could result in an increase in
dividends. Capital losses could result in a decrease in dividends. If, for some
extraordinary reason, the Fund realizes net long-term capital gains, it will
distribute them at least once every 12 months.
EXCHANGES
- --------------------------------------------------------------------------------
Shareholders who are clients of Fifth Third Securities may exchange shares of
one Fund for shares of any of the other Funds in the Trust by calling Fifth
Third Securities at (513) 744-8888 in Cincinnati or toll-free (800) 334-0483 or
sending a written request to Fifth Third Securities. Telephone exchange
instructions may be recorded. If reasonable procedures are not followed by the
Funds, they may be liable for losses due to unauthorized or fraudulent telephone
instructions.
Shares of Funds with a sales charge may be exchanged at net asset value for
shares of other Funds with an equal sales charge or no sales charge. Shares of
Funds with no sales charge acquired by direct purchase or reinvestment of
dividends on such shares may be exchanged for shares of Funds with a sales
charge at net asset value plus the applicable sales charge. When exchanging into
and out of shares of the Funds in the Trust, shareholders who have paid a sales
load once upon purchasing shares of any Fund will not have to pay a sales load
again on an exchange.
Orders for exchanges of shares of money market funds must be received by 12:00
noon (Cincinnati time). Orders for exchanges of the International Equity Fund,
Government Fund, Bond Fund, Ohio Tax Free Fund, Growth Fund, Mid Cap Fund, and
Balanced Fund must be received by 4:00 p.m. (Cincinnati time). Orders for
exchanges are taken on any day that the Funds are open for business. Orders
which are received prior to the cut-off times listed above will be executed as
of the close of business that day. Orders received after the respective cut-off
times will be executed at the close of the next business day.
An excessive number of exchanges may be disadvantageous to the Trust. Therefore
the Trust, in addition to its right to reject any exchange, reserves the right
to modify or terminate the exchange privilege at any time. Shareholders would be
notified prior to any modification or termination.
An exchange order must comply with the requirements for a redemption and must
specify the dollar value or number of shares to be exchanged. Exchanges are
subject to the minimum initial investment requirement of the Fund being
acquired. An exchange constitutes a sale for federal income tax purposes.
The exchange privilege is only available in states where shares of the Fund
being acquired may legally be sold. Before the exchange, a shareholder must
receive a prospectus of the Fund for which the exchange is being made.
REDEEMING INVESTMENT SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value next determined after Fifth
Third Bank receives the redemption request. Redemptions will be made on days on
which the Fund computes its net asset value. Telephone or written requests for
redemption must be received in proper form and can be made through Fifth Third
Bank or Fifth Third Securities.
THROUGH FIFTH THIRD SECURITIES
BY TELEPHONE. A shareholder who is a customer of Fifth Third Securities may
redeem shares by telephoning Fifth Third Securities at (513) 744-8888 in
Cincinnati or toll-free (800) 334-0483. All other investors may redeem through
Federated Securities Corp. by calling 1-800-358-2801 until December 1, 1995.
Effective December 1, 1995, all other investors may redeem through BISYS Fund
Services L.P. at 1-800-554-3826.
For calls received by Fifth Third Securities before 12:00 noon (Cincinnati
time), proceeds will normally be dispersed the same day to the shareholder's
account at Fifth Third Bank or Fifth Third Securities, or a check will be sent
to the address of record. Those Shares will not be entitled to the dividend
declared that day. For calls received after 12:00 noon (Cincinnati time),
proceeds will normally be dispersed the following business day. Those Shares
will be entitled to the dividend declared on the day the
redemption request was received. In no event will proceeds be dispersed more
than seven days after a proper request for redemption has been received. If at
any time, the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders would be promptly notified.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Fifth Third Securities or the distributor.
Telephone redemption instructions may be recorded. If reasonable procedures are
not followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as "By Mail," should be considered.
BY MAIL. A shareholder who is a customer of Fifth Third Securities may redeem
shares by sending a written request to Fifth Third Securities.
The written request should include the shareholder's name, the Fund name and
class of shares, the account number, and the share or dollar amount requested.
If share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request.
Shareholders should call Fifth Third Bank or Fifth Third Securities for
assistance in redeeming by mail.
Shareholders requesting a redemption of $50,000 or more, a redemption of any
amount to be sent to an address other than that on record with the Fund, or a
redemption payable other than to the shareholder of record must have signatures
on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by BIF,
which is administered by the Federal Deposit Insurance Corporation
("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
- a savings and loan association or a savings bank whose deposits are
insured by the SAIF, which is administered by the FDIC; or
- any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed to the
shareholder within one business day, but in no event more than seven days, after
receipt of a proper redemption request, provided the Fund or its agents have
received payment for shares from the shareholder.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if, due to
shareholder redemptions, the account balance falls below the required minimum
value of $1,000.
Before redeeming Shares to close an account, the Fund will notify the
shareholder in writing and allow the shareholder 30 days to purchase additional
Shares to meet the minimum requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each Fund in the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only shares of that Fund or class are
entitled to vote. As a Massachusetts business trust, the Trust is not required
to hold annual shareholder meetings. Shareholder approval will be sought only
for certain changes in the Trust or the Fund's operation and for the election of
Trustees under certain circumstances. As of July 31, 1995, Fifth Third Bank may
for certain purposes be deemed to control the Funds because it is owner of
record of certain shares of the Funds.
Trustees may be removed by a two-thirds vote of the number of Trustees prior to
such removal or by a two-thirds vote of the shareholders at a special meeting.
The Trustees shall call a special meeting of shareholders upon the written
request of shareholders owning at least 10% of the Trust's outstanding shares of
all series entitled to vote.
MASSACHUSETTS LAW
Under certain circumstances, shareholders may be held personally liable under
Massachusetts law for acts or obligations of the Trust on behalf of the Fund. To
protect shareholders of the Fund, the Trust has filed legal documents with
Massachusetts that expressly disclaim the liability of shareholders of the Fund
for such acts or obligations of the Trust. These documents require inclusion of
this disclaimer to be given in each agreement, obligation, or instrument the
Trust or its Trustees enter into or sign on behalf of the Fund.
In the unlikely event a shareholder of the Fund is held personally liable for
the Trust's obligations on behalf of the Fund, the Trust is required by the
Declaration of Trust to use the property of the Fund to protect or to compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder of the Fund for any act or obligation of the
Trust on behalf of the Fund. Therefore, financial loss resulting from liability
as a shareholder of the Fund will occur only if the Trust cannot meet its
obligations to indemnify shareholders and to pay judgments against them from the
assets of the Fund.
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations presently prohibit
a bank holding company registered under the Federal Bank Holding Company Act of
1956 or any affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company continuously engaged in the issuance of
its shares, and from issuing, underwriting, selling or distributing securities
in general. Such laws and regulations do not prohibit such a holding company or
affiliate from acting as investment adviser, transfer agent or custodian to such
an investment company or from purchasing shares of such a company as agent for
and upon the order of their customer. The Fund's investment adviser, Fifth Third
Bank, is subject to such banking laws and regulations.
Fifth Third Bank believes that it may perform the investment advisory services
for the Fund contemplated by its advisory agreement with the Trust without
violating the Glass-Steagall Act or other applicable banking laws or
regulations. Changes in either federal or state statutes and regulations
relating to the permissible activities of banks and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of present or future statutes and regulations, could prevent
Fifth Third Bank from continuing to perform all or a part of the above services
for its customers and/or the Fund. In such event, changes in the operation of
the Fund may occur, including the possible alteration or termination of any
automatic or other Fund share investment and redemption services then being
provided by Fifth Third Bank, and the Trustees would consider alternative
investment advisers and other means of continuing available investment services.
It is not expected that Fund shareholders would suffer any adverse financial
consequences (if another adviser with equivalent abilities to Fifth Third Bank
is found) as a result of any of these occurrences.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios, if any, will not be combined for tax purposes with
those realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional shares.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its yield and effective yield for
Investment Shares.
The yield of Investment Shares represents the annualized rate of income earned
on an investment in Investment Shares over a seven-day period. It is the
annualized dividends earned during the period on the investment, shown as a
percentage of the investment. The effective yield is calculated similarly to the
yield, but, when annualized, the income earned by an investment in Investment
Shares is assumed to be reinvested daily. The effective yield will be slightly
higher than the yield because of the compounding effect of this assumed
reinvestment.
Advertisements and other sales literature may also refer to total return. Total
return represents the change, over a specified period of time, in the value of
an investment in Investment Shares after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
Yield and effective yield will be calculated separately for Trust Shares and
Investment Shares.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Trust Shares of the Fund are sold to Trust clients of Fifth Third Bank and are
subject to a minimum initial investment of $1,000. Trust Shares are sold at net
asset value and are distributed without a Rule 12b-1 Plan.
Financial institutions and brokers providing sales and/or administrative
services may receive different compensation from one class of shares than from
another class of shares.
The amount of dividends payable to Trust Shares will exceed those payable to
Investment Shares by the difference between class expenses and distribution
expenses borne by shares of each respective class.
The stated advisory fee is the same for both classes of shares.
To obtain more information and a prospectus for Trust Shares, investors may call
(513) 744-8888 in Cincinnati or toll free (800) 334-0483.
FOUNTAIN SQUARE COMMERCIAL PAPER FUND
PORTFOLIO OF INVESTMENTS
JULY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------------ ------------
<C> <S> <C>
*COMMERCIAL PAPER--85.0%
- ---------------------------------------------------------------------------------
AUTO & TRUCKS--1.7%
------------------------------------------------------------------
$ 4,000,000 Daimler-Benz, 5.911%, 10/10/1995 $ 3,955,511
------------------------------------------------------------------ ------------
BANKING--19.5%
------------------------------------------------------------------
4,000,000 A.I.G. Funding, 5.957%, 9/19/1995 3,968,477
------------------------------------------------------------------
8,000,000 Banc One Corp., 5.784%-6.055%, 9/11/1995-11/6/1995 7,920,943
------------------------------------------------------------------
5,000,000 Morgan (J.P.) & Co., 5.821%, 9/1/1995 4,975,458
------------------------------------------------------------------
10,000,000 Rabobank Nederland, 5.891%-6.113%, 8/10/1995-10/25/1995 9,937,257
------------------------------------------------------------------
8,000,000 Republic National Bank of New York, 5.738%-5.775%,
10/13/1995-12/22/1995 7,877,168
------------------------------------------------------------------
6,000,000 Societe Generale N.A., Inc., 5.664%-5.912%, 10/26/1995-12/8/1995 5,900,312
------------------------------------------------------------------
5,000,000 Wachovia Corp., 6.134%, 8/2/1995 4,999,172
------------------------------------------------------------------ ------------
Total 45,578,787
------------------------------------------------------------------ ------------
CHEMICAL--2.1%
------------------------------------------------------------------
5,000,000 duPont (E.I.) deNemours and Co., 6.023%, 8/3/1995 4,998,364
------------------------------------------------------------------ ------------
CONSUMER PRODUCTS--3.8%
------------------------------------------------------------------
6,000,000 Hewlett-Packard Co., 5.784%-5.818%, 10/10/1995-10/30/1995 5,924,783
------------------------------------------------------------------
3,000,000 Procter & Gamble Co., 5.732%, 9/6/1995 2,983,200
------------------------------------------------------------------ ------------
Total 8,907,983
------------------------------------------------------------------ ------------
DIVERSIFIED--2.5%
------------------------------------------------------------------
6,000,000 Cargill, Inc., 5.894%, 9/27/1995 5,945,565
------------------------------------------------------------------ ------------
EDUCATION--8.0%
------------------------------------------------------------------
8,000,000 Harvard University, 6.03%-6.10%, 8/7/1995-8/14/1995 7,988,668
------------------------------------------------------------------
10,675,000 Stanford University, 5.899%-6.715%, 8/1/1995-11/13/1995 10,613,537
------------------------------------------------------------------ ------------
Total 18,602,205
------------------------------------------------------------------ ------------
FINANCE--AUTOMOTIVE--1.3%
------------------------------------------------------------------
3,000,000 Associates Corp. of North America, 6.072%, 8/2/1995 2,999,505
------------------------------------------------------------------ ------------
</TABLE>
FOUNTAIN SQUARE COMMERCIAL PAPER FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------------ ------------
<C> <S> <C>
COMMERCIAL PAPER--CONTINUED
- ---------------------------------------------------------------------------------
FINANCE--COMMERCIAL--15.3%
------------------------------------------------------------------
$ 3,000,000 A.I. Credit Corp., 5.880%, 10/12/1995 $ 2,965,800
------------------------------------------------------------------
7,000,000 General Electric Capital Corp., 5.786%-5.819%, 8/8/1995-11/28/1995 6,922,625
------------------------------------------------------------------
4,000,000 MetLife Funding Corp., 6.05%, 8/22/1995 3,986,280
------------------------------------------------------------------
11,000,000 Norwest Corp., 5.849%-6.19%, 8/14/1995-10/17/1995 10,926,508
------------------------------------------------------------------
11,000,000 Paccar Financial Corp., 6.094%-6.115%, 8/9/1995-8/23/1995 10,974,131
------------------------------------------------------------------ ------------
Total 35,775,344
------------------------------------------------------------------ ------------
FOOD AND BEVERAGE--4.4%
------------------------------------------------------------------
5,000,000 Coca-Cola Co., 5.911%, 9/8/1995 4,969,547
------------------------------------------------------------------
5,399,000 Nestle Capital, 5.921%-5.997%, 9/5/1995-10/23/1995 5,350,303
------------------------------------------------------------------ ------------
Total 10,319,850
------------------------------------------------------------------ ------------
MANUFACTURING--9.4%
------------------------------------------------------------------
5,000,000 Emerson Electric Co., 6.015%, 8/4/1995 4,997,563
------------------------------------------------------------------
8,000,000 Minnesota Mining & Manufacturing Co., 5.899%-5.985%,
8/25/1995-9/14/1995 7,952,933
------------------------------------------------------------------
9,000,000 Pitney Bowes, Inc., 5.915%-6.037%, 8/31/1995-9/21/1995 8,946,163
------------------------------------------------------------------ ------------
Total 21,896,659
------------------------------------------------------------------ ------------
OIL & GAS--3.4%
------------------------------------------------------------------
8,000,000 Shell Oil Co., 5.944%-6.220%, 9/15/1995-10/2/1995 7,929,954
------------------------------------------------------------------ ------------
PAPER/PRODUCTS--1.7%
------------------------------------------------------------------
4,000,000 Kimberly-Clark, 5.771%, 9/18/1995 3,969,973
------------------------------------------------------------------ ------------
PHARMACEUTICALS AND HEALTH CARE--3.4%
------------------------------------------------------------------
4,000,000 Schering-Plough Corp., 6.155%, 9/5/1995 3,976,861
------------------------------------------------------------------
4,000,000 Warner-Lambert Co., 5.803%, 10/23/1995 3,948,079
------------------------------------------------------------------ ------------
Total 7,924,940
------------------------------------------------------------------ ------------
</TABLE>
FOUNTAIN SQUARE COMMERCIAL PAPER FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------------ ------------
<C> <S> <C>
COMMERCIAL PAPER--CONTINUED
- ---------------------------------------------------------------------------------
RETAIL STORES--3.0%
------------------------------------------------------------------
$ 7,000,000 Toys R Us, Inc., 5.807%, 8/17/1995 $ 6,982,267
------------------------------------------------------------------ ------------
TELECOMMUNICATIONS--1.7%
------------------------------------------------------------------
4,000,000 U.S. West Communications, Inc., 5.944%, 8/11/1995 3,993,556
------------------------------------------------------------------ ------------
TRANSPORTATION--3.8%
------------------------------------------------------------------
9,000,000 United Parcel Service of America, Inc., 5.889%-6.028%,
8/9/1995-9/7/1995 8,964,826
------------------------------------------------------------------ ------------
TOTAL COMMERCIAL PAPER 198,745,289
------------------------------------------------------------------ ------------
**REPURCHASE AGREEMENTS--15.5%
- ---------------------------------------------------------------------------------
10,000,000 Bear, Stearns & Co., Inc., 5.80%, dated 7/31/1995, due 8/1/1995 10,000,000
------------------------------------------------------------------
16,311,000 Nesbitt Burns, 5.82%, dated 7/31/1995, due 8/1/1995 16,311,000
------------------------------------------------------------------
10,000,000 J.P. Morgan Securities, Inc., 5.82%, dated 7/31/1995, due 8/1/1995 10,000,000
------------------------------------------------------------------ ------------
TOTAL REPURCHASE AGREEMENTS 36,311,000
------------------------------------------------------------------ ------------
TOTAL INVESTMENTS, AT AMORTIZED COST $235,056,289+
------------------------------------------------------------------ ------------
</TABLE>
* Each issue shows the rate of discount at the time of purchase for discount
issues, or the coupon for interest bearing issues.
** The repurchase agreements are fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
+ Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($233,808,744)
at July 31, 1995.
(See Notes which are an integral part of the Financial Statements)
FOUNTAIN SQUARE COMMERCIAL PAPER FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------
Investments in repurchase agreements $ 36,311,000
- -----------------------------------------------------------------
Investments in securities 198,745,289
- ----------------------------------------------------------------- ------------
Total investments, at amortized cost and value $235,056,289
- --------------------------------------------------------------------------------
Cash 308
- --------------------------------------------------------------------------------
Income receivable 5,865
- -------------------------------------------------------------------------------- ------------
Total assets 235,062,462
- --------------------------------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------------
Payable to Adviser 97,171
- -----------------------------------------------------------------
Dividends payable 1,100,692
- -----------------------------------------------------------------
Accrued expenses 55,855
- ----------------------------------------------------------------- ------------
Total liabilities 1,253,718
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 233,808,744 shares of beneficial interest outstanding $233,808,744
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
- --------------------------------------------------------------------------------
Trust Shares ($223,640,180 / 223,640,180 shares of beneficial interest
outstanding) $1.00
- -------------------------------------------------------------------------------- ------------
Investment Shares ($10,168,564 / 10,168,564 shares of beneficial interest
outstanding) $1.00
- -------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FOUNTAIN SQUARE COMMERCIAL PAPER FUND
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------
Interest income $13,526,740
- -----------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------------------
Investment advisory fee $ 958,506
- ---------------------------------------------------------------------
Administrative personnel and services fee 265,038
- ---------------------------------------------------------------------
Custodian fee 22,146
- ---------------------------------------------------------------------
Portfolio accounting, transfer and dividend disbursing agent fees and
expenses 57,676
- ---------------------------------------------------------------------
Directors'/Trustees' fees 6,771
- ---------------------------------------------------------------------
Auditing fees 13,066
- ---------------------------------------------------------------------
Legal fees 5,545
- ---------------------------------------------------------------------
Fund share registration costs 29,953
- ---------------------------------------------------------------------
Printing and postage 19,975
- ---------------------------------------------------------------------
Insurance premiums 8,210
- ---------------------------------------------------------------------
Distribution services fee 33,414
- --------------------------------------------------------------------- ----------
Total expenses 1,420,300
- ---------------------------------------------------------------------
Deduct--
- ---------------------------------------------------------------------
Waiver of investment advisory fee $190,170
- ----------------------------------------------------------
Waiver of distribution services fee 33,414
- ----------------------------------------------------------
Waiver of custodian fee 22,146 245,730
- ---------------------------------------------------------- -------- ----------
Net expenses 1,174,570
- ----------------------------------------------------------------------------------- -----------
Net investment income $12,352,170
- ----------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FOUNTAIN SQUARE COMMERCIAL PAPER FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
--------------------------------
1995 1994
--------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------
Net investment income $ 12,352,170 $ 6,633,051
- ------------------------------------------------------------- --------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------------------
Dividends to shareholders from net investment income:
- -------------------------------------------------------------
Trust Shares (11,852,325) (6,444,903)
- -------------------------------------------------------------
Investment Shares (499,845) (188,148)
- ------------------------------------------------------------- --------------- -------------
Change in net assets from distributions to shareholders (12,352,170) (6,633,051)
- ------------------------------------------------------------- --------------- -------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- -------------------------------------------------------------
Proceeds from sale of shares 1,139,381,157 868,472,344
- -------------------------------------------------------------
Cost of shares redeemed (1,124,845,195) (833,978,799)
- ------------------------------------------------------------- --------------- -------------
Change in net assets from Fund share transactions 14,535,962 34,493,545
- ------------------------------------------------------------- --------------- -------------
Change in net assets 14,535,962 34,493,545
- -------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------
Beginning of period 219,272,782 184,779,237
- ------------------------------------------------------------- --------------- -------------
End of period $ 233,808,744 $ 219,272,782
- ------------------------------------------------------------- --------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FOUNTAIN SQUARE COMMERCIAL PAPER FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Fountain Square Funds (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end management investment
company. The Trust consists of nine diversified portfolios and one
non-diversified portfolio. The financial statements included herein are only
those of Fountain Square Commercial Paper Fund (the "Fund"). The financial
statements of the other portfolios are presented separately. The assets of each
portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held. The Fund offers two classes of shares: Trust
Shares and Investment Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require a custodian or
sub-custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the custodian
bank's vault, all securities held as collateral under repurchase agreement
transactions. Additionally, procedures have been established by the Fund to
monitor, on a daily basis, the market value of each repurchase agreement's
collateral to ensure that the value of collateral at least equals the
repurchase price to be paid under the repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the agreements. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Distributions
to shareholders are recorded on the ex-dividend date.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
FOUNTAIN SQUARE COMMERCIAL PAPER FUND
- --------------------------------------------------------------------------------
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis
are valued daily and begin earning interest on the settlement date.
F. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At July 31, 1995, capital paid-in aggregated $233,808,744.
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------------
TRUST SHARES 1995 1994
- -------------------------------------------------------------- -------------- ------------
<S> <C> <C>
Shares sold 1,114,106,500 848,035,515
- --------------------------------------------------------------
Shares redeemed (1,103,592,384) (814,974,172)
- -------------------------------------------------------------- -------------- ------------
Net change resulting from Trust Share transactions 10,514,116 33,061,343
- -------------------------------------------------------------- -------------- ------------
INVESTMENT SHARES
- --------------------------------------------------------------
Shares sold 25,274,657 20,436,829
- --------------------------------------------------------------
Shares redeemed (21,252,811) (19,004,627)
- -------------------------------------------------------------- -------------- ------------
Net change resulting from Investment Share transactions 4,021,846 1,432,202
- -------------------------------------------------------------- -------------- ------------
Net change resulting from Fund share transactions 14,535,962 34,493,545
- -------------------------------------------------------------- -------------- ------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Fifth Third Bank, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
0.40 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive a portion of its fee. The Adviser can modify or terminate this
voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waive a portion of its fee.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
compensate Federated Securities Corp. ("FSC"), the principal distributor, from
the net assets of the Fund's Investment Shares to finance activities intended to
result in the sale of the Fund's Investment Shares. The Plan provides that the
FOUNTAIN SQUARE COMMERCIAL PAPER FUND
- --------------------------------------------------------------------------------
Fund may incur distribution expenses up to 0.35 of 1% of the average daily net
assets of the Investment Shares, annually, to compensate FSC. The distributor
may voluntarily choose to waive all or a portion of its fee. The distributor can
modify or terminate this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES, PORTFOLIO ACCOUNTING
AND CUSTODIAN FEES--Fifth Third Bank serves as transfer and dividend disbursing
agent for the Fund for which it receives a fee. Fifth Third Bank sub-contracts
the execution of the transfer and dividend disbursing agent functions to a
non-affiliated entity. The fee is based on the level of the Fund's average net
assets for the period, plus out-of-pocket expenses.
Fifth Third Bank maintains the Fund's accounting records for which it receives a
fee. Fifth Third Bank sub-contracts the execution of the accounting services
function to a non-affiliated entity. The fee is based on the level of the Fund's
average net assets for the period, plus out-of-pocket expenses.
Fifth Third Bank is the Fund's custodian for which it receives a fee. The fee is
based on the level of the Fund's average net assets for the period, plus
out-of-pocket expenses. The custodian may choose to voluntarily waive all or a
portion of its fees.
Certain of the Officers and Trustees of the Trust are Officers and Trustees of
the above companies.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
FOUNTAIN SQUARE FUNDS:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Fountain Square Commercial Paper Fund (one of
the portfolios comprising Fountain Square Funds), as of July 31, 1995, and the
related statement of operations for the year then ended, and statement of
changes in net assets and financial highlights for the periods presented
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of 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 securities owned as of July
31, 1995, 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
Fountain Square Commercial Paper Fund at July 31, 1995, the results of its
operations for the year then ended, and the changes in its net assets and
financial highlights for the periods presented therein, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
September 15, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Fountain Square Commercial Paper Fund Fountain Square Funds
Investment Shares c/o Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
- -------------------------------------------------------------------------------------------------
Investment Adviser
Fifth Third Bank 38 Fountain Square Plaza
Cincinnati, Ohio 45263
- -------------------------------------------------------------------------------------------------
Custodian, Transfer Agent, and Dividend Disbursing Agent
Fifth Third Bank 38 Fountain Square Plaza
Cincinnati, Ohio 45263
- -------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania 15219
- -------------------------------------------------------------------------------------------------
</TABLE>
FOUNTAIN SQUARE COMMERCIAL PAPER FUND
TRUST SHARES
[LOGO]
FOUNTAIN SQUARE FUNDS
PROSPECTUS
[LOGO]
FIFTH THIRD BANK
INVESTMENT ADVISER
Cusip 350756201
9052205A-I (9/95)
65-0921
FOUNTAIN SQUARE COMMERCIAL PAPER FUND
(A PORTFOLIO OF FOUNTAIN SQUARE FUNDS)
TRUST SHARES
PROSPECTUS
The Trust Shares of Fountain Square Commercial Paper Fund (the "Fund") offered
by this prospectus represent interests in a diversified portfolio of securities
which is one of a series of investment portfolios in Fountain Square Funds (the
"Trust"), an open-end management investment company (a mutual fund).
The Fund is a money market fund which invests in money market instruments,
consisting primarily of commercial paper, to achieve current income consistent
with stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF FIFTH
THIRD BANK, ARE NOT ENDORSED OR GUARANTEED BY FIFTH THIRD BANK, AND ARE NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. THE FUND ATTEMPTS TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE NO ASSURANCE THAT THE
FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in Trust Shares of the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information for Trust
Shares and Investment Shares, dated September 30, 1995, with the Securities and
Exchange Commission. The information contained in the Combined Statement of
Additional Information is incorporated by reference into this prospectus. You
may request a copy of the Combined Statement of Additional Information free of
charge, obtain other information or make inquiries about the Fund by writing to
the Fund or calling (513) 579-6039 in Cincinnati or toll-free (800) 654-5372.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated September 30, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--TRUST SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- -----------------------------------------------------
Investment Objective 3
Investment Policies 3
Acceptable Investments 3
Variable Rate Demand Notes 4
Bank Instruments 4
Short-Term Credit Facilities 4
Ratings 5
Credit Enhancement 5
Demand Features 5
Repurchase Agreements 5
When-Issued and Delayed Delivery
Transactions 5
Concentration of Investments 6
Investment Limitations 6
Regulatory Compliance 6
FOUNTAIN SQUARE FUNDS INFORMATION 7
- ------------------------------------------------------
Management of the Trust 7
Board of Trustees 7
Investment Adviser 7
Advisory Fees 7
Adviser's Background 7
Distribution of Trust Shares 7
Payments to Financial Institutions 8
Administration of the Fund 8
Administrative Services 8
Custodian, Transfer Agent, and
Dividend Disbursing Agent 9
Independent Auditors 9
NET ASSET VALUE 9
- ------------------------------------------------------
INVESTING IN TRUST SHARES 9
- ------------------------------------------------------
Share Purchases 9
Through Fifth Third Bank 9
Minimum Investment Required 10
What Shares Cost 10
Certificates and Confirmations 10
Dividends 10
Capital Gains 11
EXCHANGES 11
- ------------------------------------------------------
REDEEMING TRUST SHARES 12
- ------------------------------------------------------
Through Fifth Third Bank 12
By Telephone 12
By Mail 12
Receiving Payment 13
Accounts with Low Balances 13
SHAREHOLDER INFORMATION 13
- ------------------------------------------------------
Voting Rights 13
Massachusetts Law 14
EFFECT OF BANKING LAWS 14
- ------------------------------------------------------
TAX INFORMATION 15
- ------------------------------------------------------
Federal Income Tax 15
PERFORMANCE INFORMATION 15
- ------------------------------------------------------
OTHER CLASSES OF SHARES 16
- ------------------------------------------------------
FINANCIAL STATEMENTS 17
- ------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS 26
- ------------------------------------------------------
ADDRESSES 27
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
TRUST SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)................................................................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)...................................... None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or
redemption proceeds, as applicable)...................................... None
Redemption Fees (as a percentage of amount redeemed, if applicable)........ None
Exchange Fee............................................................... None
ANNUAL TRUST SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)........................................... 0.32%
12b-1 Fee.................................................................. None
Other Expenses(2).......................................................... 0.17%
Total Trust Shares Operating Expenses(3).............................. 0.49%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver by the
investment adviser. The adviser can terminate this voluntary waiver at any time
at its sole discretion. The maximum management fee is 0.40%.
(2) Other expenses have been reduced to reflect the voluntary waiver of its fee
by the custodian.
(3) Total Operating Expenses would have been 0.58% absent the voluntary waiver
by the investment adviser and custodian.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE TRUST SHARES WILL BEAR,
EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS
COSTS AND EXPENSES, SEE "FOUNTAIN SQUARE FUNDS INFORMATION" AND "INVESTING IN
TRUST SHARES." Wire-transferred redemptions of less than $10,000 may be subject
to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- -------------------------------------------------------- ------- -------- -------- ---------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return and (2)
redemption at the end of each time period. The Fund
charges no redemption fees for Trust Shares............. $5 $16 $27 $62
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FOUNTAIN SQUARE COMMERCIAL PAPER FUND
FINANCIAL HIGHLIGHTS--TRUST SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young LLP, Independent Auditors, on
page 26.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989*
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net investment income 0.05 0.03 0.03 0.04 0.07 0.08 0.01
- --------------------------------- ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
- ---------------------------------
Distributions to shareholders
from net investment income (0.05) (0.03) (0.03) (0.04) (0.07) (0.08) (0.01)
- --------------------------------- ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------- ------ ------ ------ ------ ------ ------ ------
TOTAL RETURN** 5.25% 3.02% 2.78% 4.27% 6.89% 8.22% 1.19%
- ---------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------
Expenses 0.49% 0.49% 0.48% 0.46% 0.50% 0.53% 0.45%(b)
- ---------------------------------
Net investment income 5.12% 2.97% 2.75% 4.19% 6.61% 7.86% 8.95%(b)
- ---------------------------------
Expense waiver/
reimbursement(a) 0.09% 0.10% 0.12% 0.14% 0.14% 0.16% 0.35%(b)
- ---------------------------------
SUPPLEMENTAL DATA
- ---------------------------------
Net assets, end of period
(000 omitted) $223,640 $213,126 $180,065 $194,308 $213,889 $174,727 $62,225
- ---------------------------------
</TABLE>
* Reflects operations for the period from June 14, 1989 (date of initial public
offering) to July 31, 1989.
** Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 15, 1988. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. As of the date of this prospectus, the Board of
Trustees ("Trustees") have established two classes of shares of the Fund, known
as Trust Shares and Investment Shares. This prospectus relates only to the Trust
Shares ("Shares") of the Fund.
Trust Shares are designed for Trust clients of The Fifth Third Bank ("Fifth
Third Bank") and its affiliates as a convenient means of accumulating an
interest in a professionally managed, diversified portfolio limited to money
market instruments, consisting primarily of commercial paper, maturing in 13
months or less. A minimum initial investment of $1,000 is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income consistent with stability
of principal. The investment objective cannot be changed without approval of
shareholders. While there is no assurance that the Fund will achieve its
investment objective, it endeavors to do so by following the investment policies
described in this prospectus.
INVESTMENT POLICIES
The Fund pursues this investment objective by investing exclusively in a
portfolio of money market instruments maturing in 13 months or less, with at
least 65% of its assets invested in commercial paper. The average maturity of
the money market instruments in the Fund's portfolio, computed on a dollar
weighted basis, will be 90 days or less.
Unless indicated otherwise, the investment policies may be changed by the
Trustees without the approval of shareholders. Shareholders will be notified
before any material changes in these policies become effective.
ACCEPTABLE INVESTMENTS. The Fund invests in high quality money market
instruments that are either rated in the highest short-term rating category by
nationally recognized statistical rating organizations ("NRSROs") or of
comparable quality to securities having such ratings. Examples of these
instruments include, but are not limited to:
- domestic issues of corporate debt obligations, including variable rate
demand notes;
- commercial paper (including Canadian Commercial Paper and Europaper);
- certificates of deposit, demand and time deposits, bankers' acceptances
and other instruments issued by domestic and foreign banks and other
deposit institutions ("Bank Instruments");
- short-term credit facilities, such as demand notes;
- obligations issued or guaranteed as to payment of principal and interest
by the U.S. government or one of its agencies or instrumentalities
("Government Securities"); and
- other money market instruments.
The Fund invests only in instruments denominated and payable in U.S. dollars.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term
corporate debt instruments that have variable or floating interest rates
and provide the Fund with the right to tender the security for repurchase
at its stated principal amount plus accrued interest. Such securities
typically bear interest at a rate that is intended to cause the securities
to trade at par. The interest rate may float or be adjusted at regular
intervals (ranging from daily to annually), and is normally based on
published interest rate or interest rate index. Most variable rate demand
notes allow the Fund to demand the repurchase of the security on not more
than seven days prior notice. Other notes only permit the Fund to tender
the security at the time of each interest rate adjustment or at other fixed
intervals. See "Demand Features." The Fund treats variable rate demand
notes as maturing on the later of the date of the next interest adjustment
or the date on which the Fund may next tender the security for repurchase.
The Staff of the Securities and Exchange Commission has taken the position
that variable rate demand notes are not commercial paper; although the Fund
disagrees with this determination, variable rate demand notes will not be
included in the 65% of Fund assets which will be invested in commercial
paper. In the event that the Staff of the Securities and Exchange
Commission changes its position on this matter, the Fund may include
variable rate demand notes in the 65% minimum commercial paper investment
without notifying shareholders.
BANK INSTRUMENTS. The Fund only invests in Bank Instruments either issued
by an institution having capital, surplus and undivided profits over $100
million or insured by the Bank Insurance Fund ("BIF") or the Savings
Association Insurance Fund ("SAIF"). Bank Instruments may include
Eurodollar Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit
("Yankee CDs") and Eurodollar Time Deposits ("ETDs"). The Fund will treat
securities credit enhanced with a bank's letter of credit as Bank
Instruments.
ECDs, ETDs, Yankee CDs, and Europaper are subject to different risks than
domestic obligations of domestic banks or corporations. Examples of these
risks include international, economic and political developments, foreign
governmental restrictions that may adversely affect the payment of
principal or interest, foreign withholdings or other taxes on interest
income, difficulties in obtaining or enforcing a judgment against the
issuing entity, and the possible impact of interruptions in the flow of
international currency transactions. Different risks may also exist for
ECDs, ETDs, and Yankee CDs because the banks issuing these instruments, or
their domestic or foreign branches, are not necessarily subject to the same
regulatory requirements that apply to domestic banks, such as reserve
requirements, loan limitations, examinations, accounting, auditing, and
recordkeeping, and the public availability of information. These factors
will be carefully considered by the Fund's adviser in selecting investments
for the Fund.
SHORT-TERM CREDIT FACILITIES. Demand notes are short-term borrowing
arrangements between a corporation and an institutional lender (such as the
Fund) payable upon demand by either party.
The notice period for demand typically ranges from one to seven days, and
the party may demand full or partial payment. The Fund may also enter into,
or acquire participation in, short-term revolving credit facilities with
corporate borrowers. Demand notes and other short-term credit arrangements
usually provide for floating or variable rates of interest.
RATINGS. An NRSRO's highest rating category is determined without regard for
sub-categories and gradations. For example, securities rated A-1 or A-1+ by
Standard & Poor's Ratings Group ("S&P"), Prime-1 by Moody's Investors Service,
Inc. ("Moody's"), or F-1 (+ or -) by Fitch Investors Service, inc. ("Fitch") are
all considered rated in the highest short-term rating category. The Fund will
follow applicable regulations in determining whether a security rated by more
than one NRSRO can be treated as being in the highest short-term rating
category; currently such securities must be rated by two NRSROs in their highest
rating category. See "Regulatory Compliance."
CREDIT ENHANCEMENT. The Fund may acquire securities that have been credit
enhanced by a guaranty, letter of credit or insurance. The Fund typically
evaluates the credit quality and ratings of credit enhanced securities based
upon the financial condition and ratings of the party providing the credit
enhancement (the "credit enhancer"), rather than the issuer. Generally, the Fund
will not treat credit enhanced securities as having been issued by the credit
enhancer for diversification purposes. However, under certain circumstances,
applicable regulations may require the Fund to treat the securities as having
been issued by both the issuer and the credit enhancer. The bankruptcy,
receivership or default of the credit enhancer will adversely affect the quality
and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to puts and
standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period (usually
seven days) following a demand by the Fund. The demand feature may be issued by
the issuer of the underlying securities, a dealer in the securities or by
another third party, and may not be transferred separately from the underlying
security. The Fund uses these arrangements to provide the Fund with liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership or default by the issuer of the demand
feature, or a default on the underlying security or other event that terminates
the demand feature before its exercise, will adversely affect the liquidity of
the underlying security. Demand features that are exercisable even after a
payment default on the underlying security may be treated as a form of credit
enhancement.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell U.S. government
securities to the Fund and agree at the time of sale to repurchase them at a
mutually agreed upon time and price within one year from the date of
acquisition.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase U.S.
government securities on a when-issued or delayed delivery basis. These
transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause the Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the
market values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the Fund's adviser
deems it appropriate to do so. In addition, the Fund may enter into transactions
to sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
CONCENTRATION OF INVESTMENTS. The Fund will invest at least 65% of its total
assets in commercial paper and in excess of 25% of the Fund's assets will be
comprised of commercial paper issued by finance companies unless the Fund is in
a temporary defensive position as a result of economic conditions. Concentration
of the Fund's portfolio in such obligations may entail additional risks which
are not encountered by funds with more diversified portfolios.
INVESTMENT LIMITATIONS
The Fund will not:
- borrow money except, under certain circumstances, the Fund may borrow up
to one-third of the value of its total assets; or
- with respect to 75% of the value of its total assets, invest more than 5%
of its total assets in securities of one issuer (except repurchase
agreements collateralized by U.S. government securities and U.S.
government obligations). The remaining 25% of its total assets may be
invested in a single issuer if the investment adviser believes such a
strategy to be prudent.
The above investment limitations cannot be changed without shareholder approval.
As a matter of investment practice, which can be changed by the Trustees without
shareholder approval, the Fund will not invest more than 10% of its net assets
in securities which are illiquid, including repurchase agreements providing for
settlement in more than seven days after notice.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in this
prospectus and its Combined Statement of Additional Information, in order to
comply with applicable laws and regulations, including the provisions of and
regulations under the Investment Company Act of 1940, as amended. In particular,
the Fund will comply with the various requirements of Rule 2a-7, which regulates
money market mutual funds. For example, with limited exceptions, Rule 2a-7
prohibits the investment of more than 5% of the Fund's total assets in the
securities of any one issuer, although the Fund's investment limitation only
requires such 5% diversification with respect to 75% of its assets. The Fund
will invest more than 5% of its assets in any one issuer only under
circumstances permitted by Rule 2a-7. The Fund will also determine the effective
maturity of its investments, as well as its ability to consider a security as
having received the requisite short-term ratings by NRSROs, according to Rule
2a-7. The Fund may change these operational policies to reflect changes in the
laws and regulations without the approval of its shareholders.
FOUNTAIN SQUARE FUNDS INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust,
investment decisions for the Fund are made by Fifth Third Bank, the Fund's
investment adviser (the "Adviser"), subject to direction by the Trustees. The
Adviser continually conducts investment research and supervision for the Fund
and is responsible for the purchase or sale of portfolio instruments, for which
it receives an annual fee from the Fund.
ADVISORY FEES. The Adviser receives an annual investment advisory fee
equal to .40 of 1% of the Fund's average daily net assets. The Adviser has
undertaken to waive up to the amount of the advisory fee, for operating
expenses in excess of limitations established by certain states. The
Adviser may voluntarily choose to waive a portion of its fee or reimburse
the Fund for certain other expenses of the Fund, but reserves the right to
terminate such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Fifth Third Bank, an Ohio state chartered bank, is a
wholly-owned subsidiary of Fifth Third Bancorp, a bank holding company
organized under the laws of Ohio. Fifth Third Bank is a commercial bank
offering a wide range of banking services to its customers. As of July 31,
1995, Fifth Third Bank and its affiliates managed assets in excess of $7.8
billion on a discretionary basis and provided custody services for
additional assets in excess of $67.2 billion. Fifth Third Bank has managed
mutual funds since 1988.
Fifth Third Bank has managed pools of commingled funds since 1953.
Currently, the Trust and Investment Division manages 14 such pools with
total assets of over $1.11 billion.
As part of its regular banking operations, Fifth Third Bank may make loans
to public companies. Thus, it may be possible, from time to time, for the
Fund to hold or acquire the securities of issuers which are also lending
clients of Fifth Third Bank. The lending relationship will not be a factor
in the selection of securities.
DISTRIBUTION OF TRUST SHARES
Until December 1, 1995, Federated Securities Corp. serves as the principal
distributor for shares of the Fund. It is a Pennsylvania corporation organized
on November 14, 1969, and is the distributor for a number of investment
companies. Federated Securities Corp., a subsidiary of Federated Investors, is
located at Federated Investors Tower, Pittsburgh, PA 15222-3779.
Effective December 1, 1995, BISYS Fund Services L.P. will serve as the
distributor for the Trust. BISYS Fund Services L.P. is wholly-owned by BISYS
Group, Inc., 150 Clove Road, Little Falls, NJ 07424, a publicly owned company
engaged in information processing and recordkeeping services to and through
banking and other financial organizations.
PAYMENTS TO FINANCIAL INSTITUTIONS. The distributor, the Adviser, or their
affiliates may offer to pay a fee from their own assets to financial
institutions as financial assistance for providing substantial marketing and
sales support. The support may include initiating customer accounts, providing
sales literature, or participating in sales, educational and training seminars
(including those held at recreational facilities). Such assistance will be
predicated upon the amount of shares the financial institution sells or may sell
and/or upon the type and nature of sales or marketing support furnished by the
financial institution. Any payments made by the distributor may be reimbursed by
the Adviser or its affiliates.
The Glass-Steagall Act limits the ability of a depository institution (such as a
commercial bank or a savings and loan association) to become an underwriter or
distributor of most securities. In the event the Glass-Steagall Act is deemed to
prohibit depository institutions from acting in the capacities described above
or should Congress relax current restrictions on depository institutions, the
Trustees will consider appropriate changes in the administrative services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Until December 1, 1995, Federated Administrative
Services, a subsidiary of Federated Investors, provides the Fund with certain
administrative personnel and services necessary to operate the Fund, such as
legal and accounting services. Federated Administrative Services provides these
at an annual rate as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY NET
MAXIMUM ADMINISTRATIVE FEE ASSETS OF THE TRUST
-------------------------------- --------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of
$750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least $50,000
per Fund. Federated Administrative Services may choose voluntarily to waive a
portion of its fee at any time.
Effective December 1, 1995, BISYS Fund Services L.P. will serve as the
administrator. The administrator generally assists in all aspects of the Trust's
administration and operation including providing the Funds with certain
administrative personnel and services necessary to operate the Funds, such as
legal and accounting services. BISYS Fund Services L.P. provides these at an
annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY NET
ADMINISTRATIVE FEE ASSETS OF THE TRUST
- ------------------- ------------------------------------
<S> <C>
.10% of the first $1 billion
.08% of the next $1 billion
.07% in excess of $2 billion
</TABLE>
The administrator may periodically waive all or a portion of its administrative
fee which will cause the yield of a Fund to be higher than it would otherwise be
in the absence of such a waiver.
Effective December 1, 1995, pursuant to a separate agreement with BISYS Fund
Services L.P., Fifth Third Bank performs sub-administration services on behalf
of the Fund including providing certain administrative personnel and services
necessary to operate the Fund for which it receives a fee from BISYS Fund
Services L.P. computed daily and paid periodically calculated at an annual rate
of 0.025% of average daily net assets.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Fifth Third Bank,
Cincinnati, Ohio, is custodian for the securities and cash of the Fund, transfer
agent for the shares of the Fund, and dividend disbursing agent for the Fund.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Ernst & Young
LLP, Pittsburgh, Pennsylvania.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The net asset value
per share is determined by adding the interest of the Shares in the value of all
securities and other assets of the Fund, subtracting the interest of the Shares
in the liabilities of the Fund and those attributable to Shares, and dividing
the remainder by the total number of Shares outstanding. The Fund cannot
guarantee that its net asset value will always remain at $1.00 per Share.
INVESTING IN TRUST SHARES
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange and the Federal
Reserve Bank of Cleveland are open for business. A customer of Fifth Third Bank
may purchase Trust Shares of the Fund through Fifth Third Bank. All other
investors should purchase Trust Shares directly from the distributor. In
connection with the sale of Trust Shares, the distributor may from time to time
offer certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request. Purchases through Fifth Third
Bank may not be available to investors in all states.
THROUGH FIFTH THIRD BANK. A customer of Fifth Third Bank may telephone Fifth
Third Bank at (513) 579-6039 in Cincinnati or toll-free (800) 654-5372 to place
an order to purchase Trust Shares. All other investors must place their purchase
orders through the distributor. Texas residents must purchase Shares through
Federated Securities Corp. at 1-800-358-2801 until December 1, 1995. Effective
December 1, 1995, Texas residents must contact BISYS Fund Services L.P. at
1-800-554-3862.
Payment may be made to Fifth Third Bank either by check or federal funds. Orders
are considered received after payment by check is converted into federal funds
and received by Fifth Third Bank. This is normally the next business day after
Fifth Third Bank receives the check. When payment is made with federal funds,
the order is considered received when federal funds are received by Fifth Third
Bank. Federal funds should be wired to Fifth Third Bank as follows: ABA No. 042
000 314 Fifth Third Cincinnati. Attention: Fountain Square Funds Department; For
Credit to: (shareholder name and account number); For Further Credit to:
Fountain Square Commercial Paper Fund -- Trust Shares. Investors not purchasing
through Fifth Third Bank should consult their financial institutions for wiring
instructions.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund by an investor is $1,000. Subsequent
investments must be in amounts of at least $50. For customers of Fifth Third
Bank, an institutional investor's minimum investment will be calculated by
combining all accounts it maintains with Fifth Third Bank and investments in the
Fund.
The minimum investment requirements do not apply with respect to accounts that
have been established to automatically invest cash accumulations in the Fund.
Investors participating in such arrangements may be charged separate fees by the
financial institution that provides this service, and should read this
prospectus along with their financial institution's agreement or other
literature relating to this service.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. The Fund does not impose a sales charge.
The net asset value is determined at 4:00 p.m. (Cincinnati time), Monday through
Friday, except on: (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; or (iii) the following
holidays: New Year's Day, Martin Luther King Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans' Day,
Thanksgiving Day, and Christmas Day.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Fifth Third Bank maintains a share account for
each shareholder of record. Share certificates are not issued.
Detailed statements that include account balances, information on each purchase
or redemption, and a report of dividends paid during the month are sent to each
shareholder monthly and will serve as confirmations of all transactions in the
shareholder's account for the statement period.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends will be reinvested on
payment dates in additional Shares unless cash payments are requested by writing
to the Fund or Fifth Third Bank, as appropriate. Share purchase orders received
by Fifth Third Bank before 12:00 noon (Cincinnati time) earn dividends that day.
CAPITAL GAINS
If the Fund experiences capital gains, it could result in an increase in
dividends. Capital losses could result in a decrease in dividends. If, for some
extraordinary reason, the Fund realizes net long-term capital gains, it will
distribute them at least once every 12 months.
EXCHANGES
- --------------------------------------------------------------------------------
A shareholder who is a customer of the Fifth Third Bank Trust and Investment
Division may exchange shares of one Fund for shares of any of the other funds in
the Trust by calling or sending a written request to their Fifth Third Bank
Trust Officer. Telephone exchange instructions may be recorded. If reasonable
procedures are not followed by the Fund, they may be liable for losses due to
unauthorized or fraudulent telephone instructions.
Shares of Funds with a sales charge may be exchanged at net asset value for
shares of other Funds with an equal sales charge or no sales charge. Shares of
Funds with no sales charge acquired by direct purchase or reinvestment of
dividends on such shares may be exchanged for shares of Funds with a sales
charge at net asset value plus the applicable sales charge. When exchanging into
and out of shares of the Funds in the Trust, shareholders who have paid a sales
load once upon purchasing shares of any Fund will not have to pay a sales load
again on an exchange.
Orders for exchanges of shares of money market funds must be received by 12:00
noon (Cincinnati time). Orders for exchanges of the International Equity Fund,
Government Fund, Bond Fund, Ohio Tax Free Fund, Growth Fund, Mid Cap Fund, and
Balanced Fund must be received by 4:00 p.m. (Cincinnati time). Orders for
exchanges are taken on any day that the Funds are open for business. Orders
which are received prior to the cut-off times listed above will be executed as
of the close of business that day. Orders received after the respective cut-off
times will be executed at the close of the next business day.
An excessive number of exchanges may be disadvantageous to the Trust. Therefore
the Trust, in addition to its right to reject any exchange, reserves the right
to modify or terminate the exchange privilege at any time. Shareholders would be
notified prior to any modification or termination.
An exchange order must comply with the requirements for a redemption and must
specify the dollar value or number of shares to be exchanged. Exchanges are
subject to the minimum initial investment requirement of the Fund being
acquired. An exchange constitutes a sale for federal income tax purposes.
The exchange privilege is only available in states where shares of the Fund
being acquired may legally be sold. Before the exchange, a shareholder must
receive a prospectus of the Fund for which the exchange is being made.
REDEEMING TRUST SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value next determined after Fifth
Third Bank receives the redemption request. Redemptions will be made on days on
which the Fund computes its net asset value. Telephone or written requests for
redemption must be received in proper form and can be made through Fifth Third
Bank.
THROUGH FIFTH THIRD BANK
BY TELEPHONE. A shareholder who is a customer of Fifth Third Bank may redeem
Shares by telephoning Fifth Third Bank at (513) 579-6039 in Cincinnati or
toll-free (800) 654-5372. For calls received before 12:00 noon (Cincinnati
time), proceeds will normally be dispersed the same day to the shareholder's
account at Fifth Third Bank or a check will be sent to the address of record.
Those Shares will not be entitled to the dividend declared that day. For calls
received after 12:00 noon (Cincinnati time) proceeds will normally be dispersed
the following business day. Those Shares will be entitled to the dividend
declared on the day the redemption request was received. In no event will
proceeds be dispersed more than seven days after a proper request for redemption
has been received. If at any time, the Fund shall determine it necessary to
terminate or modify this method of redemption, shareholders would be promptly
notified.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Fifth Third Bank or the distributor.
Telephone redemption instructions may be recorded. If reasonable procedures are
not followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as "By Mail," should be considered.
BY MAIL. A shareholder who is a customer of Fifth Third Bank may redeem Shares
by sending a written request to Fifth Third Bank at the following address: 38
Fountain Square Plaza, Cincinnati, Ohio, 45263, Attn: Fountain Square Funds
Department. The written request should include the shareholder's name, the Fund
name and class of shares, the account number, and the share or dollar amount
requested. If share certificates have been issued, they must be properly
endorsed and should be sent by registered or certified mail with the written
request. Shareholders should call Fifth Third Bank for assistance in redeeming
by mail.
Shareholders requesting a redemption of $50,000 or more, a redemption of any
amount to be sent to an address other than that on record with the Fund, or a
redemption payable other than to the shareholder of record must have signatures
on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by BIF,
which is administered by the Federal Deposit Insurance Corporation
("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
- a savings and loan association or a savings bank whose deposits are
insured by the SAIF, which is administered by the FDIC; or
- any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions
that are members of a signature guarantee program. The Fund and its transfer
agent reserve the right to amend these standards at any time without notice.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed to the
shareholder within one business day, but in no event more than seven days, after
receipt of a proper redemption request, provided the Fund or its agents have
received payment for shares from the shareholder.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if, due to
shareholder redemptions, the account balance falls below the required minimum
value of $1,000.
Before redeeming Shares to close an account, the Fund will notify the
shareholder in writing and allow the shareholder 30 days to purchase additional
Shares to meet the minimum requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each Fund in the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only shares of that Fund or class are
entitled to vote. As a Massachusetts business trust, the Trust is not required
to hold annual shareholder meetings. Shareholder approval will be sought only
for certain changes in the Trust or the Fund's operation and for the election of
Trustees under certain circumstances. As of July 31, 1995, Fifth Third Bank may
for certain purposes be deemed to control the Funds because it is owner of
record of certain shares of the Funds.
Trustees may be removed by a two-thirds vote of the number of Trustees prior to
such removal or by a two-thirds vote of the shareholders at a special meeting.
The Trustees shall call a special meeting of shareholders upon the written
request of shareholders owning at least 10% of the Trust's outstanding shares of
all series entitled to vote.
MASSACHUSETTS LAW
Under certain circumstances, shareholders may be held personally liable under
Massachusetts law for acts or obligations of the Trust on behalf of the Fund. To
protect shareholders of the Fund, the Trust has filed legal documents with
Massachusetts that expressly disclaim the liability of shareholders of the Fund
for such acts or obligations of the Trust. These documents require inclusion of
this disclaimer to be given in each agreement, obligation, or instrument the
Trust or its Trustees enter into or sign on behalf of the Fund.
In the unlikely event a shareholder of the Fund is held personally liable for
the Trust's obligations on behalf of the Fund, the Trust is required by the
Declaration of Trust to use the property of the Fund to protect or to compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder of the Fund for any act or obligation of the
Trust on behalf of the Fund. Therefore, financial loss resulting from liability
as a shareholder of the Fund will occur only if the Trust cannot meet its
obligations to indemnify shareholders and to pay judgments against them from the
assets of the Fund.
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations presently prohibit
a bank holding company registered under the Federal Bank Holding Company Act of
1956 or any affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company continuously engaged in the issuance of
its shares, and from issuing, underwriting, selling or distributing securities
in general. Such laws and regulations do not prohibit such a holding company or
affiliate from acting as investment adviser, transfer agent or custodian to such
an investment company or from purchasing shares of such a company as agent for
and upon the order of their customer. The Fund's investment adviser, Fifth Third
Bank, is subject to such banking laws and regulations.
Fifth Third Bank believes that it may perform the investment advisory services
for the Fund contemplated by its advisory agreement with the Trust without
violating the Glass-Steagall Act or other applicable banking laws or
regulations. Changes in either federal or state statutes and regulations
relating to the permissible activities of banks and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of present or future statutes and regulations, could prevent
Fifth Third Bank from continuing to perform all or a part of the above services
for its customers and/or the Fund. In such event, changes in the operation of
the Fund may occur, including the possible alteration or termination of any
automatic or other Fund share investment and redemption services then being
provided by Fifth Third Bank, and the Trustees would consider alternative
investment advisers and other means of continuing available investment services.
It is not expected that Fund shareholders would suffer any adverse financial
consequences (if another adviser with equivalent abilities to Fifth Third Bank
is found) as a result of any of these occurrences.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios, if any, will not be combined for tax purposes with
those realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional shares.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its yield and effective yield for Trust
Shares.
The yield of Trust Shares represents the annualized rate of income earned on an
investment in Trust Shares over a seven-day period. It is the annualized
dividends earned during the period on the investment, shown as a percentage of
the investment. The effective yield is calculated similarly to the yield, but,
when annualized, the income earned by an investment in Trust Shares is assumed
to be reinvested daily. The effective yield will be slightly higher than the
yield because of the compounding effect of this assumed reinvestment.
Advertisements and other sales literature may also refer to total return. Total
return represents the change, over a specified period of time, in the value of
an investment in Trust Shares of the Fund after reinvesting all income
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
Yield and effective yield will be calculated separately for Trust Shares and
Investment Shares. Because Investment Shares are subject to 12b-1 fees, the
yield and effective yield of Trust Shares for the same period will exceed that
of Investment Shares.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Investment Shares of the Fund are sold to investors who are not clients of the
Trust Department of Fifth Third Bank and are subject to a minimum initial
investment of $1,000. Investment Shares are sold at net asset value and are
distributed pursuant to a Rule 12b-1 Plan whereby the distributor is paid a fee
of up to .35 of 1% of the Investment Shares' average daily net assets. Trust
shares are distributed without a Rule 12b-1 Plan.
Financial institutions and brokers providing sales and/or administrative
services may receive different compensation from one class of shares than from
another class of shares.
The amount of dividends payable to Trust Shares will exceed those payable to
Investment Shares by the difference between class expenses and distribution
expenses borne by shares of each respective class.
The stated advisory fee is the same for both classes of shares.
To obtain more information and a prospectus for Investment Shares, investors may
call (513) 579-6039 in Cincinnati or toll free (800) 654-5372.
FOUNTAIN SQUARE COMMERCIAL PAPER FUND
PORTFOLIO OF INVESTMENTS
JULY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------------ ------------
<C> <S> <C>
*COMMERCIAL PAPER--85.0%
- ---------------------------------------------------------------------------------
AUTO & TRUCKS--1.7%
------------------------------------------------------------------
$ 4,000,000 Daimler-Benz, 5.911%, 10/10/1995 $ 3,955,511
------------------------------------------------------------------ ------------
BANKING--19.5%
------------------------------------------------------------------
4,000,000 A.I.G. Funding, 5.957%, 9/19/1995 3,968,477
------------------------------------------------------------------
8,000,000 Banc One Corp., 5.784%-6.055%, 9/11/1995-11/6/1995 7,920,943
------------------------------------------------------------------
5,000,000 Morgan (J.P.) & Co., 5.821%, 9/1/1995 4,975,458
------------------------------------------------------------------
10,000,000 Rabobank Nederland, 5.891%-6.113%, 8/10/1995-10/25/1995 9,937,257
------------------------------------------------------------------
8,000,000 Republic National Bank of New York, 5.738%-5.775%,
10/13/1995-12/22/1995 7,877,168
------------------------------------------------------------------
6,000,000 Societe Generale N.A., Inc., 5.664%-5.912%, 10/26/1995-12/8/1995 5,900,312
------------------------------------------------------------------
5,000,000 Wachovia Corp., 6.134%, 8/2/1995 4,999,172
------------------------------------------------------------------ ------------
Total 45,578,787
------------------------------------------------------------------ ------------
CHEMICAL--2.1%
------------------------------------------------------------------
5,000,000 duPont (E.I.) deNemours and Co., 6.023%, 8/3/1995 4,998,364
------------------------------------------------------------------ ------------
CONSUMER PRODUCTS--3.8%
------------------------------------------------------------------
6,000,000 Hewlett-Packard Co., 5.784%-5.818%, 10/10/1995-10/30/1995 5,924,783
------------------------------------------------------------------
3,000,000 Procter & Gamble Co., 5.732%, 9/6/1995 2,983,200
------------------------------------------------------------------ ------------
Total 8,907,983
------------------------------------------------------------------ ------------
DIVERSIFIED--2.5%
------------------------------------------------------------------
6,000,000 Cargill, Inc., 5.894%, 9/27/1995 5,945,565
------------------------------------------------------------------ ------------
EDUCATION--8.0%
------------------------------------------------------------------
8,000,000 Harvard University, 6.03%-6.10%, 8/7/1995-8/14/1995 7,988,668
------------------------------------------------------------------
10,675,000 Stanford University, 5.899%-6.715%, 8/1/1995-11/13/1995 10,613,537
------------------------------------------------------------------ ------------
Total 18,602,205
------------------------------------------------------------------ ------------
FINANCE--AUTOMOTIVE--1.3%
------------------------------------------------------------------
3,000,000 Associates Corp. of North America, 6.072%, 8/2/1995 2,999,505
------------------------------------------------------------------ ------------
</TABLE>
FOUNTAIN SQUARE COMMERCIAL PAPER FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------------ ------------
<C> <S> <C>
COMMERCIAL PAPER--CONTINUED
- ---------------------------------------------------------------------------------
FINANCE--COMMERCIAL--15.3%
------------------------------------------------------------------
$ 3,000,000 A.I. Credit Corp., 5.880%, 10/12/1995 $ 2,965,800
------------------------------------------------------------------
7,000,000 General Electric Capital Corp., 5.786%-5.819%, 8/8/1995-11/28/1995 6,922,625
------------------------------------------------------------------
4,000,000 MetLife Funding Corp., 6.05%, 8/22/1995 3,986,280
------------------------------------------------------------------
11,000,000 Norwest Corp., 5.849%-6.19%, 8/14/1995-10/17/1995 10,926,508
------------------------------------------------------------------
11,000,000 Paccar Financial Corp., 6.094%-6.115%, 8/9/1995-8/23/1995 10,974,131
------------------------------------------------------------------ ------------
Total 35,775,344
------------------------------------------------------------------ ------------
FOOD AND BEVERAGE--4.4%
------------------------------------------------------------------
5,000,000 Coca-Cola Co., 5.911%, 9/8/1995 4,969,547
------------------------------------------------------------------
5,399,000 Nestle Capital, 5.921%-5.997%, 9/5/1995-10/23/1995 5,350,303
------------------------------------------------------------------ ------------
Total 10,319,850
------------------------------------------------------------------ ------------
MANUFACTURING--9.4%
------------------------------------------------------------------
5,000,000 Emerson Electric Co., 6.015%, 8/4/1995 4,997,563
------------------------------------------------------------------
8,000,000 Minnesota Mining & Manufacturing Co., 5.899%-5.985%,
8/25/1995-9/14/1995 7,952,933
------------------------------------------------------------------
9,000,000 Pitney Bowes, Inc., 5.915%-6.037%, 8/31/1995-9/21/1995 8,946,163
------------------------------------------------------------------ ------------
Total 21,896,659
------------------------------------------------------------------ ------------
OIL & GAS--3.4%
------------------------------------------------------------------
8,000,000 Shell Oil Co., 5.944%-6.220%, 9/15/1995-10/2/1995 7,929,954
------------------------------------------------------------------ ------------
PAPER/PRODUCTS--1.7%
------------------------------------------------------------------
4,000,000 Kimberly-Clark, 5.771%, 9/18/1995 3,969,973
------------------------------------------------------------------ ------------
PHARMACEUTICALS AND HEALTH CARE--3.4%
------------------------------------------------------------------
4,000,000 Schering-Plough Corp., 6.155%, 9/5/1995 3,976,861
------------------------------------------------------------------
4,000,000 Warner-Lambert Co., 5.803%, 10/23/1995 3,948,079
------------------------------------------------------------------ ------------
Total 7,924,940
------------------------------------------------------------------ ------------
</TABLE>
FOUNTAIN SQUARE COMMERCIAL PAPER FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------------ ------------
<C> <S> <C>
COMMERCIAL PAPER--CONTINUED
- ---------------------------------------------------------------------------------
RETAIL STORES--3.0%
------------------------------------------------------------------
$ 7,000,000 Toys R Us, Inc., 5.807%, 8/17/1995 $ 6,982,267
------------------------------------------------------------------ ------------
TELECOMMUNICATIONS--1.7%
------------------------------------------------------------------
4,000,000 U.S. West Communications, Inc., 5.944%, 8/11/1995 3,993,556
------------------------------------------------------------------ ------------
TRANSPORTATION--3.8%
------------------------------------------------------------------
9,000,000 United Parcel Service of America, Inc., 5.889%-6.028%,
8/9/1995-9/7/1995 8,964,826
------------------------------------------------------------------ ------------
TOTAL COMMERCIAL PAPER 198,745,289
------------------------------------------------------------------ ------------
**REPURCHASE AGREEMENTS--15.5%
- ---------------------------------------------------------------------------------
10,000,000 Bear, Stearns & Co., Inc., 5.80%, dated 7/31/1995, due 8/1/1995 10,000,000
------------------------------------------------------------------
16,311,000 Nesbitt Burns, 5.82%, dated 7/31/1995, due 8/1/1995 16,311,000
------------------------------------------------------------------
10,000,000 J.P. Morgan Securities, Inc., 5.82%, dated 7/31/1995, due 8/1/1995 10,000,000
------------------------------------------------------------------ ------------
TOTAL REPURCHASE AGREEMENTS 36,311,000
------------------------------------------------------------------ ------------
TOTAL INVESTMENTS, AT AMORTIZED COST $235,056,289+
------------------------------------------------------------------ ------------
</TABLE>
* Each issue shows the rate of discount at the time of purchase for discount
issues, or the coupon for interest bearing issues.
** The repurchase agreements are fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
+ Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($233,808,744)
at July 31, 1995.
(See Notes which are an integral part of the Financial Statements)
FOUNTAIN SQUARE COMMERCIAL PAPER FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in repurchase agreements $ 36,311,000
- -----------------------------------------------------------------
Investments in securities 198,745,289
- ----------------------------------------------------------------- ------------
Total investments, at amortized cost and value $235,056,289
- --------------------------------------------------------------------------------
Cash 308
- --------------------------------------------------------------------------------
Income receivable 5,865
- -------------------------------------------------------------------------------- ------------
Total assets 235,062,462
- --------------------------------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------------
Payable to Adviser 97,171
- -----------------------------------------------------------------
Dividends payable 1,100,692
- -----------------------------------------------------------------
Accrued expenses 55,855
- ----------------------------------------------------------------- ------------
Total liabilities 1,253,718
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 233,808,744 shares of beneficial interest outstanding $233,808,744
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
- --------------------------------------------------------------------------------
Trust Shares ($223,640,180 / 223,640,180 shares of beneficial interest
outstanding) $1.00
- -------------------------------------------------------------------------------- ------------
Investment Shares ($10,168,564 / 10,168,564 shares of beneficial interest
outstanding) $1.00
- -------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FOUNTAIN SQUARE COMMERCIAL PAPER FUND
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------
Interest income $13,526,740
- -----------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------------------
Investment advisory fee $ 958,506
- ---------------------------------------------------------------------
Administrative personnel and services fee 265,038
- ---------------------------------------------------------------------
Custodian fee 22,146
- ---------------------------------------------------------------------
Portfolio accounting, transfer and dividend disbursing agent fees and
expenses 57,676
- ---------------------------------------------------------------------
Directors'/Trustees' fees 6,771
- ---------------------------------------------------------------------
Auditing fees 13,066
- ---------------------------------------------------------------------
Legal fees 5,545
- ---------------------------------------------------------------------
Fund share registration costs 29,953
- ---------------------------------------------------------------------
Printing and postage 19,975
- ---------------------------------------------------------------------
Insurance premiums 8,210
- ---------------------------------------------------------------------
Distribution services fee 33,414
- --------------------------------------------------------------------- ----------
Total expenses 1,420,300
- ---------------------------------------------------------------------
Deduct--
- ---------------------------------------------------------------------
Waiver of investment advisory fee $190,170
- ----------------------------------------------------------
Waiver of distribution services fee 33,414
- ----------------------------------------------------------
Waiver of custodian fee 22,146 245,730
- ---------------------------------------------------------- -------- ----------
Net expenses 1,174,570
- ----------------------------------------------------------------------------------- -----------
Net investment income $12,352,170
- ----------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FOUNTAIN SQUARE COMMERCIAL PAPER FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
--------------------------------
1995 1994
--------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------
Net investment income $ 12,352,170 $ 6,633,051
- ------------------------------------------------------------- --------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------------------
Dividends to shareholders from net investment income:
- -------------------------------------------------------------
Trust Shares (11,852,325) (6,444,903)
- -------------------------------------------------------------
Investment Shares (499,845) (188,148)
- ------------------------------------------------------------- --------------- -------------
Change in net assets from distributions to shareholders (12,352,170) (6,633,051)
- ------------------------------------------------------------- --------------- -------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- -------------------------------------------------------------
Proceeds from sale of shares 1,139,381,157 868,472,344
- -------------------------------------------------------------
Cost of shares redeemed (1,124,845,195) (833,978,799)
- ------------------------------------------------------------- --------------- -------------
Change in net assets from Fund share transactions 14,535,962 34,493,545
- ------------------------------------------------------------- --------------- -------------
Change in net assets 14,535,962 34,493,545
- -------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------
Beginning of period 219,272,782 184,779,237
- ------------------------------------------------------------- --------------- -------------
End of period $ 233,808,744 $ 219,272,782
- ------------------------------------------------------------- --------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FOUNTAIN SQUARE COMMERCIAL PAPER FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Fountain Square Funds (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end management investment
company. The Trust consists of nine diversified portfolios and one
non-diversified portfolio. The financial statements included herein are only
those of Fountain Square Commercial Paper Fund (the "Fund"). The financial
statements of the other portfolios are presented separately. The assets of each
portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held. The Fund offers two classes of shares: Trust
Shares and Investment Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require a custodian or
sub-custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the custodian
bank's vault, all securities held as collateral under repurchase agreement
transactions. Additionally, procedures have been established by the Fund to
monitor, on a daily basis, the market value of each repurchase agreement's
collateral to ensure that the value of collateral at least equals the
repurchase price to be paid under the repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the agreements. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Distributions
to shareholders are recorded on the ex-dividend date.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
FOUNTAIN SQUARE COMMERCIAL PAPER FUND
- --------------------------------------------------------------------------------
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis
are valued daily and begin earning interest on the settlement date.
F. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At July 31, 1995, capital paid-in aggregated $233,808,744.
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------------
TRUST SHARES 1995 1994
- -------------------------------------------------------------- -------------- ------------
<S> <C> <C>
Shares sold 1,114,106,500 848,035,515
- --------------------------------------------------------------
Shares redeemed (1,103,592,384) (814,974,172)
- -------------------------------------------------------------- -------------- ------------
Net change resulting from Trust Share transactions 10,514,116 33,061,343
- -------------------------------------------------------------- -------------- ------------
INVESTMENT SHARES
- --------------------------------------------------------------
Shares sold 25,274,657 20,436,829
- --------------------------------------------------------------
Shares redeemed (21,252,811) (19,004,627)
- -------------------------------------------------------------- -------------- ------------
Net change resulting from Investment Share transactions 4,021,846 1,432,202
- -------------------------------------------------------------- -------------- ------------
Net change resulting from Fund share transactions 14,535,962 34,493,545
- -------------------------------------------------------------- -------------- ------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Fifth Third Bank, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
0.40 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive a portion of its fee. The Adviser can modify or terminate this
voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waive a portion of its fee.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
compensate Federated Securities Corp. ("FSC"), the principal distributor, from
the net assets of the Fund's Investment Shares to finance activities intended to
result in the sale of the Fund's Investment Shares. The Plan provides that the
FOUNTAIN SQUARE COMMERCIAL PAPER FUND
- --------------------------------------------------------------------------------
Fund may incur distribution expenses up to 0.35 of 1% of the average daily net
assets of the Investment Shares, annually, to compensate FSC. The distributor
may voluntarily choose to waive all or a portion of its fee. The distributor can
modify or terminate this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES, PORTFOLIO ACCOUNTING
AND CUSTODIAN FEES--Fifth Third Bank serves as transfer and dividend disbursing
agent for the Fund for which it receives a fee. Fifth Third Bank sub-contracts
the execution of the transfer and dividend disbursing agent functions to a
non-affiliated entity. The fee is based on the level of the Fund's average net
assets for the period, plus out-of-pocket expenses.
Fifth Third Bank maintains the Fund's accounting records for which it receives a
fee. Fifth Third Bank sub-contracts the execution of the accounting services
function to a non-affiliated entity. The fee is based on the level of the Fund's
average net assets for the period, plus out-of-pocket expenses.
Fifth Third Bank is the Fund's custodian for which it receives a fee. The fee is
based on the level of the Fund's average net assets for the period, plus
out-of-pocket expenses. The custodian may choose to voluntarily waive all or a
portion of its fees.
Certain of the Officers and Trustees of the Trust are Officers and Trustees of
the above companies.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
FOUNTAIN SQUARE FUNDS:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Fountain Square Commercial Paper Fund (one of
the portfolios comprising Fountain Square Funds), as of July 31, 1995, and the
related statement of operations for the year then ended, and statement of
changes in net assets and financial highlights for the periods presented
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of 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 securities owned as of July
31, 1995, 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
Fountain Square Commercial Paper Fund at July 31, 1995, the results of its
operations for the year then ended, and the changes in its net assets and
financial highlights for the periods presented therein, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
September 15, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Fountain Square Commercial Paper Fund Fountain Square Funds
Trust Shares c/o Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
- -------------------------------------------------------------------------------------------------
Investment Adviser
Fifth Third Bank 38 Fountain Square Plaza
Cincinnati, Ohio 45263
- -------------------------------------------------------------------------------------------------
Custodian, Transfer Agent, and Dividend Disbursing Agent
Fifth Third Bank 38 Fountain Square Plaza
Cincinnati, Ohio 45263
- -------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania 15219
- -------------------------------------------------------------------------------------------------
</TABLE>
FOUNTAIN SQUARE COMMERCIAL PAPER FUND
(A PORTFOLIO OF FOUNTAIN SQUARE FUNDS)
INVESTMENT SHARES
TRUST SHARES
Combined Statement of Additional Information
The Trust Shares and Investment Shares of Fountain Square Commercial
Paper Fund (the "Fund") represent interests in a diversified portfolio
of securities. This Combined Statement of Additional Information should
be read with the respective prospectuses for Trust Shares and Investment
Shares dated September 30, 1995. This Statement is not a prospectus
itself. To receive a copy of the Trust Shares prospectus, customers of
Fifth Third Bank may write to the Fountain Square Commercial Paper Fund
or call (513) 579-6039 in Cincinnati, Ohio or toll-free (800) 654-5372.
To receive a copy of the Investment Shares prospectus, customers of
Fifth Third Securities may write to the Fountain Square Commercial Paper
Fund or call (513) 744-8888 in Cincinnati, Ohio or toll-free (800) 334-
0483.
Fountain Square Funds
c/o Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Statement dated September 30, 1995
FIFTH THIRD BANK
Investment Adviser
GENERAL INFORMATION ABOUT THE FUND 1
INVESTMENT OBJECTIVE AND POLICIES 1
Types of Investments 1
When-Issued and Delayed Delivery
Transactions 2
Repurchase Agreements 2
Reverse Repurchase Agreements 2
Investment Limitations 2
FOUNTAIN SQUARE FUNDS MANAGEMENT 4
Officers and Trustees 4
Fund Ownership 5
Trustees' Compensation 5
Trustee Liability 6
INVESTMENT ADVISORY SERVICES 6
Adviser to the Fund 6
Advisory Fees 6
BROKERAGE TRANSACTIONS 6
Transfer Agent and Dividend
Disbursing Agent 7
PURCHASING SHARES 7
Distribution Plan (Investment
Shares) 7
Conversion to Federal Funds 8
DETERMINING NET ASSET VALUE 8
Use of the Amortized Cost Method 8
REDEEMING SHARES 9
Redemption in Kind 9
TAX STATUS 9
The Fund's Tax Status 9
Shareholders' Tax Status 9
YIELD 10
EFFECTIVE YIELD 10
PERFORMANCE COMPARISONS 10
GENERAL INFORMATION ABOUT THE FUND
Fountain Square Commercial Paper Fund (the "Fund") is a portfolio in the
Fountain Square Funds (the "Trust"). The Trust was established as a
Massachusetts business trust under a Declaration of Trust dated September 15,
1988.
Shares of the Fund are offered in two classes, Trust Shares and Investment
Shares (individually and collectively referred to as "Shares"). This Combined
Statement of Additional Information relates to the above-mentioned Shares of
the Fund.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide current income consistent with
stability of principal. The investment objective cannot be changed without
approval of shareholders.
TYPES OF INVESTMENTS
The Fund invests in money market instruments which mature in 13 months or
less. At least 65% of the assets of the Fund will be invested in commercial
paper. The remaining portion of Fund assets will be invested in money market
instruments which include, but are not limited to, bank instruments and U.S.
government obligations.
The instruments of banks and savings and loans whose deposits are insured by
Bank Insurance Fund ("BIF") or the Savings Association Insurance Fund
("SAIF"), such as certificates of deposit, demand and time deposits, and
bankers' acceptances, are not necessarily guaranteed by that organization.
U.S. Government Obligations
The types of U.S. government obligations in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued or guaranteed
by U.S. government agencies or instrumentalities. These securities are
backed by:
o the full faith and credit of the U.S. Treasury;
o the issuer's right to borrow from the U.S. Treasury;
o the discretionary authority of the U.S. government to purchase
certain obligations of agencies or instrumentalities; or
o the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
o Farm Credit Banks;
o Federal Home Loan Banks;
o Federal National Mortgage Association;
o Student Loan Marketing Association; and
o Federal Home Loan Mortgage Corporation.
Bank Instruments
In addition to domestic bank obligations such as certificates of
deposit, demand and time deposits, and bankers' acceptances, the Fund
may invest in:
o Eurodollar Certificates of Deposit issued by foreign branches of
U.S. or foreign banks;
o Eurodollar Time Deposits, which are U.S. dollar-denominated deposits
in foreign branches of U.S. or foreign banks; and
o Yankee Certificates of Deposit, which are U.S. dollar-denominated
certificates of deposit issued by U.S. branches of foreign banks and
held in the United States.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the
Fund's records at the trade date. These assets are marked to market daily and
are maintained until the transaction has been settled. The Fund does not
intend to engage in when-issued and delayed delivery transactions to an extent
that would cause the segregation of more than 20% of the total value of its
assets.
REPURCHASE AGREEMENTS
The Fund or its custodian will take possession of the securities subject to
repurchase agreements and these securities will be marked to market daily. To
the extent that the original seller does not repurchase the securities from
the Fund, the Fund could receive less than the repurchase price on any sale of
such securities. In the event that such a defaulting seller filed for
bankruptcy or became insolvent, disposition of such securities by the Fund
might be delayed pending court action. The Fund believes that under the
regular procedures normally in effect for custody of the Fund's portfolio
securities subject to repurchase agreements, a court of competent jurisdiction
would rule in favor of the Fund and allow retention or disposition of such
securities. The Fund will only enter into repurchase agreements with banks and
other recognized financial institutions such as broker/dealers, which are
deemed by the Fund's adviser to be creditworthy, pursuant to guidelines
established by the Board of Trustees (the "Trustees").
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. This transaction
is similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate. The use of
reverse repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but the
ability to enter into reverse repurchase agreements does not ensure that the
Fund will be able to avoid selling portfolio instruments at a disadvantageous
time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated on the Fund's records at the trade date. These securities are
marked to market daily and maintained until the transaction is settled.
INVESTMENT LIMITATIONS
Selling Short and Buying on Margin
The Fund will not sell any money market instruments short or purchase
any money market instruments on margin but may obtain such short-term
credits as may be necessary for clearance of purchases and sales of
money market instruments.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may
borrow money directly or through reverse repurchase agreements as a
temporary measure for extraordinary or emergency purposes and then only
in amounts not in excess of 5% of the value of its total assets or in an
amount up to one-third of the value of its total assets, including the
amount borrowed, in order to meet redemption requests without
immediately selling portfolio instruments. Any direct borrowings need
not be collateralized.
Pledging Securities
The Fund will not pledge securities.
Investing in Commodities, Commodity Contracts, or Real Estate
The Fund will not invest in commodities, commodity contracts, or real
estate, except that it may purchase money market instruments issued by
companies that invest in real estate or sponsor such interests.
Underwriting
The Fund will not engage in underwriting of securities issued by others.
Lending Cash or Securities
The Fund will not lend any of its assets, except that it may purchase or
hold money market instruments, including repurchase agreements and
variable rate demand notes, permitted by its investment objective and
policies.
Acquiring Securities
The Fund will not acquire the voting securities of any issuer. It will
not invest in securities of a company for the purpose of exercising
control or management.
Diversification of Investments
With respect to 75% of the value of its total assets, the Fund will not
purchase securities issued by any one issuer having a value of more than
5% of the value of its total assets except repurchase agreements and
U.S. government obligations. The total amount of the remaining 25% of
the value of the Fund's total assets may be invested in a single issuer
if the investment adviser believes such a strategy to be prudent.
The Fund considers the type of bank obligations it purchases cash items.
Concentration of Investments
The Fund will not invest more than 25% of the value of its total assets
in any one industry except commercial paper of finance companies.
However, the Fund reserves the right to invest more than 25% of its net
assets in domestic bank instruments (such as time and demand deposits
and certificates of deposit), U.S. government obligations or instruments
secured by these money market instruments, such as repurchase
agreements. The Fund will not invest more than 25% of its net assets in
instruments of foreign banks.
Investing in Securities of Other Investment Companies
The Fund can acquire up to 3% of the total outstanding securities of
other investment companies. The Fund will limit its investments in the
securities of other investment companies to those of money market funds
having investment objectives and policies similar to its own. The Fund
will purchase securities of other investment companies only in open-
market transactions involving no more than customary broker's
commissions. However, there is no limitation applicable to securities of
any investment company acquired in a merger, consolidation, or
acquisition of assets.
The above investment limitations cannot be changed without shareholder
approval. The Fund does not consider the issuance of separate classes of
shares to involve the issuance of "senior securities" within the meaning of
the investment limitation set forth above. The following investment
limitations, however, may be changed by Trustees without shareholder approval.
Shareholders will be notified before any material change in these policies
becomes effective.
Investing in Restricted Securities
The Fund will not invest more than 10% of the value of its net assets in
securities which are subject to restrictions on resale under federal
securities laws.
Investing in New Issuers
The Fund will not invest more than 5% of the value of its total assets
in securities of issuers which have records of less than three years of
continuous operations, including the operation of any predecessor.
Investing in Minerals
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, although it may purchase
the securities of issuers which invest in or sponsor such programs.
Except with respect to borrowing money, if a percentage limitation is adhered
to at the time of investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a
violation of such restriction.
For the purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S. branch
of a domestic bank or savings and loan having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment to be "cash
items."
In order to permit the sale of Shares in certain states, the Fund may make
commitments more restrictive than the investment limitations described above.
Accordingly, the Fund has undertaken not to invest in: real estate limited
partnerships; oil, gas, or other mineral leases; warrants; or the securities
of any issuer if the officers, directors, or trustees of the Fund or its
investment adviser owning beneficially more than 0.5% of the securities of
such issuer together own beneficially more than 5% of such securities. Should
the Fund determine that any such commitment is no longer in the best interest
of the Fund and its shareholders, the Fund will revoke the commitment by
terminating the sale of its shares in the state involved.
FOUNTAIN SQUARE FUNDS MANAGEMENT
OFFICERS AND TRUSTEES
Officers and Trustees of the Trust are listed with their addresses, principal
occupations, and present positions. Except as listed below, none of the
Trustees or Officers are affiliated with The Fifth Third Bank ("Fifth Third
Bank"), Fifth Third Bancorp, Federated Investors, Federated Securities Corp.,
or Federated Administrative Services.
J. Christopher Donahue *+
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Chairman of the Board of Trustees, President and Treasurer
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp.; President, Passport Research, Ltd.; Trustee, Federated
Administrative Services, Federated Services Company, and Federated
Shareholder Services; President or Vice President of the Funds; Director,
Trustee, or Managing General Partner of some of the Funds.
Edward Burke Carey
394 East Town Street
Columbus, OH
Birthdate: July 2, 1945
Member of the Board of Trustees
President of Carey Leggett Realty Advisors.
Lee A. Carter +
Cincinnati Commerce Center
Suite 2020
Cincinnati, OH
Birthdate: December 17, 1938
Member of the Board of Trustees
Formerly, President, Local Marketing Corporation (retired December 31, 1993).
Albert E. Harris
5905 Graves Road
Cincinnati, OH
Birthdate: July 2, 1932
Member of the Board of Trustees
Formerly, Chairman of the Board EDB Holdings, Inc. (retired July, 1993).
Charles L. Davis, Jr.
Federated Investors Tower
Pittsburgh, PA
Birthdate: March 23, 1960
Vice President and Assistant Treasurer
Vice President, Federated Administrative Services; Vice President and
Assistant Treasurer of some of the Funds.
Jay S. Neuman
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 22, 1950
Secretary
Corporate Counsel, Federated Investors; prior to January, 1991, Associate
Counsel, The Boston Company Advisors, Inc.
*This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
+Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board of Trustees between
meetings of the Board.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding Shares.
As of July 31, 1995, Fifth Third Bank as nominee for numerous trust and agency
accounts, was the owner of record of 223,640,168 Trust Shares (100%) of the
Fund.
As of July 31, 1995, no shareholders of record owned 5% or more of the
outstanding Investment Shares of the Fund:
Trustees' Compensation
NAME , AGGREGATE
POSITION WITH COMPENSATION FROM
TRUST TRUST*+
J. Christopher Donahue $ 0
Chairman of Board of
Trustees, President and Treasurer
Edward Burke Carey $ 7,800
Trustee
Lee A. Carter $ 7,800
Trustee
Albert E. Harris $ 7,800
Trustee
* Information is furnished for the fiscal year ended July 31, 1995. The Trust
is the only investment company in the Fund complex.
+The aggregate compensation is provided for the Trust which is comprised of
ten portfolios.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees are not liable for
errors of judgment or mistakes of fact or law. However, they are not protected
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
ADVISER TO THE FUND
The Fund's investment adviser is Fifth Third Bank (the "Adviser"). It provides
investment advisory services through its Trust and Investment Division. Fifth
Third Bank is a wholly-owned subsidiary of Fifth Third Bancorp.
The Adviser shall not be liable to the Trust, the Fund or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or
sale of any security, or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the
Trust.
Because of the internal controls maintained by Fifth Third Bank to restrict
the flow of non-public information, Fund investments are typically made
without any knowledge of Fifth Third Bank's or its affiliates' lending
relationships with an issuer.
ADVISORY FEES
For its advisory services, Fifth Third Bank receives an annual investment
advisory fee as described in the prospectus.
For the fiscal years ended July 31, 1995, 1994, and 1993,, the Adviser earned
$958,506, $891,943, and $796,334,, respectively, of which $190,170, $224,244,
and $243,753, were voluntarily waived, respectively, because of undertakings
to limit the Fund's expenses.
State Expense Limitations
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2 1/2% per year of the first $30 million of average net assets,
2% per year of the next $70 million of average net assets, and 1 1/2%
per year of the remaining average net assets, the Adviser has agreed to
reimburse the Fund for its expenses over the limitation up to the amount
of the advisory fee in any single fiscal year.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced, in any
single fiscal year, by the amount of the excess, subject to an annual
adjustment.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the Adviser looks for prompt execution of the order at
a favorable price. In working with dealers, the Adviser will generally utilize
those who are recognized dealers in specific portfolio instruments, except
when a better price and execution of the order can be obtained elsewhere. The
Adviser makes decisions on portfolio transactions and selects brokers and
dealers subject to review by the Trustees.
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
Adviser and may include:
o advice as to the advisability of investing in securities;
o security analysis and reports;
o economic studies;
o industry studies;
o receipt of quotations for portfolio evaluations; and
o similar services.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage
and research services provided.
Research services provided by brokers may be used by the Adviser in advising
the Fund and other accounts. To the extent that receipt of these services may
supplant services for which the Adviser or its affiliates might otherwise have
paid, it would tend to reduce expenses.
For the fiscal years ended July 31, 1995, 1994, and 1993, the Fund did not pay
any commissions on brokerage transactions.
Administrative Services
Until December 1, 1995, Federated Administrative Services ("FAS"), a
subsidiary of Federated Investors, provides administrative personnel and
services to the Fund for a fee as described in the prospectus. For the fiscal
years ended July 31, 1995, 1994, and 1993, the Fund incurred administrative
service fees of $265,038, $256,533, and $248,161, respectively.
Effective December 1, 1995, BISYS Fund Services L.P., 3435 Stelzer Road,
Columbus, Ohio 43219, will provide administrative services to the Funds for
the fees set forth in the prospectus.
Effective December 1, 1995, pursuant to a separate agreement with BISYS Fund
Services L.P., Fifth Third Bank performs sub-administration services on behalf
of each Fund, for which it receives compensation from BISYS Fund Services L.P.
Under the custodian agreement, Fifth Third Bank holds the Fund's portfolio
securities and keeps all necessary records and documents relating to its
duties. Fifth Third Bank's fees for custody services are based upon the market
value of Fund securities held in custody plus out-of-pocket expenses.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Fifth Third Bank serves as transfer agent and dividend disbursing agent for
the Funds. The fee paid to the transfer agent is based upon the size, type
and number of accounts and transactions made by shareholders.
Fifth Third Bank also maintains the Trust's accounting records. The fee paid
for this service is based upon the level of the Funds' average net assets for
the period plus out-of-pocket expenses.
PURCHASING SHARES
Shares are sold at their net asset value without a sales load on days the New
York Stock Exchange and the Federal Reserve Bank of Cleveland are open for
business. The procedure for purchasing Shares is explained in the respective
prospectuses under "Investing in Investment Shares" and "Investing in Trust
Shares."
DISTRIBUTION PLAN (INVESTMENT SHARES)
With respect to the Investment Shares class of the Fund, the Trust has adopted
a Plan pursuant to Rule 12b-1 which was promulgated by the Securities and
Exchange Commission pursuant to the Investment Company Act of 1940. The Plan
provides for payment of fees to the distributor to finance any activity which
is principally intended to result in the sale of Investment Shares of the Fund
subject to the Plan. Such activities may include the advertising and marketing
of Investment Shares; preparing, printing, and distributing prospectuses and
sales literature to prospective shareholders, brokers, or administrators; and,
implementing and operating the Plan. Pursuant to the Plan, the distributor may
pay fees to brokers for distribution and administrative services and to
administrators for administrative services as to Investment Shares. The
administrative services are provided by a representative who has knowledge of
the shareholder's particular circumstances and goals, and include, but are not
limited to: communicating account openings; communicating account closings;
entering purchase transactions; entering redemption transactions; providing or
arranging to provide accounting support for all transactions, wiring funds and
receiving funds for Investment Share purchases and redemptions, confirming and
reconciling all transactions, reviewing the activity in Fund accounts, and
providing training and supervision of broker personnel; posting and
reinvesting dividends to Fund accounts or arranging for this service to be
performed by the Fund's transfer agent; and maintaining and distributing
current copies of prospectuses and shareholder reports to the beneficial
owners of Investment Shares and prospective shareholders.
The Board of Trustees expects that the Plan will result in the sale of
sufficient number of Investment Shares so as to allow the Fund to achieve
economic viability. It is also anticipated that an increase in the size of the
Fund will facilitate more efficient portfolio management and assist the Fund
in seeking to achieve its investment objective.
For the fiscal year ended July 31, 1995, distribution fees paid to Federated
Securities Corp. amounted to $33,414, all of which was voluntarily waived.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds. Fifth Third Bank acts as the
shareholder's agent in depositing checks and converting them to federal funds.
DETERMINING NET ASSET VALUE
The Fund attempts to stabilize the value of a share at $1.00. The days on
which net asset value is calculated by the Fund are described in the
prospectus.
USE OF THE AMORTIZED COST METHOD
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
The Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in Rule 2a-7 (the "Rule")
promulgated by the Securities and Exchange Commission under the Investment
Company Act of 1940. Under the Rule, the Trustees must establish procedures
reasonably designed to stabilize the net asset value per share, as computed
for purposes of distribution and redemption, at $1.00 per share, taking into
account current market conditions and the Fund's investment objective.
Monitoring Procedures
The Trustees' procedures include monitoring the relationship between the
amortized cost value per share and the net asset value per share based
upon available indications of market value. The Trustees will decide
what, if any, steps should be taken if there is a difference of more
than .50 of 1% between the two values.
The Trustees will take any steps they consider appropriate (such as
redemption in kind or shortening the average portfolio maturity) to
minimize any material dilution or other unfair results arising from
differences between the two methods of determining net asset value.
Investment Restrictions
The Rule requires that the Fund limit its investments to instruments
that, in the opinion of the Trustees, present minimal credit risks and
if rated, have received the requisite rating from one or more nationally
recognized statistical rating organizations. If the instruments are not
rated, the Trustees must determine that they are of comparable quality.
Shares of investment companies purchased by the Fund will meet these
same criteria and will have investment policies consistent with the
Rule. The Rule also requires the Fund to maintain a dollar weighted
average portfolio maturity (not more than 90 days) appropriate to the
objective of maintaining a stable net asset value of $1.00 per share. In
addition, no instruments with a remaining maturity of more than 397 days
can be purchased by the Fund.
Should the disposition of a portfolio security result in a dollar
weighted average portfolio maturity of more than 90 days, the Fund will
invest its available cash to reduce the average maturity to 90 days or
less as soon as possible.
The Fund may attempt to increase yield by trading portfolio securities
to take advantage of short-term market variations. This policy may, from
time to time, result in high portfolio turnover. Under the amortized
cost method of valuation, neither the amount of daily income nor the net
asset value is affected by any unrealized appreciation or depreciation
of the portfolio.
In periods of declining interest rates, the indicated daily yield on
shares of the Fund computed by dividing the annualized daily income on
the Fund's portfolio by the net asset value computed as above may tend
to be higher than a similar computation made by using a method of
valuation based upon market prices and estimates.
In periods of rising interest rates, the indicated daily yield on shares
of the Fund computed the same way may tend to be lower than a similar
computation made by using a method of calculation based upon market
prices and estimates.
REDEEMING SHARES
The Fund redeems Shares at the next computed net asset value after the Fifth
Third Bank receives the redemption request. Redemption procedures are
explained in the respective prospectuses under "Redeeming Investment Shares"
and "Redeeming Trust Shares." Although Fifth Third Bank does not charge for
telephone redemptions, it reserves the right to charge a fee for the cost of
wire-transferred redemptions of less than $10,000.
REDEMPTION IN KIND
The Trust has elected to be governed by Rule 18f-1 of the Investment Company
Act of 1940 under which the Trust is obligated to redeem shares for any one
shareholder in cash only up to the lesser of $250,000 or 1% of a Fund's net
asset value during any 90-day period.
Any redemption beyond this amount will also be in cash unless the Trustees
determine that payments should be in kind. In such a case, the Trust will pay
all or a portion of the remainder of the redemption in portfolio instruments,
valued in the same way as the Fund determines net asset value. The portfolio
instruments will be selected in a manner that the Trustees deem fair and
equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving their securities and selling them before
their maturity could receive less than the redemption value of their
securities and could incur certain transaction costs.
TAX STATUS
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Fund must,
among other requirements:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o derive less than 30% of its gross income from the sale of securities
held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends received as cash
or additional shares. No portion of any income dividend paid by the Fund is
eligible for the dividends received deduction available to corporations. These
dividends and any short-term capital gains are taxable as ordinary income.
Capital Gains
Capital gains experienced by the Fund could result in an increase in
dividends. Capital losses could result in a decrease in dividends. If,
for some extraordinary reason, the Fund realizes net long-term capital
gains, it will distribute them at least once every 12 months.
YIELD
The yield for Investment Shares and Trust Shares were 5.46%. and 5.46%,
respectively, for the seven-day period ended July 31, 1995.
The Fund calculates the yield for both classes of Shares daily, based upon the
seven days ending on the day of the calculation, called the "base period."
This yield is computed by:
o determining the net change in the value of a hypothetical account with a
o balance of one Share at the beginning of the base period, with the net
change excluding capital changes but including the value of any
additional Shares purchased with dividends earned from the original one
Share and all dividends declared on the original and any purchased
Shares;
o dividing the net change in the account's value by the value of the
account at the beginning of the base period to determine the base period
return; and
o multiplying the base period return by (365/7).
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in either
class of Shares, the performance will be reduced for those shareholders paying
those fees.
EFFECTIVE YIELD
The effective yield for Investment Shares and Trust Shares were 5.61% and
5.61%, respectively, for the seven-day period ended July 31, 1995.
The Fund's effective yield for both classes of Shares is computed by
compounding the unannualized base period return by:
o adding 1 to the base period return;
o raising the sum to the 365/7th power; and
o subtracting 1 from the result.
PERFORMANCE COMPARISONS
The performance of both classes of shares depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates on money market instruments;
o changes in the expenses of the Fund or of either class of shares; and
o the relative amount of Fund cash flow.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the compositions of any index
used, prevailing market conditions, portfolio compositions of other funds, and
methods used to value portfolio securities and compute offering price. The
financial publications and/or indices which the Fund uses in advertising may
include:
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all income dividends and capital gains
distributions, if any. From time to time, the Fund will quote its Lipper
ranking in the money market instruments category in advertising and
sales literature.
o BANK RATE MONITOR NATIONAL INDEX, Miami Beach, Florida, is a financial
reporting service which publishes weekly average rates of 50 leading
bank and thrift institution money market deposit accounts. The rates
published in the index are averages of the personal account rates
offered on the Wednesday prior to the date of publication by ten of the
largest banks and thrifts in each of the five largest Standard
Metropolitan Statistical Areas. Account minimums range upward from
$2,500 in each institution, and compounding methods vary. If more than
one rate is offered, the lowest rate is used. Rates are subject to
change at any time specified by the institution.
o DONOGHUE'S MONEY FUND REPORT publishes annualized yields of hundreds of
money market funds on a weekly basis and through its Money Market
Insight publication reports monthly and 12-month-to-date investment
results for the same money funds.
Advertisements and other sales literature for either class of shares may refer
to total return. Total return is the historic change in the value of an
investment in either class of shares based on the reinvestment of dividends
over a specified period of time.
Cusip 350756201
Cusip 350756300
9052205B (9/95)
FOUNTAIN SQUARE GOVERNMENT CASH RESERVES FUND
INVESTMENT SHARES
[LOGO]
FOUNTAIN SQUARE FUNDS
PROSPECTUS
[LOGO]
FIFTH THIRD BANK
INVESTMENT ADVISER
Cusip 350756508
1041201A-R (9/95)
65-0920
FOUNTAIN SQUARE GOVERNMENT
CASH RESERVES FUND
(A PORTFOLIO OF FOUNTAIN SQUARE FUNDS)
INVESTMENT SHARES
PROSPECTUS
The Investment Shares of Fountain Square Government Cash Reserves Fund (the
"Fund") offered by this prospectus represent interests in a diversified
portfolio of securities which is one of a series of investment portfolios in
Fountain Square Funds (the "Trust"), an open-end management investment company
(a mutual fund).
The Fund is a money market fund which invests in short-term U.S. government
securities to achieve high current income consistent with stability of principal
and liquidity. The Fund intends to limit its investments to those U.S.
government securities whose interest is generally exempt from personal income
tax in the various states if owned directly. Please see the "Tax Information"
section of this prospectus.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF FIFTH
THIRD BANK, ARE NOT ENDORSED OR GUARANTEED BY FIFTH THIRD BANK, AND ARE NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. THE FUND ATTEMPTS TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE NO ASSURANCE THAT THE
FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in Investment Shares of the Fund. Keep this prospectus for future
reference.
The Fund has also filed a Combined Statement of Additional Information for
Investment Shares, dated September 30, 1995, with the Securities and Exchange
Commission. The information contained in the Combined Statement of Additional
Information is incorporated by reference into this prospectus. You may request a
copy of the Combined Statement of Additional Information free of charge, obtain
other information or make inquiries about the Fund by writing to the Fund or
calling (513) 744-8888 in Cincinnati or toll-free (800) 334-0483.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated September 30, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INVESTMENT SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Acceptable Investments 3
When-Issued and Delayed Delivery
Transactions 4
Investment Limitations 4
FOUNTAIN SQUARE FUNDS INFORMATION 4
- ------------------------------------------------------
Management of the Trust 4
Board of Trustees 4
Investment Adviser 4
Advisory Fees 5
Adviser's Background 5
Distribution of Investment Shares 5
Distribution Plan 5
Other Payments to Financial
Institutions 6
Administration of the Fund 6
Administrative Services 6
Custodian, Transfer Agent, and
Dividend Disbursing Agent 7
Independent Auditors 7
NET ASSET VALUE 7
- ------------------------------------------------------
INVESTING IN TRUST SHARES 7
- ------------------------------------------------------
Share Purchases 7
Through Fifth Third Securities 8
Minimum Investment Required 8
What Shares Cost 8
Certificates and Confirmations 8
Dividends 9
Capital Gains 9
EXCHANGES 9
- ------------------------------------------------------
REDEEMING INVESTMENT SHARES 10
- ------------------------------------------------------
Through Fifth Third Securities 10
By Telephone 10
By Mail 10
Receiving Payment 11
Accounts with Low Balances 11
SHAREHOLDER INFORMATION 11
- ------------------------------------------------------
Voting Rights 11
Massachusetts Law 12
EFFECT OF BANKING LAWS 12
- ------------------------------------------------------
TAX INFORMATION 13
- ------------------------------------------------------
Federal Income Tax 13
State and Local Taxes 13
PERFORMANCE INFORMATION 13
- ------------------------------------------------------
OTHER CLASSES OF SHARES 14
- ------------------------------------------------------
FINANCIAL STATEMENTS 15
- ------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS 22
- ------------------------------------------------------
ADDRESSES 23
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)......... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)............................................... None
Contingent Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, as applicable)............................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable).................. None
Exchange Fee........................................................................ None
ANNUAL INVESTMENT SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1).................................................... 0.30%
12b-1 Fee (after waiver)(2)......................................................... 0.00%
Other Expenses...................................................................... 0.20%
Total Investment Shares Operating Expenses(3).................................. 0.50%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver by the
investment adviser. The adviser can terminate this voluntary waiver at any time
at its sole discretion. The maximum management fee is 0.40%.
(2) The 12b-1 has been reduced to reflect the voluntary waiver by the
distributor. The distributor can terminate this voluntary waiver at any time at
its sole discretion. The maximum 12b-1 fee is 0.35%.
(3) Total Investment Shares operating expenses would have been 0.95% absent the
voluntary waiver by the investment adviser and the distributor.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF INVESTMENT SHARES WILL BEAR,
EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS
COSTS AND EXPENSES, SEE "FOUNTAIN SQUARE FUNDS INFORMATION" AND "INVESTING IN
INVESTMENT SHARES." Wire-transferred redemptions of less than $10,000 may be
subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- ------------------------------------------------------------- ------- -------- -------- ---------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end
of each time period. The Fund charges no redemption fees
for Investment Shares........................................ $5 $16 $28 $63
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FOUNTAIN SQUARE GOVERNMENT CASH RESERVES FUND
FINANCIAL HIGHLIGHTS--INVESTMENT SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young LLP, Independent Auditors, on
page 22.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
---------------------------------------
1995 1994 1993 1992*
------ ------ ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------
Net investment income 0.05 0.03 0.03 0.03
- ------------------------------------------------- ------ ------ ------ ------
LESS DISTRIBUTIONS
- -------------------------------------------------
Dividends to shareholders from net
investment income (0.05) (0.03) (0.03) (0.03)
- ------------------------------------------------- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------- ------ ------ ------ ------
TOTAL RETURN** 5.22% 3.03% 2.76% 2.61%
- -------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------
Expenses 0.50% 0.50% 0.50% 0.50%(b)
- -------------------------------------------------
Net investment income 5.17% 2.96% 3.22% 3.68%(b)
- -------------------------------------------------
Expense waiver/reimbursement(a) 0.45% 0.48% 0.50% 0.50%(b)
- -------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------
Net assets, end of period (000 omitted) $45,726 $11,073 $10,923 $8,726
- -------------------------------------------------
</TABLE>
* Reflects operations for the period from November 25, 1991 (date of initial
public investment) to July 31, 1992.
** Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 15, 1988. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. As of the date of this prospectus, the Board of
Trustees ("Trustees") have established two classes of shares of the Fund, known
as Trust Shares and Investment Shares. This prospectus relates only to the
Investment Shares of the Fund.
Investment Shares ("Shares") are designed for investors who are not clients of
the Trust Department of The Fifth Third Bank ("Fifth Third Bank") or its
affiliates as a convenient means of accumulating an interest in a professionally
managed, diversified portfolio limited to U.S. government obligations. A minimum
initial investment of $1,000 is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is high current income consistent with
stability of principal and liquidity. This investment objective cannot be
changed without approval of shareholders. While there is no assurance that the
Fund will achieve its investment objective, it endeavors to do so by following
the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
short-term U.S. government securities maturing in 13 months or less. The average
maturity of U.S. government securities in the Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less. Unless indicated otherwise, the
investment policies may be changed by the Trustees without approval of
shareholders. Shareholders will be notified before any material changes in these
policies become effective.
The Fund intends to limit its investments to those U.S. government securities
whose interest is generally exempt from personal income tax in the various
states if owned directly. However, from time to time, the Fund may also invest
in other U.S. government securities if the adviser deems it advantageous to do
so. Please see the "Tax Information" section of this prospectus.
ACCEPTABLE INVESTMENTS. The U.S. government securities in which the Fund invests
are either issued or guaranteed by the U.S. government, its agencies, or
instrumentalities. These securities include, but are not limited to:
- direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds; and
- notes, bonds, and discount notes of U.S. government agencies or
instrumentalities, such as the: Farm Credit Banks; Federal Home Loan
Banks; and Student Loan Marketing Association.
Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government are backed by the full faith and credit of the U.S. Treasury. No
assurances can be given that the U.S. government will provide financial support
to other agencies or instrumentalities since it is not obligated to do so. These
agencies and instrumentalities are supported by:
- the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;
- discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or
- the credit of the agency or instrumentality.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase U.S.
government securities on a when-issued or delayed delivery basis. These
transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause the Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. Accordingly, the Fund may pay more
or less than the market value of the securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the Fund's adviser
deems it appropriate to do so. In addition, the Fund may enter into transactions
to sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or pledge securities except, under
certain circumstances, the Fund may borrow up to one-third of the value of its
total assets and pledge up to 10% of the value of its total assets to secure
such borrowings.
The above investment limitation cannot be changed without shareholder approval.
The following limitation, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in this limitation becomes effective.
The Fund will not commit more than 10% of its net assets to illiquid
obligations.
FOUNTAIN SQUARE FUNDS INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees are
responsible for managing the Trust's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust,
investment decisions for the Fund are made by Fifth Third Bank, the Fund's
investment adviser (the "Adviser"), subject to direction by the Trustees. The
Adviser continually conducts investment research and
supervision for the Fund and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the Fund.
ADVISORY FEES. The Adviser receives an annual investment advisory fee equal
to .40 of 1% of the Fund's average daily net assets. The Adviser has
undertaken to waive up to the amount of the advisory fee, for operating
expenses in excess of limitations established by certain states. The
Adviser may voluntarily choose to waive a portion of its fee or reimburse
other expenses of the Fund, but reserves the right to terminate such waiver
or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Fifth Third Bank, an Ohio state chartered bank, is a
wholly-owned subsidiary of Fifth Third Bancorp, a bank holding company
organized under the laws of Ohio. Fifth Third Bank is a commercial bank
offering a wide range of banking services to its customers. As of July 31,
1995, Fifth Third Bank and its affiliates managed assets in excess of $7.8
billion on a discretionary basis and provided custody services for
additional assets in excess of $67.2 billion. Fifth Third Bank has managed
mutual funds since 1988.
Fifth Third Bank has managed pools of commingled funds since 1953.
Currently, the Trust and Investment Division manages 14 such pools with
total assets of over $1.11 billion.
As part of their regular banking operations, Fifth Third Bank may make
loans to public companies. Thus, it may be possible, from time to time, for
the Fund to hold or acquire the securities of issuers which are also
lending clients of Fifth Third Bank. The lending relationship will not be a
factor in the selection of securities.
DISTRIBUTION OF INVESTMENT SHARES
Until December 1, 1995, Federated Securities Corp. serves as the principal
distributor for shares of the Fund. It is a Pennsylvania corporation organized
on November 14, 1969, and is the distributor for a number of investment
companies. Federated Securities Corp., a subsidiary of Federated Investors, is
located at Federated Investors Tower, Pittsburgh, PA 15222-3779.
Effective December 1, 1995, BISYS Fund Services L.P. will serve as the
distributor for the Trust. BISYS Fund Services L.P. is wholly-owned by BISYS
Group, Inc., 150 Clove Road, Little Falls, NJ 07424, a publicly owned company
engaged in information processing and recordkeeping services to and through
banking and other financial organizations.
DISTRIBUTION PLAN. Pursuant to the provisions of a distribution plan adopted in
accordance with Rule 12b-1 (the "Plan") under the Investment Company Act of
1940, the Fund will pay to the distributor an amount computed at an annual rate
of up to 0.35% of the average daily net asset value of the Shares to finance any
activity which is principally intended to result in the sale of Shares subject
to the Plan.
The distributor may from time to time and for such periods as it deems
appropriate, voluntarily reduce its compensation under the Plan to the extent
the expenses attributable to the Shares exceed such lower expense limitation as
the distributor may, by notice to the Trust, voluntarily declare to be
effective.
The distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and brokers/dealers to provide
sales and/or administrative services as agents for
their clients or customers who beneficially own Shares. Administrative services
may include, but are not limited to, the following functions: providing office
space, equipment, telephone facilities, and various personnel including
clerical, supervisory, and computer as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and redemption
transactions and automatic investments of client account cash balances;
answering routine client inquiries regarding the Fund; assisting clients in
changing dividend options; account designations, and addresses; and providing
such other services as the Fund reasonably requests.
Financial institutions will receive fees from the distributor based upon Shares
owned by their clients or customers. The schedules of such fees and the basis
upon which such fees will be paid will be determined from time to time by the
distributor.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. The distributor, the Adviser, or their
affiliates may also offer to pay a fee from their own assets to financial
institutions as financial assistance for providing substantial marketing and
sales support. The support may include initiating customer accounts, providing
sales literature, or participating in sales, educational and training seminars
(including those held at recreational facilities). Such assistance will be
predicated upon the amount of shares the financial institution sells or may sell
and/or upon the type and nature of sales or marketing support furnished by the
financial institution. Any payments made by the distributor may be reimbursed by
the Adviser or its affiliates.
The Glass-Steagall Act limits the ability of a depository institution (such as a
commercial bank or a savings and loan association) to become an underwriter or
distributor of most securities. In the event the Glass-Steagall Act is deemed to
prohibit depository institutions from acting in the capacities described above
or should Congress relax current restrictions on depository institutions, the
Trustees will consider appropriate changes in the administrative services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Until December 1, 1995, Federated Administrative
Services, a subsidiary of Federated Investors, provides the Fund with certain
administrative personnel and services necessary to operate the Fund, such as
legal and accounting services. Federated Administrative Services provides these
at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
- --------------------- ----------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
on assets in excess of $750
.075 of 1% million
</TABLE>
The administrative fee received during any fiscal year shall be at least $50,000
per Fund. Federated Administrative Services may choose voluntarily to waive a
portion of its fee at any time.
Effective December 1, 1995, BISYS Fund Services L.P. will serve as the
administrator. The administrator generally assists in all aspects of the Trust's
administration and operation including providing the Fund with certain
administrative personnel and services necessary to operate the Fund, such as
legal and accounting services. BISYS Fund Services L.P. provides these at an
annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY NET
ADMINISTRATIVE FEE ASSETS OF THE TRUST
- ------------------- ------------------------------------
<S> <C>
.10% of the first $1 billion
.08% of the next $1 billion
.07% in excess of $2 billion
</TABLE>
The administrator may periodically waive all or a portion of its administrative
fee which will cause the yield of a Fund to be higher than it would otherwise be
in the absence of such a waiver.
Effective December 1, 1995, pursuant to a separate agreement with BISYS Fund
Services L.P., Fifth Third Bank performs sub-administration services on behalf
of the Fund including providing certain administrative personnel and services
necessary to operate the Fund for which it receives a fee from BISYS Fund
Services L.P. computed daily and paid periodically calculated at an annual rate
of 0.025% of average daily net assets.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Fifth Third Bank,
Cincinnati, Ohio, is custodian for the securities and cash of the Fund, transfer
agent for the shares of the Fund, and dividend disbursing agent for the Fund.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Ernst & Young
LLP, Pittsburgh, Pennsylvania.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The net asset value
per Share is determined by adding the interest of the Shares in the value of all
securities and other assets of the Fund, subtracting the interest of the Shares
in liabilities of the Fund and those attributable to Shares, and dividing the
remainder by the total number of Shares outstanding. The Fund cannot guarantee
that its net asset value will always remain at $1.00 per Share.
INVESTING IN TRUST SHARES
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange and the Federal
Reserve Bank of Cleveland are open for business. Customers of Fifth Third
Securities may purchase Investment Shares through Fifth Third Securities. All
other investors should purchase Investment Shares directly from the distributor.
In connection with the sale of Investment Shares, the distributor may from time
to time offer certain items of nominal value to any shareholder or investor. The
Fund reserves the right to reject
any purchase request. Purchasing through Fifth Third Bank may not be available
to investors in all states.
THROUGH FIFTH THIRD SECURITIES. A customer of Fifth Third Securities may
telephone Fifth Third Securities at (513) 744-8888 in Cincinnati or toll-free
(800) 334-0483 to place an order to purchase Investment Shares. All other
investors must place their purchase orders through the distributor. Texas
residents must purchase Shares through Federated Securities Corp. at
1-800-358-2801 until December 1, 1995. Effective December 1, 1995, Texas
residents must contact BISYS Fund Services L.P. at 1-800-554-3862.
Payment may be made to the Fund either by check or federal funds. Orders are
considered received after payment by check is converted into federal funds and
received by Fifth Third Bank. This is normally the next business day after Fifth
Third Bank receives the check. When payment is made with federal funds, the
order is considered received when federal funds are received by Fifth Third
Bank. Federal funds should be wired to Fifth Third Bank as follows: ABA No. 042
000 314 Fifth Third Cincinnati. Attention: Fountain Square Funds Department; For
Credit to: (shareholder name and account number); For Further Credit to:
Fountain Square Government Cash Reserves Fund -- Investment Shares. Investors
not purchasing through Fifth Third Bank should consult their financial
institution for wiring instructions.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Shares is $1,000. Subsequent investments must
be in amounts of at least $50. For customers of Fifth Third Bank, an
institutional investor's minimum investment will be calculated by combining all
accounts it maintains with Fifth Third Bank and investments in the Fund.
The minimum investment requirements do not apply with respect to accounts that
have been established to automatically invest cash accumulations in the Fund.
Investors participating in such arrangements may be charged separate fees by the
financial institution that provides this service, and should read this
prospectus along with their financial institution's agreement or other
literature relating to this service.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. The Fund does not impose a sales charge.
The net asset value is determined at 4:00 p.m. (Cincinnati time), Monday through
Friday, except on: (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; or (iii) the following
holidays: New Year's Day, Martin Luther King Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans' Day,
Thanksgiving Day, and Christmas Day.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Fifth Third Bank maintains a share account for
each shareholder of record. Share certificates are not issued.
Detailed statements that include account balances, information on each purchase
or redemption, and a report of dividends paid during the month are sent to each
shareholder monthly and will serve as confirmations of all transactions in the
shareholder's account for the statement period.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends will be reinvested on
payment dates in additional Shares unless cash payments are requested by writing
to the Fund or Fifth Third Bank, as appropriate. Share purchase orders received
by Fifth Third Bank before 12:00 noon (Cincinnati time) earn dividends that day.
CAPITAL GAINS
If the Fund experiences capital gains, it could result in an increase in
dividends. Capital losses could result in a decrease in dividends. If, for some
extraordinary reason, the Fund realizes net long-term capital gains, it will
distribute them at least once every 12 months.
EXCHANGES
- --------------------------------------------------------------------------------
Shareholders who are clients of Fifth Third Securities may exchange shares of
one Fund for shares of any of the other funds in the Trust by calling Fifth
Third Securities at (513) 744-8888 in Cincinnati or toll free (800) 334-0483 or
sending a written request to Fifth Third Securities. Telephone exchange
instructions may be recorded. If reasonable procedures are not followed by the
Funds, they may be liable for losses due to unauthorized or fraudulent telephone
instructions.
Shares of Funds with a sales charge may be exchanged at net asset value for
shares of other Funds with an equal sales charge or no sales charge. Shares of
Funds with no sales charge acquired by direct purchase or reinvestment of
dividends on such shares may be exchanged for shares of Funds with a sales
charge at net asset value plus the applicable sales charge. When exchanging into
and out of shares of the Funds in the Trust, shareholders who have paid a sales
load once upon purchasing shares of any Fund will not have to pay a sales load
again on an exchange.
Orders for exchanges of shares of money market funds must be received by 12:00
noon (Cincinnati time). Orders for exchanges of the International Equity Fund,
Government Fund, Bond Fund, Ohio Tax Free Fund, Growth Fund, Mid Cap Fund, and
Balanced Fund must be received by 4:00 p.m. (Cincinnati time). Orders for
exchanges are taken on any day that the Funds are open for business. Orders
which are received prior to the cut-off times listed above will be executed as
of the close of business that day. Orders received after the respective cut-off
times will be executed at the close of the next business day.
An excessive number of exchanges may be disadvantageous to the Trust. Therefore
the Trust, in addition to its right to reject any exchange, reserves the right
to modify or terminate the exchange privilege at any time. Shareholders would be
notified prior to any modification or termination.
An exchange order must comply with the requirements for a redemption and must
specify the dollar value or number of shares to be exchanged. Exchanges are
subject to the minimum initial investment requirement of the Fund being
acquired. An exchange constitutes a sale for federal income tax purposes.
The exchange privilege is only available in states where shares of the Fund
being acquired may legally be sold. Before the exchange, a shareholder must
receive a prospectus of the Fund for which the exchange is being made.
REDEEMING INVESTMENT SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value next determined after Fifth
Third Bank receives the redemption request. Redemptions will be made on days on
which the Fund computes its net asset value. Telephone or written requests for
redemption must be received in proper form and can be made through Fifth Third
Bank or Fifth Third Securities.
THROUGH FIFTH THIRD SECURITIES
BY TELEPHONE. A shareholder who is a customer of Fifth Third Securities may
redeem shares by telephoning Fifth Third Securities at (513) 744-8888 in
Cincinnati or toll-free (800) 334-0483. All other investors may redeem through
Federated Securities Corp. by calling 1-800-358-2801 until December 1, 1995.
Effective December 1, 1995, all other investors may redeem through BISYS Fund
Services L.P. at 1-800-554-3862.
For calls received by Fifth Third Securities before 12:00 noon (Cincinnati
time), proceeds will normally be dispersed the same day to the shareholder's
account at Fifth Third Bank or Fifth Third Securities, or a check will be sent
to the address of record. Those Shares will not be entitled to the dividend
declared that day. For calls received after 12:00 noon (Cincinnati time),
proceeds will normally be dispersed the following business day. Those Shares
will be entitled to the dividend declared on the day the redemption request was
received. In no event will proceeds be dispersed more than seven days after a
proper request for redemption has been received. If at any time the Fund shall
determine it necessary to terminate or modify this method of redemption,
shareholders would be promptly notified.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Fifth Third Securities or the distributor.
Telephone redemption instructions may be recorded. If reasonable procedures are
not followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as "By Mail," should be considered.
BY MAIL. A shareholder who is a customer of Fifth Third Securities may redeem
Shares by sending a written request to Fifth Third Securities.
The written request should include the shareholder's name, the Fund name and
class of shares, the account number, and the share or dollar amount requested.
If share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request.
Shareholders should call Fifth Third Bank or Fifth Third Securities for
assistance in redeeming by mail.
Shareholders requesting a redemption of $50,000 or more, a redemption of any
amount to be sent to an address other than that on record with the Fund, or a
redemption payable other than to the shareholder of record must have signatures
on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund, which is administered by the Federal Deposit Insurance
Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
- a savings and loan association or a savings bank whose deposits are
insured by the Savings Association Insurance Fund, which is administered
by the FDIC; or
- any other "eligible guarantor institution," as defined by the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed to the
shareholder within one business day, but in no event more than seven days, after
receipt of a proper written redemption request, provided the Fund or its agents
have received payment for shares from the distributor.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if, due to
shareholder redemptions, the account balance falls below the required minimum
value of $1,000.
Before redeeming Shares to close an account, the Fund will notify the
shareholder in writing and allow the shareholder 30 days to purchase additional
Shares to meet the minimum requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each Fund in the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only shares of that Fund or class are
entitled to vote. As a Massachusetts business trust, the Trust is not required
to hold annual shareholder meetings. Shareholder approval will be sought only
for certain changes in the Trust or the Fund's operation and for the election of
Trustees under certain circumstances. As of July 31, 1995, Fifth Third Bank may
for certain purposes be deemed to control the Funds because it is owner of
record of certain shares of the Funds.
Trustees may be removed by a two-thirds vote of the number of Trustees prior to
such removal or by a two-thirds vote of the shareholders at a special meeting.
The Trustees shall call a special meeting of
shareholders upon the written request of shareholders owning at least 10% of the
Trust's outstanding shares of all series entitled to vote.
MASSACHUSETTS LAW
Under certain circumstances, shareholders may be held personally liable under
Massachusetts law for acts or obligations of the Trust on behalf of the Fund. To
protect shareholders of the Fund, the Trust has filed legal documents with
Massachusetts that expressly disclaim the liability of shareholders of the Fund
for such acts or obligations of the Trust. These documents require inclusion of
this disclaimer to be given in each agreement, obligation, or instrument the
Trust or its Trustees enter into or sign on behalf of the Fund.
In the unlikely event a shareholder of the Fund is held personally liable for
the Trust's obligations on behalf of the Fund, the Trust is required by the
Declaration of Trust to use the property of the Fund to protect or to compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder of the Fund for any act or obligation of the
Trust on behalf of the Fund. Therefore, financial loss resulting from liability
as a shareholder of the Fund will occur only if the Trust cannot meet its
obligations to indemnify shareholders and to pay judgments against them from the
assets of the Fund.
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations presently prohibit
a bank holding company registered under the Federal Bank Holding Company Act of
1956 or any affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company continuously engaged in the issuance of
its shares, and from issuing, underwriting, selling or distributing securities
in general. Such laws and regulations do not prohibit such a holding company or
affiliate from acting as investment adviser, transfer agent or custodian to such
an investment company or from purchasing shares of such a company as agent for
and upon the order of their customer. The Fund's investment adviser, Fifth Third
Bank, is subject to such banking laws and regulations.
Fifth Third Bank believes that it may perform the investment advisory services
for the Fund contemplated by its advisory agreement with the Trust without
violating the Glass-Steagall Act or other applicable banking laws or
regulations. Changes in either federal or state statutes and regulations
relating to the permissible activities of banks and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of present or future statutes and regulations, could prevent
Fifth Third Bank from continuing to perform all or a part of the above services
for its customers and/or the Fund. In such event, changes in the operation of
the Fund may occur, including the possible alteration or termination of any
automatic or other Fund share investment and redemption services then being
provided by Fifth Third Bank, and the Trustees would consider alternative
investment advisers and other means of continuing available investment services.
It is not expected that Fund shareholders would suffer any adverse financial
consequences (if another adviser with equivalent abilities to Fifth Third Bank
is found) as a result of any of these occurrences.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios, if any, will not be combined for tax purposes with
those realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional shares.
STATE AND LOCAL TAXES
The Fund intends to limit its investments to U.S. government securities paying
interest which, if owned directly by shareholders of the Fund, would generally
be exempt from state personal income tax. However, from time to time, the Fund
may also invest in other U.S. government securities if the Adviser deems it
advantageous to do so. Moreover, under the laws of some states, the net
investment income generally distributed by the Fund may be taxable to
shareholders. State laws differ on this issue, and shareholders are urged to
consult their own tax advisers regarding the status of their accounts under
state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its yield and effective yield for
Investment Shares.
The yield of Investment Shares represents the annualized rate of income earned
on an investment in Investment Shares over a seven-day period. It is the
annualized dividends earned during the period on the investment, shown as a
percentage of the investment. The effective yield is calculated similarly to the
yield, but, when annualized, the income earned by an investment in Investment
Shares is assumed to be reinvested daily. The effective yield will be slightly
higher than the yield because of the compounding effect of this assumed
reinvestment.
Advertisements and other sales literature may also refer to total return. Total
return represents the change, over a specified period of time, in the value of
an investment in Investment Shares after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
Yield and effective yield will be calculated separately for Trust Shares and
Investment Shares. Because Investment Shares are subject to 12b-1 fees, the
yield and effective yield of Trust Shares, for the same period, will exceed that
of Investment Shares.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Trust Shares are sold to trust customers of Fifth Third Bank and are subject to
a minimum initial investment of $1,000. Trust Shares are sold at net asset value
and are distributed without a Rule 12b-1 Plan.
Financial institutions and brokers providing sales and/or administrative
services may receive different compensation from one class of shares than from
another class of shares.
The amount of dividends payable to Trust Shares will exceed those payable to
Investment Shares by the difference between class expenses and distribution
expenses borne by shares of each respective class.
The stated advisory fee is the same for both classes of shares.
To obtain more information and a prospectus for Trust Shares, investors may call
(513) 744-8888 in Cincinnati or toll free (800) 334-0483.
FOUNTAIN SQUARE GOVERNMENT CASH RESERVES FUND
PORTFOLIO OF INVESTMENTS
JULY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
SHORT-TERM OBLIGATIONS--100.2%
- ------------------------------------------------------------------------------------
$44,250,000 * Federal Farm Credit Bank Discount Notes, 5.663%-8.101%,
8/1/1995-11/9/1995 $ 43,928,382
----------------------------------------------------------------
5,000,000 ** Federal Farm Credit Bank Floating Rate Note, 5.935%, 2/26/1996 4,993,628
----------------------------------------------------------------
74,900,000 * Federal Home Loan Bank Discount Notes, 5.683%-8.177%,
8/7/1995-11/20/1995 74,157,399
----------------------------------------------------------------
5,000,000 ** Federal Home Loan Bank Floating Rate Notes, 5.75%, 12/15/1995 5,000,241
----------------------------------------------------------------
5,000,000 Federal Home Loan Bank Fixed Rate Notes, 5.82%, 10/19/1995 4,997,269
----------------------------------------------------------------
4,000,000 * Student Loan Marketing Association Discount Note, 5.80%,
9/20/1995 3,968,889
----------------------------------------------------------------
15,000,000 ** Student Loan Marketing Association Floating Rate Notes,
5.67%-5.88%, 8/10/1995-12/14/1995 15,000,000
----------------------------------------------------------------
23,600,000 ** Student Loan Marketing Association Master Note 5.79%, 8/1/1995 23,600,000
---------------------------------------------------------------- ------------
TOTAL INVESTMENTS, AT AMORTIZED COST AND VALUE $175,645,808+
---------------------------------------------------------------- ------------
</TABLE>
* Each issue shows the rate of discount at the time of purchase.
** Current rate and next demand date shown.
+ Also represents cost for federal tax purposes.
Note: The category of investments is shown as a percentage of net assets
($175,328,820) at
July 31, 1995.
(See Notes which are an integral part of the Financial Statements)
FOUNTAIN SQUARE GOVERNMENT CASH RESERVES FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------
Investments in securities, at amortized cost and value $175,645,808
- -------------------------------------------------------------------------------
Cash 32,091
- -------------------------------------------------------------------------------
Income receivable 543,243
- -------------------------------------------------------------------------------
Deferred expenses 5,572
- ------------------------------------------------------------------------------- ------------
Total assets 176,226,714
- -------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------
Dividends payable 799,670
- --------------------------------------------------------------------
Payable to Adviser 46,164
- --------------------------------------------------------------------
Accrued expenses 52,060
- -------------------------------------------------------------------- --------
Total liabilities 897,894
- ------------------------------------------------------------------------------- ------------
NET ASSETS for 175,328,820 shares of beneficial interest outstanding $175,328,820
- ------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
Trust Shares ($129,603,214 / 129,603,214 shares of beneficial interest
outstanding) $1.00
- ------------------------------------------------------------------------------- ------------
Investment Shares ($45,725,606 / 45,725,606 shares of beneficial interest
outstanding) $1.00
- ------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FOUNTAIN SQUARE GOVERNMENT CASH RESERVES FUND
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------
Interest income $8,570,187
- ------------------------------------------------------------------------------------
EXPENSES:
- ------------------------------------------------------------------------------------
Investment advisory fee $ 604,802
- ----------------------------------------------------------------------
Administrative personnel and services fee 166,528
- ----------------------------------------------------------------------
Custodian fee 8,917
- ----------------------------------------------------------------------
Portfolio accounting, transfer and dividend disbursing agent fees
and expenses 41,559
- ----------------------------------------------------------------------
Director's/Trustee's fees 2,837
- ----------------------------------------------------------------------
Auditing fees 13,066
- ----------------------------------------------------------------------
Legal fees 1,192
- ----------------------------------------------------------------------
Fund share registration costs 39,935
- ----------------------------------------------------------------------
Printing and postage 14,143
- ----------------------------------------------------------------------
Insurance premiums 6,625
- ----------------------------------------------------------------------
Distribution services fee 101,919
- ----------------------------------------------------------------------
Miscellaneous 8,861
- ---------------------------------------------------------------------- ----------
Total expenses 1,010,384
- ----------------------------------------------------------------------
Deduct--
- ----------------------------------------------------------------------
Waiver of investment advisory fee $152,445
- -----------------------------------------------------------
Waiver of distribution services fee 101,919 254,364
- ----------------------------------------------------------- -------- ----------
Net expenses 756,020
- ------------------------------------------------------------------------------------ ----------
Net investment income $7,814,167
- ------------------------------------------------------------------------------------ ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FOUNTAIN SQUARE GOVERNMENT CASH RESERVES FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
------------------------------
1995 1994
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------
Net investment income $ 7,814,167 $ 3,502,654
- --------------------------------------------------------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------
Dividends to shareholders from net investment income:
- ---------------------------------------------------------------
Trust Shares (6,273,259) (3,237,670)
- ---------------------------------------------------------------
Investment Shares (1,540,908) (264,984)
- --------------------------------------------------------------- ------------- -------------
Change in net assets from distributions to shareholders (7,814,167) (3,502,654)
- --------------------------------------------------------------- ------------- -------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- ---------------------------------------------------------------
Proceeds from sale of shares 267,323,856 248,288,040
- ---------------------------------------------------------------
Cost of shares redeemed (209,700,168) (234,498,643)
- --------------------------------------------------------------- ------------- -------------
Change in net assets from Fund share transactions 57,623,688 13,789,397
- --------------------------------------------------------------- ------------- -------------
Change in net assets 57,623,688 13,789,397
- ---------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------
Beginning of period 117,705,132 103,915,735
- --------------------------------------------------------------- ------------- -------------
End of period $ 175,328,820 $ 117,705,132
- --------------------------------------------------------------- ------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FOUNTAIN SQUARE GOVERNMENT CASH RESERVES FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Fountain Square Funds (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end management investment
company. The Trust consists of nine diversified portfolios and one
non-diversified portfolio. The financial statements included herein are only
those of Fountain Square Government Cash Reserves Fund (the "Fund"). The
financial statements of the other portfolios are presented separately. The
assets of each portfolio are segregated and a shareholder's interest is limited
to the portfolio in which shares are held. The Fund offers two classes of
shares: Trust Shares and Investment Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A.INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
B.INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Distributions
to shareholders are recorded on the ex-dividend date.
C.FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
D.WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
valued daily and begin earning interest on the settlement date.
E.DEFERRED EXPENSES--The costs incurred by the Fund with respect to registration
of its shares in its first fiscal year, excluding the initial expense of
registering its shares, have been deferred and are being amortized using the
straight-line method not to exceed a period of five years from the Fund's
commencement date.
F.OTHER--Investment transactions are accounted for on the trade date.
FOUNTAIN SQUARE GOVERNMENT CASH RESERVES FUND
- --------------------------------------------------------------------------------
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At July 31, 1995, capital paid-in aggregated $175,328,820.
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-----------------------------
TRUST SHARES 1995 1994
- --------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 195,672,222 226,131,178
- ---------------------------------------------------------------
Shares redeemed (172,701,456) (212,491,332)
- --------------------------------------------------------------- ------------ ------------
Net change resulting from Trust share transactions 22,970,766 13,639,846
- --------------------------------------------------------------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT SHARES
- ---------------------------------------------------------------
<S> <C> <C>
Shares sold 71,651,634 22,156,862
- ---------------------------------------------------------------
Shares redeemed (36,998,712) (22,007,311)
- --------------------------------------------------------------- ------------ ------------
Net change resulting from Investment share transactions 34,652,922 149,551
- --------------------------------------------------------------- ------------ ------------
Net change resulting from Fund share transactions 57,623,688 13,789,397
- --------------------------------------------------------------- ------------ ------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Fifth Third Bank, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
0.40 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive a portion of its fee. The Adviser can modify or terminate this
voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waive a portion of its fee.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
compensate Federated Securities Corp. ("FSC"), the principal distributor, from
the net assets of the Fund's Investment Shares to finance activities intended to
result in the sale of the Fund's Investment Shares. The Plan provides that the
Fund may incur distribution expenses up to 0.35 of 1% of the average daily net
assets of the Investment Shares, annually, to compensate FSC. The distributor
may voluntarily choose to waive all or a portion of its fee. The distributor can
modify or terminate this voluntary waiver at any time at its sole discretion.
FOUNTAIN SQUARE GOVERNMENT CASH RESERVES FUND
- --------------------------------------------------------------------------------
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES, PORTFOLIO ACCOUNTING
AND CUSTODIAN FEES--Fifth Third Bank serves as transfer and dividend disbursing
agent for the Fund for which it receives a fee. Fifth Third Bank sub-contracts
the execution of the transfer and dividend disbursing agent functions to a
non-affiliated entity. The fee is based on the level of the Fund's average net
assets for the period, plus out-of-pocket expenses.
Fifth Third Bank maintains the Fund's accounting records for which it receives a
fee. Fifth Third Bank sub-contracts the execution of the accounting services
function to a non-affiliated entity. The fee is based on the level of the Fund's
average net assets for the period, plus out-of-pocket expenses.
Fifth Third Bank is the Fund's custodian for which it receives a fee. The fee is
based on the level of the Fund's average net assets for the period, plus
out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $30,604 were initially borne
by FAS. The Fund has agreed to reimburse FAS for the organizational expenses
during the five year period following July 10, 1991 (Fund's date of initial
public investment). For the year ended July 31, 1995, the Fund paid $6,604,
pursuant to this agreement.
Certain of the Officers and Trustees of the Trust are Officers and Trustees of
the above companies.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
FOUNTAIN SQUARE FUNDS:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Fountain Square Government Cash Reserves Fund
(one of the portfolios comprising Fountain Square Funds), as of July 31, 1995,
and the related statement of operations for the year then ended, and statement
of changes in net assets and financial highlights for the periods presented
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of 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 securities owned as of July
31, 1995, 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
Fountain Square Government Cash Reserves Fund at July 31, 1995, the results of
its operations for the year then ended, and the changes in its net assets and
financial highlights for the periods presented therein, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
September 15, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Fountain Square Government Fountain Square Funds
Cash Reserves Fund c/o Fifth Third Bank
Investment Shares 38 Fountain Square Plaza
Cincinnati, Ohio 45263
- -------------------------------------------------------------------------------------------------
Investment Adviser
Fifth Third Bank 38 Fountain Square Plaza
Cincinnati, Ohio 45263
- -------------------------------------------------------------------------------------------------
Custodian, Transfer Agent, and Dividend Disbursing Agent
Fifth Third Bank 38 Fountain Square Plaza
Cincinnati, Ohio 45263
- -------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania 15219
- -------------------------------------------------------------------------------------------------
</TABLE>
FOUNTAIN SQUARE GOVERNMENT CASH RESERVES FUND
TRUST SHARES
[LOGO]
FOUNTAIN SQUARE FUNDS
PROSPECTUS
[LOGO]
FIFTH THIRD BANK
INVESTMENT ADVISER
Cusip 350756409
1041201A-I (9/95)
65-0919
FOUNTAIN SQUARE GOVERNMENT
CASH RESERVES FUND
(A PORTFOLIO OF FOUNTAIN SQUARE FUNDS)
TRUST SHARES
PROSPECTUS
The Trust Shares of Fountain Square Government Cash Reserves Fund (the "Fund")
offered by this prospectus represent interests in a diversified portfolio of
securities which is one of a series of investment portfolios in Fountain Square
Funds (the "Trust"), an open-end management investment company (a mutual fund).
The Fund is a money market fund which invests in short-term U.S. government
securities to achieve high current income consistent with stability of principal
and liquidity. The Fund intends to limit its investments to those U.S.
government securities whose interest is generally exempt from personal income
tax in the various states if owned directly. Please see the "Tax Information"
section of this prospectus.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF FIFTH
THIRD BANK, ARE NOT ENDORSED OR GUARANTEED BY FIFTH THIRD BANK, AND ARE NOT
INSURED, OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. THE FUND ATTEMPTS TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE NO ASSURANCE THAT THE
FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in Trust Shares of the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information for Trust
Shares and Investment Shares, dated September 30, 1995, with the Securities and
Exchange Commission. The information contained in the Combined Statement of
Additional Information is incorporated by reference into this prospectus. You
may request a copy of the Combined Statement of Additional Information free of
charge, obtain other information or make inquiries about the Fund by writing to
the Fund or calling (513) 579-6039 in Cincinnati or toll-free (800) 654-5372.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated September 30, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--TRUST SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Acceptable Investments 3
When-Issued and Delayed Delivery
Transactions 4
Investment Limitations 4
FOUNTAIN SQUARE FUNDS INFORMATION 4
- ------------------------------------------------------
Management of the Trust 4
Board of Trustees 4
Investment Adviser 4
Advisory Fees 5
Adviser's Background 5
Distribution of Trust Shares 5
Payments to Financial Institutions 5
Administration of the Fund 6
Administrative Services 6
Custodian, Transfer Agent, and
Dividend Disbursing Agent 6
Independent Auditors 7
NET ASSET VALUE 7
- ------------------------------------------------------
INVESTING IN TRUST SHARES 7
- ------------------------------------------------------
Share Purchases 7
Through Fifth Third Bank 7
Minimum Investment Required 7
What Shares Cost 8
Certificates and Confirmations 8
Dividends 8
Capital Gains 8
EXCHANGES 8
- ------------------------------------------------------
REDEEMING TRUST SHARES 9
- ------------------------------------------------------
Through Fifth Third Bank 9
By Telephone 9
By Mail 10
Receiving Payment 10
Accounts with Low Balances 10
SHAREHOLDER INFORMATION 11
- ------------------------------------------------------
Voting Rights 11
Massachusetts Law 11
EFFECT OF BANKING LAWS 11
- ------------------------------------------------------
TAX INFORMATION 12
- ------------------------------------------------------
Federal Income Tax 12
State and Local Taxes 12
PERFORMANCE INFORMATION 13
- ------------------------------------------------------
OTHER CLASSES OF SHARES 13
- ------------------------------------------------------
FINANCIAL STATEMENTS 14
- ------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS 21
- ------------------------------------------------------
ADDRESSES 22
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
TRUST SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)..................................................................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)........................................ None
Contingent Deferred Sales Charge (as a percentage of original purchase price
or
redemption proceeds, as applicable)........................................ None
Redemption Fee (as a percentage of amount redeemed, if applicable)........... None
Exchange Fee................................................................. None
ANNUAL TRUST SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)............................................. 0.30%
12b-1 Fee (after waiver)..................................................... None
Total Other Expenses......................................................... 0.20%
Total Trust Shares Operating Expenses(2)................................ 0.50%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver by the
investment adviser. The adviser can terminate this voluntary waiver at any time
at its sole discretion. The maximum management fee is 0.40%.
(2) Total Trust Shares operating expenses would have been 0.60% absent the
voluntary waiver by the investment adviser.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF TRUST SHARES WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "FOUNTAIN SQUARE FUNDS INFORMATION" AND "INVESTING IN TRUST
SHARES." Wire-transferred redemptions of less than $10,000 may be subject to
additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
------- -------- -------- ---------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period. The Fund
charges no redemption fees for Trust Shares............. $5 $16 $28 $63
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FOUNTAIN SQUARE GOVERNMENT CASH RESERVES FUND
FINANCIAL HIGHLIGHTS--TRUST SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young LLP, Independent Auditors, on
page 21.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
--------------------------------------------------
1995 1994 1993 1992 1991*
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------
Net investment income 0.05 0.03 0.03 0.04 0.003
- -------------------------------------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
- --------------------------------------
Dividends to shareholders from net
investment income (0.05) (0.03) (0.03) (0.04) (0.003)
- -------------------------------------- ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------- ------ ------ ------ ------ ------
TOTAL RETURN** 5.22% 3.03% 2.76% 4.19% 0.33%
- --------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------
Expenses 0.50% 0.50% 0.50% 0.50% 0.30%(b)
- --------------------------------------
Net investment income 5.17% 3.01% 3.22% 4.14% 5.49%(b)
- --------------------------------------
Expense waiver/reimbursement (a) 0.10% 0.13% 0.15% 0.15% 0.53%(b)
- --------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------
Net assets, end of period
(000 omitted) $129,603 $106,632 $92,993 $82,888 $87,097
- --------------------------------------
</TABLE>
* Reflects operations for the period from July 10, 1991 (date of initial public
investment) to
July 31, 1991.
** Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 15, 1988. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. As of the date of this prospectus, the Board of
Trustees ("Trustees") have established two classes of shares of the Fund, known
as Trust Shares and Investment Shares. This prospectus relates only to the Trust
Shares of the Fund.
Trust Shares ("Shares") are designed for Trust clients of The Fifth Third Bank
("Fifth Third Bank") and its affiliates as a convenient means of accumulating an
interest in a professionally managed, diversified portfolio limited to U.S.
government obligations. A minimum initial investment of $1,000 is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is high current income consistent with
stability of principal and liquidity. This investment objective cannot be
changed without approval of shareholders. While there is no assurance that the
Fund will achieve its investment objective, it endeavors to do so by following
the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
short-term U.S. government securities maturing in 13 months or less. The average
maturity of U.S. government securities in the Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less. Unless indicated otherwise, the
investment policies may be changed by the Trustees without approval of
shareholders. Shareholders will be notified before any material changes in these
policies become effective.
The Fund intends to limit its investments to those U.S. government securities
whose interest is generally exempt from personal income tax in the various
states if owned directly. However, from time to time, the Fund may also invest
in other U.S. government securities if the adviser deems it advantageous to do
so. Please see the "Tax Information" section of this prospectus.
ACCEPTABLE INVESTMENTS. The U.S. government securities in which the Fund invests
are either issued or guaranteed by the U.S. government, its agencies, or
instrumentalities. These securities include, but are not limited to:
- direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds; and
- notes, bonds, and discount notes of U.S. government agencies or
instrumentalities, such as the: Farm Credit Banks; Federal Home Loan
Banks; and Student Loan Marketing Association.
Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government are backed by the full faith and credit of the U.S. Treasury. No
assurances can be given that the U.S. government will provide financial support
to other agencies or instrumentalities since it is not obligated to do so. These
agencies and instrumentalities are supported by:
- the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;
- discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or
- the credit of the agency or instrumentality.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase U.S.
government securities on a when-issued or delayed delivery basis. These
transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause the Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. Accordingly, the Fund may pay more
or less than the market value of the securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the Fund's adviser
deems it appropriate to do so. In addition, the Fund may enter into transactions
to sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or pledge securities except, under
certain circumstances, the Fund may borrow up to one-third of the value of its
total assets and pledge up to 10% of the value of its total assets to secure
such borrowings.
The above investment limitation cannot be changed without shareholder approval.
The following limitation, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in this limitation becomes effective.
The Fund will not commit more than 10% of its net assets to illiquid
obligations.
FOUNTAIN SQUARE FUNDS INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees are
responsible for managing the Trust's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust,
investment decisions for the Fund are made by Fifth Third Bank, the Fund's
investment adviser (the "Adviser"), subject to direction by the Trustees. The
Adviser continually conducts investment research and
supervision for the Fund and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the Fund.
ADVISORY FEES. The Adviser receives an annual investment advisory fee equal
to 0.40 of 1% of the Fund's average daily net assets. The Adviser has
undertaken to waive up to the amount of the advisory fee, for operating
expenses in excess of limitations established by certain states. The
Adviser may voluntarily choose to waive a portion of its fee or reimburse
other expenses of the Fund, but reserves the right to terminate such waiver
or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Fifth Third Bank, an Ohio state chartered bank, is a
wholly-owned subsidiary of Fifth Third Bancorp, a bank holding company
organized under the laws of Ohio. Fifth Third Bank is a commercial bank
offering a wide range of banking services to its customers. As of July 31,
1995, Fifth Third Bank and its affiliates managed assets in excess of $7.8
billion on a discretionary basis and provided custody services for
additional assets in excess of $67.2 billion. Fifth Third Bank has managed
mutual funds since 1988.
Fifth Third Bank has managed pools of commingled funds since 1953.
Currently, the Trust and Investment Division manages 14 such pools with
total assets of over $1.11 billion.
As part of their regular banking operations, Fifth Third Bank may make
loans to public companies. Thus, it may be possible, from time to time, for
the Fund to hold or acquire the securities of issuers which are also
lending clients of Fifth Third Bank. The lending relationship will not be a
factor in the selection of securities.
DISTRIBUTION OF TRUST SHARES
Until December 1, 1995, Federated Securities Corp. serves as the principal
distributor for shares of the Fund. It is a Pennsylvania corporation organized
on November 14, 1969, and is the distributor for a number of investment
companies. Federated Securities Corp., a subsidiary of Federated Investors, is
located at Federated Investors Tower, Pittsburgh, PA 15222-3779.
Effective December 1, 1995, BISYS Fund Services L.P. will serve as the
distributor for the Trust. BISYS Fund Services L.P. is wholly-owned by BISYS
Group, Inc., 150 Clove Road, Little Falls, NJ 07424, a publicly owned company
engaged in information processing and recordkeeping services to and through
banking and other financial organizations.
PAYMENTS TO FINANCIAL INSTITUTIONS. The distributor, the Adviser, or their
affiliates may offer to pay a fee from their own assets to financial
institutions as financial assistance for providing substantial marketing and
sales support. The support may include initiating customer accounts, providing
sales literature, or participating in sales, educational and training seminars
(including those held at recreational facilities). Such assistance will be
predicated upon the amount of shares the financial institution sells or may sell
and/or upon the type and nature of sales or marketing support furnished by the
financial institution. Any payments made by the distributor may be reimbursed by
the Adviser or its affiliates.
The Glass-Steagall Act limits the ability of a depository institution (such as a
commercial bank or a savings and loan association) to become an underwriter or
distributor of most securities. In the event
the Glass-Steagall Act is deemed to prohibit depository institutions from acting
in the capacities described above or should Congress relax current restrictions
on depository institutions, the Trustees will consider appropriate changes in
the administrative services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Until December 1, 1995, Federated Administrative
Services, a subsidiary of Federated Investors, provides the Fund with certain
administrative personnel and services necessary to operate the Fund, such as
legal and accounting services. Federated Administrative Services provides these
at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
- ------------------- ------------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least $50,000
per Fund. Federated Administrative Services may choose voluntarily to waive a
portion of its fee at any time.
Effective December 1, 1995, BISYS Fund Services L.P. will serve as the
administrator. The administrator generally assists in all aspects of the Trust's
administration and operation including providing the Funds with certain
administrative personnel and services necessary to operate the Funds, such as
legal and accounting services. BISYS Fund Services L.P. provides these at an
annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY NET
ADMINISTRATIVE FEE ASSETS OF THE TRUST
- ------------------- ------------------------------------
<S> <C>
.10% of the first $1 billion
.08% of the next $1 billion
.07% in excess of $2 billion
</TABLE>
The administrator may periodically waive all or a portion of its administrative
fee which will cause the yield of a Fund to be higher than it would otherwise be
in the absence of such a waiver.
Effective December 1, 1995, pursuant to a separate agreement with BISYS Fund
Services L.P., Fifth Third Bank performs sub-administration services on behalf
of the Fund including providing certain administrative personnel and services
necessary to operate the Fund for which it receives a fee from BISYS Fund
Services L.P. computed daily and paid periodically calculated at an annual rate
of 0.025% of average daily net assets.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Fifth Third Bank,
Cincinnati, Ohio, is custodian for the securities and cash of the Fund, transfer
agent for the shares of the Fund, and dividend disbursing agent for the Fund.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Ernst & Young
LLP, Pittsburgh, Pennsylvania.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The net asset value
per Share is determined by adding the interest of the Shares in the value of all
securities and other assets of the Fund, subtracting the interest of the Shares
in liabilities of the Fund and those attributable to Shares, and dividing the
remainder by the total number of Shares outstanding. The Fund cannot guarantee
that its net asset value will always remain at $1.00 per Share.
INVESTING IN TRUST SHARES
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange and the Federal
Reserve Bank of Cleveland are open for business. A customer of Fifth Third Bank
may purchase Trust Shares of the Fund through Fifth Third Bank. All other
investors should purchase Trust Shares directly from the distributor. In
connection with the sale of Trust Shares, the distributor may from time to time
offer certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request. Purchases through Fifth Third
Bank may not be available to investors in all states.
THROUGH FIFTH THIRD BANK. A customer of Fifth Third Bank may telephone Fifth
Third Bank at (513) 579-6039 in Cincinnati or toll-free (800) 654-5372 to place
an order to purchase Trust Shares. All other investors must place their purchase
orders through the distributor. Texas residents must purchase Shares through
Federated Securities Corp. at 1-800-358-2801 until December 1, 1995. Effective
December 1, 1995, Texas residents must contact BISYS Fund Services L.P. at
1-800-554-3862.
Payment may be made to Fifth Third Bank either by check or federal funds. Orders
are considered received after payment by check is converted into federal funds
and received by Fifth Third Bank. This is normally the next business day after
Fifth Third Bank receives the check. When payment is made with federal funds,
the order is considered received when federal funds are received by Fifth Third
Bank. Federal funds should be wired to Fifth Third Bank as follows: ABA No. 042
000 314 Fifth Third Cincinnati. Attention: Fountain Square Funds Department; For
Credit to: (shareholder name and account number); For Further Credit to:
Fountain Square Government Cash Reserves Fund--Trust Shares. Investors not
purchasing through Fifth Third Bank should consult their financial institutions
for wiring instructions.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Shares is $1,000. Subsequent investments must
be in amounts of at least $50. For customers of Fifth Third Bank, an
institutional investor's minimum investment will be calculated by combining all
accounts it maintains with Fifth Third Bank and investments in the Fund.
The minimum investment requirements do not apply with respect to accounts that
have been established to automatically invest cash accumulations in the Fund.
Investors participating in such arrangements may be charged separate fees by the
financial institution that provides this service, and should read this
prospectus along with their financial institution's agreement or other
literature relating to this service.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. The Fund does not impose a sales charge.
The net asset value is determined at 4:00 p.m. (Cincinnati time), Monday through
Friday, except on: (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; or (iii) the following
holidays: New Year's Day, Martin Luther King Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans' Day,
Thanksgiving Day, and Christmas Day.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Fifth Third Bank maintains a share account for
each shareholder of record. Share certificates are not issued.
Detailed statements that include account balances, information on each purchase
or redemption, and a report of dividends paid during the month are sent to each
shareholder monthly and will serve as confirmations of all transactions in the
shareholder's account for the statement period.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends will be reinvested on
payment dates in additional Shares unless cash payments are requested by writing
to the Fund or Fifth Third Bank, as appropriate. Share purchase orders received
by Fifth Third Bank before 12:00 noon (Cincinnati time) earn dividends that day.
CAPITAL GAINS
If the Fund experiences capital gains, it could result in an increase in
dividends. Capital losses could result in a decrease in dividends. If, for some
extraordinary reason, the Fund realizes net long-term capital gains, it will
distribute them at least once every 12 months.
EXCHANGES
- --------------------------------------------------------------------------------
A shareholder who is a customer of the Fifth Third Bank Trust and Investment
Division may exchange shares of one Fund for shares of any of the other funds in
the Trust by calling or sending a written request to their Fifth Third Bank
Trust Officer. Telephone exchange instructions may be recorded. If reasonable
procedures are not followed by the Fund, they may be liable for losses due to
unauthorized or fraudulent telephone instructions.
Shares of Funds with a sales charge may be exchanged at net asset value for
shares of other Funds with an equal sales charge or no sales charge. Shares of
Funds with no sales charge acquired by direct purchase or reinvestment of
dividends on such shares may be exchanged for shares of Funds with a sales
charge at net asset value plus the applicable sales charge. When exchanging into
and out of shares of the Funds in the Trust, shareholders who have paid a sales
load once upon purchasing shares of any Fund will not have to pay a sales load
again on an exchange.
Orders for exchanges of shares of money market funds must be received by 12:00
noon (Cincinnati time). Orders for exchanges of the International Equity Fund,
Government Fund, Bond Fund, Ohio Tax-Free Fund, Growth Fund, Mid Cap Fund, and
Balanced Fund must be received by 4:00 p.m. (Cincinnati time). Orders for
exchanges are taken on any day that the Funds are open for business. Orders
which are received prior to the cut-off times listed above will be executed as
of the close of business that day. Orders received after the respective cut-off
times will be executed at the close of the next business day.
An excessive number of exchanges may be disadvantageous to the Trust. Therefore
the Trust, in addition to its right to reject any exchange, reserves the right
to modify or terminate the exchange privilege at any time. Shareholders would be
notified prior to any modification or termination.
An exchange order must comply with the requirements for a redemption and must
specify the dollar value or number of shares to be exchanged. Exchanges are
subject to the minimum initial investment requirement of the Fund being
acquired. An exchange constitutes a sale for federal income tax purposes.
The exchange privilege is only available in states where shares of the Fund
being acquired may legally be sold. Before the exchange, a shareholder must
receive a prospectus of the Fund for which the exchange is being made.
REDEEMING TRUST SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value next determined after Fifth
Third Bank receives the redemption request. Redemptions will be made on days on
which the Fund computes its net asset value. Telephone or written requests for
redemption must be received in proper form and can be made through Fifth Third
Bank.
THROUGH FIFTH THIRD BANK
BY TELEPHONE. A shareholder who is a customer of Fifth Third Bank may redeem
Shares by telephoning Fifth Third Bank at (513) 579-6039 in Cincinnati or
toll-free (800) 654-5372. For calls received by Fifth Third Bank before 12:00
noon (Cincinnati time), proceeds will normally be dispersed the same day to the
shareholder's account at Fifth Third Bank or a check will be sent to the address
of record. Those Shares will not be entitled to the dividend declared that day.
For calls received by Fifth Third Bank after 12:00 noon (Cincinnati time),
proceeds will normally be dispersed the following business day. Those Shares
will be entitled to the dividend declared on the day the redemption request was
received. In no event will proceeds be dispersed more than seven days after a
proper request for
redemption has been received. If at any time the Fund shall determine it
necessary to terminate or modify this method of redemption, shareholders would
be promptly notified.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Fifth Third Bank or the distributor.
Telephone redemption instructions may be recorded. If reasonable procedures are
not followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as "By Mail," should be considered.
BY MAIL. A shareholder who is a customer of Fifth Third Bank may redeem Shares
by sending a written request to Fifth Third Bank at the following address: 38
Fountain Square Plaza, Cincinnati, Ohio, 45263, Attn: Fountain Square Funds
Department. The written request should include the shareholder's name, the Fund
name and class of shares, the account number, and the share or dollar amount
requested. If share certificates have been issued, they must be properly
endorsed and should be sent by registered or certified mail with the written
request. Shareholders should call Fifth Third Bank for assistance in redeeming
by mail.
Shareholders requesting a redemption of $50,000 or more, a redemption of any
amount to be sent to an address other than that on record with the Fund, or a
redemption payable other than to the shareholder of record must have signatures
on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund, which is administered by the Federal Deposit Insurance
Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
- a savings and loan association or a savings bank whose deposits are
insured by the Savings Association Insurance Fund, which is administered
by the FDIC; or
- any other "eligible guarantor institution," as defined by the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed to the
shareholder within one business day, but in no event more than seven days, after
receipt of a proper redemption request, provided the Fund or its agents have
received payment for shares from the shareholder.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if, due to
shareholder redemptions, the account balance falls below the required minimum
value of $1,000.
Before redeeming Shares to close an account, the Fund will notify the
shareholder in writing and allow the shareholder 30 days to purchase additional
Shares to meet the minimum requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each Fund in the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only shares of that Fund or class are
entitled to vote. As a Massachusetts business trust, the Trust is not required
to hold annual shareholder meetings. Shareholder approval will be sought only
for certain changes in the Trust or the Fund's operation and for the election of
Trustees under certain circumstances. As of July 31, 1995, Fifth Third Bank may
for certain purposes be deemed to control the Funds because it is owner of
record of certain shares of the Funds.
Trustees may be removed by a two-thirds vote of the number of Trustees prior to
such removal or by a two-thirds vote of the shareholders at a special meeting.
The Trustees shall call a special meeting of shareholders upon the written
request of shareholders owning at least 10% of the Trust's outstanding shares of
all series entitled to vote.
MASSACHUSETTS LAW
Under certain circumstances, shareholders may be held personally liable under
Massachusetts law for acts or obligations of the Trust on behalf of the Fund. To
protect shareholders of the Fund, the Trust has filed legal documents with
Massachusetts that expressly disclaim the liability of shareholders of the Fund
for such acts or obligations of the Trust. These documents require inclusion of
this disclaimer to be given in each agreement, obligation, or instrument the
Trust or its Trustees enter into or sign on behalf of the Fund.
In the unlikely event a shareholder of the Fund is held personally liable for
the Trust's obligations on behalf of the Fund, the Trust is required by the
Declaration of Trust to use the property of the Fund to protect or to compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder of the Fund for any act or obligation of the
Trust on behalf of the Fund. Therefore, financial loss resulting from liability
as a shareholder of the Fund will occur only if the Trust cannot meet its
obligations to indemnify shareholders and to pay judgments against them from the
assets of the Fund.
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations presently prohibit
a bank holding company registered under the Federal Bank Holding Company Act of
1956 or any affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company continuously engaged in the issuance of
its shares, and from issuing, underwriting, selling or distributing securities
in general. Such laws and regulations do not prohibit such a holding company or
affiliate from acting as
investment adviser, transfer agent or custodian to such an investment company or
from purchasing shares of such a company as agent for and upon the order of
their customer. The Fund's investment adviser, Fifth Third Bank, is subject to
such banking laws and regulations.
Fifth Third Bank believes that it may perform the investment advisory services
for the Fund contemplated by its advisory agreement with the Trust without
violating the Glass-Steagall Act or other applicable banking laws or
regulations. Changes in either federal or state statutes and regulations
relating to the permissible activities of banks and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of present or future statutes and regulations, could prevent
Fifth Third Bank from continuing to perform all or a part of the above services
for its customers and/or the Fund. In such event, changes in the operation of
the Fund may occur, including the possible alteration or termination of any
automatic or other Fund share investment and redemption services then being
provided by Fifth Third Bank, and the Trustees would consider alternative
investment advisers and other means of continuing available investment services.
It is not expected that Fund shareholders would suffer any adverse financial
consequences (if another adviser with equivalent abilities to Fifth Third Bank
is found) as a result of any of these occurrences.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios, if any, will not be combined for tax purposes with
those realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional shares.
STATE AND LOCAL TAXES
The Fund intends to limit its investments to U.S. government securities paying
interest which, if owned directly by shareholders of the Fund, would generally
be exempt from state personal income tax. However, from time to time, the Fund
may also invest in other U.S. government securities if the Adviser deems it
advantageous to do so. Moreover, under the laws of some states, the net
investment income generally distributed by the Fund may be taxable to
shareholders. State laws differ on this issue, and shareholders are urged to
consult their own tax advisers regarding the status of their accounts under
state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its yield and effective yield for Trust
Shares.
The yield of Trust Shares represents the annualized rate of income earned on an
investment in Trust Shares over a seven-day period. It is the annualized
dividends earned during the period on the investment shown as a percentage of
the investment. The effective yield is calculated similarly to the yield, but,
when annualized, the income earned by an investment in Trust Shares is assumed
to be reinvested daily. The effective yield will be slightly higher than the
yield because of the compounding effect of this assumed reinvestment.
Advertisements and other sales literature may also refer to total return. Total
return represents the change, over a specified period of time, in the value of
an investment in Trust Shares after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed as
a percentage.
Yield and effective yield will be calculated separately for Trust Shares and
Investment Shares. Because Investment Shares are subject to 12b-1 fees, the
yield and effective yield of Trust Shares, for the same period, will exceed that
of Investment Shares.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Investment Shares are sold to investors who are not clients of the Trust
Department of Fifth Third Bank and are subject to a minimum initial investment
of $1,000. Investment Shares are sold at net asset value and are distributed
pursuant to a Rule 12b-1 Plan whereby the distributor is paid a fee of up to
0.35 of 1% of the Investment Shares' average daily net assets. Trust Shares are
distributed without a Rule 12b-1 Plan.
Financial institutions and brokers providing sales and/or administrative
services may receive different compensation from one class of shares than from
another class of shares.
The amount of dividends payable to Trust Shares will exceed those payable to
Investment Shares by the difference between class expenses and distribution
expenses borne by shares of each respective class.
The stated advisory fee is the same for both classes of shares.
To obtain more information and a prospectus for Investment Shares, investors may
call (513) 579-6039 in Cincinnati or toll free (800) 654-5372.
FOUNTAIN SQUARE GOVERNMENT CASH RESERVES FUND
PORTFOLIO OF INVESTMENTS
JULY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
SHORT-TERM OBLIGATIONS--100.2%
- ------------------------------------------------------------------------------------
$44,250,000 * Federal Farm Credit Bank Discount Notes, 5.663%-8.101%,
8/1/1995-11/9/1995 $ 43,928,382
----------------------------------------------------------------
5,000,000 ** Federal Farm Credit Bank Floating Rate Note, 5.935%, 2/26/1996 4,993,628
----------------------------------------------------------------
74,900,000 * Federal Home Loan Bank Discount Notes, 5.683%-8.177%,
8/7/1995-11/20/1995 74,157,399
----------------------------------------------------------------
5,000,000 ** Federal Home Loan Bank Floating Rate Notes, 5.75%, 12/15/1995 5,000,241
----------------------------------------------------------------
5,000,000 Federal Home Loan Bank Fixed Rate Notes, 5.82%, 10/19/1995 4,997,269
----------------------------------------------------------------
4,000,000 * Student Loan Marketing Association Discount Note, 5.80%,
9/20/1995 3,968,889
----------------------------------------------------------------
15,000,000 ** Student Loan Marketing Association Floating Rate Notes,
5.67%-5.88%, 8/10/1995-12/14/1995 15,000,000
----------------------------------------------------------------
23,600,000 ** Student Loan Marketing Association Master Note, 5.79%, 8/1/1995 23,600,000
---------------------------------------------------------------- ------------
TOTAL INVESTMENTS, AT AMORTIZED COST AND VALUE $175,645,808+
---------------------------------------------------------------- ------------
</TABLE>
* Each issue shows the rate of discount at the time of purchase.
** Current rate and next demand date shown.
+ Also represents cost for federal tax purposes.
Note: The category of investments is shown as a percentage of net assets
($175,328,820) at
July 31, 1995.
(See Notes which are an integral part of the Financial Statements)
FOUNTAIN SQUARE GOVERNMENT CASH RESERVES FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------
Investments in securities, at amortized cost and value $175,645,808
- -------------------------------------------------------------------------------
Cash 32,091
- -------------------------------------------------------------------------------
Income receivable 543,243
- -------------------------------------------------------------------------------
Deferred expenses 5,572
- ------------------------------------------------------------------------------- ------------
Total assets 176,226,714
- -------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------
Dividends payable 799,670
- --------------------------------------------------------------------
Payable to Adviser 46,164
- --------------------------------------------------------------------
Accrued expenses 52,060
- -------------------------------------------------------------------- --------
Total liabilities 897,894
- ------------------------------------------------------------------------------- ------------
NET ASSETS for 175,328,820 shares of beneficial interest outstanding $175,328,820
- ------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
Trust Shares ($129,603,214 / 129,603,214 shares of beneficial interest
outstanding) $1.00
- ------------------------------------------------------------------------------- ------------
Investment Shares ($45,725,606 / 45,725,606 shares of beneficial interest
outstanding) $1.00
- ------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FOUNTAIN SQUARE GOVERNMENT CASH RESERVES FUND
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------
Interest income $8,570,187
- ------------------------------------------------------------------------------------
EXPENSES:
- ------------------------------------------------------------------------------------
Investment advisory fee $ 604,802
- ----------------------------------------------------------------------
Administrative personnel and services fee 166,528
- ----------------------------------------------------------------------
Custodian fee 8,917
- ----------------------------------------------------------------------
Portfolio accounting, transfer and dividend disbursing agent fees
and expenses 41,559
- ----------------------------------------------------------------------
Director's/Trustee's fees 2,837
- ----------------------------------------------------------------------
Auditing fees 13,066
- ----------------------------------------------------------------------
Legal fees 1,192
- ----------------------------------------------------------------------
Fund share registration costs 39,935
- ----------------------------------------------------------------------
Printing and postage 14,143
- ----------------------------------------------------------------------
Insurance premiums 6,625
- ----------------------------------------------------------------------
Distribution services fee 101,919
- ----------------------------------------------------------------------
Miscellaneous 8,861
- ---------------------------------------------------------------------- ----------
Total expenses 1,010,384
- ----------------------------------------------------------------------
Deduct--
- -----------------------------------------------------------
Waiver of investment advisory fee $152,445
- -----------------------------------------------------------
Waiver of distribution services fee 101,919 254,364
- ----------------------------------------------------------- -------- ----------
Net expenses 756,020
- ------------------------------------------------------------------------------------ ----------
Net investment income $7,814,167
- ------------------------------------------------------------------------------------ ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FOUNTAIN SQUARE GOVERNMENT CASH RESERVES FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
------------------------------
1995 1994
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------
Net investment income $ 7,814,167 $ 3,502,654
- -------------------------------------------------------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------------------
Dividends to shareholders from net investment income:
- --------------------------------------------------------------
Trust Shares (6,273,259) (3,237,670)
- --------------------------------------------------------------
Investment Shares (1,540,908) (264,984)
- -------------------------------------------------------------- ------------- -------------
Change in net assets from distributions to shareholders (7,814,167) (3,502,654)
- -------------------------------------------------------------- ------------- -------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- --------------------------------------------------------------
Proceeds from sale of shares 267,323,856 248,288,040
- --------------------------------------------------------------
Cost of shares redeemed (209,700,168) (234,498,643)
- -------------------------------------------------------------- ------------- -------------
Change in net assets from Fund share transactions 57,623,688 13,789,397
- -------------------------------------------------------------- ------------- -------------
Change in net assets 57,623,688 13,789,397
- --------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------
Beginning of period 117,705,132 103,915,735
- -------------------------------------------------------------- ------------- -------------
End of period $ 175,328,820 $ 117,705,132
- -------------------------------------------------------------- ------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FOUNTAIN SQUARE GOVERNMENT CASH RESERVES FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Fountain Square Funds (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end management investment
company. The Trust consists of nine diversified portfolios and one
non-diversified portfolio. The financial statements included herein are only
those of Fountain Square Government Cash Reserves Fund (the "Fund"). The
financial statements of the other portfolios are presented separately. The
assets of each portfolio are segregated and a shareholder's interest is limited
to the portfolio in which shares are held. The Fund offers two classes of
shares: Trust Shares and Investment Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A.INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
B.INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Distributions
to shareholders are recorded on the ex-dividend date.
C.FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
D.WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
valued daily and begin earning interest on the settlement date.
E.DEFERRED EXPENSES--The costs incurred by the Fund with respect to registration
of its shares in its first fiscal year, excluding the initial expense of
registering its shares, have been deferred and are being amortized using the
straight-line method not to exceed a period of five years from the Fund's
commencement date.
F.OTHER--Investment transactions are accounted for on the trade date.
FOUNTAIN SQUARE GOVERNMENT CASH RESERVES FUND
- --------------------------------------------------------------------------------
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At July 31, 1995, capital paid-in aggregated $175,328,820.
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-----------------------------
TRUST SHARES 1995 1994
- --------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 195,672,222 226,131,178
- ---------------------------------------------------------------
Shares redeemed (172,701,456) (212,491,332)
- --------------------------------------------------------------- ------------ ------------
Net change resulting from Trust share transactions 22,970,766 13,639,846
- --------------------------------------------------------------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT SHARES
- ---------------------------------------------------------------
<S> <C> <C>
Shares sold 71,651,634 22,156,862
- ---------------------------------------------------------------
Shares redeemed (36,998,712) (22,007,311)
- --------------------------------------------------------------- ------------ ------------
Net change resulting from Investment share transactions 34,652,922 149,551
- --------------------------------------------------------------- ------------ ------------
Net change resulting from Fund share transactions 57,623,688 13,789,397
- --------------------------------------------------------------- ------------ ------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Fifth Third Bank, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
0.40 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive a portion of its fee. The Adviser can modify or terminate this
voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waive a portion of its fee.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
compensate Federated Securities Corp. ("FSC"), the principal distributor, from
the net assets of the Fund's Investment Shares to finance activities intended to
result in the sale of the Fund's Investment Shares. The Plan provides that the
Fund may incur distribution expenses up to 0.35 of 1% of the average daily net
assets of the Investment Shares, annually, to compensate FSC. The distributor
may voluntarily choose to waive all or a portion of its fee. The distributor can
modify or terminate this voluntary waiver at any time at its sole discretion.
FOUNTAIN SQUARE GOVERNMENT CASH RESERVES FUND
- --------------------------------------------------------------------------------
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES, PORTFOLIO ACCOUNTING
AND CUSTODIAN FEES--Fifth Third Bank serves as transfer and dividend disbursing
agent for the Fund for which it receives a fee. Fifth Third Bank sub-contracts
the execution of the transfer and dividend disbursing agent functions to a
non-affiliated entity. The fee is based on the level of the Fund's average net
assets for the period, plus out-of-pocket expenses.
Fifth Third Bank maintains the Fund's accounting records for which it receives a
fee. Fifth Third Bank sub-contracts the execution of the accounting services
function to a non-affiliated entity. The fee is based on the level of the Fund's
average net assets for the period, plus out-of-pocket expenses.
Fifth Third Bank is the Fund's custodian for which it receives a fee. The fee is
based on the level of the Fund's average net assets for the period, plus
out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $30,604 were initially borne
by FAS. The Fund has agreed to reimburse FAS for the organizational expenses
during the five year period following July 10, 1991 (Fund's date of initial
public investment). For the year ended July 31, 1995, the Fund paid $6,604,
pursuant to this agreement.
Certain of the Officers and Trustees of the Trust are Officers and Trustees of
the above companies.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
FOUNTAIN SQUARE FUNDS:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Fountain Square Government Cash Reserves Fund
(one of the portfolios comprising Fountain Square Funds), as of July 31, 1995,
and the related statement of operations for the year then ended, and statement
of changes in net assets and financial highlights for the periods presented
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of 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 securities owned as of July
31, 1995, 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
Fountain Square Government Cash Reserves Fund at July 31, 1995, the results of
its operations for the year then ended, and the changes in its net assets and
financial highlights for the periods presented therein, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
September 15, 1995
ADDRESSES
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<TABLE>
<S> <C> <C>
Fountain Square Government Fountain Square Funds
Cash Reserves Fund c/o Fifth Third Bank
Trust Shares 38 Fountain Square Plaza
Cincinnati, Ohio 45263
- ------------------------------------------------------------------------------------------------
Investment Adviser
Fifth Third Bank 38 Fountain Square Plaza
Cincinnati, Ohio 45263
- ------------------------------------------------------------------------------------------------
Custodian, Transfer Agent, and Dividend Disbursing Agent
Fifth Third Bank 38 Fountain Square Plaza
Cincinnati, Ohio 45263
- ------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania 15219
- ------------------------------------------------------------------------------------------------
</TABLE>
FOUNTAIN SQUARE GOVERNMENT CASH RESERVES FUND
(A PORTFOLIO OF FOUNTAIN SQUARE FUNDS)
INVESTMENT SHARES
TRUST SHARES
Combined Statement of Additional Information
The Trust Shares and Investment Shares of Fountain Square Government
Cash Reserves Fund (the "Fund") represent interests in a diversified
portfolio of securities. This Combined Statement of Additional
Information should be read with the respective prospectuses for Trust
Shares and Investment Shares dated September 30, 1995. This
Statement is not a prospectus itself. To receive a copy of the Trust
Shares prospectus, customers of Fifth Third Bank may write to the
Fountain Square Government Cash Reserves Fund or call (513) 579-6039 in
Cincinnati, Ohio or toll-free (800) 654-5372. To receive a copy of the
Investment Shares prospectus, customers of Fifth Third Securities may
write to the Fountain Square Government Cash Reserves Fund or call (513)
744-8888 in Cincinnati, Ohio or toll-free (800) 334-0483.
FOUNTAIN SQUARE FUNDS
C/O FIFTH THIRD BANK
38 FOUNTAIN SQUARE PLAZA
CINCINNATI, OHIO 45263
Statement dated September 30, 1995
FIFTH THIRD BANK
Investment Adviser
GENERAL INFORMATION ABOUT THE FUND 1
INVESTMENT OBJECTIVE AND POLICIES 1
Types of Investments 1
When-Issued and Delayed Delivery
Transactions 1
Investment Limitations 1
FOUNTAIN SQUARE FUNDS MANAGEMENT 3
Officers and Trustees 3
Fund Ownership 4
Trustees' Compensation 4
Trustee Liability 4
INVESTMENT ADVISORY SERVICES 4
Adviser to the Fund 4
Advisory Fees 5
BROKERAGE TRANSACTIONS 5
Administrative Services 5
Transfer Agent and Dividend
Disbursing Agent 6
Distribution Plan (Investment
Shares) 6
Conversion to Federal Funds 6
DETERMINING NET ASSET VALUE 6
Use of the Amortized Cost Method 7
REDEEMING SHARES 7
Redemption in Kind 7
TAX STATUS 8
The Fund's Tax Status 8
Shareholders' Tax Status 8
State and Local Taxes 8
YIELD 8
EFFECTIVE YIELD 9
PERFORMANCE COMPARISONS 9
GENERAL INFORMATION ABOUT THE FUND
Fountain Square Government Cash Reserves Fund (the "Fund") is a portfolio in
the Fountain Square Funds (the "Trust"). The Trust was established as a
Massachusetts business trust under a Declaration of Trust dated September 15,
1988.
Shares of the Fund are offered in two classes, Trust Shares and Investment
Shares (individually and collectively known as "Shares"). This combined
statement of additional information relates to the above-mentioned Shares of
the Fund.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide high current income consistent
with stability of principal and liquidity. The investment objective cannot be
changed without approval of shareholders. The Fund intends to limit its
investments to those U.S. government securities whose interest is generally
exempt from personal income tax in the various states if owned directly.
However, from time to time, the Fund may also invest in other U.S. government
securities if the adviser deems it advantageous to do so. Please see the "Tax
Status" section of this statement of additional information.
TYPES OF INVESTMENTS
The Fund invests primarily in short-term U.S. government securities.
Variable Rate U.S. Government Securities
Some of the short-term U.S. government securities the Fund may purchase
carry variable interest rates. These securities have a rate of interest
subject to adjustment at least annually. This adjusted interest rate is
ordinarily tied to some objective standard, such as the 91-day U.S.
Treasury bill rate.
Variable interest rates will reduce the changes in the market value of
such securities from their original purchase prices. Accordingly, the
potential for capital appreciation or capital depreciation should not be
greater than the potential for capital appreciation or capital
depreciation of fixed interest rate U.S. government securities having
maturities equal to the interest rate adjustment dates of the variable
rate U.S. government securities.
The Fund may purchase variable rate U.S. government securities upon the
determination by the Board of Trustees that the interest rate as
adjusted will cause the instrument to have a current market value that
approximates its par value on the adjustment date.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the
Fund's records at the trade date. These assets are marked to market daily and
are maintained until the transaction has been settled. The Fund does not
intend to engage in when-issued and delayed delivery transactions to an extent
that would cause the segregation of more than 20% of the total value of its
assets.
INVESTMENT LIMITATIONS
Selling Short and Buying On Margin
The Fund will not sell any securities short or purchase any securities
on margin but may obtain such short-term credits as may be necessary for
clearance of transactions.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may
borrow money in amounts up to one-third of the value of its total
assets, including the amounts borrowed.
The Fund will not borrow money except as a temporary, extraordinary, or
emergency measure or to facilitate management of the portfolio by
enabling the Fund to meet redemption requests when the liquidation of
portfolio securities is deemed to be inconvenient or disadvantageous.
The Fund will not purchase any securities while borrowings in excess of
5% of its total assets are outstanding.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may pledge assets having
a market value not exceeding the lesser of the dollar amounts borrowed
or 10% of the value of total assets at the time of the pledge.
Lending Cash or Securities
The Fund will not lend any of its assets, except that it may purchase or
hold U.S. government securities permitted by its investment objective,
policies and limitations.
The above investment limitations cannot be changed without shareholder
approval. The Fund does not consider the issuance of separate classes of
shares to involve the issuance of "senior securities" within the meaning of
the investment limitation set forth above. The following limitations, however,
may be changed by the Board of Trustees (the "Trustees") without shareholder
approval. Shareholders will be notified before any material change in those
limitations becomes effective.
Investing in Securities of Other Investment Companies
The Fund can acquire up to 3% of the total outstanding securities of
other investment companies. The Fund will limit its investments in the
securities of other investment companies to those money market funds
having investment objectives and policies similar to its own. The Fund
will purchase securities of other investment companies only in open-
market transactions involving no more than customary broker's
commissions. However, there is no limitation applicable to securities of
any investment company acquired in a merger, consolidation, or
acquisition of assets. It should be noted that investment companies
incur certain expenses such as management fees, and, therefore, any
investment by the Fund in such shares would be subject to customary
expenses.
Investing in Illiquid Securities
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities.
Except with respect to borrowing money, if a percentage limitation is adhered
to at the time of investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a
violation of such restriction.
For the purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S. branch
of a domestic bank or savings and loan having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment to be "cash
items."
FOUNTAIN SQUARE FUNDS MANAGEMENT
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions. Except as listed below, none of the Trustees or
Officers are affiliated with The Fifth Third Bank ("Fifth Third Bank"), Fifth
Third Bancorp, Federated Investors, Federated Securities Corp., or Federated
Administrative Services.
J. Christopher Donahue *+
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Chairman of the Board of Trustees, President and Treasurer
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp.; President, Passport Research, Ltd.; Trustee, Federated
Administrative Services, Federated Services Company, and Federated
Shareholder Services; President or Vice President of the Funds; Director,
Trustee, or Managing General Partner of some of the Funds.
Edward Burke Carey
394 East Town Street
Columbus, OH
Birthdate: July 2, 1945
Member of the Board of Trustees
President of Carey Leggett Realty Advisors.
Lee A. Carter +
Cincinnati Commerce Center
Suite 2020
Cincinnati, OH
Birthdate: December 17, 1938
Member of the Board of Trustees
Formerly, President, Local Marketing Corporation (retired December 31, 1993).
Albert E. Harris
5905 Graves Road
Cincinnati, OH
Birthdate: July 2, 1932
Member of the Board of Trustees
Formerly, Chairman of the Board EDB Holdings, Inc. (retired July, 1993).
Charles L. Davis, Jr.
Federated Investors Tower
Pittsburgh, PA
Birthdate: March 23, 1960
Vice President and Assistant Treasurer
Assistant
Assistant Treasurer of some of the Funds.
Jay S. Neuman
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 22, 1950
Secretary
Corporate Counsel, Federated Investors; prior to January, 1991, Associate
Counsel, The Boston Company Advisors, Inc.
*This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
+Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board of Trustees between
meetings of the Board.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding Shares.
As of July 31, 1995, Fifth Third Bank as nominee for numerous trust and agency
accounts, was the owner of record of 129,603,214 Trust Shares (100%) of the
Fund.
As of July 31, 1995, no shareholders of record owned 5% or more of the
outstanding Investment Shares of the Fund:
TRUSTEES' COMPENSATION
NAME , AGGREGATE
POSITION WITH COMPENSATION FROM
TRUST TRUST*+
J. Christopher Donahue $ 0
Chairman of Board of
Trustees, President and Treasurer
Edward Burke Carey $ 7,800
Trustee
Lee A. Carter $ 7,800
Trustee
Albert E. Harris $ 7,800
Trustee
* Information is furnished for the fiscal year ended July 31, 1995. The Trust
is the only investment company in the Fund complex.
+The aggregate compensation is provided for the Trust which is comprised of
ten portfolios.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees are not liable for
errors of judgment or mistakes of fact or law. However, they are not protected
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
ADVISER TO THE FUND
The Fund's investment adviser is Fifth Third Bank (the "Adviser"). It provides
investment advisory services through its Trust and Investment Division. Fifth
Third Bank is a wholly-owned subsidiary of Fifth Third Bancorp.
The Adviser shall not be liable to the Trust, the Fund or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or
sale of any security, or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the
Trust.
ADVISORY FEES
For its advisory services, Fifth Third Bank receives an annual investment
advisory fee as described in the prospectus.
For the fiscal years ended July 31, 1995, 1994, and 1993, the Adviser earned
$604,802, $466,283, and $414,436, respectively, of which $152,445, $152,426,
and $155,413, respectively, were voluntarily waived because of undertakings to
limit the Fund's expenses.
State Expense Limitations
The adviser has undertaken to comply with the expense limitation
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2 1/2% per year of the first $30 million of average net assets,
2% per year of the next $70 million of average net assets, and 1 1/2%
per year of the remaining average net assets, the adviser has agreed to
reimburse the Fund for its expenses over the limitation up to the amount
of the advisory fee in any single fiscal year.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced, in any
single fiscal year, by the amount of the excess, subject to an annual
adjustment.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the order at
a favorable price. In working with dealers, the adviser will generally use
those who are recognized dealers in specific portfolio instruments, except
when a better price and execution of the order can be obtained elsewhere. The
adviser makes decisions on portfolio transactions and selects brokers and
dealers subject to review by the Trustees.
The adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
adviser and may include:
o advice as to the advisability of investing in securities;
o security analysis and reports;
o economic studies;
o industry studies;
o receipt of quotations for portfolio evaluations; and
o similar services.
The adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage
and research services provided.
Research services provided by brokers and dealers may be used by the adviser
in advising the Fund and other accounts. To the extent that receipt of these
services may supplant services for which the adviser or its affiliates might
otherwise have paid, it would tend to reduce expenses.
For the fiscal years ended July 31, 1995, 1994, and 1993, the Fund did not pay
any commissions on brokerage transactions.
Administrative Services
Until December 1, 1995, Federated Administrative Services ("FAS"), a
subsidiary of Federated Investors, provides administrative personnel and
services to the Fund for a fee as described in the prospectus. For the fiscal
years ended July 31, 1995, 1994, and 1993, the Fund incurred administrative
fees of $166,528, $134,133, and $128,876, respectively.
Effective December 1, 1995, BISYS Fund Services L.P., 3435 Stelzer Road,
Columbus, Ohio 43219, will provide administrative services to the Funds for
the fees set forth in the prospectus.
Effective December 1, 1995, pursuant to a separate agreement with BISYS Fund
Services L.P., Fifth Third Bank performs sub-administration services on behalf
of each Fund, for which it receives compensation from BISYS Fund Services L.P.
Under the custodian agreement, Fifth Third Bank holds the Fund's portfolio
securities and keeps all necessary records and documents relating to its
duties. Fifth Third Bank's fees for custody services are based upon the market
value of Fund securities held in custody plus out-of-pocket expenses.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Fifth Third Bank serves as transfer agent and dividend disbursing agent for
the Funds. The fee paid to the transfer agent is based upon the size, type
and number of accounts and transactions made by shareholders.
Fifth Third Bank also maintains the Trust's accounting records. The fee paid
for this service is based upon the level of the Funds' average net assets for
the period plus out-of-pocket expenses.
PURCHASING SHARES
Shares are sold at their net asset value without a sales charge on days the
New York Stock Exchange and the Federal Reserve Bank of Cleveland are open for
business. The procedure for purchasing Shares is explained in the respective
prospectuses under "Investing in Investment Shares" or "Investing in Trust
Shares."
DISTRIBUTION PLAN (INVESTMENT SHARES)
With respect to the Investment Shares class of the Fund, the Trust has adopted
a Plan pursuant to Rule 12b-1 which was promulgated by the Securities and
Exchange Commission pursuant to the Investment Company Act of 1940. The Plan
provides for payment of fees to the distributor to finance any activity which
is principally intended to result in the sale of Investment Shares of the Fund
subject to the Plan. Such activities may include the advertising and marketing
of Investment Shares; preparing, printing, and distributing prospectuses and
sales literature to prospective shareholders, brokers, or administrators; and
implementing and operating the Plan. Pursuant to the Planthe distributor may
pay fees to brokers for distribution and administrative services and to
administrators for administrative services as to Investment Shares. The
administrative services are provided by a representative who has knowledge of
the shareholder's particular circumstances and goals, and include, but are not
limited to: communicating account openings; communicating account closings;
entering purchase transactions; entering redemption transactions; providing or
arranging to provide accounting support for all transactions, wiring funds and
receiving funds for Investment Share purchases and redemptions, confirming and
reconciling all transactions, reviewing the activity in Fund accounts, and
providing training and supervision of broker personnel; posting and
reinvesting dividends to Fund accounts or arranging for this service to be
performed by the Fund's transfer agent; and maintaining and distributing
current copies of prospectuses and shareholder reports to the beneficial
owners of Investment Shares and prospective shareholders.
The Trustees expect that the adoption of the Plan will result in the sale of
sufficient number of Investment Shares so as to allow the Fund to achieve
economic viability. It is also anticipated that an increase in the size of the
Fund will facilitate more efficient portfolio management and assist the Fund
in seeking to achieve its investment objective.
For the fiscal year ended July 31, 1995, distribution fees applicable to
Investment Shares paid to Federated Securities Corp. amounted to $101,919, all
of which was voluntarily waived.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds. Fifth Third Bank acts as the
shareholder's agent in depositing checks and converting them to federal funds.
DETERMINING NET ASSET VALUE
The Fund attempts to stabilize the value of a share at $1.00. The days on
which net asset value is calculated by the Fund are described in the
prospectus.
USE OF THE AMORTIZED COST METHOD
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
The Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in Rule 2a-7 (the "Rule")
promulgated by the Securities and Exchange Commission under the Investment
Company Act of 1940. Under the Rule, the Trustees must establish procedures
reasonably designed to stabilize the net asset value per share, as computed
for purposes of distribution and redemption, at $1.00 per share, taking into
account current market conditions and the Fund's investment objective.
Monitoring Procedures
The Trustees' procedures include monitoring the relationship between the
amortized cost value per share and the net asset value per share based
upon available indications of market value. The Trustees will decide
what, if any, steps should be taken if there is a difference of more
than 0.50 of 1% between the two values. The Trustees will take any steps
they consider appropriate (such as redemption in kind or shortening the
average portfolio maturity) to minimize any material dilution or other
unfair results arising from differences between the two methods of
determining net asset value.
Investment Restrictions
The Rule requires that the Fund limit its investments to instruments
that, in the opinion of the Trustees, present minimal credit risks and
if rated, have received the requisite rating from one or more nationally
recognized statistical rating organizations. If the instruments are not
rated, the Trustees must determine that they are of comparable quality.
Shares of investment companies purchased by the Fund will meet these
same criteria and will have investment policies consistent with the
Rule. The Rule also requires the Fund to maintain a dollar-weighted
average portfolio maturity (not more than 90 days) appropriate to the
objective of maintaining a stable net asset value of $1.00 per share. In
addition, no instruments with a remaining maturity of more than 397 days
can be purchased by the Fund.
Should the disposition of a portfolio security result in a dollar-
weighted average portfolio maturity of more than 90 days, the Fund will
invest its available cash to reduce the average maturity to 90 days or
less as soon as possible.
The Fund may attempt to increase yield by trading portfolio securities
to take advantage of short-term market variations. This policy may, from
time to time, result in high portfolio turnover. Under the amortized
cost method of valuation, neither the amount of daily income nor the net
asset value is affected by any unrealized appreciation or depreciation
of the portfolio.
In periods of declining interest rates, the indicated daily yield on
shares of the Fund computed by dividing the annualized daily income on
the Fund's portfolio by the net asset value computed as above may tend
to be higher than a similar computation made by using a method of
valuation based upon market prices and estimates.
In periods of rising interest rates, the indicated daily yield on shares
of the Fund computed the same way may tend to be lower than a similar
computation made by using a method of calculation based upon market
prices and estimates.
REDEEMING SHARES
Shares are redeemed at the next computed net asset value after Fifth Third
Bank receives the redemption request. Redemption procedures are explained in
the respective prospectuses under "Redeeming Investment Shares" or "Redeeming
Trust Shares." Although Fifth Third Bank does not charge for telephone
redemptions, it reserves the right to charge a fee for the cost of wire-
transferred redemptions of less than $10,000.
REDEMPTION IN KIND
The Trust has elected to be governed by Rule 18f-1 of the Investment Company
Act of 1940 under which the Trust is obligated to redeem shares for any one
shareholder in cash up to the lesser of $250,000 or 1% of a Fund's net asset
value during any 90-day period.
Any redemption beyond this amount will also be in cash unless the Trustees
determine that payments should be in kind. In such a case, the Trust will pay
all or a portion of the remainder of the redemption in portfolio instruments,
valued in the same way as the Fund determines net asset value. The portfolio
instruments will be selected in a manner that the Trustees deem fair and
equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving their securities and selling them before
their maturity could receive less than the redemption value of their
securities and could incur certain transaction costs.
TAX STATUS
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Fund must,
among other requirements:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o derive less than 30% of its gross income from the sale of securities
held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
duringthe year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends received as cash
or additional shares. No portion of any income dividend paid by the Fund is
eligible for the dividends received deduction available to corporations. These
dividends and any short-term capital gains are taxable as ordinary income.
STATE AND LOCAL TAXES
The Fund intends to limit its investments to U.S. government securities paying
interest which, if owned directly by shareholders of the Fund, would generally
be exempt from state personal income tax. However, from time to time, the Fund
may also invest in other U.S. government securities if the adviser deems it
advantageous to do so. Moreover, under the laws of some states, the net
investment income generally distributed by the Fund may be taxable to
shareholders. State laws differ on this issue, and shareholders are urged to
consult their own tax advisers regarding the status of their accounts under
state and local tax laws.
Capital Gains
Capital gains experienced by the Fund could result in an increase in
dividends. Capital losses could result in a decrease in dividends. If,
for some extraordinary reason, the Fund realizes net long-term capital
gains, it will distribute them at least once every 12 months.
YIELD
The yield for Investment Shares and Trust Shares were 5.34% and 5.34%,
respectively, for the seven-day period ended July 31, 1995.
The Fund calculates the yield for both classes of shares daily, based upon the
seven days ending on the day of the calculation, called the "base period."
This yield is computed by:
o determining the net change in the value of a hypothetical account with a
balance of one Share at the beginning of the base period, with the net
change excluding capital changes but including the value of any
additional Shares purchased with dividends earned from the original one
Share and all dividends declared on the original and any purchased
Shares;
o dividing the net change in the account's value by the value of the
account at the beginning of the base period to determine the base period
return; and
o multiplying the base period return by (365/7).
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in either
class of shares, the performance will be reduced for those shareholders paying
those fees.
EFFECTIVE YIELD
The effective yield for Investment Shares and Trust Shares were 5.48% and
5.48%, respectively, for the seven-day period ended July 31, 1995 .
The Fund's effective yield for both classes of shares is computed by
compounding the unannualized base period return by:
o adding 1 to the base period return;
o raising the sum to the 365/7th power; and
o subtracting 1 from the result.
PERFORMANCE COMPARISONS
The performance of both classes of shares depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates on money market instruments;
o changes in expenses of the Fund or of either class of shares; and
o the relative amount of Fund cash flow.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index
used, prevailing market conditions, portfolio compositions of other funds, and
methods used to value portfolio securities and compute offering price.
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all income dividends and capital gains
distributions, if any. From time to time, the Fund will quote its Lipper
ranking for either class of shares in the "short-term U.S. government
funds" category in advertising and sales literature.
o SALOMON 30 DAY TREASURY BILL INDEX is a weekly quote of the most
representative yields for selected securities issued by the U.S.
Treasury, maturing in 30 days.
o DONOGHUE'S MONEY FUND REPORT publishes annualized yields of hundreds of
money market funds on a weekly basis and through its Money Market
Insight publication reports monthly and 12-month-to-date investment
results for the same money funds.
Advertisements and other sales literature for either class of shares may refer
to total return. Total return is the historic change in the value of an
investment in either class of shares based on the reinvestment of dividends
over a specified period of time.
Cusip 350756508
Cusip 350756409
1041201B (9/95)
FOUNTAIN SQUARE U.S. TREASURY OBLIGATIONS FUND
[LOGO]
FOUNTAIN SQUARE FUNDS
PROSPECTUS
[LOGO]
FIFTH THIRD BANK
INVESTMENT ADVISER
Cusip 350756102
8120101A (9/95)
65-0923
FOUNTAIN SQUARE U.S. TREASURY OBLIGATIONS FUND
(A PORTFOLIO OF FOUNTAIN SQUARE FUNDS)
PROSPECTUS
The shares of Fountain Square U.S. Treasury Obligations Fund (the "Fund")
offered by this prospectus represent interests in a diversified portfolio of
securities which is one of a series of investment portfolios in Fountain Square
Funds (the "Trust"), an open-end management investment company (a mutual fund).
The Fund is a money market fund which invests in short-term U.S. Treasury
obligations to achieve stability of principal and current income consistent with
stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF FIFTH
THIRD BANK, ARE NOT ENDORSED OR GUARANTEED BY FIFTH THIRD BANK, AND ARE NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. THE FUND ATTEMPTS TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE NO ASSURANCE THAT THE
FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information, dated September
30, 1995, with the Securities and Exchange Commission. The information contained
in the Statement of Additional Information is incorporated by reference into
this prospectus. You may request a copy of the Statement of Additional
Information free of charge, obtain other information or make inquiries about the
Fund by writing to the Fund or calling (513) 579-6039 in Cincinnati or toll-free
(800) 654-5372.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated September 30, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Acceptable Investments 3
Repurchase Agreements 3
When-Issued and Delayed Delivery
Transactions 3
Investment Limitations 4
FOUNTAIN SQUARE FUNDS INFORMATION 4
- ------------------------------------------------------
Management of the Trust 4
Board of Trustees 4
Investment Adviser 4
Advisory Fees 4
Adviser's Background 4
Distribution of Fund Shares 5
Payments to Financial Institutions 5
Administration of the Fund 6
Administrative Services 6
Custodian, Transfer Agent, and
Dividend Disbursing Agent 6
Independent Auditors 6
NET ASSET VALUE 7
- ------------------------------------------------------
INVESTING IN THE FUND 7
- ------------------------------------------------------
Share Purchases 7
Through Fifth Third Bank 7
Minimum Investment Required 7
What Shares Cost 8
Certificates and Confirmations 8
Dividends 8
Capital Gains 8
EXCHANGES 8
- ------------------------------------------------------
REDEEMING SHARES 9
- ------------------------------------------------------
Through Fifth Third Bank 9
By Telephone 9
By Mail 10
Receiving Payment 10
Accounts with Low Balances 10
SHAREHOLDER INFORMATION 11
- ------------------------------------------------------
Voting Rights 11
Massachusetts Law 11
EFFECT OF BANKING LAWS 11
- ------------------------------------------------------
TAX INFORMATION 12
- ------------------------------------------------------
Federal Income Tax 12
PERFORMANCE INFORMATION 13
- ------------------------------------------------------
FINANCIAL STATEMENTS 14
- ------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 18
- ------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS 20
- ------------------------------------------------------
ADDRESSES 21
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)..................................................................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)........................................ None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)...................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)........... None
Exchange Fee................................................................. None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)............................................. 0.29%
12b-1 Fee.................................................................... None
Other Expenses............................................................... 0.15%
Total Fund Operating Expenses(2)........................................ 0.44%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver by the
investment adviser. The adviser can terminate this voluntary waiver at any time
at its sole discretion. The maximum management fee is 0.40%.
(2) Total operating expenses would have been 0.55% absent the voluntary waiver
by the investment adviser.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "FOUNTAIN SQUARE FUNDS INFORMATION" AND "INVESTING IN THE FUND."
Wire-transferred redemptions of less than $10,000 may be subject to additional
fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return and (2)
redemption at the end of each time period. The Fund
charges no redemption fees.............................. $ 5 $ 14 $ 25 $ 55
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FOUNTAIN SQUARE U.S. TREASURY OBLIGATIONS FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young LLP, Independent Auditors, on
page 20.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989*
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------
Net investment income 0.05 0.03 0.03 0.04 0.07 0.08 0.06
- ----------------------------------------- ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
- -----------------------------------------
Dividends to shareholders from net
investment income (0.05) (0.03) (0.03) (0.04) (0.07) (0.08) (0.06)
- ----------------------------------------- ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------- ------ ------ ------ ------ ------ ------ ------
TOTAL RETURN** 5.18% 3.02% 2.82% 4.32% 6.74% 8.15% 5.65%
- -----------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------
Expenses 0.44% 0.44% 0.44% 0.45% 0.49% 0.54% 0.56%(b)
- -----------------------------------------
Net investment income 5.07% 2.99% 2.79% 4.18% 6.33% 7.84% 8.71%(b)
- -----------------------------------------
Expense waiver/reimbursement (a) 0.11% 0.14% 0.15% 0.15% 0.15% 0.15% 0.15%(b)
- -----------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------
Net assets, end of period (000 omitted) $321,640 $336,229 $290,408 $339,924 $242,247 $138,368 $141,743
- -----------------------------------------
</TABLE>
* Reflects operations for the period from December 1, 1988 (date of initial
public offering) to July 31, 1989.
** Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 15, 1988. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. This prospectus relates only to the
short-term U.S. Treasury obligations portfolio of the Trust, known as Fountain
Square U.S. Treasury Obligations Fund. The Fund is designed for individuals and
institutions as a convenient means of participating in a professionally managed,
diversified portfolio limited to U.S. Treasury obligations. A minimum initial
investment of $1,000 is required.
The Fund attempts to stabilize the value of a share at $1.00. Fund shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is stability of principal and current
income consistent with stability of principal. While there is no assurance that
the Fund will achieve its investment objective, it endeavors to do so by
following the investment policies described in this prospectus. The investment
objective and the policies and limitations described below cannot be changed
without approval of shareholders.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio consisting
exclusively of short-term U.S. Treasury obligations. The average maturity of the
Fund's portfolio, computed on a dollar weighted basis, will be 120 days or less.
As a matter of operating policy, the Fund will limit the average maturity of its
portfolio to 90 days or less, in order to meet current regulatory requirements.
ACCEPTABLE INVESTMENTS. The short-term U.S. Treasury obligations in which the
Fund invests are issued by the U.S. government and are fully guaranteed as to
principal and interest by the United States. All U.S. Treasury obligations in
which the Fund invests mature in one year or less from the date of acquisition
unless they are purchased under a repurchase agreement that provides for
repurchase by the seller within one year from the date of acquisition. The Fund
may also retain Fund assets in cash.
REPURCHASE AGREEMENTS. The Fund may invest in U.S. Treasury obligations pursuant
to repurchase agreements. Repurchase agreements are arrangements in which banks,
broker/dealers and other recognized financial institutions sell U.S. Treasury
obligations to the Fund and agree at the time of sale to repurchase them at a
mutually agreed upon time and price within one year from the date of
acquisition.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase U.S.
government securities on a when-issued or delayed delivery basis. These
transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause the Fund to miss a price or yield
considered to be
advantageous. Settlement dates may be a month or more after entering into these
transactions, and the market values of the securities purchased may vary from
the purchase prices. Accordingly, the Fund may pay more or less than the market
value of the securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the Fund's adviser
deems it appropriate to do so. In addition, the Fund may enter into transactions
to sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through reverse repurchase agreements
or pledge securities except, under certain circumstances, the Fund may borrow
money and engage in reverse repurchase agreements in amounts up to one-third of
the value of its total assets and pledge up to 10% of the value of its total
assets to secure such borrowings.
As a matter of investment practice, which can be changed without shareholder
approval, repurchase agreements providing for settlement in more than seven days
after notice, along with illiquid obligations, will be limited to not more than
10% of the Fund's net assets.
FOUNTAIN SQUARE FUNDS INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees ("Trustees"). The
Trustees are responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust,
investment decisions for the Fund are made by The Fifth Third Bank ("Fifth Third
Bank"), the Fund's investment adviser, (the "Adviser"), subject to direction by
the Trustees. The Adviser continually conducts investment research and
supervision for the Fund and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the Fund.
ADVISORY FEES. The Adviser receives an annual investment advisory fee equal
to .40 of 1% of the Fund's average daily net assets. The Adviser has
undertaken to waive up to the amount of the advisory fee, for operating
expenses in excess of limitations established by certain states. The
Adviser may voluntarily choose to waive a portion of its fee or reimburse
other expenses of the Fund but reserves the right to terminate such waiver
or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Fifth Third Bank, an Ohio state chartered bank, is a
wholly-owned subsidiary of Fifth Third Bancorp, a bank holding company
organized under the laws of Ohio. Fifth Third Bank is a commercial bank
offering a wide range of banking services to its customers. As of July 31,
1995, Fifth Third Bank and its affiliates managed assets in excess of $7.8
billion on a
discretionary basis and provided custody services for additional assets in
excess of $67.2 billion. Fifth Third Bank has managed mutual funds since
1988.
Fifth Third Bank has managed pools of commingled funds since 1953.
Currently, the Trust and Investment Division manages 14 such pools with
total assets of over $1.11 billion.
As part of their regular banking operations, Fifth Third Bank may make
loans to public companies. Thus, it may be possible, from time to time, for
the Fund to hold or acquire the securities of issuers which are also
lending clients of Fifth Third Bank. The lending relationship will not be a
factor in the selection of securities.
DISTRIBUTION OF FUND SHARES
Until December 1, 1995, Federated Securities Corp. serves as the principal
distributor for shares of the Fund. It is a Pennsylvania corporation organized
on November 14, 1969, and is the distributor for a number of investment
companies. Federated Securities Corp., a subsidiary of Federated Investors, is
located at Federated Investors Tower, Pittsburgh, PA 15222-3779.
Effective December 1, 1995, BISYS Fund Services L.P. will serve as the
distributor for the Trust. BISYS Fund Services L.P. is wholly-owned by BISYS
Group, Inc., 150 Clove Road, Little Falls, NJ 07424, a publicly owned company
engaged in information processing and recordkeeping services to and through
banking and other financial organizations.
PAYMENTS TO FINANCIAL INSTITUTIONS. The distributor, the Adviser, or their
affiliates may offer to pay a fee from their own assets to financial
institutions as financial assistance for providing substantial marketing and
sales support. The support may include initiating customer accounts, providing
sales literature, or participating in sales, educational and training seminars
(including those held at recreational facilities). Such assistance will be
predicated upon the amount of shares the financial institution sells or may sell
and/or upon the type and nature of sales or marketing support furnished by the
financial institution. Any payments made by the distributor may be reimbursed by
the Adviser or its affiliates.
The Glass-Steagall Act limits the ability of a depository institution (such as a
commercial bank or a savings and loan association) to become an underwriter or
distributor of most securities. In the event the Glass-Steagall Act is deemed to
prohibit depository institutions from acting in the capacities described above
or should Congress relax current restrictions on depository institutions, the
Trustees will consider appropriate changes in the administrative services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Until December 1, 1995, Federated Administrative
Services, a subsidiary of Federated Investors, provides the Fund with certain
administrative personnel and services necessary to operate the Fund, such as
legal and accounting services. Federated Administrative Services provides these
at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY NET
ADMINISTRATIVE FEE ASSETS OF THE TRUST
- ------------------- ------------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least $50,000
per Fund. Federated Administrative Services may choose voluntarily to waive a
portion of its fee at any time.
Effective December 1, 1995, BISYS Fund Services L.P. will serve as the
administrator. The administrator generally assists in all aspects of the Trust's
administration and operation including providing the Fund with certain
administrative personnel and services necessary to operate the Fund, such as
legal and accounting services. BISYS Fund Services L.P. provides these at an
annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY NET
ADMINISTRATIVE FEE ASSETS OF THE TRUST
- ------------------- ------------------------------------
<S> <C>
.10% of the first $1 billion
.08% of the next $1 billion
.07% in excess of $2 billion
</TABLE>
The administrator may periodically waive all or a portion of its administrative
fee which will cause the yield of a Fund to be higher than it would otherwise be
in the absence of such a waiver.
Effective December 1, 1995, pursuant to a separate agreement with BISYS Fund
Services L.P., Fifth Third Bank performs sub-administration services on behalf
of the Fund including providing certain administrative personnel and services
necessary to operate the Fund for which it receives a fee from BISYS Fund
Services L.P. computed daily and paid periodically calculated at an annual rate
of 0.025% of average daily net assets.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Fifth Third Bank,
Cincinnati, Ohio, is custodian for the securities and cash of the Fund, transfer
agent for the shares of the Fund, and dividend disbursing agent for the Fund.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Ernst & Young
LLP, Pittsburgh, Pennsylvania.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of its shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per share is determined by subtracting total liabilities from total assets
and dividing the remainder by the number of shares outstanding. The Fund cannot
guarantee that its net asset value will always remain at $1.00 per share.
INVESTING IN THE FUND
- --------------------------------------------------------------------------------
SHARE PURCHASES
Fund shares are sold on days on which the New York Stock Exchange and the
Federal Reserve Bank of Cleveland are open for business. A customer of Fifth
Third Bank may purchase shares of the Fund through Fifth Third Bank. All other
investors should purchase Fund shares directly from the distributor. In
connection with the sale of Fund shares, the distributor may, from time to time,
offer certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request. Purchases through Fifth Third
Bank may not be available to investors in all states.
THROUGH FIFTH THIRD BANK. A customer of Fifth Third Bank may telephone Fifth
Third Bank at (513) 579-6039 in Cincinnati or toll-free (800) 654-5372 to place
an order to purchase shares of the Fund. All other investors must place their
purchase orders through the distributor. Texas residents must purchase Fund
shares through Federated Securities Corp at 1-800-358-2801 until December 1,
1995. Effective December 1, 1995, Texas residents must contact BISYS Fund
Services L.P. at 1-800-554-3862.
Payment may be made to Fifth Third Bank either by check or federal funds. Orders
are considered received after payment by check is converted into federal funds
and received by Fifth Third Bank. This is normally the next business day after
Fifth Third Bank receives the check. When payment is made with federal funds,
the order is considered received when federal funds are received by Fifth Third
Bank. Federal funds should be wired to Fifth Third Bank as follows: ABA No. 042
000 314 Fifth Third Cincinnati. Attention: Fountain Square Funds Department; For
Credit to: (shareholder's name and account number); For Further credit to:
Fountain Square U.S. Treasury Obligations Fund. Investors not purchasing through
Fifth Third Bank should consult their financial institution for wiring
instructions.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund by an investor is $1,000. Subsequent
investments must be in amounts of at least $50. For customers of Fifth Third
Bank, an institutional investor's minimum investment will be calculated by
combining all accounts it maintains with Fifth Third Bank and investments in the
Fund.
The minimum investment requirements do not apply with respect to accounts that
have been established to automatically invest cash accumulations in the Fund.
Investors participating in such arrangements may be charged separate fees by the
financial institution that provides this service, and should read this
prospectus along with their financial institution's agreement or other
literature relating to this service.
WHAT SHARES COST
Fund shares are sold at their net asset value next determined after an order is
received. The Fund does not impose a sales charge.
The net asset value is determined at 4:00 p.m. (Cincinnati time), Monday through
Friday, except on: (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities that its net asset value might be
materially affected; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; or (iii) the following
holidays: New Year's Day, Martin Luther King Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans' Day,
Thanksgiving Day, and Christmas Day.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Fifth Third Bank maintains a share account for
each shareholder of record. Share certificates are not issued.
Detailed statements that include account balances, information on each purchase
or redemption, and a report of dividends paid during the month are sent to each
shareholder monthly and will serve as confirmations of all transactions in the
shareholder's account for the statement period.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends will be reinvested on
payment dates in additional shares of the Fund unless cash payments are
requested by writing to the Fund or Fifth Third Bank, as appropriate. Share
purchase orders received by Fifth Third Bank before 12:00 noon (Cincinnati time)
earn dividends that day.
CAPITAL GAINS
If the Fund experiences capital gains, it could result in an increase in
dividends. Capital losses could result in a decrease in dividends. If, for some
extraordinary reason, the Fund realizes net long-term capital gains, it will
distribute them at least once every 12 months.
EXCHANGES
- --------------------------------------------------------------------------------
A shareholder who is a customer of the Fifth Third Bank Trust and Investment
Division may exchange shares of one Fund for shares of any of the other funds in
the Trust by calling or sending a written request to their Fifth Third Bank
Trust Officer. Telephone exchange instructions may be recorded. If reasonable
procedures are not followed by the Fund, they may be liable for losses due to
unauthorized or fraudulent telephone instructions.
Shares of the Funds with a sales charge may be exchanged at net asset value for
shares of other Funds with an equal sales charge or no sales charge. Shares of
Funds with no sales charge acquired by direct purchase or reinvestment of
dividends on such shares may be exchanged for shares of Funds with a sales
charge at net asset value plus the applicable sales charge. When exchanging into
and out of shares of the Funds in the Trust, shareholders who have paid a sales
load once upon purchasing shares of any Fund will not have to pay a sales load
again on an exchange.
Orders for exchanges of shares of money market funds must be received by 12:00
noon (Cincinnati time). Orders for exchanges of the International Equity Fund,
Government Fund, Bond Fund, Ohio Tax-Free Fund, Growth Fund, Mid Cap Fund, and
Balanced Fund must be received by 4:00 p.m. (Cincinnati time). Orders for
exchanges are taken on any day that the Funds are open for business. Orders
which are received prior to the cut-off times listed above will be executed as
of the close of business that day. Orders received after the respective cut-off
times will be executed at the close of the next business day.
An excessive number of exchanges may be disadvantageous to the Trust. Therefore
the Trust, in addition to its right to reject any exchange, reserves the right
to modify or terminate the exchange privilege at any time. Shareholders would be
notified prior to any modification or termination.
An exchange order must comply with the requirements for a redemption and must
specify the dollar value or number of shares to be exchanged. Exchanges are
subject to the minimum initial investment requirement of the Fund being
acquired. An exchange constitutes a sale for federal income tax purposes.
The exchange privilege is only available in states where shares of the Fund
being acquired may legally be sold. Before the exchange, a shareholder must
receive a prospectus of the Fund for which the exchange is being made.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at their net asset value next determined after Fifth
Third Bank receives the redemption request. Redemptions will be made on days on
which the Fund computes its net asset value. Telephone or written requests for
redemption must be received in proper form and can be made through Fifth Third
Bank.
THROUGH FIFTH THIRD BANK
BY TELEPHONE. A shareholder who is a customer of Fifth Third Bank may redeem
shares of the Fund by telephoning Fifth Third Bank at (513) 579-6039 in
Cincinnati or toll-free (800) 654-5372. For calls received by Fifth Third Bank
before 12:00 noon (Cincinnati time), proceeds will normally be dispersed the
same day to the shareholder's account at Fifth Third Bank or a check will be
sent to the address of record. Those shares will not be entitled to the dividend
declared that day. For calls received by Fifth Third Bank after 12:00 noon
(Cincinnati time), proceeds will normally be dispersed the following business
day. Those shares will be entitled to the dividend declared on the day the
redemption request was received. In no event will proceeds be dispersed more
than seven days after a proper request for redemption has been received. If at
any time the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders would be promptly notified.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Fifth Third Bank or the distributor.
Telephone redemption instructions may be recorded. If reasonable procedures are
not followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as "By Mail," should be considered.
BY MAIL. A shareholder who is a customer of Fifth Third Bank may redeem Fund
shares by sending a written request to Fifth Third Bank at the following
address: 38 Fountain Square Plaza, Cincinnati, Ohio, 45263, Attn: Fountain
Square Funds Department. The written request should include the shareholder's
name, the Fund name, the account number, and the share or dollar amount
requested. If share certificates have been issued, they must be properly
endorsed and should be sent by registered or certified mail with the written
request. Shareholders should call Fifth Third Bank for assistance in redeeming
by mail.
Shareholders requesting a redemption of $50,000 or more, a redemption of any
amount to be sent to an address other than that on record with the Fund, or a
redemption payable other than to the shareholder of record must have signatures
on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund, which is administered by the Federal Deposit Insurance
Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
- a savings and loan association or a savings bank whose deposits are
insured by the Savings Association Insurance Fund, which is administered
by the FDIC; or
- any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed to the
shareholder within one business day, but in no event more than seven days, after
receipt of a proper written redemption request, provided the Fund or its agents
have received payment for shares from the shareholder.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if, due to
shareholder redemptions, the account balance falls below the required minimum
value of $1,000.
Before redeeming shares to close an account, the Fund will notify the
shareholder in writing and allow the shareholder 30 days to purchase additional
shares to meet the minimum requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights, except that only shares of the Fund are
entitled to vote on matters affecting the Fund. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust or the
Fund's operation and for the election of Trustees under certain circumstances.
As of July 31, 1995, Fifth Third Bank may for certain purposes be deemed to
control the Funds because it is owner of record of certain shares of the Funds.
Trustees may be removed by a two-thirds vote of the number of Trustees prior to
such removal or by a two-thirds vote of the shareholders at a special meeting.
The Trustees shall call a special meeting of shareholders upon the written
request of shareholders owning at least 10% of the Trust's outstanding shares of
all series entitled to vote.
MASSACHUSETTS LAW
Under certain circumstances, shareholders may be held personally liable under
Massachusetts law for acts or obligations of the Trust on behalf of the Fund. To
protect shareholders of the Fund, the Trust has filed legal documents with
Massachusetts that expressly disclaim the liability of shareholders of the Fund
for such acts or obligations of the Trust. These documents require inclusion of
this disclaimer to be given in each agreement, obligation, or instrument the
Trust or its Trustees enter into or sign on behalf of the Fund.
In the unlikely event a shareholder of the Fund is held personally liable for
the Trust's obligations on behalf of the Fund, the Trust is required by the
Declaration of Trust to use the property of the Fund to protect or to compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder of the Fund for any act or obligation of the
Trust on behalf of the Fund. Therefore, financial loss resulting from liability
as a shareholder of the Fund will occur only if the Trust cannot meet its
obligations to indemnify shareholders and to pay judgments against them from the
assets of the Fund.
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations presently prohibit
a bank holding company registered under the Federal Bank Holding Company Act of
1956 or any affiliate thereof from sponsoring, organizing or controlling a
registered, open-end investment company continuously engaged in the issuance of
its shares, and from issuing, underwriting, selling or distributing securities
in general. Such laws and regulations do not prohibit such a holding company or
affiliate from acting as investment adviser, transfer agent or custodian to such
an investment company or from purchasing shares of such a company as agent for
and upon the order of their customer. The Fund's investment adviser, Fifth Third
Bank, is subject to such banking laws and regulations.
Fifth Third Bank believes that it may perform the investment advisory services
for the Fund contemplated by its advisory agreement with the Trust without
violating the Glass-Steagall Act or other applicable banking laws or
regulations. Changes in either federal or state statutes and regulations
relating to the permissible activities of banks and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of present or future statutes and regulations, could prevent
Fifth Third Bank from continuing to perform all or a part of the above services
for its customers and/or the Fund. In such event, changes in the operation of
the Fund may occur, including the possible alteration or termination of any
automatic or other Fund share investment and redemption services then being
provided by Fifth Third Bank, and the Trustees would consider alternative
investment advisers and other means of continuing available investment services.
It is not expected that Fund shareholders would suffer any adverse financial
consequences (if another adviser with equivalent abilities to Fifth Third Bank
is found) as a result of any of these occurrences.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios, if any, will not be combined for tax purposes with
those realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional shares.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its yield and effective yield.
The yield of the Fund represents the annualized rate of income earned on an
investment in the Fund over a seven-day period. It is the annualized dividends
earned during the period on the investment, shown as a percentage of the
investment. The effective yield is calculated similarly to the yield, but, when
annualized, the income earned by an investment in the Fund is assumed to be
reinvested daily. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.
Advertisements and other sales literature may also refer to total return. Total
return represents the change, over a specified period of time, in the value of
an investment in the Fund after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed as
a percentage.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
FOUNTAIN SQUARE U.S. TREASURY OBLIGATIONS FUND
PORTFOLIO OF INVESTMENTS
JULY 31, 1995
- --------------------------------------------------------------------------------
The obligations listed below are issued or guaranteed by the U.S. government,
its agencies or instrumentalities or secured by such obligations.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <C> <S> <C>
- ----------- ------------------------------------------------------------------ ------------
U.S. TREASURY OBLIGATIONS--36.5%
- ----------------------------------------------------------------------------------
U.S. TREASURY BILLS--26.9%
------------------------------------------------------------------
$88,000,000 8/17/1995-1/18/1996 $ 86,672,007
------------------------------------------------------------------ ------------
U.S. TREASURY NOTES--9.6%
------------------------------------------------------------------
31,000,000 3.875%-7.50%, 8/31/1995-4/30/1996 30,882,015
------------------------------------------------------------------ ------------
TOTAL U.S. TREASURY OBLIGATIONS 117,554,022
------------------------------------------------------------------ ------------
*REPURCHASE AGREEMENTS--63.9%
- ----------------------------------------------------------------------------------
16,000,000 Bear, Stearns & Co., Inc., 5.80%, dated 7/31/1995, due 8/1/1995 16,000,000
------------------------------------------------------------------
16,000,000 BT Securities Corp., 5.80%, dated 7/31/1995, due 8/1/1995 16,000,000
------------------------------------------------------------------
16,000,000 Deutsche Bank Government Securities, 5.80%, dated 7/31/1995, due
8/1/1995 16,000,000
------------------------------------------------------------------
46,000,000 Nesbitt Burns, 5.82%, dated 7/31/1995, due 8/1/1995 46,000,000
------------------------------------------------------------------
46,490,000 J.P. Morgan Securities, Inc., 5.82%, dated 7/31/1995, due 8/1/1995 46,490,000
------------------------------------------------------------------
16,000,000 Sanwa Securities USA Co., LP., 5.75%, dated 7/31/1995, due
8/1/1995 16,000,000
------------------------------------------------------------------
49,000,000 UBS Securities, Inc., 5.75%, dated 7/31/1995, due 8/1/1995 49,000,000
------------------------------------------------------------------ ------------
TOTAL REPURCHASE AGREEMENTS 205,490,000
------------------------------------------------------------------ ------------
TOTAL INVESTMENTS, AT AMORTIZED COST $323,044,022+
------------------------------------------------------------------ ------------
</TABLE>
* Repurchase agreements are fully collateralized by U.S. Treasury Obligations
based on market prices at the date of the portfolio.
+ Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($321,640,118) at
July 31, 1995.
(See Notes which are an integral part of the Financial Statements)
FOUNTAIN SQUARE U.S. TREASURY OBLIGATIONS FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in repurchase agreements $205,490,000
- ------------------------------------------------------------------
Investments in securities 117,554,022
- ------------------------------------------------------------------ ------------
Total investments, at amortized cost and value $323,044,022
- --------------------------------------------------------------------------------
Cash 494
- --------------------------------------------------------------------------------
Income receivable 350,327
- -------------------------------------------------------------------------------- ------------
Total assets 323,394,843
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Dividends payable 1,553,062
- ------------------------------------------------------------------
Payable to Adviser 135,512
- ------------------------------------------------------------------
Accrued expenses 66,151
- ------------------------------------------------------------------ ------------
Total liabilities 1,754,725
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 321,640,118 shares of beneficial interest outstanding $321,640,118
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
($321,640,118 / 321,640,118 shares of beneficial interest outstanding) $1.00
- -------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FOUNTAIN SQUARE U.S. TREASURY OBLIGATIONS FUND
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------
Interest income $18,977,975
- ---------------------------------------------------------------------------------
EXPENSES--
- ---------------------------------------------------------------------------------
Investment advisory fee $1,377,583
- --------------------------------------------------------------------
Administrative personnel and services fee 380,685
- --------------------------------------------------------------------
Custodian fee 43,092
- --------------------------------------------------------------------
Portfolio accounting, transfer and dividend disbursing agent fees
and
expenses 58,070
- --------------------------------------------------------------------
Director's/Trustee's fees 6,914
- --------------------------------------------------------------------
Auditing fees 13,066
- --------------------------------------------------------------------
Legal fees 534
- --------------------------------------------------------------------
Fund share registration costs 9,277
- --------------------------------------------------------------------
Printing and postage 12,107
- --------------------------------------------------------------------
Insurance premiums 9,267
- --------------------------------------------------------------------
Miscellaneous 250
- -------------------------------------------------------------------- ----------
Total expenses 1,910,845
- --------------------------------------------------------------------
Deduct--Waiver of investment advisory fee 395,440
- -------------------------------------------------------------------- ----------
Net expenses 1,515,405
- --------------------------------------------------------------------------------- -----------
Net investment income $17,462,570
- --------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FOUNTAIN SQUARE U.S. TREASURY OBLIGATIONS FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
---------------------------------
1995 1994
--------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------
Net investment income $ 17,462,570 $ 10,016,721
- ------------------------------------------------------------ --------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------------------
Dividends to shareholders from net investment income (17,462,570) (10,016,721)
- ------------------------------------------------------------ --------------- -------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- ------------------------------------------------------------
Proceeds from sale of shares 1,029,179,974 813,333,646
- ------------------------------------------------------------
Cost of shares redeemed (1,043,768,436) (767,513,323)
- ------------------------------------------------------------ --------------- -------------
Change in net assets from Fund share transactions (14,588,462) 45,820,323
- ------------------------------------------------------------ --------------- -------------
Change in net assets (14,588,462) 45,820,323
- ------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------
Beginning of period 336,228,580 290,408,257
- ------------------------------------------------------------ --------------- -------------
End of period $ 321,640,118 $ 336,228,580
- ------------------------------------------------------------ --------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FOUNTAIN SQUARE U.S. TREASURY OBLIGATIONS FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Fountain Square Funds (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end management investment
company. The Trust consists of nine diversified portfolios and one
non-diversified portfolio. The financial statements included herein present only
those of Fountain Square U.S. Treasury Obligations Fund (the "Fund"). The
financial statements of the other portfolios are presented separately. The
assets of each portfolio are segregated and a shareholder's interest is limited
to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian
or sub-custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the custodian
bank's vault, all securities held as collateral under repurchase agreement
transactions. Additionally, procedures have been established by the Fund to
monitor, on a daily basis, the market value of each repurchase agreement's
collateral to ensure that the value of collateral at least equals the
repurchase price to be paid under the repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Distributions
to shareholders are recorded on the ex-dividend date.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for
FOUNTAIN SQUARE U.S. TREASURY OBLIGATIONS FUND
- --------------------------------------------------------------------------------
the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are valued daily and begin earning interest on the settlement
date.
F. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At July
31, 1995, capital paid-in aggregated $321,640,118. Transactions in Fund shares
were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------------
1995 1994
- -------------------------------------------------------------- -------------- ------------
<S> <C> <C>
Shares sold 1,029,179,974 813,333,646
- --------------------------------------------------------------
Shares redeemed (1,043,768,436) (767,513,323)
- -------------------------------------------------------------- -------------- ------------
Net change resulting from Fund share transactions (14,588,462) 45,820,323
- -------------------------------------------------------------- -------------- ------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Fifth Third Bank, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
0.40 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive a portion of its fee. The Adviser can modify or terminate this
voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Trust for the period. FAS may
voluntarily choose to waive a portion of its fee.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES, PORTFOLIO ACCOUNTING
AND CUSTODIAN FEES--Fifth Third Bank serves as transfer and dividend disbursing
agent for the Fund for which it receives a fee. Fifth Third Bank sub-contracts
the execution of the transfer and dividend disbursing agent functions to a
non-affiliated entity. The fee is based on the level of the Fund's average net
assets for the period, plus out-of-pocket expenses.
Fifth Third Bank maintains the Fund's accounting records for which it receives a
fee. Fifth Third Bank sub-contracts the execution of the accounting services
function to a non-affiliated entity. The fee is based on the level of the Fund's
average net assets for the period, plus out-of-pocket expenses.
Fifth Third Bank is the Fund's custodian for which it receives a fee. The fee is
based on the level of the Fund's average net assets for the period, plus
out-of-pocket expenses.
Certain of the Officers and Trustees of the Trust are Officers and Trustees of
the above companies.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
FOUNTAIN SQUARE FUNDS:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Fountain Square U.S. Treasury Obligations Fund
(one of the portfolios comprising Fountain Square Funds), as of July 31, 1995,
and the related statement of operations for the year then ended, and statement
of changes in net assets and financial highlights for the periods presented
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of 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 securities owned as of July
31, 1995, 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
Fountain Square U.S. Treasury Obligations Fund at July 31, 1995, the results of
its operations for the year then ended, and the changes in its net assets and
financial highlights for the periods presented therein, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
September 15, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Fountain Square U.S. Treasury Fountain Square Funds
Obligations Fund c/o Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
- -------------------------------------------------------------------------------------------------
Investment Adviser
Fifth Third Bank 38 Fountain Square Plaza
Cincinnati, Ohio 45263
- -------------------------------------------------------------------------------------------------
Custodian, Transfer Agent, and Dividend Disbursing Agent
Fifth Third Bank 38 Fountain Square Plaza
Cincinnati, Ohio 45263
- -------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania 15219
- -------------------------------------------------------------------------------------------------
</TABLE>
FOUNTAIN SQUARE U.S. TREASURY OBLIGATIONS FUND
(A PORTFOLIO OF FOUNTAIN SQUARE FUNDS)
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectus of the Fund dated September 30, 1995. This Statement
is not a prospectus itself. To receive a copy of the prospectus, write
to the Fountain Square U.S. Treasury Obligations Fund or call (513) 579-
6039 in Cincinnati, Ohio or toll-free (800) 654-5372.
FOUNTAIN SQUARE FUNDS
C/O FIFTH THIRD BANK
38 FOUNTAIN SQUARE PLAZA
CINCINNATI, OHIO 45263
Statement dated September 30, 1995
FIFTH THIRD BANK
Investment Adviser
GENERAL INFORMATION ABOUT THE FUND 1
INVESTMENT OBJECTIVE AND POLICIES 1
Types of Investments 1
When-Issued and Delayed Delivery
Transactions 1
Repurchase Agreements 1
Reverse Repurchase Agreements 1
Investment Limitations 2
FOUNTAIN SQUARE FUNDS MANAGEMENT 3
Officers and Trustees 3
Fund Ownership 4
Trustees' Compensation 4
Trustee Liability 4
INVESTMENT ADVISORY SERVICES 4
Adviser to the Fund 4
Advisory Fees 5
BROKERAGE TRANSACTIONS 5
Transfer Agent and Dividend
Disbursing Agent 6
PURCHASING SHARES 6
Conversion to Federal Funds 6
DETERMINING NET ASSET VALUE 6
Use of the Amortized Cost Method 6
REDEEMING SHARES 7
Redemption in Kind 7
TAX STATUS 8
The Fund's Tax Status 8
Shareholders' Tax Status 8
YIELD 8
EFFECTIVE YIELD 8
PERFORMANCE COMPARISONS 9
GENERAL INFORMATION ABOUT THE FUND
Fountain Square U.S. Treasury Obligations Fund (the "Fund") is a portfolio in
the Fountain Square Funds (the "Trust"). The Trust was established as a
Massachusetts business trust under a Declaration of Trust dated September 15,
1988.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide stability of principal and
current income consistent with stability of principal.
The investment objective and policies cannot be changed without approval of
shareholders.
TYPES OF INVESTMENTS
The Fund invests in U.S. Treasury obligations maturing in one year or less.
U.S. Treasury obligations as used herein refers to evidences of indebtedness
issued by the United States, which are fully guaranteed as to principal and
interest by the United States maturing in one year or less from the date of
acquisition. The Fund may also retain Fund assets in cash.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the
Fund's records at the trade date. These assets are marked to market daily and
are maintained until the transaction has been settled. The Fund does not
intend to engage in when-issued and delayed delivery transactions to an extent
that would cause the segregation of more than 20% of the total value of its
assets.
REPURCHASE AGREEMENTS
The Fund or its custodian will take possession of the securities subject to
repurchase agreements and these securities will be marked to market daily. To
the extent that the original seller does not repurchase the securities from
the Fund, the Fund could receive less than the repurchase price on any sale of
such securities. In the event that such a defaulting seller filed for
bankruptcy or became insolvent, disposition of such securities by the Fund
might be delayed pending court action. The Fund believes that under the
regular procedures normally in effect for custody of the Fund's portfolio
securities subject to repurchase agreements, a court of competent jurisdiction
would rule in favor of the Fund and allow retention or disposition of such
securities. The Fund will only enter into repurchase agreements with banks and
other recognized financial institutions such as broker/dealers which are
deemed by the Fund's adviser to be creditworthy pursuant to guidelines
established by the Board of Trustees (the "Trustees").
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. This transaction
is similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated on the Fund's records at the trade date. These securities are
marked to market daily and maintained until the transaction is settled.
During the period any reverse repurchase agreements are outstanding, the Fund
will restrict the purchase of portfolio instruments to money market
instruments maturing on or before the expiration date of the reverse
repurchase agreements, but only to the extent necessary to assure completion
of the reverse repurchase agreements.
The use of reverse repurchase agreements may enable the Fund to avoid selling
portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but the ability to enter into reverse repurchase agreements
does not ensure that the Fund will be able to avoid selling portfolio
instruments at a disadvantageous time.
INVESTMENT LIMITATIONS
The Fund will not change any of the investment limitations described below
without approval of shareholders.
Selling Short and Buying on Margin
The Fund will not sell any portfolio instruments short or purchase any
portfolio instruments on margin but may obtain such short-term credits
as may be necessary for clearance of purchases and sales of portfolio
instruments.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may
borrow money directly or through reverse repurchase agreements as a
temporary measure for extraordinary or emergency purposes and then only
in amounts not in excess of 5% of the value of its total assets or in an
amount up to one-third of the value of its total assets, including the
amount borrowed, in order to meet redemption requests without
immediately selling portfolio instruments. Any direct borrowings need
not be collateralized.
The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage purposes.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may pledge assets having
a market value not exceeding the lesser of the dollar amounts borrowed
or 10% of the value of total assets at the time of the borrowing.
Lending Cash or Securities
The Fund will not lend any of its assets, except that it may purchase or
hold U.S. Treasury obligations, including repurchase agreements,
permitted by its investment objective and policies.
Investing in Securities of Other Investment Companies
The Fund can acquire up to 3 percent of the total outstanding securities
of other investment companies with similar investment objectives and
policies. The Fund will limit its investments in the securities of other
investment companies to those of money market funds having investment
objectives and policies similar to its own. The Fund will purchase
securities of other investment companies only in open-market
transactions involving no more than customary broker's commissions.
However, there is no limitation applicable to securities of any
investment company acquired in a merger, consolidation, or acquisition
of assets.
Except with respect to borrowing money, if a percentage limitation is adhered
to at the time of investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a
violation of such restriction. In connection with investing in shares of other
investment companies, it should be noted that investment companies incur
certain expenses such as management fees, and, therefore, any investment by
the Fund in such shares would be subject to customary expenses.
For the purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S. branch
of a domestic bank or savings and loan having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment to be "cash
items."
FOUNTAIN SQUARE FUNDS MANAGEMENT
OFFICERS AND TRUSTEES
Officers and Trustees of the Trust are listed with their addresses, principal
occupations, and present positions. Except as listed below, none of the
Trustees or Officers are affiliated with The Fifth Third Bank ("Fifth Third
Bank"), Fifth Third Bancorp, Federated Investors, Federated Securities Corp.,
or Federated Administrative Services.
J. Christopher Donahue *+
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Chairman of the Board of Trustees, President and Treasurer
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp.; President, Passport Research, Ltd.; Trustee, Federated
Administrative Services, Federated Services Company, and Federated
Shareholder Services; President or Vice President of the Funds; Director,
Trustee, or Managing General Partner of some of the Funds.
Edward Burke Carey
394 East Town Street
Columbus, OH
Birthdate: July 2, 1945
Member of the Board of Trustees
President of Carey Leggett Realty Advisors.
Lee A. Carter +
Cincinnati Commerce Center
Suite 2020
Cincinnati, OH
Birthdate: December 17, 1938
Member of the Board of Trustees
Formerly, President, Local Marketing Corporation (retired December 31, 1993).
Albert E. Harris
5905 Graves Road
Cincinnati, OH
Birthdate: July 2, 1932
Member of the Board of Trustees
Formerly, Chairman of the Board EDB Holdings, Inc. (retired July, 1993).
Charles L. Davis, Jr.
Federated Investors Tower
Pittsburgh, PA
Birthdate: March 23, 1960
Vice President and Assistant Treasurer
Assistant
Assistant Treasurer of some of the Funds.
Jay S. Neuman
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 22, 1950
Secretary
Corporate Counsel, Federated Investors; prior to January, 1991, Associate
Counsel, The Boston Company Advisors, Inc.
*This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
+Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board of Trustees between
meetings of the Board.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of July 31, 1995, Fifth Third Bank as nominee for numerous trust and agency
accounts, was the owner of record of 321,635,855 Shares (100%) of the Fund.
Trustees' Compensation
NAME , AGGREGATE
POSITION WITH COMPENSATION FROM
TRUST TRUST*+
J. Christopher Donahue $ 0
Chairman of Board of
Trustees, President and Treasurer
Edward Burke Carey $ 7,800
Trustee
Lee A. Carter $ 7,800
Trustee
Albert E. Harris $ 7,800
Trustee
* Information is furnished for the fiscal year ended July 31, 1995. The Trust
is the only investment company in the Fund complex.
+The aggregate compensation is provided for the Trust which is comprised of
ten portfolios.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees are not liable for
errors of judgment or mistakes of fact or law. However, they are not protected
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
ADVISER TO THE FUND
The Fund's investment adviser is Fifth Third Bank (the "Adviser"). It provides
investment advisory services through its Trust and Investment Division. Fifth
Third Bank is a wholly-owned subsidiary of Fifth Third Bancorp.
The Adviser shall not be liable to the Trust, the Fund or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or
sale of any security, or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the
Trust.
ADVISORY FEES
For its advisory services, Fifth Third Bank receives an annual investment
advisory fee as described in the prospectus.
For the fiscal years ended July 31, 1995, 1994, and 1993, the Adviser earned
$1,377,583, $1,341,031, and $1,238,063, respectively, of which $395,440,
$473,109, and $464,273 were voluntarily waived, respectively, because of
undertakings to limit the Fund's expenses.
State Expense Limitations
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2 1/2% per year of the first $30 million of average net assets,
2% per year of the next $70 million of average net assets, and 1 1/2%
per year of the remaining average net assets, the Adviser has agreed to
reimburse the Fund for its expenses over the limitation up to the amount
of the advisory fee in any single fiscal year.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced, in any
single fiscal year, by the amount of the excess, subject to an annual
adjustment.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the Adviser looks for prompt execution of the order at
a favorable price. In working with dealers, the Adviser will generally use
those who are recognized dealers in specific portfolio instruments, except
when a better price and execution of the order can be obtained elsewhere. The
Adviser makes decisions on portfolio transactions and selects brokers and
dealers subject to review by the Trustees.
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
Adviser and may include:
o advice as to the advisability of investing in securities;
o security analysis and reports;
o economic studies;
o industry studies;
o receipt of quotations for portfolio evaluations; and
o similar services.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage
and research services provided.
Research services provided by brokers and dealers may be used by the Adviser
in advising the Fund and other accounts. To the extent that receipt of these
services may supplant services for which the Adviser or its affiliates might
otherwise have paid, it would tend to reduce expenses.
For the fiscal years ended July 31, 1995, 1994, and 1993, the Fund did not pay
any commissions on brokerage transactions.
Administrative Services
Until December 1, 1995, Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services to the
Fund for a fee as described in the prospectus. For the fiscal years ended July
31, 1995, 1994, and 1993, the Fund incurred administrative service fees of
$380,685, $385,743, and $386,565, respectively.
Effective December 1, 1995, BISYS Fund Services L.P., 3435 Stelzer Road,
Columbus, Ohio 43219, will provide administrative services to the Funds for
the fees set forth in the prospectus.
Effective December 1, 1995, pursuant to a separate agreement with BISYS Fund
Services L.P., Fifth Third Bank performs sub-administration services on behalf
of each Fund, for which it receives compensation from BISYS Fund Services L.P.
Under the custodian agreement, Fifth Third Bank holds the Fund's portfolio
securities and keeps all necessary records and documents relating to its
duties. Fifth Third Bank's fees for custody services are based upon the market
value of Fund securities held in custody plus out-of-pocket expenses.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Fifth Third Bank serves as transfer agent and dividend disbursing agent for
the Funds. The fee paid to the transfer agent is based upon the size, type
and number of accounts and transactions made by shareholders.
Fifth Third Bank also maintains the Trust's accounting records. The fee paid
for this service is based upon the level of the Funds' average net assets for
the period plus out-of-pocket expenses.
PURCHASING SHARES
Shares are sold at their net asset value without a sales charge on days the
New York Stock Exchange and the Federal Reserve Bank of Cleveland are open for
business. The procedure for purchasing shares of the Fund is explained in the
prospectus under "Investing in the Fund."
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds. Fifth Third Bank acts as the
shareholder's agent in depositing checks and converting them to federal funds.
DETERMINING NET ASSET VALUE
The Fund attempts to stabilize the value of a share at $1.00. The days on
which net asset value is calculated by the Fund are described in the
prospectus.
USE OF THE AMORTIZED COST METHOD
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
The Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in Rule 2a-7 (the "Rule")
promulgated by the Securities and Exchange Commission under the Investment
Company Act of 1940. Under the Rule, the Trustees must establish procedures
reasonably designed to stabilize the net asset value per share, as computed
for purposes of distribution and redemption, at $1.00 per share, taking into
account current market conditions and the Fund's investment objective.
Monitoring Procedures
The Trustees' procedures include monitoring the relationship between the
amortized cost value per share and the net asset value per share based
upon available indications of market value. The Trustees will decide
what, if any, steps should be taken if there is a difference of more
than .50 of 1% between the two values. The Trustees will take any steps
they consider appropriate (such as redemption in kind or shortening the
average portfolio maturity) to minimize any material dilution or other
unfair results arising from differences between the two methods of
determining net asset value.
Investment Restrictions
The Rule requires that the Fund limit its investments to instruments
that, in the opinion of the Trustees, present minimal credit risks and
if rated, have received the requisite rating from one or more nationally
recognized statistical rating organizations. If the instruments are not
rated, the Trustees must determine that they are of comparable quality.
Shares of investment companies purchased by the Fund will meet these
same criteria and will have investment policies consistent with the
Rule. The Rule also requires the Fund to maintain a dollar weighted
average portfolio maturity (not more than 90 days) appropriate to the
objective of maintaining a stable net asset value of $1.00 per share. In
addition, no instruments with a remaining maturity of more than 397 days
can be purchased by the Fund.
Should the disposition of a portfolio security result in a dollar
weighted average portfolio maturity of more than 90 days, the Fund will
invest its available cash to reduce the average maturity to 90 days or
less as soon as possible.
The Fund may attempt to increase yield by trading portfolio securities
to take advantage of short-term market variations. This policy may, from
time to time, result in high portfolio turnover. Under the amortized
cost method of valuation, neither the amount of daily income nor the net
asset value is affected by any unrealized appreciation or depreciation
of the portfolio.
In periods of declining interest rates, the indicated daily yield on
shares of the Fund computed by dividing the annualized daily income on
the Fund's portfolio by the net asset value computed as above may tend
to be higher than a similar computation made by using a method of
valuation based upon market prices and estimates.
In periods of rising interest rates, the indicated daily yield on shares
of the Fund computed the same way may tend to be lower than a similar
computation made by using a method of calculation based upon market
prices and estimates.
REDEEMING SHARES
Shares are redeemed at the next computed net asset value after Fifth Third
Bank receives the redemption request. Redemption procedures are explained in
the prospectus under "Redeeming Shares." Although Fifth Third Bank does not
charge for telephone redemptions, it reserves the right to charge a fee for
the cost of wire-transferred redemptions of less than $10,000.
REDEMPTION IN KIND
The Trust has elected to be governed by Rule 18f-1 of the Investment Company
Act of 1940 under which the Trust is obligated to redeem shares for any one
shareholder in cash only up to the lesser of $250,000 or 1% of a Fund's net
asset value during any 90-day period.
Any redemption beyond this amount will also be in cash unless the Trustees
determine that payments should be in kind. In such a case, the Trust will pay
all or a portion of the remainder of the redemption in portfolio instruments,
valued in the same way as the Fund determines net asset value. The portfolio
instruments will be selected in a manner that the Trustees deem fair and
equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving their securities and selling them before
their maturity could receive less than the redemption value of their
securities and could incur certain transaction costs.
TAX STATUS
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Fund must,
among other requirements:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o derive less than 30% of its gross income from the sale of securities
held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends received as cash
or additional shares. No portion of any income dividend paid by the Fund is
eligible for the dividends received deduction available to corporations. These
dividends and any short-term capital gains are taxable as ordinary income.
Capital Gains
Capital gains experienced by the Fund could result in an increase in
dividends. Capital losses could result in a decrease in dividends. If,
for some extraordinary reason, the Fund realizes net long-term capital
gains, it will distribute them at least once every 12 months.
YIELD
The Fund's yield for the seven-day period ended July 31, 1995 was 5.44%. The
Fund calculates its yield daily, based upon the seven days ending on the day
of the calculation, called the "base period." This yield is computed by:
o determining the net change in the value of a hypothetical account with a
o balance of one share at the beginning of the base period, with the net
change excluding capital changes but including the value of any
additional shares purchased with dividends earned from the original one
share and all dividends declared on the original and any purchased
shares;
o dividing the net change in the account's value by the value of the
account at the beginning of the base period to determine the base period
return; and
o multiplying the base period return by (365/7).
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the
Fund, the performance will be reduced for those shareholders paying those
fees.
EFFECTIVE YIELD
The Fund's effective yield for the seven-day period ended July 31, 1995 was
5.61%. The Fund's effective yield is computed by compounding the unannualized
base period return by:
o adding 1 to the base period return;
o raising the sum to the 365/7th power; and
o subtracting 1 from the result.
PERFORMANCE COMPARISONS
The Fund's performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio invested;
o changes in interest rates on money market instruments;
o changes in Fund expenses; and
o the relative amount of Fund cash flow.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index
used, prevailing market conditions, portfolio compositions of other funds, and
methods used to value portfolio securities and compute offering price. The
financial publications and/or indices which the Fund uses in advertising may
include:
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all income dividends and capital gains
distributions, if any. From time to time, the Fund will quote its Lipper
ranking in the "short-term U.S. government funds" category in
advertising and sales literature.
o SALOMON 30-DAY TREASURY BILL INDEX is a weekly quote of the most
representative yields for selected securities issued by the U.S.
Treasury, maturing in 30 days.
o DONOGHUE'S MONEY FUND REPORT publishes annualized yields of hundreds of
money market funds on a weekly basis and through its Money Market
Insight publication reports monthly and 12-month-to-date investment
results for the same money funds.
Advertisements and other sales literature for the Fund may refer to total
return. Total return is the historic change in the value of an investment in
the Fund based on the monthly reinvestment of dividends over a specified
period of time.
Cusip 350756102
8120101B (9/95)
