FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
January 31, 1995
[LOGO]
FOUNTAIN SQUARE FUNDS
SEMI ANNUAL REPORT AND SUPPLEMENT TO PROSPECTUS DATED AUGUST 1, 1994
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
(A Portfolio of Fountain Square Funds)
- --------------------------------------------------------------------------------
SUPPLEMENT TO PROSPECTUS DATED AUGUST 1, 1994
A. Please delete the last sentence of the fourth paragraph on the cover of the
prospectus and replace it with the following:
"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 or
calling the Fund at 1-800-654-5372."
B. Please insert the following "Financial Highlights" table for Fountain Square
International Equity Fund after page 2, following the section entitled
"Summary of Fund Expenses" and before the section entitled "Objective of the
Fund." In addition, please add the heading "Financial Highlights" to the
Table of Contents page, after the heading "Summary of Fund Expenses."
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JANUARY 31, 1995*
-------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- --------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------
Net investment income 0.01
- --------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (1.00)
- -------------------------------------------------------------------- -----------
Total from investment operations (0.99)
- --------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------
Dividends to shareholders from net investment income --
- -------------------------------------------------------------------- ------------
NET ASSET VALUE, END OF PERIOD $ 9.01
-----
- --------------------------------------------------------------------
TOTAL RETURN** (9.90%)
- --------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------
Expenses 1.63%(a)
- --------------------------------------------------------------------
Net investment income 0.18%(a)
- --------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------
Net assets, end of period (000 omitted) $71,122
- --------------------------------------------------------------------
Portfolio turnover rate 16%
- --------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from August 19, 1994 (date of initial
public investment) to January 31, 1995.
** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(See Notes which are an integral part of the financial statements)
C. Please delete the section entitled "When-Issued and Delayed Delivery
Transactions" on page 5 and replace it with the following:
"WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase 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 sub-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."
D. Please insert the following as the second paragraph of the section entitled
"Lending of Portfolio Securities" on page 5:
"There is the risk that when lending portfolio securities, the securities may
not be available to the Fund on a timely basis and the Fund may, therefore, lose
the opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action."
E. Please delete the last sentence of the section entitled "Forward Foreign
Currency Exchange Contracts" on page 5 and replace it with the following:
"The Fund will not enter into forward contracts for hedging purposes in a
particular currency in an amount in excess of the Fund's assets denominated in
that currency, but as consistent with its other investment policies, is not
otherwise limited in its ability to use this strategy."
F. Please delete the first paragraph of the section entitled "Administrative
Arrangements" on page 10 and replace it with the following. In addition,
please delete the heading "Administrative Arrangements" from the Table of
Contents page and replace it with the heading "Other Payments to Financial
Institutions."
"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
predicted upon the amount of shares the financial institutional 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."
G. Please delete the section entitled "Legal Counsel" from page 10. In addition,
please delete the heading "Legal Counsel" from the Table of Contents page,
and delete the references to "Legal Counsel" on the address page.
H. Please revise the references to "Independent Auditors" on page 10 and the
address page to refer to Ernst & Young LLP.
I. Please delete the sales charge table under the section entitled "Fifth Third
Bank Club 53, One Account Plus or One Account Gold Programs" on page 13 and
replace it with the following:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS
A PERCENTAGE A PERCENTAGE
OF PUBLIC OF NET AMOUNT
AMOUNT OF TRANSACTION OFFERING PRICE INVESTED
- ------------------------------------------------------- ----------------
<S> <C> <C>
Less than $50,000...................................... 3.97% 4.13%
$50,000-$99,999........................................ 3.47% 3.59%
$100,000-$149,999...................................... 2.47% 2.53%
$150,000-$249,999...................................... 1.47% 1.49%
$250,000-$499,999...................................... 0.47% 0.47%
$500,000 or more....................................... 0.00% 0.00%
</TABLE>
J. Please insert the following as the second paragraph of the section entitled
"Voting Rights" which begins on page 16:
"As of January 31, 1995, Fifth Third Bank, may for certain purposes be deemed to
control the Fund because it is owner of record of certain shares of the Fund."
K. Please insert the following Financial Statements after the section entitled
"Performance Information" and before the address page. In addition, please
add the heading "Financial Statements" to the Table of Contents page after
the heading "Performance Information."
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
JANUARY 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--88.2%
- -------------------------------------------------------------------------------------
AUSTRALIA--7.9%
-------------------------------------------------------------------
BANKING--1.2%
-------------------------------------------------------------------
93,300 Westpac Banking Corporation Ltd. $ 317,901
-------------------------------------------------------------------
70,587 National Australia Bank Ltd. 555,848
------------------------------------------------------------------- -----------
Total 873,749
------------------------------------------------------------------- -----------
BEVERAGES & TOBACCO--0.3%
-------------------------------------------------------------------
15,795 Coca Cola Amatil Ltd. 101,657
-------------------------------------------------------------------
157,200 Fosters Brewing Group Ltd. 129,741
------------------------------------------------------------------- -----------
Total 231,398
------------------------------------------------------------------- -----------
BROADCASTING & PUBLISHING--0.5%
-------------------------------------------------------------------
95,809 News Corp Ltd. 364,899
------------------------------------------------------------------- -----------
BUILDING PRODUCTS--0.4%
-------------------------------------------------------------------
64,100 Boral Ltd. 158,225
-------------------------------------------------------------------
48,100 Pioneer International 115,088
------------------------------------------------------------------- -----------
Total 273,313
------------------------------------------------------------------- -----------
CHEMICALS--0.2%
-------------------------------------------------------------------
17,500 ICI Australia Ltd. 129,194
------------------------------------------------------------------- -----------
DIVERSIFIED--0.1%
-------------------------------------------------------------------
36,599 South Corp Holdings Ltd. 79,256
------------------------------------------------------------------- -----------
ENERGY--1.8%
-------------------------------------------------------------------
17,437 Ampolex Ltd. 44,626
-------------------------------------------------------------------
84,716 Broken Hill Proprietary Co. Ltd. 1,182,836
-------------------------------------------------------------------
33,155 Santos Ltd. 82,091
------------------------------------------------------------------- -----------
Total 1,309,553
------------------------------------------------------------------- -----------
FOOD & HOUSEHOLD PRODUCTS--0.1%
-------------------------------------------------------------------
66,230 Goodman Fielder Wattie Ltd. 60,177
------------------------------------------------------------------- -----------
FOREST PRODUCTS--0.3%
-------------------------------------------------------------------
30,900 Amcor Ltd. 209,167
------------------------------------------------------------------- -----------
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
AUSTRALIA--CONTINUED
-------------------------------------------------------------------
INDUSTRIAL GOODS & SERVICES--0.5%
-------------------------------------------------------------------
29,104 Australian National Industries $ 30,411
-------------------------------------------------------------------
50,825 CSR Ltd. 163,940
-------------------------------------------------------------------
57,579 Pacific Dunlop Ltd. 133,409
------------------------------------------------------------------- -----------
Total 327,760
------------------------------------------------------------------- -----------
METALS & MINING--0.1%
-------------------------------------------------------------------
16,300 Newcrest Mining Ltd. 59,859
------------------------------------------------------------------- -----------
METALS--NON-FERROUS--1.4%
-------------------------------------------------------------------
31,700 CRA Ltd. 396,522
-------------------------------------------------------------------
80,300 MIM Holdings Ltd. 120,387
-------------------------------------------------------------------
42,165 North Ltd. 95,779
-------------------------------------------------------------------
15,200 Renison Goldfields Consolidated Ltd. 53,402
-------------------------------------------------------------------
51,700 Western Mining Ltd. 266,193
------------------------------------------------------------------- -----------
Total 932,283
------------------------------------------------------------------- -----------
RETAIL STORES--0.3%
-------------------------------------------------------------------
68,300 Coles Myer Ltd. 217,721
------------------------------------------------------------------- -----------
REAL ESTATE--0.4%
-------------------------------------------------------------------
39,521 General Property Trust Units 65,834
-------------------------------------------------------------------
13,073 Lend Lease Corp. Ltd. 153,230
-------------------------------------------------------------------
45,900 Westfield Trust 78,893
------------------------------------------------------------------- -----------
Total 297,957
------------------------------------------------------------------- -----------
SERVICES--0.1%
-------------------------------------------------------------------
12,200 Brambles Industries Ltd. 105,308
------------------------------------------------------------------- -----------
TRANSPORTATION--0.1%
-------------------------------------------------------------------
23,700 TNT Australian 34,455
------------------------------------------------------------------- -----------
WHOLESALE & INTERNATIONAL TRADE--0.1%
-------------------------------------------------------------------
32,044 Burns Philp & Co. Ltd. 80,311
------------------------------------------------------------------- -----------
TOTAL AUSTRALIA 5,586,360
------------------------------------------------------------------- -----------
BELGIUM--5.8%
-------------------------------------------------------------------
BANKING--0.8%
-------------------------------------------------------------------
1,200 Kredietbank 244,580
-------------------------------------------------------------------
1,300 Generale de Banque 336,506
------------------------------------------------------------------- -----------
Total 581,086
------------------------------------------------------------------- -----------
BUILDING PRODUCTS--0.2%
-------------------------------------------------------------------
350 Cimenteries CBR 132,145
------------------------------------------------------------------- -----------
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
BELGIUM--CONTINUED
-------------------------------------------------------------------
CHEMICALS--0.7%
-------------------------------------------------------------------
2,250 Gevaert Photo-Producten NV $ 103,668
-------------------------------------------------------------------
725 Solvay Et Cie 360,139
------------------------------------------------------------------- -----------
Total 463,807
------------------------------------------------------------------- -----------
ENERGY--0.8%
-------------------------------------------------------------------
2,000 Petrofina SA 592,573
------------------------------------------------------------------- -----------
GAS & ELECTRIC UTILITY--1.2%
-------------------------------------------------------------------
850 Electrabel NPV Parts 155,566
-------------------------------------------------------------------
3,900 Electrabel Ords. Parts 710,032
------------------------------------------------------------------- -----------
Total 865,598
------------------------------------------------------------------- -----------
INDUSTRIAL HOLDING COMPANY--1.0%
-------------------------------------------------------------------
200 Bekaert SA 138,064
-------------------------------------------------------------------
2,050 Groupe Bruxelles Lambert 241,381
-------------------------------------------------------------------
1,125 Tractebel 327,923
------------------------------------------------------------------- -----------
Total 707,368
------------------------------------------------------------------- -----------
INSURANCE--0.6%
-------------------------------------------------------------------
3,000 AG Financiere Cie Financiere Et 247,172
-------------------------------------------------------------------
1,150 Royale Belge 164,477
------------------------------------------------------------------- -----------
Total 411,649
------------------------------------------------------------------- -----------
MISCELLANEOUS MATERIALS & COMMODITIES--0.1%
-------------------------------------------------------------------
450 Glaverbel SA 64,937
------------------------------------------------------------------- -----------
MERCHANDISING--0.2%
-------------------------------------------------------------------
4,500 Delhaize Freres 169,901
------------------------------------------------------------------- -----------
TRANSPORTATION--0.2%
-------------------------------------------------------------------
2,200 ACEC-Union Miniere SA 161,901
------------------------------------------------------------------- -----------
TOTAL BELGIUM 4,150,965
------------------------------------------------------------------- -----------
FRANCE--9.3%
-------------------------------------------------------------------
AUTOMOTIVE--0.2%
-------------------------------------------------------------------
1,350 Peugeot SA 176,891
------------------------------------------------------------------- -----------
BANKING--1.2%
-------------------------------------------------------------------
5,200 Banque Nationale de Paris 232,690
-------------------------------------------------------------------
3,100 Cie Financiere de Paribas SA 191,247
-------------------------------------------------------------------
2,300 Societe Generale 223,512
-------------------------------------------------------------------
4,500 Cie de Suez Compagnie 198,542
------------------------------------------------------------------- -----------
Total 845,991
------------------------------------------------------------------- -----------
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
FRANCE--CONTINUED
-------------------------------------------------------------------
BEVERAGES & TOBACCO--0.6%
-------------------------------------------------------------------
2,100 LVMH Moet Vuitton $ 334,270
-------------------------------------------------------------------
1,450 Pernod Ricard 82,974
------------------------------------------------------------------- -----------
Total 417,244
------------------------------------------------------------------- -----------
BUILDING PRODUCTS--0.2%
-------------------------------------------------------------------
2,500 LaFarge-Coppee 174,247
------------------------------------------------------------------- -----------
BUSINESS SERVICES--0.5%
-------------------------------------------------------------------
3,100 Cie Generale des Eaux 278,853
-------------------------------------------------------------------
1,550 Havas SA 108,151
------------------------------------------------------------------- -----------
Total 387,004
------------------------------------------------------------------- -----------
CHEMICALS--0.6%
-------------------------------------------------------------------
2,000 Air Liquide (L') 276,514
-------------------------------------------------------------------
7,000 Rhone Poulenc SA 168,932
------------------------------------------------------------------- -----------
Total 445,446
------------------------------------------------------------------- -----------
CONSTRUCTION--0.1%
-------------------------------------------------------------------
775 Bouygues 76,051
------------------------------------------------------------------- -----------
CONSUMER GOODS & SERVICES--0.1%
-------------------------------------------------------------------
340 BIC 43,257
------------------------------------------------------------------- -----------
DEFENSE--0.3%
-------------------------------------------------------------------
3,900 Thomson CSF 102,129
-------------------------------------------------------------------
150 Sagem 74,995
------------------------------------------------------------------- -----------
Total 177,124
------------------------------------------------------------------- -----------
ELECTRICAL & ELECTRONIC--0.7%
-------------------------------------------------------------------
4,200 Alcatel Alsthom 362,784
-------------------------------------------------------------------
90 Legrand 107,315
------------------------------------------------------------------- -----------
Total 470,099
------------------------------------------------------------------- -----------
ENERGY--1.2%
-------------------------------------------------------------------
6,900 Societe Elf Aquitane SA 500,474
-------------------------------------------------------------------
5,700 Total SA Class B 322,922
------------------------------------------------------------------- -----------
Total 823,396
------------------------------------------------------------------- -----------
FINANCIAL SERVICES--0.1%
-------------------------------------------------------------------
650 Cie Bancaire 56,491
-------------------------------------------------------------------
125 EuraFrance 36,894
------------------------------------------------------------------- -----------
Total 93,385
------------------------------------------------------------------- -----------
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
FRANCE--CONTINUED
-------------------------------------------------------------------
FOOD PRODUCTS & SERVICES--0.4%
-------------------------------------------------------------------
2,100 Groupe Danone $ 289,940
------------------------------------------------------------------- -----------
FOOD & HOUSEHOLD PRODUCTS--0.3%
-------------------------------------------------------------------
875 Eridania Begsin-Say 116,482
-------------------------------------------------------------------
300 Saint Louis-Bouchon 73,997
------------------------------------------------------------------- -----------
Total 190,479
------------------------------------------------------------------- -----------
HEALTH & PERSONAL CARE--0.6%
-------------------------------------------------------------------
1,700 L'Oreal 347,544
-------------------------------------------------------------------
2,300 Sanofi SA 111,975
------------------------------------------------------------------- -----------
Total 459,519
------------------------------------------------------------------- -----------
INDUSTRIAL GOODS & SERVICES--0.2%
-------------------------------------------------------------------
3,100 Michelin Class B 116,729
------------------------------------------------------------------- -----------
INDUSTRIAL HOLDING COMPANY--0.3%
-------------------------------------------------------------------
150 Chargeurs 31,892
-------------------------------------------------------------------
1,950 Lyonnaise des Eaux 153,528
------------------------------------------------------------------- -----------
Total 185,420
------------------------------------------------------------------- -----------
INSURANCE--0.3%
-------------------------------------------------------------------
4,400 AXA 179,236
------------------------------------------------------------------- -----------
LEISURE--0.1%
-------------------------------------------------------------------
750 Accor SA 76,165
------------------------------------------------------------------- -----------
MACHINERY & EQUIPMENT--0.1%
-------------------------------------------------------------------
1,500 Schneider SA 99,556
------------------------------------------------------------------- -----------
MISCELLANEOUS MATERIALS & COMMODITIES--0.4%
-------------------------------------------------------------------
2,300 Cie de St. Gobain (Compagnide) 265,502
------------------------------------------------------------------- -----------
MERCHANDISING--0.7%
-------------------------------------------------------------------
725 Carrefour 281,406
-------------------------------------------------------------------
2,200 Casino Guichard Perrachon Et Cie 53,971
-------------------------------------------------------------------
525 Pinault Printemps Redoute 96,347
-------------------------------------------------------------------
575 Promodes 97,322
------------------------------------------------------------------- -----------
Total 529,046
------------------------------------------------------------------- -----------
REAL ESTATE--0.1%
-------------------------------------------------------------------
775 Simco-Union SA 59,912
------------------------------------------------------------------- -----------
TOTAL FRANCE 6,581,639
------------------------------------------------------------------- -----------
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
GREAT BRITAIN--9.5%
-------------------------------------------------------------------
AEROSPACE & MILITARY TECHNOLOGY--0.1%
-------------------------------------------------------------------
4,888 British Aerospace PLC $ 36,160
------------------------------------------------------------------- -----------
APPLIANCES & HOUSEHOLD PRODUCTS--0.1%
-------------------------------------------------------------------
5,500 Thorn EMI PLC 88,971
------------------------------------------------------------------- -----------
BANKING--1.0%
-------------------------------------------------------------------
18,400 Abbey National PLC 122,390
-------------------------------------------------------------------
19,800 Barclays PLC 181,994
-------------------------------------------------------------------
21,300 HSBC Holdings PLC 206,602
-------------------------------------------------------------------
12,700 Lloyds Bank PLC 108,669
-------------------------------------------------------------------
9,884 Royal Bank of Scotland 60,881
------------------------------------------------------------------- -----------
Total 680,536
------------------------------------------------------------------- -----------
BEVERAGES & TOBACCO--0.3%
-------------------------------------------------------------------
9,600 Bass PLC 78,638
-------------------------------------------------------------------
18,700 Guiness PLC 123,198
------------------------------------------------------------------- -----------
Total 201,836
------------------------------------------------------------------- -----------
BROADCASTING & PUBLISHING--0.1%
-------------------------------------------------------------------
8,500 Reed International PLC 98,909
------------------------------------------------------------------- -----------
BUILDING PRODUCTS--0.3%
-------------------------------------------------------------------
7,700 BPB Industries PLC 37,893
-------------------------------------------------------------------
11,300 Blue Circle Industries 47,538
-------------------------------------------------------------------
2,900 RMC Group PLC 42,400
-------------------------------------------------------------------
7,100 Redland PLC 47,565
-------------------------------------------------------------------
12,000 Tarmac PLC 21,622
------------------------------------------------------------------- -----------
Total 197,018
------------------------------------------------------------------- -----------
BUSINESS SERVICES--0.2%
-------------------------------------------------------------------
3,217 De La Rue Ltd. 51,274
-------------------------------------------------------------------
5,800 North West Water Group PLC 45,025
-------------------------------------------------------------------
6,178 Thames Water PLC 45,311
------------------------------------------------------------------- -----------
Total 141,610
------------------------------------------------------------------- -----------
CHEMICALS--0.3%
-------------------------------------------------------------------
5,800 BOC Group PLC 64,821
-------------------------------------------------------------------
4,500 Courtaulds PLC 28,789
-------------------------------------------------------------------
7,700 Imperial Chemical Industries PLC 90,945
------------------------------------------------------------------- -----------
Total 184,555
------------------------------------------------------------------- -----------
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
GREAT BRITAIN--CONTINUED
-------------------------------------------------------------------
CONGLOMERATES--0.0%
-------------------------------------------------------------------
7,900 Lonrho PLC $ 19,063
------------------------------------------------------------------- -----------
CONSTRUCTION--0.0%
-------------------------------------------------------------------
6,500 Taylor Woodrow PLC 13,208
------------------------------------------------------------------- -----------
CONTAINERS & PACKAGING--0.1%
-------------------------------------------------------------------
5,200 Bowater PLC 33,103
------------------------------------------------------------------- -----------
ELECTRICAL & ELECTRONIC--0.2%
-------------------------------------------------------------------
34,500 General Electric PLC 149,519
------------------------------------------------------------------- -----------
ENERGY--0.6%
-------------------------------------------------------------------
61,355 British Petroleum Co. PLC 398,857
-------------------------------------------------------------------
2,624 Burmah Castrol PLC 34,075
-------------------------------------------------------------------
9,700 Lasmo PLC 22,482
------------------------------------------------------------------- -----------
Total 455,414
------------------------------------------------------------------- -----------
ENTERTAINMENT--0.0%
-------------------------------------------------------------------
4,800 Rank Organisation Group 28,118
------------------------------------------------------------------- -----------
FOOD PRODUCTS & SERVICES--0.1%
-------------------------------------------------------------------
5,200 Associated British Foods 48,622
------------------------------------------------------------------- -----------
FOOD & HOUSEHOLD PRODUCTS--0.3%
-------------------------------------------------------------------
10,900 Cadbury Schweppes PLC 72,849
-------------------------------------------------------------------
6,900 Unilever PLC 128,487
------------------------------------------------------------------- -----------
Total 201,336
------------------------------------------------------------------- -----------
FOREST PRODUCTS--0.1%
-------------------------------------------------------------------
12,900 Arjo Wiggins Appleton 46,282
------------------------------------------------------------------- -----------
GAS & ELECTRIC UTILITY--0.7%
-------------------------------------------------------------------
51,600 British Gas PLC 248,612
-------------------------------------------------------------------
5,500 Eastern Group PLC 61,992
-------------------------------------------------------------------
13,900 National Power PLC 104,815
-------------------------------------------------------------------
8,100 Scottish Power PLC 42,177
-------------------------------------------------------------------
3,400 Southern Electric PLC 39,887
------------------------------------------------------------------- -----------
Total 497,483
------------------------------------------------------------------- -----------
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
GREAT BRITAIN--CONTINUED
-------------------------------------------------------------------
HEALTH & PERSONAL CARE--0.8%
-------------------------------------------------------------------
25,400 Glaxo Holdings PLC $ 249,193
-------------------------------------------------------------------
14,100 Smithkline Beecham "A" 101,846
-------------------------------------------------------------------
13,600 Smithkline Beecham Equity Units 92,514
-------------------------------------------------------------------
6,600 Zeneca PLC 91,678
------------------------------------------------------------------- -----------
Total 535,231
------------------------------------------------------------------- -----------
INDUSTRIAL HOLDING COMPANY--0.8%
-------------------------------------------------------------------
38,200 BTR PLC 181,928
-------------------------------------------------------------------
6,100 BICC PLC 29,535
-------------------------------------------------------------------
24,800 Grand Metropolitan 142,323
-------------------------------------------------------------------
55,066 Hanson PLC 200,841
-------------------------------------------------------------------
4,500 T.I. Group 23,931
-------------------------------------------------------------------
11,600 Trafalgar House PLC 12,154
------------------------------------------------------------------- -----------
Total 590,712
------------------------------------------------------------------- -----------
INSURANCE--1.1%
-------------------------------------------------------------------
11,300 Boots Co. PLC 83,774
-------------------------------------------------------------------
4,600 Commercial Union PLC 36,001
-------------------------------------------------------------------
6,300 General Accident PLC 50,056
-------------------------------------------------------------------
11,000 Great Universal 90,456
-------------------------------------------------------------------
14,874 Guardian Royal Exchange PLC 40,141
-------------------------------------------------------------------
31,300 Marks & Spencer PLC 188,320
-------------------------------------------------------------------
22,700 Prudential Corporation PLC 105,406
-------------------------------------------------------------------
8,100 Royal Insurance Holdings PLC 33,947
-------------------------------------------------------------------
18,107 Sainsbury (J) PLC 122,166
-------------------------------------------------------------------
7,500 Sedgwick Group PLC 18,455
------------------------------------------------------------------- -----------
Total 768,722
------------------------------------------------------------------- -----------
LEISURE--0.1%
-------------------------------------------------------------------
15,200 Ladbroke Group PLC 39,815
-------------------------------------------------------------------
11,400 Forte PLC 42,710
------------------------------------------------------------------- -----------
Total 82,525
------------------------------------------------------------------- -----------
MACHINERY & EQUIPMENT--0.1%
-------------------------------------------------------------------
4,800 GKN PLC 41,453
------------------------------------------------------------------- -----------
MISCELLANEOUS MATERIALS & COMMODITIES--0.0%
-------------------------------------------------------------------
12,994 Pilkington PLC 29,498
------------------------------------------------------------------- -----------
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
GREAT BRITAIN--CONTINUED
-------------------------------------------------------------------
MERCHANDISING--0.1%
-------------------------------------------------------------------
13,300 Argyll Group PLC $ 57,641
-------------------------------------------------------------------
16,800 Sears PLC 26,270
-------------------------------------------------------------------
17,100 Tesco PLC 67,323
------------------------------------------------------------------- -----------
Total 151,234
------------------------------------------------------------------- -----------
METALS--NON-FERROUS--0.2%
-------------------------------------------------------------------
13,200 RTZ Corp. 163,030
------------------------------------------------------------------- -----------
METALS--STEEL--0.1%
-------------------------------------------------------------------
31,300 British Steel PLC 73,291
------------------------------------------------------------------- -----------
PAPER PRODUCTS--0.1%
-------------------------------------------------------------------
7,100 Caradon PLC 25,586
-------------------------------------------------------------------
17,000 Harrison & Crossfield PLC 24,447
------------------------------------------------------------------- -----------
Total 50,033
------------------------------------------------------------------- -----------
PRINTING & PUBLISHING--0.2%
-------------------------------------------------------------------
17,000 Reuters Holdings PLC 117,935
------------------------------------------------------------------- -----------
REAL ESTATE--0.1%
-------------------------------------------------------------------
6,800 Land Securities PLC 59,912
-------------------------------------------------------------------
5,200 MEPC British Registered 30,709
-------------------------------------------------------------------
3,900 Slough Estates 13,992
------------------------------------------------------------------- -----------
Total 104,613
------------------------------------------------------------------- -----------
TEXTILE PRODUCTS--0.0%
-------------------------------------------------------------------
7,700 Coats Viyella 21,147
------------------------------------------------------------------- -----------
TOBACCO--0.3%
-------------------------------------------------------------------
31,300 B.A.T. Industries PLC 222,606
------------------------------------------------------------------- -----------
TRANSPORTATION--AIRLINES--0.1%
-------------------------------------------------------------------
10,500 British Airways PLC 61,091
------------------------------------------------------------------- -----------
TRANSPORTATION--ROAD & RAIL--0.1%
-------------------------------------------------------------------
9,400 Peninsular & Oriental Steam Navi 84,611
------------------------------------------------------------------- -----------
TELECOMMUNICATIONS--0.8%
-------------------------------------------------------------------
62,200 British Telecommunications PLC 393,489
-------------------------------------------------------------------
23,037 Cable & Wireless PLC 134,948
-------------------------------------------------------------------
11,300 Vodafone Group PLC 33,725
------------------------------------------------------------------- -----------
Total 562,162
------------------------------------------------------------------- -----------
TOTAL GREAT BRITAIN 6,781,637
------------------------------------------------------------------- -----------
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
HONG KONG--0.0%
-------------------------------------------------------------------
REAL ESTATE--0.0%
-------------------------------------------------------------------
428 New World Developments Co. Ltd. $ 951
------------------------------------------------------------------- -----------
INDONESIA--1.9%
-------------------------------------------------------------------
AGRICULTURE--0.1%
-------------------------------------------------------------------
47,000 Sinar Mas Agro Res. 60,951
------------------------------------------------------------------- -----------
BANKING--0.1%
-------------------------------------------------------------------
54,000 Bank DaGang Naisonal Indo 76,728
------------------------------------------------------------------- -----------
FOREST PRODUCTS--0.6%
-------------------------------------------------------------------
311,000 Barito Pacific Timber 441,895
------------------------------------------------------------------- -----------
HOTELS & LODGING--0.2%
-------------------------------------------------------------------
86,000 Jakarta International Hotel & Development 117,347
-------------------------------------------------------------------
9,000 Matahari Putra Prima 14,615
------------------------------------------------------------------- -----------
Total 131,962
------------------------------------------------------------------- -----------
METALS & MINING--0.1%
-------------------------------------------------------------------
31,000 United Tractors 62,925
------------------------------------------------------------------- -----------
TEXTILE PRODUCTS--0.0%
-------------------------------------------------------------------
4,000 Mayatexdian Industry 1,579
-------------------------------------------------------------------
9,000 Pan Brothers Tex I 4,465
------------------------------------------------------------------- -----------
Total 6,044
------------------------------------------------------------------- -----------
TIRE & RUBBER--0.1%
-------------------------------------------------------------------
88,000 Gudjah Tunggal 98,244
------------------------------------------------------------------- -----------
TOBACCO--0.7%
-------------------------------------------------------------------
100,000 Hanjaya Mandala Sampoerna 480,394
------------------------------------------------------------------- -----------
TOTAL INDONESIA 1,359,143
------------------------------------------------------------------- -----------
ITALY--7.5%
-------------------------------------------------------------------
AGRICULTURE--0.1%
-------------------------------------------------------------------
65,100 Parmalat Finanziaria SPA 70,529
------------------------------------------------------------------- -----------
AUTOMOTIVE--1.1%
-------------------------------------------------------------------
175,000 Fiat SPA 647,701
-------------------------------------------------------------------
38,000 Fiat SPA, non-convertible 96,100
-------------------------------------------------------------------
15,000 Gilardini Inds. 38,403
------------------------------------------------------------------- -----------
Total 782,204
------------------------------------------------------------------- -----------
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
ITALY--CONTINUED
-------------------------------------------------------------------
BANKING--1.0%
-------------------------------------------------------------------
17,000 Banca Nazionale Dell Agricultura $ 37,844
-------------------------------------------------------------------
92,000 Banca Commerciale Italiana 230,653
-------------------------------------------------------------------
30,000 Banco Ambrosiano Veneto 81,489
-------------------------------------------------------------------
118,500 Credito Italiano 147,991
-------------------------------------------------------------------
38,000 Istituto Bancario San 237,285
------------------------------------------------------------------- -----------
Total 735,262
------------------------------------------------------------------- -----------
BUILDING PRODUCTS--0.1%
-------------------------------------------------------------------
10,500 Italcementi 81,957
-------------------------------------------------------------------
4,750 Italcementi Di 18,345
------------------------------------------------------------------- -----------
Total 100,302
------------------------------------------------------------------- -----------
CHEMICALS--0.3%
-------------------------------------------------------------------
315,000 Montedison SPA 243,061
------------------------------------------------------------------- -----------
COMPUTER HARDWARE--0.1%
-------------------------------------------------------------------
65,000 Olivetti ING C, & Co. 84,018
------------------------------------------------------------------- -----------
ENGINEERING--0.0%
-------------------------------------------------------------------
9,000 Impregilo SPA 9,087
------------------------------------------------------------------- -----------
FINANCIAL SERVICES--0.4%
-------------------------------------------------------------------
13,000 Fidis 31,212
-------------------------------------------------------------------
25,500 Mediobanca Banca Di Credito Fina 223,321
------------------------------------------------------------------- -----------
Total 254,533
------------------------------------------------------------------- -----------
FOREST PRODUCTS--0.1%
-------------------------------------------------------------------
4,000 Saffa Class A 11,489
-------------------------------------------------------------------
20,000 She Sta Meridionale Finanz 48,706
------------------------------------------------------------------- -----------
Total 60,195
------------------------------------------------------------------- -----------
FURNITURE--0.0%
-------------------------------------------------------------------
3,000 Falck, Accia & Ferr Lombarde 6,257
------------------------------------------------------------------- -----------
GAS & ELECTRIC UTILITY--0.2%
-------------------------------------------------------------------
34,000 Edison SPA 159,231
------------------------------------------------------------------- -----------
GAS UTILITY--0.1%
-------------------------------------------------------------------
38,000 Italgas 105,236
------------------------------------------------------------------- -----------
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
ITALY--CONTINUED
-------------------------------------------------------------------
INSURANCE--1.7%
-------------------------------------------------------------------
40,350 Assicurazioni Generali SPA $ 976,342
-------------------------------------------------------------------
19,600 R.A.S. 188,977
-------------------------------------------------------------------
6,500 S.A.I. 76,915
------------------------------------------------------------------- -----------
Total 1,242,234
------------------------------------------------------------------- -----------
MANUFACTURING--CONSUMER GOODS--0.1%
-------------------------------------------------------------------
5,000 Sasib 26,258
-------------------------------------------------------------------
35,000 Snia BPD SPA 45,240
------------------------------------------------------------------- -----------
Total 71,498
------------------------------------------------------------------- -----------
OIL & GAS EXPLORATION PRODUCT & SERVICES--0.1%
-------------------------------------------------------------------
22,500 Saipem 43,835
------------------------------------------------------------------- -----------
PAPER PRODUCTS--0.1%
-------------------------------------------------------------------
5,000 Burgo (Cartiere) Spaitalian 35,281
------------------------------------------------------------------- -----------
RETAIL STORES/CATALOG--0.1%
-------------------------------------------------------------------
8,000 Rinascente 46,458
------------------------------------------------------------------- -----------
REAL ESTATE--0.0%
-------------------------------------------------------------------
900 Risanamento Di Napoli 15,399
------------------------------------------------------------------- -----------
TEXTILE PRODUCTS--0.2%
-------------------------------------------------------------------
10,000 Benetton Group SPA 108,027
------------------------------------------------------------------- -----------
TIRE & RUBBER--0.2%
-------------------------------------------------------------------
85,000 Pirelli SPA 121,015
------------------------------------------------------------------- -----------
TRANSPORTATION & SHIPPING--0.0%
-------------------------------------------------------------------
30,000 Alitalia 17,422
------------------------------------------------------------------- -----------
TELECOMMUNICATIONS--1.5%
-------------------------------------------------------------------
360,000 Telecom Italia SPA 958,381
-------------------------------------------------------------------
12,000 Sirti 87,521
------------------------------------------------------------------- -----------
Total 1,045,902
------------------------------------------------------------------- -----------
TOTAL ITALY 5,356,986
------------------------------------------------------------------- -----------
JAPAN--30.7%
-------------------------------------------------------------------
ALUMINUM--0.1%
-------------------------------------------------------------------
8,000 Nipon Light Metal 44,792
------------------------------------------------------------------- -----------
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
JAPAN--CONTINUED
-------------------------------------------------------------------
APPLIANCES & HOUSEHOLD PRODUCTS--1.2%
-------------------------------------------------------------------
23,000 Matsushita Electric Industrial $ 320,778
-------------------------------------------------------------------
23,000 Sanyo Electric Co. 116,921
-------------------------------------------------------------------
15,000 Sharp Corp. 221,331
-------------------------------------------------------------------
4,000 Sony Corporation 185,554
------------------------------------------------------------------- -----------
Total 844,584
------------------------------------------------------------------- -----------
AUTOMOTIVE--1.5%
-------------------------------------------------------------------
12,000 Honda Motor 187,980
-------------------------------------------------------------------
30,000 Nissan Motors 214,054
-------------------------------------------------------------------
36,000 Toyota Motor Co. 691,280
------------------------------------------------------------------- -----------
Total 1,093,314
------------------------------------------------------------------- -----------
BANKING--6.9%
-------------------------------------------------------------------
31,000 Asahi Bank 369,693
-------------------------------------------------------------------
23,000 Bank of Tokyo 357,970
-------------------------------------------------------------------
16,000 Chiba Bank 141,167
-------------------------------------------------------------------
36,000 Dai-ichi Kangyo Bank 676,727
-------------------------------------------------------------------
39,000 Fuji Bank 851,366
-------------------------------------------------------------------
26,000 Industrial Bank of Japan 701,588
-------------------------------------------------------------------
9,000 Joyo Bank 71,402
-------------------------------------------------------------------
39,000 Sakura Bank 488,747
-------------------------------------------------------------------
16,000 Shizuoka Bank 192,426
-------------------------------------------------------------------
39,000 Sumitomo Bank Ltd. 760,711
-------------------------------------------------------------------
24,000 Tokai Bank 288,640
------------------------------------------------------------------- -----------
Total 4,900,437
------------------------------------------------------------------- -----------
BEVERAGES & TOBACCO--0.4%
-------------------------------------------------------------------
8,000 Asahi Breweries Ltd. 86,511
-------------------------------------------------------------------
16,000 Kirin Brewery Company 176,256
------------------------------------------------------------------- -----------
Total 262,767
------------------------------------------------------------------- -----------
CHEMICALS--1.1%
-------------------------------------------------------------------
23,000 Asahi Chemical Industry 162,946
-------------------------------------------------------------------
23,200 Mitsubishi Chemical 110,904
-------------------------------------------------------------------
8,000 Shin-Etsu Chemical 137,447
-------------------------------------------------------------------
31,000 Sumitomo Chemical Co. 149,130
-------------------------------------------------------------------
16,000 Takeda Chemical Industries 198,895
------------------------------------------------------------------- -----------
Total 759,322
------------------------------------------------------------------- -----------
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
JAPAN--CONTINUED
-------------------------------------------------------------------
CONSTRUCTION--1.2%
-------------------------------------------------------------------
8,000 Aoki Corporation $ 56,192
-------------------------------------------------------------------
8,000 Daiwa House Industry 122,086
-------------------------------------------------------------------
16,000 Kumagai Gumi Co. Ltd. 92,979
-------------------------------------------------------------------
13,000 Mitsui Fudosan 148,464
-------------------------------------------------------------------
8,000 Penta-Ocean Construction Co. Ltd. 75,434
-------------------------------------------------------------------
8,000 Sekisui House Ltd. 100,256
-------------------------------------------------------------------
11,000 Shimizu Construction 112,282
-------------------------------------------------------------------
8,000 Sumitomo Cement 43,983
-------------------------------------------------------------------
16,000 Taisei Construction 113,354
------------------------------------------------------------------- -----------
Total 865,030
------------------------------------------------------------------- -----------
DATA PROCESSING--0.3%
-------------------------------------------------------------------
25,000 Fujitsu Ltd. 216,530
------------------------------------------------------------------- -----------
ELECTRIC UTILITY--0.8%
-------------------------------------------------------------------
5,100 Kansai Electric Power, Inc. 111,848
-------------------------------------------------------------------
17,100 Tokyo Electric Power 447,604
------------------------------------------------------------------- -----------
Total 559,452
------------------------------------------------------------------- -----------
ELECTRICAL & ELECTRONIC--0.4%
-------------------------------------------------------------------
28,000 Mitsubishi Electric 172,901
-------------------------------------------------------------------
2,000 Rohm Company 72,160
-------------------------------------------------------------------
1,000 Advantest 27,590
------------------------------------------------------------------- -----------
Total 272,651
------------------------------------------------------------------- -----------
ELECTRONIC COMPONENTS/INSTRUMENTS--1.1%
-------------------------------------------------------------------
4,500 Fanuc Co. Ltd. 186,464
-------------------------------------------------------------------
47,000 Hitachi Ltd. 405,652
-------------------------------------------------------------------
21,000 NEC Corp. 197,378
------------------------------------------------------------------- -----------
Total 789,494
------------------------------------------------------------------- -----------
ENERGY--0.3%
-------------------------------------------------------------------
20,000 Energy Corp. 73,373
-------------------------------------------------------------------
23,000 Nippon Oil Company 148,069
------------------------------------------------------------------- -----------
Total 221,442
------------------------------------------------------------------- -----------
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
JAPAN--CONTINUED
-------------------------------------------------------------------
ENGINEERING--0.5%
-------------------------------------------------------------------
8,000 Hazama Guhi $ 47,621
-------------------------------------------------------------------
16,000 Kajima Corp. 148,120
-------------------------------------------------------------------
16,000 Obayashi Gumi 130,171
------------------------------------------------------------------- -----------
Total 325,912
------------------------------------------------------------------- -----------
ENTERTAINMENT--0.1%
-------------------------------------------------------------------
4,000 Tokyo Dome Corp. 73,575
------------------------------------------------------------------- -----------
FINANCIAL SERVICES--1.6%
-------------------------------------------------------------------
16,000 Daiwa Securities Ltd. 208,597
-------------------------------------------------------------------
15,000 Mitsubishi Trust & Banking Co. 216,783
-------------------------------------------------------------------
23,000 Nomura Securities Co. 450,949
-------------------------------------------------------------------
16,000 Yamaichi Securities Ltd. 120,954
-------------------------------------------------------------------
16,000 Yasuda Trust and Banking 124,026
------------------------------------------------------------------- -----------
Total 1,121,309
------------------------------------------------------------------- -----------
FOOD & HOUSEHOLD PRODUCTS--0.4%
-------------------------------------------------------------------
16,000 Kao Corporation 176,256
-------------------------------------------------------------------
8,000 Nippon Meat Packers, Inc. 105,916
------------------------------------------------------------------- -----------
Total 282,172
------------------------------------------------------------------- -----------
FOREST PRODUCTS--0.5%
-------------------------------------------------------------------
3,000 Daishowa Seishi 16,372
-------------------------------------------------------------------
16,000 Nippon Paper Industries 102,520
-------------------------------------------------------------------
16,000 OJI Paper 154,588
-------------------------------------------------------------------
3,000 Sumitomo Forestry Co. Ltd. 50,633
------------------------------------------------------------------- -----------
Total 324,113
------------------------------------------------------------------- -----------
GAS & ELECTRIC UTILITY--0.2%
-------------------------------------------------------------------
47,000 Osaka Gas Co. Ltd. 169,101
------------------------------------------------------------------- -----------
GAS UTILITY--0.3%
-------------------------------------------------------------------
47,000 Tokyo Gas Ltd. 187,626
------------------------------------------------------------------- -----------
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
JAPAN--CONTINUED
-------------------------------------------------------------------
HEALTH & PERSONAL CARE--0.8%
-------------------------------------------------------------------
8,000 Chugai Pharmaceutical Ltd. $ 77,779
-------------------------------------------------------------------
8,000 Kyowa Kogyo Co. Ltd. 76,728
-------------------------------------------------------------------
2,000 Nochida Pharmaceutical 37,192
-------------------------------------------------------------------
8,000 Sankyo Co. 190,809
-------------------------------------------------------------------
3,000 Shiseido Co. Ltd. 32,442
-------------------------------------------------------------------
8,000 Yamanouchi Pharmaceutical Co. Ltd. 164,128
------------------------------------------------------------------- -----------
Total 579,078
------------------------------------------------------------------- -----------
INDUSTRIAL GOODS & SERVICES--0.9%
-------------------------------------------------------------------
8,000 Bridgestone Corporation 112,383
-------------------------------------------------------------------
16,000 Mitsui Engineering & Shipbuilding 46,247
-------------------------------------------------------------------
8,000 MGK Insulators Ltd. 81,660
-------------------------------------------------------------------
8,000 Nippon Denso Ltd. 144,724
-------------------------------------------------------------------
10,000 Sumitomo Electric Industries 128,352
-------------------------------------------------------------------
8,000 Toto 139,873
------------------------------------------------------------------- -----------
Total 653,239
------------------------------------------------------------------- -----------
INSURANCE--0.4%
-------------------------------------------------------------------
8,000 Nippon Fire & Marine Insurance 50,370
-------------------------------------------------------------------
23,000 Tokio Marine Fire 260,342
------------------------------------------------------------------- -----------
Total 310,712
------------------------------------------------------------------- -----------
MACHINERY & EQUIPMENT--1.4%
-------------------------------------------------------------------
3,000 Chiyoda Chemical Engineering 37,293
-------------------------------------------------------------------
8,000 Daikin Industries 69,128
-------------------------------------------------------------------
5,000 Ebara 79,841
-------------------------------------------------------------------
16,000 Komatsu 141,490
-------------------------------------------------------------------
23,000 Kubota Corporation 159,459
-------------------------------------------------------------------
62,000 Mitsubishi Heavy Industries 421,074
-------------------------------------------------------------------
3,000 Tokyo Electron Ltd. 80,043
------------------------------------------------------------------- -----------
Total 988,328
------------------------------------------------------------------- -----------
MANUFACTURING--CONSUMER GOODS--0.7%
-------------------------------------------------------------------
14,000 Canon 207,991
-------------------------------------------------------------------
5,000 Casio Computer 54,575
-------------------------------------------------------------------
8,000 Fuji Photo Film Ltd. 174,639
-------------------------------------------------------------------
1,900 Sega Enterprise 97,739
------------------------------------------------------------------- -----------
Total 534,944
------------------------------------------------------------------- -----------
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
JAPAN--CONTINUED
-------------------------------------------------------------------
MISC. MATERIALS & COMMODITIES--0.4%
-------------------------------------------------------------------
23,000 Asahi Glass Co. $ 269,639
------------------------------------------------------------------- -----------
MERCHANDISING--1.4%
-------------------------------------------------------------------
6,000 Yokado 277,118
-------------------------------------------------------------------
8,000 Jusco Ltd. 152,001
-------------------------------------------------------------------
8,000 Marui 120,469
-------------------------------------------------------------------
16,000 Mitsukoshi Ltd. 144,077
-------------------------------------------------------------------
4,000 Seven-Eleven Japan Ltd. 297,533
------------------------------------------------------------------- -----------
Total 991,198
------------------------------------------------------------------- -----------
METALS & MINING--1.4%
-------------------------------------------------------------------
13,000 Furukawa Electric 80,407
-------------------------------------------------------------------
40,000 Kawasaki Steel Corporation 155,639
-------------------------------------------------------------------
47,000 Kobe Steel 142,026
-------------------------------------------------------------------
16,000 Mitsubishi Material Corp. 74,545
-------------------------------------------------------------------
45,000 Nippon Kokan 126,886
-------------------------------------------------------------------
59,000 Nippon Steel Corporation 220,027
-------------------------------------------------------------------
54,000 Sumitomo Metal Industries 168,636
-------------------------------------------------------------------
7,000 Sumitomo Metal & Mining 56,596
------------------------------------------------------------------- -----------
Total 1,024,762
------------------------------------------------------------------- -----------
OFFICE EQUIPMENT--0.4%
-------------------------------------------------------------------
16,000 Dai Nippon Printing Ltd. 257,107
------------------------------------------------------------------- -----------
PAPER PRODUCTS--0.1%
-------------------------------------------------------------------
16,000 UBE Industries 65,813
------------------------------------------------------------------- -----------
RETAIL STORES/CATALOG--0.0%
-------------------------------------------------------------------
1,000 Adyama Trading Co. 20,415
------------------------------------------------------------------- -----------
REAL ESTATE--0.3%
-------------------------------------------------------------------
17,000 Mitsubishi Estate Co. 195,863
------------------------------------------------------------------- -----------
SERVICES--0.4%
-------------------------------------------------------------------
2,000 Secom Co. Ltd. 118,245
-------------------------------------------------------------------
11,000 Toppan Printing 146,746
------------------------------------------------------------------- -----------
Total 264,991
------------------------------------------------------------------- -----------
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
JAPAN--CONTINUED
-------------------------------------------------------------------
TEXTILE PRODUCTS--0.5%
-------------------------------------------------------------------
16,000 Shon Denko $ 52,230
-------------------------------------------------------------------
16,000 Teijin 77,456
-------------------------------------------------------------------
23,000 Toray 146,210
-------------------------------------------------------------------
16,000 Toyobo 59,830
------------------------------------------------------------------- -----------
Total 335,726
------------------------------------------------------------------- -----------
TRANSPORTATION & SHIPPING--1.7%
-------------------------------------------------------------------
16,000 Ajinomoto Co., Inc. 187,575
-------------------------------------------------------------------
16,000 Hankyu Corp. 88,775
-------------------------------------------------------------------
31,000 Japan Air Lines 198,005
-------------------------------------------------------------------
23,000 Kinki Nippon Railway 186,656
-------------------------------------------------------------------
16,000 Nippon Express Co. 154,588
-------------------------------------------------------------------
23,000 Nippon Yusen 132,960
-------------------------------------------------------------------
16,000 Odakyu Railway 121,277
-------------------------------------------------------------------
16,000 Tobu Railway 101,873
-------------------------------------------------------------------
16,000 Tokyo Corp. 111,575
------------------------------------------------------------------- -----------
Total 1,283,284
------------------------------------------------------------------- -----------
WHOLESALE & INTERNATIONAL TRADE--1.0%
-------------------------------------------------------------------
23,000 Marubeni Corporation 116,224
-------------------------------------------------------------------
22,000 Mitsubishi Corporation 255,693
-------------------------------------------------------------------
23,000 Mitsui & Co. 180,147
-------------------------------------------------------------------
16,000 Sumitomo Corporation 154,749
------------------------------------------------------------------- -----------
Total 706,813
------------------------------------------------------------------- -----------
TOTAL JAPAN 21,795,535
------------------------------------------------------------------- -----------
MEXICO--2.3%
-------------------------------------------------------------------
BANKING--0.1%
-------------------------------------------------------------------
850 Grupo Financiero Sa de Banocci 1,475
-------------------------------------------------------------------
7,550 Grupo Financiero Serfin 8,682
-------------------------------------------------------------------
27,300 Grupo Finan Banamex 50,302
------------------------------------------------------------------- -----------
Total 60,459
------------------------------------------------------------------- -----------
BEVERAGES & TOBACCO--0.1%
-------------------------------------------------------------------
3,850 Coca-Cola Femsa SA 6,427
-------------------------------------------------------------------
24,200 Fomento Economico 44,209
-------------------------------------------------------------------
1,400 Grupo Modelo SA 19,843
------------------------------------------------------------------- -----------
Total 70,479
------------------------------------------------------------------- -----------
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
MEXICO--CONTINUED
-------------------------------------------------------------------
BUILDING PRODUCTS--0.2%
-------------------------------------------------------------------
7,750 Apasco S.A. de C.V. $ 26,485
-------------------------------------------------------------------
5,700 Cementos de Mexico 17,953
-------------------------------------------------------------------
19,350 Cementos de Mexico SA 66,431
-------------------------------------------------------------------
4,900 Cementos de Mexico CPO 15,897
-------------------------------------------------------------------
775 Tubos de Acero De Mexico 2,173
-------------------------------------------------------------------
4,900 Tomex SA 17,015
------------------------------------------------------------------- -----------
Total 145,954
------------------------------------------------------------------- -----------
CONSTRUCTION--0.0%
-------------------------------------------------------------------
450 Grupo de DeSarrollo 2,197
------------------------------------------------------------------- -----------
DIVERSIFIED--0.3%
-------------------------------------------------------------------
5,750 Grupo Industrial Alfa 46,182
-------------------------------------------------------------------
5,750 Grupo Sidek SA 6,375
-------------------------------------------------------------------
30,500 Grupo Carso 158,748
------------------------------------------------------------------- -----------
Total 211,305
------------------------------------------------------------------- -----------
ENGINEERING--0.0%
-------------------------------------------------------------------
4,800 Grupo Tribasa SA 23,585
------------------------------------------------------------------- -----------
FINANCIAL SERVICES--0.0%
-------------------------------------------------------------------
650 Grupo Financiero Banorth 972
-------------------------------------------------------------------
68,690 Grupo Financiero Bancomer SA de C.V. 23,258
------------------------------------------------------------------- -----------
Total 24,230
------------------------------------------------------------------- -----------
FOOD & HOUSEHOLD PRODUCTS--0.1%
-------------------------------------------------------------------
3,650 Herdez S.A. de C.V. 1,392
-------------------------------------------------------------------
5,950 Kimberly Clark de Mexico 52,474
------------------------------------------------------------------- -----------
Total 53,866
------------------------------------------------------------------- -----------
HOTELS & LODGING--0.0%
-------------------------------------------------------------------
11,747 Grupo Situr SA 8,417
------------------------------------------------------------------- -----------
INDUSTRIAL GOODS & SERVICES--0.0%
-------------------------------------------------------------------
2,800 Desc S.A. de C.V. 5,732
-------------------------------------------------------------------
3,800 Grupo Industrial 13,614
-------------------------------------------------------------------
4,600 Industria Penoles 10,070
------------------------------------------------------------------- -----------
Total 29,416
------------------------------------------------------------------- -----------
INDUSTRIAL HOLDING COMPANY--0.0%
-------------------------------------------------------------------
13,900 Grupo Industrial Maseca S.A. C.V. 11,383
------------------------------------------------------------------- -----------
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
MEXICO--CONTINUED
-------------------------------------------------------------------
MACHINERY & EQUIPMENT--0.1%
-------------------------------------------------------------------
4,625 Expresas Ica Sociedad Controladora $ 39,332
------------------------------------------------------------------- -----------
MISCELLANEOUS MATERIALS & COMMODITIES--0.0%
-------------------------------------------------------------------
2,300 Consorcio G Grupo Dina S.A. de C.V. 2,680
------------------------------------------------------------------- -----------
MERCHANDISING--0.3%
-------------------------------------------------------------------
101,800 Cifra S.A. de C.V. 122,885
-------------------------------------------------------------------
20,500 Empresas la Modern 66,182
------------------------------------------------------------------- -----------
Total 189,067
------------------------------------------------------------------- -----------
RETAIL STORES/CATALOGS--0.0%
-------------------------------------------------------------------
35,384 Grupo Gigante SA 8,359
------------------------------------------------------------------- -----------
GENERAL MERCHANDISE--0.0%
-------------------------------------------------------------------
16,331 Controladora Comercial Mexicana 10,287
------------------------------------------------------------------- -----------
TRANSPORTATION & SHIPPING--0.1%
-------------------------------------------------------------------
2,900 Aerovias de Mexico SA 247
-------------------------------------------------------------------
650 Transportation Maritima Mexicana 3,767
-------------------------------------------------------------------
13,400 Vitro Mexican NPV Ords 43,683
------------------------------------------------------------------- -----------
Total 47,697
------------------------------------------------------------------- -----------
TELECOMMUNICATIONS--1.0%
-------------------------------------------------------------------
10,964 Grupo Televisa S.A. CPO 111,542
-------------------------------------------------------------------
384,300 Telefonos de Mexico S.A. de C.V. 606,322
------------------------------------------------------------------- -----------
Total 717,864
------------------------------------------------------------------- -----------
TOTAL MEXICO 1,656,577
------------------------------------------------------------------- -----------
NETHERLANDS--6.8%
-------------------------------------------------------------------
APPLIANCES & HOUSEHOLD PRODUCTS--0.4%
-------------------------------------------------------------------
9,600 Philips Electronics N.V. 303,862
------------------------------------------------------------------- -----------
BANKING--0.4%
-------------------------------------------------------------------
8,900 ABN Amro Holdings 304,745
------------------------------------------------------------------- -----------
BEVERAGES & TOBACCO--0.2%
-------------------------------------------------------------------
1,150 Heineken N.V. 171,649
------------------------------------------------------------------- -----------
BROADCASTING & PUBLISHING--0.5%
-------------------------------------------------------------------
19,000 Elsevier Nlgi Ords 183,325
-------------------------------------------------------------------
2,000 Wolters Klumer CVA 148,495
------------------------------------------------------------------- -----------
Total 331,820
------------------------------------------------------------------- -----------
CHEMICALS--0.4%
-------------------------------------------------------------------
2,200 Akzo NV NLG20 Ords 250,065
------------------------------------------------------------------- -----------
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
NETHERLANDS--CONTINUED
-------------------------------------------------------------------
ENERGY--2.4%
-------------------------------------------------------------------
15,400 Royal Dutch Petroleum $ 1,723,275
------------------------------------------------------------------- -----------
FOOD PRODUCTS & SERVICES--0.8%
-------------------------------------------------------------------
4,600 Unilever NV 545,056
------------------------------------------------------------------- -----------
FOREST PRODUCTS--0.1%
-------------------------------------------------------------------
3,000 NV Koninklijke 93,192
------------------------------------------------------------------- -----------
INSURANCE--0.5%
-------------------------------------------------------------------
7,900 Internationale Nederlanden Groep 370,432
------------------------------------------------------------------- -----------
MACHINERY & EQUIPMENT--0.0%
-------------------------------------------------------------------
850 Verenigde Machinefabrieken Stork 22,804
------------------------------------------------------------------- -----------
MERCHANDISING--0.2%
-------------------------------------------------------------------
3,500 Koninklijke Ahold NV 106,871
------------------------------------------------------------------- -----------
METALS--0.1%
-------------------------------------------------------------------
900 Hoogovens and Staalf 40,454
------------------------------------------------------------------- -----------
SERVICES--0.7%
-------------------------------------------------------------------
14,300 Koninklijke PTT Nederland NV 471,137
------------------------------------------------------------------- -----------
TRANSPORTATION & SHIPPING--0.1%
-------------------------------------------------------------------
2,400 KLM Royal Dutch Air 64,529
-------------------------------------------------------------------
700 Nedlloyd Groep NV 21,415
------------------------------------------------------------------- -----------
Total 85,944
------------------------------------------------------------------- -----------
TOTAL NETHERLANDS 4,821,306
------------------------------------------------------------------- -----------
PORTUGAL--2.4%
-------------------------------------------------------------------
BANKING--1.5%
-------------------------------------------------------------------
21,500 Banco Espirito Santo 340,235
-------------------------------------------------------------------
33,000 Banco Commercial Portuguese 391,035
-------------------------------------------------------------------
11,900 Banco Portugues Investmento 187,177
-------------------------------------------------------------------
10,000 Banco Portugues do Atlantico 171,394
------------------------------------------------------------------- -----------
Total 1,089,841
------------------------------------------------------------------- -----------
BEVERAGES & TOBACCO--0.1%
-------------------------------------------------------------------
3,800 Unicer 50,194
------------------------------------------------------------------- -----------
CHEMICALS--0.0%
-------------------------------------------------------------------
500 Corporacao Industrial do Norte 14,325
------------------------------------------------------------------- -----------
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
PORTUGAL--CONTINUED
-------------------------------------------------------------------
ENGINEERING--0.1%
-------------------------------------------------------------------
270 Soares da Costa $ 3,658
-------------------------------------------------------------------
900 Soares da Costa SA 12,634
-------------------------------------------------------------------
950 Engil Soc Construcao Civil 13,639
-------------------------------------------------------------------
900 Sociedade de Construcoes Soares da Cos 18,291
-------------------------------------------------------------------
800 Sonague Sociedade Gestora de Parti 6,228
------------------------------------------------------------------- -----------
Total 54,450
------------------------------------------------------------------- -----------
FINANCIAL SERVICES--0.0%
-------------------------------------------------------------------
2,100 Banco Internacional do Furchal SA 19,403
------------------------------------------------------------------- -----------
FOREST PRODUCTS--0.1%
-------------------------------------------------------------------
4,700 Corticeira Anorim 74,977
------------------------------------------------------------------- -----------
INDUSTRIAL HOLDING COMPANY--0.4%
-------------------------------------------------------------------
13,000 Sonae 275,404
------------------------------------------------------------------- -----------
INSURANCE--0.0%
-------------------------------------------------------------------
3,300 Companhia de Seguros 22,342
------------------------------------------------------------------- -----------
REAL ESTATE--0.0%
-------------------------------------------------------------------
800 Mundicenter 19,904
------------------------------------------------------------------- -----------
TRANSPORTATION & SHIPPING--0.1%
-------------------------------------------------------------------
600 Inapa Inv Part Ges 13,373
-------------------------------------------------------------------
6,900 Estado Nivais de Lisboa 32,449
------------------------------------------------------------------- -----------
Total 45,822
------------------------------------------------------------------- -----------
TELECOMMUNICATIONS--0.1%
-------------------------------------------------------------------
1,600 Radio Marconi 47,985
------------------------------------------------------------------- -----------
TOTAL PORTUGAL 1,714,647
------------------------------------------------------------------- -----------
SPAIN--4.1%
-------------------------------------------------------------------
AUTOMOTIVE--0.1%
-------------------------------------------------------------------
1,450 Fasa-Renault 46,740
------------------------------------------------------------------- -----------
BANKING--1.3%
-------------------------------------------------------------------
3,133 Banco Espana Credito (Banesto) 20,317
-------------------------------------------------------------------
4,400 Corporacion Bancaria de Espana 148,173
-------------------------------------------------------------------
11,867 Banco de Santander SA 424,831
-------------------------------------------------------------------
5,600 Banco Central SA 129,545
-------------------------------------------------------------------
8,700 Banco Bilbao Vizcaya 218,084
------------------------------------------------------------------- -----------
Total 940,950
------------------------------------------------------------------- -----------
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
SPAIN--CONTINUED
-------------------------------------------------------------------
BEVERAGES & TOBACCO--0.0%
-------------------------------------------------------------------
1,350 Tabaclera $ 38,397
------------------------------------------------------------------- -----------
BUILDING PRODUCTS--0.1%
-------------------------------------------------------------------
400 Portland Valderrivassa 27,274
-------------------------------------------------------------------
1,500 Uralita 13,653
------------------------------------------------------------------- -----------
Total 40,927
------------------------------------------------------------------- -----------
BUSINESS SERVICES--0.1%
-------------------------------------------------------------------
7,300 Autopista 57,582
------------------------------------------------------------------- -----------
CHEMICALS--0.0%
-------------------------------------------------------------------
3,700 Ercros SA 3,985
------------------------------------------------------------------- -----------
CONSTRUCTION--0.0%
-------------------------------------------------------------------
2,700 Dragados Y Contrucciones 37,168
------------------------------------------------------------------- -----------
ENERGY--0.5%
-------------------------------------------------------------------
11,500 Repsol SA 322,725
------------------------------------------------------------------- -----------
FOOD & HOUSEHOLD PRODUCTS & SERVICES--0.1%
-------------------------------------------------------------------
2,100 Ebro Agricolas Compania de Alime 22,060
-------------------------------------------------------------------
1,050 Viscofan Envolturas Celulosicas 15,131
------------------------------------------------------------------- -----------
Total 37,191
------------------------------------------------------------------- -----------
INDUSTRIAL HOLDING COMPANY--0.0%
-------------------------------------------------------------------
750 Alba (Corp Finan) 30,206
------------------------------------------------------------------- -----------
INSURANCE--0.1%
-------------------------------------------------------------------
1,000 Corporacion Mapfre SA 38,454
------------------------------------------------------------------- -----------
MACHINERY & EQUIPMENT--0.0%
-------------------------------------------------------------------
325 Zardoya Otis SA 30,196
------------------------------------------------------------------- -----------
METALS--0.1%
-------------------------------------------------------------------
540 Acerinox SA 56,070
------------------------------------------------------------------- -----------
REAL ESTATE--0.0%
-------------------------------------------------------------------
150 Immobiliaria Metrolpolitana 4,460
-------------------------------------------------------------------
1,650 Vallehermoso SA 25,968
------------------------------------------------------------------- -----------
Total 30,428
------------------------------------------------------------------- -----------
TELECOMMUNICATIONS--0.6%
-------------------------------------------------------------------
34,000 Telefonica de Espana 420,339
------------------------------------------------------------------- -----------
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------------------
SPAIN--CONTINUED
-------------------------------------------------------------------
GAS & ELECTRIC UTILITIES--1.1%
-------------------------------------------------------------------
1,350 Gas Naturale $ 110,584
-------------------------------------------------------------------
550 Fomento Construccion Es Y Contra 51,352
-------------------------------------------------------------------
9,500 Empresa Nacional Electricidad Es 388,370
-------------------------------------------------------------------
32,300 Iberdrola SA 191,577
-------------------------------------------------------------------
11,300 Union Electrica Fenosa 40,969
------------------------------------------------------------------- -----------
Total 782,852
------------------------------------------------------------------- -----------
TOTAL SPAIN 2,914,210
------------------------------------------------------------------- -----------
THAILAND--0.0%
-------------------------------------------------------------------
FINANCIAL SERVICES--0.0%
-------------------------------------------------------------------
3,900 National Finance & Security 16,815
------------------------------------------------------------------- -----------
TOTAL COMMON STOCKS (IDENTIFIED COST, $67,610,475) 62,736,771
------------------------------------------------------------------- -----------
PREFERRED STOCKS--0.2%
- -------------------------------------------------------------------------------------
AUSTRALIA--0.2%
-------------------------------------------------------------------
BROADCASTING & PUBLISHING--0.2%
-------------------------------------------------------------------
47,804 News Corp. Ltd. 167,226
------------------------------------------------------------------- -----------
TOTAL PREFERRED STOCKS (IDENTIFIED COST, $68,129) 167,226
------------------------------------------------------------------- -----------
WARRANTS AND RIGHTS--0.1%
- -------------------------------------------------------------------------------------
FRANCE--0.0%
-------------------------------------------------------------------
125 Eurafrance Rights 0
------------------------------------------------------------------- -----------
ITALY--0.0%
-------------------------------------------------------------------
5,500 Credito Italiano 0
-------------------------------------------------------------------
2,300 R.A.S. SPA 8,979
------------------------------------------------------------------- -----------
TOTAL ITALY 8,979
------------------------------------------------------------------- -----------
HONG KONG--0.0%
-------------------------------------------------------------------
800 Applied International Warrants 5
------------------------------------------------------------------- -----------
THAILAND--0.1%
-------------------------------------------------------------------
1,300 National Finance & Security 1,090
-------------------------------------------------------------------
2,400 CMIC Finance & Security Rights (convertible to ordinary shares) 6,611
-------------------------------------------------------------------
600 CMIC Finance & Security Rights (convertible to units) 0
-------------------------------------------------------------------
3,600 Dhana Siam Financial & Security 25,582
------------------------------------------------------------------- -----------
TOTAL THAILAND 33,283
------------------------------------------------------------------- -----------
TOTAL WARRANTS AND RIGHTS (IDENTIFIED COST, $0) 42,267
------------------------------------------------------------------- -----------
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- ---------- ------------------------------------------------------------------- -----------
<C> <C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS--11.1%
- -------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES--11.1%
-------------------------------------------------------------------
$2,900,000 Federal Home Loan Bank, VRDN, 2/7/95 $ 2,896,916
-------------------------------------------------------------------
5,000,000 Federal National Mortgage Association, VRDN, 2/17/95 4,986,966
------------------------------------------------------------------- -----------
TOTAL U.S. GOVERNMENT OBLIGATIONS, AT AMORTIZED COST 7,883,882
------------------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST, $75,562,486) $70,830,146+
------------------------------------------------------------------- -----------
</TABLE>
+ The cost for federal tax purposes amounts to $75,562,486. The net unrealized
depreciation of investments on a federal tax basis amounts to $4,732,340,
which is comprised of $874,801 appreciation and $5,607,141 depreciation at
January 31, 1995.
Note: The categories of investments are shown as a percentage of net assets
($71,122,013) at January 31, 1995.
The following abbreviation is used in this portfolio:
VRDN--Variable Rate Demand Notes
(See Notes which are an integral part of the financial statements)
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in securities, at amortized cost and value
(identified and tax cost, $75,562,486) $70,830,146
- --------------------------------------------------------------------------------
Cash 180,702
- --------------------------------------------------------------------------------
Unrealized appreciation on forward foreign currency exchange contracts 113,023
- --------------------------------------------------------------------------------
Dividends and interest receivable 42,277
- --------------------------------------------------------------------------------
Realized gain on forward foreign currency exchange contracts 27,619
- --------------------------------------------------------------------------------
Receivable for Fund shares sold 2,500
- --------------------------------------------------------------------------------
Other receivables 10,298
- -------------------------------------------------------------------------------- -----------
Total assets 71,206,565
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Unrealized depreciation of foreign currency $48,165
- ----------------------------------------------------------------------
Accrued expenses 36,387
- ---------------------------------------------------------------------- -------
Total liabilities 84,552
- -------------------------------------------------------------------------------- -----------
NET ASSETS for 7,894,634 shares of beneficial interest outstanding $71,122,013
- -------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid-in capital $77,080,842
- --------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments and foreign currency
transactions (4,618,959)
- --------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments and foreign currency
transactions (1,384,774)
- --------------------------------------------------------------------------------
Undistributed net investment income 44,904
- -------------------------------------------------------------------------------- -----------
Total net assets $71,122,013
- -------------------------------------------------------------------------------- -----------
NET ASSET VALUE, and Redemption Proceeds Per Share:
($71,122,013 / 7,894,634 shares of beneficial interest outstanding) $9.01
- -------------------------------------------------------------------------------- -----------
COMPUTATION OF OFFERING PRICE:
- --------------------------------------------------------------------------------
Offering Price Per Share (100/95.5 of $9.01) $9.43*
- -------------------------------------------------------------------------------- -----------
</TABLE>
* See "What Shares Cost" in the prospectus.
(See Notes which are an integral part of the financial statements)
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JANUARY 31, 1995*
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------
Interest income $ 205,625
- ---------------------------------------------------------------------------------
Dividend income (net of foreign taxes withheld of $39,445) 256,416
- --------------------------------------------------------------------------------- -----------
Total investment income 462,041
- ---------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------
Investment advisory fee $252,811
- ---------------------------------------------------------------------
Administrative personnel and services fees 61,599
- ---------------------------------------------------------------------
Custodian fee 57,941
- ---------------------------------------------------------------------
Portfolio accounting and transfer and dividend disbursing agent
fees and expenses 28,793
- ---------------------------------------------------------------------
Legal fees 2,028
- ---------------------------------------------------------------------
Auditing fees 1,896
- ---------------------------------------------------------------------
Printing and postage 1,620
- ---------------------------------------------------------------------
Miscellaneous 10,449
- --------------------------------------------------------------------- --------
Total expenses 417,137
- --------------------------------------------------------------------------------- -----------
Net investment income 44,904
- --------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------
Net realized loss on investments and foreign currency transactions
(identified cost basis) (1,384,774)
- ---------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments and
foreign currency transactions (4,618,959)
- --------------------------------------------------------------------------------- -----------
Net realized and unrealized gain (loss) on investments (6,003,733)
- --------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $(5,958,829)
- --------------------------------------------------------------------------------- -----------
</TABLE>
* For the period from August 19, 1994 (date of initial public investment) to
January 31, 1995.
(See Notes which are an integral part of the financial statements)
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JANUARY 31, 1995*
------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------
Net investment income $ 44,904
- ----------------------------------------------------------------------
Net realized gain (loss) on investments and foreign currency
transactions
($1,384,774 net loss as computed for federal tax purposes) (1,384,774)
- ----------------------------------------------------------------------
Change in unrealized appreciation (depreciation) of investments and
foreign currency transactions (4,618,959)
----------
- ----------------------------------------------------------------------
Change in net assets resulting from operations (5,958,829)
----------
- ----------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------------
Dividends to shareholders from net investment income --
----------
- ----------------------------------------------------------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- ----------------------------------------------------------------------
Proceeds from sale of shares 77,823,275
- ----------------------------------------------------------------------
Cost of shares redeemed (742,433)
- ---------------------------------------------------------------------- ---------------
Change in net assets from Fund share transactions 77,080,842
- ---------------------------------------------------------------------- ---------------
Change in net assets 71,122,013
- ----------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------
Beginning of period --
- ---------------------------------------------------------------------- ---------------
End of period (including undistributed net investment income of
$44,904) $ 71,122,013
- ---------------------------------------------------------------------- ---------------
</TABLE>
* For the period from August 19, 1994 (date of initial public investment) to
January 31, 1995
(unaudited).
(See Notes which are an integral part of the financial statements)
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
(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 ten portfolios. The financial statements included
herein are only those of Fountain Square International Equity 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.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--Listed equity securities are valued at the last sale price
reported on national securities exchanges. Unlisted securities and short-term securities
are generally valued at the prices provided by an independent pricing service. Short-term
securities with remaining maturities of sixty days or less may be stated at amortized
cost, which approximates fair market value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require a 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 brokers/dealers, which are deemed by the Fund's adviser
to be creditworthy pursuant to guidelines reviewed or established by the Board of
Trustees.
Risks may arise from the potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Fund could receive less than the repurchase price
on the sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Dividend income and distributions to
shareholders are recorded on the ex-dividend date. 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").
D. FOREIGN CURRENCY TRANSLATION--The accounting records of the Fund are maintained in U.S.
dollars. All assets and liabilities denominated in foreign currencies ("FC") are
translated into U.S. dollars based on the rate of exchange of such currencies against the
U.S. dollar on the date of valuation. Purchases and sales of securities, income and
expenses are translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts recorded and
collected or paid are adjusted when reported by the custodian bank. The Fund does not
isolate that portion of the results of operations resulting from changes in foreign
exchange rates on investments from the fluctuations arising from changes in market prices
of securities held. Such fluctuations are included with the net realized and unrealized
gain or loss from investments.
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Reported net realized foreign exchange gains or losses arise from sales and maturities of
short-term securities, sales of FCs, currency gains or losses realized between the trade
and settlement dates on securities transactions, the difference between the amount of
dividends, interest, and foreign withholding taxes recorded on the Fund's books, and the
U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and liabilities other
than investments in securities at fiscal year end, resulting from changes in the exchange
rate.
E. 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. However, federal taxes may be imposed on the Fund upon the disposition of
certain investments in passive foreign investment companies. Withholding taxes on foreign
dividends have been provided for in accordance with the Fund's understanding of the
applicable country's tax rules and rates.
F. FORWARD COMMITMENTS--The Fund may enter into forward commitments for the delayed delivery
of forward foreign currency exchange contracts which are based upon financial indices at
an exchange rate at a future date. Risks may arise upon entering these contracts from the
potential inability of counterparties to meet the terms of their contracts and from
unanticipated movements in foreign exchange rates. The forward foreign currency exchange
contracts are adjusted by the daily exchange rate of the underlying currency and any
gains or losses are recorded for financial statement purposes as unrealized until the
contract settlement date. For the period ended January 31, 1995, the Fund incurred
realized gains of $27,619 from forward foreign currency exchange contracts.
At January 31, 1995 the Fund had outstanding forward foreign currency exchange contracts
as set forth below.
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED
SETTLEMENT CONTRACTS IN EXCHANGE APPRECIATION
DATE TO DELIVER FOR (DEPRECIATION)
- --------------- -------------- ------------ --------------
<S> <C> <C> <C>
4/28/95 19,269,000 $ 3,600,000 $(52,777)
French Franc
4/28/95 343,236,250 2,717,197 137,471
Spanish Peseta
4/28/95 1,006,465,600 10,220,000 28,329
Japanese Yen
------------
Net Unrealized Appreciation on Forward $113,023
Commitments
------------
G. FOREIGN CURRENCY COMMITMENTS--The Fund may enter into foreign currency commitments for
the delayed delivery of securities or foreign currency exchange transactions. Risks may
arise upon entering into these transactions from the potential inability of
counterparties to meet the terms of their commitments and from unanticipated movements in
security prices or foreign exchange rates. The foreign currency transactions are adjusted
by the daily exchange rate of the underlying currency and any gains or losses are
recorded for financial statement purposes as unrealized until the settlement date.
H. OPTION CONTRACTS--The Fund may write or purchase option contracts. A written option
obligates the Fund to deliver (a call), or to receive (a put), the contract amount of
foreign currency upon exercise by the holder of the option. The value of the option
contract is recorded as a liability and unrealized gain or loss is measured by the
difference between the current value and the premium received. The Fund had no written
options outstanding at January 31, 1995.
I. 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
</TABLE>
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
the securities purchased. Securities purchased on a when-issued or delayed delivery basis
are marked to market daily and begin earning interest on the settlement date.
J. CONCENTRATION OF CREDIT RISK--The Fund invests in equity and fixed income securities of
non-U.S. issuers. Although the Fund maintains a diversified investment portfolio the
political or economic developments within a particular country or region may have an
adverse effect on the ability of domiciled issuers to meet their obligations.
Additionally, political or economic developments may have an effect on the liquidity and
volatility of portfolio securities and currency holdings.
K. 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.
L. OTHER--Investment transactions are accounted for on the trade date.
</TABLE>
(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).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JANUARY 31, 1995*
- ---------------------------------------------------------------------- ------------------
<S> <C>
Shares sold 7,973,333
- ----------------------------------------------------------------------
Shares redeemed (78,699)
----------
- ----------------------------------------------------------------------
Net change resulting from Fund share transactions 7,894,634
----------
- ----------------------------------------------------------------------
</TABLE>
* For the period from August 19, 1994 (date of initial public investment) to
January 31, 1995.
(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
1.00 of 1% of the Fund's average daily net assets. Morgan Stanley Asset
Management, Inc. is the Fund's sub-adviser (the "Sub-Adviser"). The Adviser
compensates the Sub-Adviser at the annual rate of 0.50 of 1% of the Fund's
average daily net assets.
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 net assets of the Trust for the period. FAS may voluntarily
choose to waive a portion of its fee.
TRANSFER AND DIVIDEND DISBURSING AGENT, ACCOUNTING AND CUSTODY FEES--Fifth Third
Bank serves as transfer and dividend disbursing agent for the Fund for which it
receives a fee. Fifth Third Bank has subcontracted the execution of the transfer
and dividend disbursing agency services 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 has subcontracted 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 Directors or
Trustees of the above companies.
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended January 31, 1995, were as follows:
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
PURCHASES $ 76,324,228
- ------------------------------------------------------------------------------- ------------
SALES $ 8,080,116
- ------------------------------------------------------------------------------- ------------
</TABLE>
February 28, 1995
[LOGO]
Fifth Third Bank
Investment Adviser
Federated Securities Corp. is the distributor of the Funds
350756854
007382 (2/95)
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
[LOGO]
FOUNTAIN SQUARE FUNDS
PROSPECTUS
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
(A PORTFOLIO OF THE FOUNTAIN SQUARE FUNDS)
PROSPECTUS
The shares of Fountain Square International Equity 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 the Fountain Square Funds
(the "Trust"), an open-end management investment company (a mutual fund).
The investment objective of the Fund is to seek long-term capital appreciation.
The Fund pursues this objective through a diversified portfolio primarily
invested in equity securities of non-U.S. issuers.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
Additional information about the Fund is contained in the Fund's Statement of
Additional Information dated August 1, 1994, which was filed 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 or
calling the Trust.
THE INVESTMENT COMPANY SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR
OBLIGATIONS OF FIFTH THIRD BANK (THE "ADVISER"), AND ARE NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"), THE FEDERAL
RESERVE BOARD OR BY ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES
INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
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 August 1, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SYNOPSIS 1
- ------------------------------------------------------
EXPENSES OF THE FUND 2
- ------------------------------------------------------
OBJECTIVE OF THE FUND 3
- ------------------------------------------------------
Investment Policies 3
Money Market Instruments 4
Repurchase Agreements 4
Investing in Securities of Other
Investment Companies 4
Restricted and Illiquid Securities 4
When-Issued and Delayed
Delivery Transactions 5
Lending of Portfolio Securities 5
Foreign Currency Transactions 5
Forward Foreign Currency Exchange
Contracts 5
Options 5
Futures and Options on Futures 6
Risk Considerations 7
Exchange Rates 7
Foreign Companies 7
U.S. Government Policies 7
Emerging Markets 7
Investment Limitations 8
FOUNTAIN SQUARE FUNDS INFORMATION 8
- ------------------------------------------------------
Management of the Trust 8
Board of Trustees 8
Investment Adviser 8
Advisory Fees 8
Adviser's Background 9
Sub-Adviser 9
Sub-Advisory Fees 9
Sub-Adviser's Background 9
Portfolio Manager 9
Distribution of Fund Shares 9
Distribution Plan 9
Administrative Arrangements 10
Administration of the Fund 10
Administrative Services 10
Custodian, Transfer Agent and
Dividend Disbursing Agent 10
Legal Counsel 10
Independent Auditors 10
Expenses of the Fund 11
Brokerage Transactions 11
NET ASSET VALUE 11
- ------------------------------------------------------
INVESTING IN THE FUND 11
- ------------------------------------------------------
Share Purchases 11
Through Fifth Third Bank
or Fifth Third Securities 11
Minimum Investment Required 12
What Shares Cost 12
Purchases at Net Asset Value 12
Dealer Concessions 12
Reducing/Eliminating the Sales Charge 13
Quantity Discounts and Accumulated
Purchases 13
Letter of Intent 13
Fifth Third Bank Club 53,
One Account Plus or One
Account Gold Programs 13
Purchases with Proceeds from
Redemptions of Unaffiliated Mutual
Fund Shares 14
Purchases with Proceeds from
Distributions of Qualified Retirement
Plans or Other Trusts Administered by
Fifth Third Bank 14
Concurrent Purchases 14
Systematic Investment Program 14
Certificates and Confirmations 14
Dividends and Capital Gains 14
EXCHANGES 14
- ------------------------------------------------------
REDEEMING SHARES 15
- ------------------------------------------------------
Through Fifth Third Bank or
Fifth Third Securities 15
By Telephone 15
By Mail 15
Receiving Payment 16
Systematic Withdrawal Program 16
Accounts with Low Balances 16
SHAREHOLDER INFORMATION 16
- ------------------------------------------------------
Voting Rights 16
Massachusetts Law 17
EFFECT OF BANKING LAWS 17
- ------------------------------------------------------
TAX INFORMATION 17
- ------------------------------------------------------
Federal Income Tax 17
PERFORMANCE INFORMATION 18
- ------------------------------------------------------
ADDRESSES Inside Back Cover
- ------------------------------------------------------
SYNOPSIS
- --------------------------------------------------------------------------------
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. Shares of the Fund are designed for individuals and
institutions as a convenient means of accumulating an interest in a
professionally managed, diversified portfolio invested in equity securities of
non-U.S. issuers.
For information on how to purchase shares of the Fund, please refer to
"Investing in the Fund." A minimum initial investment of $2,500 is required for
the Fund, except for investments by individual retirement accounts ("IRAs").
Subsequent investments must be in amounts of at least $100. The Fund may make
certain investments and employ certain investment techniques that involve risks,
including investing in non-U.S. issuers, entering into repurchase agreements,
lending portfolio securities and entering into futures contracts and related
options. These risks are described under "Investment Policies." Shares are sold
at net asset value plus any applicable sales charge and are redeemed at net
asset value. Information on redeeming shares may be found under "Redeeming
Shares." The Fund is advised by Fifth Third Bank and sub-advised by Morgan
Stanley Asset Management Inc.
EXPENSES OF THE FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)..................................................................... 4.50%
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 FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee............................................................... 1.00%
12b-1 Fees(1)................................................................ 0.00%
Other Expenses............................................................... 0.60%
Total Fund Operating Expenses........................................... 1.60%
</TABLE>
(1) As of the date of this prospectus, the Fund is not paying or accruing 12b-1
fees. The Fund will not accrue or pay 12b-1 fees until it has created a separate
class of shares for certain institutional investors. The Fund can pay up to
0.35% as a 12b-1 fee to the distributor.
* TOTAL OPERATING EXPENSES ARE ESTIMATED BASED ON AVERAGE EXPENSES EXPECTED TO
BE INCURRED DURING THE FISCAL YEAR ENDING JULY 31, 1995. DURING THE COURSE OF
THIS PERIOD, EXPENSES MAY BE MORE OR LESS THAN THE AVERAGE AMOUNT SHOWN.
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 $5,000 may be subject to additional
fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
- ---------------------------------------------------------------------------------------------
<S> <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......................................... $61 $93
</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. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING JULY 31,
1995.
OBJECTIVE OF THE FUND
- --------------------------------------------------------------------------------
The investment objective of the Fund is to seek long-term capital appreciation.
The Fund invests primarily in equity securities of non-U.S. issuers. The
objective is based on the premise that investing in non-U.S. securities provides
three potential benefits over investing solely in U.S. securities:
- the opportunity to take advantage of investment opportunities in
countries outside the U.S. which may arise because of differing economic
and political cycles;
- the opportunity to invest in financial markets of foreign countries, some
of which are believed to have superior growth potential; and
- the opportunity to reduce the overall volatility of a U.S. only portfolio
by combining domestic and international investments and thereby
diversifying across a wide range of countries and currencies.
The investment objective cannot be changed without the approval of holders of a
majority of the Fund's shares. 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.
Unless indicated otherwise, the investment policies of the Fund may be changed
by the Board of Trustees ("Trustees") without the approval of shareholders.
Shareholders will be notified before any material change in these policies
becomes effective.
INVESTMENT POLICIES
The Fund will invest at least 65%, and under normal market conditions
substantially all, of its total assets in equity securities of issuers located
in at least three countries outside of the United States. The Fund may also
purchase common stock equivalents (such as rights and warrants and securities
that are convertible into common stocks); corporate and government fixed income
securities denominated in currencies other than U.S. dollars; enter into
repurchase agreements, futures and options transactions involving securities and
securities indices, and foreign currency transactions, including forward foreign
currency exchange contracts; and maintain reserves in foreign or U.S. money
market instruments.
The Fund pursues its objective by investing in accordance with country
weightings determined by the adviser, Fifth Third Bank, in consultation with
Morgan Stanley Asset Management Inc. (the "sub-adviser"), in common stocks of
non-U.S. issuers which, in the aggregate, generally replicate broad country
indices. The sub-adviser utilizes a top-down approach in selecting investments
for the Fund that emphasizes country selection and weighting rather than
individual stock selection. This approach reflects the philosophy that a
diversified selection of securities representing exposure to world markets based
upon the economic outlook and current valuation levels (as discussed below) for
each country is an effective way to maximize the return and minimize the risk
associated with international investment. (Although, of course there can be no
assurance that these goals will be achieved.)
In consultation with the adviser, the sub-adviser determines country allocations
for the Fund on an ongoing basis within policy ranges dictated by each country's
market capitalization and liquidity. The Fund will invest substantially in
industrialized countries throughout the world that comprise the Morgan Stanley
Capital International EAFE (Europe, Australia and the Far East) Index. In
addition, the Fund may invest in emerging country equity securities. As used in
this Prospectus, the term "emerging country" applies to any country which, in
the opinion of the sub-adviser, is generally considered to be an emerging or
developing country by the international financial community, including the
International Bank for Reconstruction and Development (more commonly known as
the World Bank) and the International Finance Corporation. There are currently
over 130 countries which, in the opinion of the sub-adviser, are generally
considered to be emerging or developing countries by the international financial
community, approximately 40 of which currently have stock markets. These
countries generally include every nation in the world except the United States,
Canada, Japan, Australia, New Zealand and most nations located in Western
Europe. Currently, investing in many emerging countries is not feasible or may
involve unacceptable political risks. The Fund will focus its investments on
those emerging market countries in which it believes the economies are
developing strongly and in which the markets are becoming more sophisticated. As
markets in other countries develop, the Fund expects to expand and further
diversify the emerging countries in which it invests. The Fund does not
intend to invest in any security in a country where the currency is not freely
convertible to U.S. dollars, unless the Fund has obtained the necessary
governmental licensing to convert such currency or other appropriately licensed
or sanctioned contractual guarantee to protect such investment against loss of
that currency's external value, or the Fund has a reasonable expectation at the
time the investment is made that such governmental licensing or other
appropriately licensed or sanctioned guarantee would be obtained or that the
currency in which the security is quoted would be freely convertible at the time
of any proposed sale of the security by the Fund.
By analyzing a variety of macroeconomic and political factors, the sub-adviser
develops fundamental projections on interest rates, currencies, corporate
profits and economic growth for each country. These country projections are then
used to determine what is believed to be a fair value for the stock market of
each country. Discrepancies between actual value and fair value as determined by
the sub-adviser provide an expected return for each stock market. The expected
return is adjusted by currency return expectations derived from the
sub-adviser's purchasing-power parity exchange rate model to arrive at an
expected total return in U.S. dollars. The final country allocation decision is
then arrived at by considering the expected total return in light of various
country specific considerations such as market size, volatility, liquidity and
country risk.
Within a particular country, investments generally are made through the purchase
of common stocks which, in aggregate, replicate a broad market index, which in
most cases will be the Morgan Stanley Capital International Index for the given
country. The sub-adviser may overweight or underweight an industry segment of a
particular index if it concludes this would be advantageous to the Fund. Stock
selection by the Fund in this manner helps reduce stock-specific risk through
diversification and minimizes transaction costs, which can be substantial in
foreign markets.
MONEY MARKET INSTRUMENTS. The Fund may invest in U.S. and foreign short-term
money market instruments, including interest-bearing call deposits with banks,
government obligations, certificates of deposit, bankers' acceptances,
commercial paper, short-term corporate debt securities, and repurchase
agreements. These investments may be used to temporarily invest cash received
from the sale of Fund shares, to establish and maintain reserves for temporary
defensive purposes, or to take advantage of market opportunities.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, which are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell securities to the Fund and agree at the time of sale to
repurchase them at a mutually agreed upon time and price. 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.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest in
the securities of other investment companies, but it will not own more than 3%
of the total outstanding voting stock of any such investment company, invest
more than 5% of its total assets in any one such investment company, or invest
more than 10% of its total assets in such other investment companies in general.
To the extent that the Fund invests in securities issued by other investment
companies, the Fund will indirectly bear its proportionate share of any fees and
expenses paid by such companies in addition to the fees and expenses payable
directly by the Fund.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies but which are
subject to restrictions on resale under federal securities law. Restricted
securities may be issued by new and early stage companies which may include a
high degree of business and financial risk that can result in substantial
losses. As a result of the absence of a public trading market for these
securities, they may be less liquid than publicly traded securities. Although
these securities may be resold in privately negotiated transactions, the prices
realized from these sales could be less than those originally paid by the Fund,
or less than what may be considered the fair value of such securities. Further,
companies whose securities are not publicly traded may not be subject to the
disclosure and other investor protection requirements which might be applicable
if their securities were publicly traded. If such securities are required to be
registered under the securities laws of one or more jurisdictions before being
resold, the Fund may be required to bear the expense of registration. The Fund
will limit investments in illiquid securities, including certain restricted
securities not determined
by the Trustees to be liquid, over-the-counter options, and repurchase
agreements providing for settlement in more than seven days after notice, to 15%
of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase 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. In when-issued and delayed delivery transactions, the Fund relies
on the seller to complete the transaction. The seller's failure to complete the
transaction may cause the Fund to miss a price or yield considered to be
advantageous.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities on a short-term or long-term basis up to
one-third of the value of its total assets to broker/dealers, banks, or other
institutional borrowers of securities. The Fund will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the adviser
has determined are creditworthy under guidelines established by the Trustees and
will receive collateral in the form of cash or U.S. government securities equal
to at least 100% of the value of the securities loaned.
FOREIGN CURRENCY TRANSACTIONS. The Fund will enter into foreign currency
transactions to obtain the necessary currencies to settle securities
transactions. Currency transactions may be conducted either on a spot or cash
basis at prevailing rates or through forward foreign currency exchange
contracts.
The Fund may also enter into foreign currency transactions to protect Fund
assets against adverse changes in foreign currency exchange rates or exchange
control regulations. Such changes could unfavorably affect the value of Fund
assets which are denominated in foreign currencies, such as foreign securities
or funds deposited in foreign banks, as measured in U.S. dollars. Although
foreign currency exchanges may be used by the Fund to protect against a decline
in the value of one or more currencies, such efforts may also limit any
potential gain that might result from a relative increase in the value of such
currencies and might, in certain cases, result in losses to the Fund. (Please
see Foreign Currency Transactions in the Statement of Additional Information for
further information about the risks.)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency
exchange contract ("forward contract") is an obligation to purchase or sell an
amount of a particular currency at a specific price and on a future date agreed
upon by the parties.
Generally, no commission charges or deposits are involved. At the time the Fund
enters into a forward contract, Fund assets with a value equal to the Fund's
obligation under the forward contract are segregated and are maintained until
the contract has been settled. The Fund will not enter into a forward contract
with a term of more than one year.
The Fund will generally enter into a forward contract to provide the proper
currency to settle a securities transaction at the time the transaction occurs
("trade date"). The period between trade date and settlement date will vary
between 24 hours and 60 days, depending upon local custom.
The Fund may also protect against the decline of a particular foreign currency
by entering into a forward contract to sell an amount of that currency
approximating the value of all or a portion of the Fund's assets denominated in
that currency ("hedging"). The success of this type of short-term hedging
strategy is highly uncertain due to the difficulties of predicting short-term
currency market movements and of precisely matching forward contract amounts and
the constantly changing value of the securities involved. Although the
sub-adviser will consider the likelihood of changes in currency values when
making investment decisions, the sub-adviser believes that it is important to be
able to enter into forward contracts when it believes the interests of the Fund
will be served. The Fund will not enter into forward contracts for hedging
purposes in a particular currency in an amount in excess of the Fund's assets
denominated in that currency.
OPTIONS. The Fund may deal in options on foreign currencies, securities, and
securities indices, and on futures contracts involving these items, which
options may be listed for trading on an international securities exchange or
traded over-the-counter. The Fund may use options to manage interest rate and
currency risks. The Fund may also write covered call options and secured put
options to generate income or lock in gains. The Fund may write covered call
options and secured put options on up to 25% of its net assets and may purchase
put and call options provided that no more than 5% of the fair market value of
its net assets may be invested in premiums on such options.
A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying currency, security or other asset at the
exercise price during the option period. A put option gives the purchaser the
right to sell, and the writer the obligation to buy, the underlying currency,
security or other asset at the exercise price during the option period. The
writer of a covered call owns assets that are acceptable for escrow, and the
writer of a secured put invests an amount not less than the exercise price in
eligible assets to the extent that it is obligated as a writer. If a call
written by the Fund is exercised, the Fund foregoes any possible profit from an
increase in the market price of the underlying asset over the exercise price
plus the premium received. In writing puts, there is a risk that the Fund may be
required to take delivery of the underlying asset at a disadvantageous price.
Over-the-counter options ("OTC options") differ from exchange traded options in
several respects. They are transacted directly with dealers and not with a
clearing corporation, and there is a risk of nonperformance by the dealer as a
result of the insolvency of such dealer or otherwise, in which event the Fund
may experience material losses. However, in writing options, the premium is paid
in advance by the dealer. OTC options, which may not be continuously liquid, are
available for a greater variety of assets, and with a wider range of expiration
dates and exercise prices, than are exchange traded options.
It is not certain that a secondary market for positions in options, or futures
contracts (see below), will exist at all times. Although the adviser will
consider liquidity before entering into these transactions, there is no
assurance that a liquid secondary market on an exchange or otherwise will exist
for any particular futures contract or option at any particular time. The Fund's
ability to establish and close out futures and options positions depends on this
secondary market.
FUTURES AND OPTIONS ON FUTURES. The Fund may enter into futures contracts
involving foreign currency, securities and securities indices, or options
thereon, for bona fide hedging purposes. The Fund may also enter into such
futures contracts or related options for purposes other than bona fide hedging
if the aggregate amount of initial margin deposits on the Fund's futures and
related options positions would not exceed 5% of the net liquidation value of
the Fund's assets, provided further that in the case of an option that is
in-the-money at the time of the purchase, the in-the-money amount may be
excluded in calculating the 5% limitation. In addition, the Fund may not sell
futures contracts if the value of such futures contracts exceeds the total
market value of the Fund's portfolio securities. Futures contracts and options
thereon sold by the Fund are generally subject to segregation and coverage
requirements established by either the Commodity Futures Trading Commission
("CFTC") or the SEC, with the result that, if the Fund does not hold the
instrument underlying the futures contract or option, the Fund will be required
to segregate on an ongoing basis with its custodian cash, U.S. government
securities, or other liquid high grade debt obligations in an amount at least
equal to the Fund' obligations with respect to such instruments.
The Fund may enter into securities index futures contracts and purchase and
write put and call options on securities index futures contracts that are traded
on regulated exchanges, including non-U.S. exchanges to the extent permitted by
the CFTC. Securities index futures contracts are based on indexes that reflect
the market value of securities of the firms included in the indexes. An index
futures contract is an agreement pursuant to which two parties agree to take or
make delivery of an amount of cash equal to the differences between the value of
the index at the close of the last trading day of the contract and the price at
which the index contract was originally written.
The Fund may enter into securities index futures contracts to sell a securities
index in anticipation of or during a market decline to attempt to offset the
decrease in market value of securities in its portfolio that might otherwise
result. When the Fund is not fully invested and anticipates a significant market
advance, it may enter into futures contracts to purchase the index in order to
gain rapid market exposure that may in part or entirely offset increases in the
cost of securities that it intends to purchase. In many of these transactions,
the Fund will purchase such securities upon termination of the futures position
but, depending on market conditions, a futures position may be terminated
without the corresponding purchases of common stock. The Fund may also invest in
securities index futures contracts when the sub-adviser believes such investment
is more efficient, liquid or cost-effective than investing directly in the
securities underlying the index.
An option on a securities index futures contract gives the purchaser the right,
in return for the premium paid, to assume a position in a securities index
futures contract. The Fund may purchase and write put and call options on
securities index futures contracts in order to hedge all or a portion of its
investment
and may enter into closing purchase transactions with respect to written options
in order to terminate existing positions. There is no guarantee that such
closing transactions can be effected. The Fund may also invest in options on
securities index futures contracts when the sub-adviser believes such investment
is more efficient, liquid or cost-effective than investing directly in the
futures contract or in the securities underlying the index, or when the futures
contract or underlying securities are not available for investment upon
favorable terms.
The use of futures and related options involves special considerations and
risks, for example, (1) the ability of the Fund to utilize futures successfully
will depend on the sub-adviser's ability to predict pertinent market movements;
(2) there might be imperfect correlation, or even no correlation, between the
change in market value of the securities held by the Fund and the prices of the
futures and options thereon relating to the securities purchased or sold by the
Fund. The use of futures and related options may reduce risk of loss by wholly
or partially offsetting the negative effect of unfavorable price movements but
they can also reduce the opportunity for gain by offsetting the positive effect
of favorable price movements in positions. No assurance can be given that the
sub-adviser's judgment in this respect will be correct.
RISK CONSIDERATIONS. Investing in non-U.S. securities carries substantial risks
in addition to those associated with domestic investments. In an attempt to
reduce some of these risks, the Fund diversifies its investments broadly among
foreign countries, which may include both developed and emerging countries. At
least three different countries will always be represented.
EXCHANGE RATES. Foreign securities are denominated in foreign currencies.
Therefore, the value in U.S. dollars of the Fund's assets and income may be
affected by changes in exchange rates and regulations. Although the Fund
values its assets daily in U.S. dollars, it will not convert its holding of
foreign currencies to U.S. dollars daily. When the Fund converts its
holdings to another currency, it may incur conversion costs. Foreign
exchange dealers realize a profit on the difference between the prices at
which they buy and sell currencies.
FOREIGN COMPANIES. Other differences between investing in foreign and U.S.
companies include:
- less publicly available information about foreign companies;
- the lack of uniform financial accounting standards applicable to foreign
companies;
- less readily available market quotations on foreign companies;
- differences in government regulation and supervision of foreign stock
exchanges, brokers, listed companies, and banks;
- differences in legal systems which may affect the ability to enforce
contractual obligations or obtain court judgments;
- generally lower foreign stock market volume;
- the likelihood that foreign securities may be less liquid or more
volatile;
- foreign brokerage commissions may be higher;
- unreliable mail service between countries; and
- political or financial changes which adversely affect investments in some
countries.
U.S. GOVERNMENT POLICIES. In the past, U.S. government policies have
discouraged or restricted certain investments abroad by investors such as
the Fund. Although the Fund is unaware of any current restrictions,
investors are advised that these policies could be reinstituted.
EMERGING MARKETS. The Fund may take advantage of the unusual opportunities
for higher returns available from investing in emerging countries. These
investments, however, carry considerably more volatility and risk because
they generally are associated with less mature economies and less stable
political systems. The economies of individual emerging countries may
differ favorably or unfavorably from the U.S. economy in such respects as
growth of gross domestic product, rate of inflation, currency depreciation,
capital reinvestment, resource self-sufficiency and balance of payments
position. Further, the economies of developing countries generally are
heavily dependent upon international trade and, accordingly, have been, and
may continue to be, adversely affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries
with which they trade. These economies also have been, and may continue to
be, adversely affected by economic conditions in the countries with which
they trade.
Prior governmental approval for foreign investments may be required under
certain circumstances in some emerging countries, and the extent of foreign
investment in certain debt securities and domestic companies may be subject
to limitation in other emerging countries. Foreign ownership limitations
also may be imposed by the charters of individual companies in emerging
countries to prevent, among other concerns, violation of foreign investment
limitations.
Repatriation of investment income, capital and the proceeds of sales by
foreign investors may require governmental registration and/or approval in
some emerging countries. The Fund could be adversely affected by delays in,
or a refusal to grant, any required governmental registration or approval
for such repatriation. Any investment subject to such repatriation controls
will be considered illiquid if it appears reasonably likely that this
process will take more than seven days.
With respect to any emerging country, there is the possibility of
nationalization, expropriation or confiscatory taxation, political changes,
governmental regulation, social instability or diplomatic developments
(including war) which could affect adversely the economies of such
countries or the value of the Fund's investments in those countries. In
addition, it may be difficult to obtain and enforce a judgment in a court
outside of the U.S.
INVESTMENT LIMITATIONS
The Fund will not:
- borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a money market or other portfolio
instrument, as applicable, for a percentage of its cash value with an
agreement to buy it back on a set date) or pledge securities except,
under certain circumstances, the Fund may borrow money up to one-third of
the value of its total assets and pledge assets as necessary to secure
such borrowings; or
- underwrite any issue of securities, except as it may be deemed to be an
underwriter under the Securities Act of 1933 in connection with the sale
of restricted securities which the Fund may purchase pursuant to its
investment objective, policies and limitations.
The above investment limitations cannot be changed without shareholder approval.
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. The Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust,
and except as noted below with regard to the sub-adviser, investment decisions
for the Fund are made by Fifth Third Bank, the Fund's 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 assets of
the Fund. As discussed further below, the adviser has retained the sub-adviser
to act as sub-adviser to the Fund. As adviser, Fifth Third Bank will conduct a
program for ongoing oversight and evaluation of the sub-adviser's services to
the Fund, and will regularly report to the Trustees on these matters. Fifth
Third Bank will also assist in the formulation of, and will continue to monitor,
the structure and strategies of the portfolio to meet the needs of shareholders.
As part of the above, Fifth Third Bank will review the portfolio daily and will
monitor the Fund's expenses, as well as the brokerage and research services
provided to the Fund and selection of brokers by the sub-adviser.
ADVISORY FEES. The adviser receives an investment advisory fee at an
annual rate equal to 1.00% of the Fund's average daily net assets. The fee,
while higher than the advisory fee paid by other mutual funds in general,
is comparable to fees paid by many mutual funds with similar objectives
and policies. The investment advisory contract provides for the voluntary
waiver of expenses by the adviser from time to time. 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 fees or reimburse
the Fund for certain other expenses, 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 March 31,
1994, Fifth Third Bank and its affiliates managed assets in excess of $6.8
billion on a discretionary basis and provided custody services for
additional assets in excess of $40.0 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 $1.14 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.
SUB-ADVISER. Under the terms of a Sub-Advisory Agreement between Fifth Third
Bank and the sub-adviser, the sub-adviser will be responsible as sub-adviser for
managing the Fund's portfolio, selecting investments for purchase or sale, along
with the countries in which the Fund will invest, and the dealers in these
securities. In addition, the sub-adviser will furnish to Fifth Third Bank such
investment advice and statistical and other factual information as may from time
to time be reasonably requested by Fifth Third Bank.
SUB-ADVISORY FEES. The adviser will be responsible for compensating the
sub-adviser at the annual rate of 0.50% of the Fund's average daily net
assets.
SUB-ADVISER'S BACKGROUND. Morgan Stanley Asset Management Inc., with
principal offices at 1221 Avenue of the Americas, New York, NY 10020, is a
wholly-owned subsidiary of Morgan Stanley Group Inc. It conducts a
worldwide portfolio management business, providing a broad range of
portfolio management services to customers in the United States and abroad.
At March 31, 1994, the sub-adviser managed investments totaling
approximately $34.8 billion under active management and $13.4 billion as
Named Fiduciary or Fiduciary Adviser.
PORTFOLIO MANAGER. Paul Jackson is a Principal of Morgan Stanley & Co. and
joined the sub-adviser in 1991. He has been the portfolio manager of the
Fund since its inception. Mr. Jackson began at Morgan Stanley & Co. in 1986
concentrating on top-down analysis as an Economist and Quantitative
Analyst. As a member of the Equity Research Department, he was responsible
for Morgan Stanley & Co.'s global quantitative research effort. During this
time, he authored the GlobalQuant publication. Formerly, Mr. Jackson worked
at the U.K. Department of Energy focusing on macroeconomic analysis. Mr.
Jackson graduated from the London School of Economics and was awarded a
Masters degree in Economics from University College, Oxford.
DISTRIBUTION OF FUND SHARES
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.
is a subsidiary of Federated Investors.
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 Federated Securities Corp. an amount computed at an annual rate of up to
0.35% of the average daily net asset value of the Fund's shares to finance any
activity which is principally intended to result in the sale of shares subject
to the Plan. The Fund will not accrue or pay any distribution expenses pursuant
to the Plan until a separate class of shares has been created for certain
institutional investors.
Federated Securities Corp. 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.
ADMINISTRATIVE ARRANGEMENTS. The distributor may also pay financial
institutions a fee based upon the average net asset value of shares of their
customers invested in the Trust for providing administrative services. This fee
is in addition to the amounts paid under the distribution plan for
administrative services, and, if paid, will be reimbursed by the adviser and not
the Trust.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or a savings and loan association) from being 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 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. 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
- --------------------- ------------------------------------
<C> <S>
.150% of the first $250 million
.125% of the next $250 million
.100% of the next $250 million
.075% in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$150,000 with respect to the Fund. Federated Administrative Services may choose
voluntarily to waive a portion of its fee at any time.
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.
LEGAL COUNSEL. Legal counsel for the Fund is provided by Houston, Houston &
Donnelly, Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, L.L.P.,
Washington, D.C.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Ernst & Young,
Pittsburgh, Pennsylvania.
EXPENSES OF THE FUND
The Fund pays all of its own expenses and its allocable share of the Trust's
expenses. The expenses for the Fund include, but are not limited to, the cost
of: organizing the Fund and continuing existence of the Fund and the Trust;
Trustees' fees; investment advisory and administrative services; printing
prospectuses and other Fund documents for shareholders; registering the Trust,
the Fund and shares of the Fund; taxes and commissions; issuing, purchasing,
repurchasing, and redeeming shares; fees for custodians, transfer agents,
dividend disbursing agents, shareholder servicing agents, and registrars;
printing, mailing, auditing, accounting, and legal expenses; reports to
shareholders and governmental agencies; meetings of Trustees and shareholders
and proxy solicitations therefor; insurance premiums; association membership
dues; and such nonrecurring and extraordinary items as may arise.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser and sub-adviser look for prompt execution of the order
at a favorable price. In working with dealers, the adviser and sub-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. In selecting among firms believed to meet these criteria,
the adviser and sub-adviser may give consideration to those firms which have
sold or are selling shares of the Fund. The adviser and sub-adviser make
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees.
Subject to the overriding objective of obtaining the best possible execution of
orders, a portion of the Fund's portfolio brokerage transactions may be
allocated to broker affiliates of the sub-adviser. In order for such affiliates
to effect any portfolio transactions for the Fund, the commissions, fees or
other remuneration they receive must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection with
comparable transactions involving similar securities being purchased or sold on
a securities exchange during a comparable period of time. Furthermore, the
Trustees of the Fund, including a majority of the Trustees who are not
"interested persons," have adopted procedures which are reasonably designed to
provide that any commissions, fees or other remuneration paid to such affiliates
are consistent with the foregoing standard.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The net asset value per share of the Fund fluctuates daily and is determined by
dividing the sum of the market value of all securities and other assets, less
liabilities, by the number shares outstanding.
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. Customers of the Fifth
Third Trust and Investment Division may purchase Fund shares through their Trust
Officer. Customers of Fifth Third Securities may purchase shares through their
Fifth Third Securities representative. All other investors should purchase
shares directly from the distributor. In connection with the sale of shares of
the Fund, 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 OR FIFTH THIRD SECURITIES. To place an order for
shares, a customer of the Trust and Investment Division may telephone their
Fifth Third Trust Officer. Customers other than those of the Trust and
Investment Division may telephone Fifth Third Securities at (513) 744-8888 in
Cincinnati or toll-free (800) 334-0483. Texas residents should purchase shares
through Federated Securities Corp. at 1-800-358-2801.
Purchase orders must be received by Fifth Third Bank by 4:00 p.m. (Cincinnati
time) in order for shares to be purchased at that day's price. Payment may be
made to Fifth Third Bank either by check or
federal funds. Purchases by check 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: Mutual Fund Services Department; For Credit to: (shareholder name and
account number); For Further Credit to: Fountain Square (Name of Fund).
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 is $2,500, unless the investment is
for an IRA, in which case the minimum initial investment is $1,000. Subsequent
investments must be in amounts of at least $100.
WHAT SHARES COST
Shares of the Fund are sold at net asset value next determined after an order is
received, plus a sales charge as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS
A PERCENTAGE OF A PERCENTAGE OF
AMOUNT OF TRANSACTION PUBLIC OFFERING PRICE NET AMOUNT INVESTED
- --------------------------------------------------------------------- ---------------------
<S> <C> <C>
Less than $50,000............................. 4.50% 4.71%
$50,000 but less than $100,000................ 4.00% 4.17%
$100,000 but less than $150,000............... 3.00% 3.09%
$150,000 but less than $250,000............... 2.00% 2.04%
$250,000 but less than $500,000............... 1.00% 1.01%
$500,000 or more.............................. 0.00% 0.00%
</TABLE>
The net asset value for the Fund is determined at the close of trading on the
New York Stock Exchange, currently 4:00 p.m. (New York 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; and (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.
PURCHASES AT NET ASSET VALUE
Shares of the Fund may be purchased at net asset value, without a sales charge,
by current and retired employees and Directors of Fifth Third Bancorp and their
spouses and children under 21, Fountain Square Fund Trustees and clients of
Fifth Third Bank who make purchases through the Trust and Investment Division.
DEALER CONCESSIONS
For sales of shares of the Fund, a dealer will normally receive up to 85% of the
applicable sales charge. Any portion of the sales charge which is not paid to a
dealer will be retained by the distributor. However, the distributor, in its
sole discretion, may uniformly offer to pay to all dealers selling shares of the
Fund, all or a portion of the sales charge it normally retains. If accepted by
the dealer, such additional payments will be predicated upon the amount of Fund
shares sold.
The sales charge for shares sold other than through registered broker/dealers
will be retained by the distributor. The distributor may pay fees to banks out
of the sales charge in exchange for sales and/or administrative services
performed on behalf of the bank's customers in connection with the initiation of
customer accounts and purchases of shares.
REDUCING/ELIMINATING THE SALES CHARGE
The sales charge can be reduced or eliminated on the purchase of shares through:
- quantity discounts and accumulated purchases;
- signing a 13-month letter of intent;
- Fifth Third Bank's Club 53, One Account Plus or One Account Gold
Programs;
- purchases with proceeds from redemptions of unaffiliated mutual fund
shares;
- purchases with proceeds from distributions of qualified retirement plans
or other trusts administered by Fifth Third Bank; or
- concurrent purchases.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table above,
larger purchases reduce the sales charge paid. The distributor will combine
purchases made on the same day by the investors, their spouses, and the
investor's children under age 21 when it calculates the sales charge. In
addition, the sales charge, if applicable, is reduced for purchases made at one
time by a trustee or fiduciary for a single trust estate or a single fiduciary
account.
If an additional purchase of Fund shares is made, the distributor will aggregate
such additional purchases with previous purchases of shares of the Fund provided
the prior purchase is still invested in the Fund. For example, if a shareholder
already owns shares having a current value at the public offering price of
$40,000 and he purchases $10,000 more at the current public offering price, the
sales charge on the additional purchase according to the schedule now in effect
would be 4.00%, not 4.50%.
To receive the sales charge reduction, an investor should complete the
appropriate section of the account application at the time the purchase is made
indicating that Fund shares have been purchased and are still invested or that
such purchases are being combined. The distributor will reduce the sales charge
after it confirms the purchase.
LETTER OF INTENT. If a shareholder intends to purchase at least $50,000 of Fund
shares over the next 13 months, the sales charge may be reduced by signing a
letter of intent to that effect. This letter of intent includes a provision for
a sales charge adjustment depending on the amount actually purchased within the
13-month period and a provision for the Fund's custodian to hold up to 4.50% of
the total amount intended to be purchased in escrow (in shares of the Fund)
until such purchase is completed.
The amount held in escrow will be applied to the shareholder's account at the
end of the 13-month period unless the amount specified in the letter of intent,
which must be $50,000 or more of Fund shares, is not purchased. In this event,
an appropriate number of escrowed shares may be redeemed in order to realize the
difference in the sales charge.
This letter of intent will not oblige the shareholder to purchase shares, but if
he does, each purchase during the period will be at the sales charge applicable
to the total amount intended to be purchased. The letter may be dated as of a
prior date to include any purchases made within the past 90 days.
FIFTH THIRD BANK CLUB 53, ONE ACCOUNT PLUS OR ONE ACCOUNT GOLD PROGRAMS. All
shareholders who have a Club 53 Account, One Account Plus, or One Account Gold
through Fifth Third Bank are eligible for a reduced sales charge on the purchase
of shares of the Fund. Shareholders should consult their local Fifth Third
Banking Center or Fifth Third Securities Representative for details.
The reduced sales charges applicable to the accounts are as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS
A PERCENTAGE A PERCENTAGE
OF PUBLIC OF NET AMOUNT
AMOUNT OF TRANSACTION OFFERING PRICE INVESTED
- ------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
Less than $50,000...................................... 2.75% 2.83%
$50,000-$99,999........................................ 2.50% 2.56%
$100,000-$149,999...................................... 2.00% 2.04%
$150,000-$249,999...................................... 1.50% 1.52%
$250,000-$499,999...................................... 0.75% 0.76%
$500,000 or more....................................... 0.00% 0.00%
</TABLE>
PURCHASES WITH PROCEEDS FROM REDEMPTIONS OF UNAFFILIATED MUTUAL FUND SHARES.
Investors may purchase shares of the Fund at net asset value, without a sales
charge, with the proceeds from the redemption of shares of a mutual fund which
was sold with a sales charge or commission. The purchase must be made within 60
days of the redemption, and Fifth Third Securities must be notified by the
investor in writing, or by his financial institution, at the time the purchase
is made.
PURCHASES WITH PROCEEDS FROM DISTRIBUTIONS OF QUALIFIED RETIREMENT PLANS OR
OTHER TRUSTS ADMINISTERED BY FIFTH THIRD BANK. Investors may purchase shares of
the Fund at net asset value, without a sales charge, with the proceeds from the
distribution of a qualified retirement plan or other trust administered by Fifth
Third Bank.
CONCURRENT PURCHASES. For purposes of qualifying for a sales charge reduction,
a shareholder has the privilege of combining concurrent purchases of two or more
Funds in the Trust, the purchase price of which includes a sales charge. For
example, if a shareholder concurrently invested $20,000 in shares of one of the
Funds of the Trust with a sales charge, and $30,000 in shares of another Fund
with a sales charge, the sales charge would be reduced on both purchases.
To receive this sales charge reduction, Fifth Third Bank or Federated Securities
Corp. must be notified by the shareholder in writing or by their financial
institution at the time the concurrent purchases are made. The Fund will reduce
the sales charge after it confirms the purchases.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in Fund shares at the net asset value next determined after an order is
received by Fifth Third Bank, plus any applicable sales charge. The minimum
initial investment requirement does not apply for those shareholders who
participate in the Systematic Investment Program. A shareholder may apply for
participation in this program through Fifth Third Securities.
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 are sent to shareholders.
DIVIDENDS AND CAPITAL GAINS
Dividends are declared just prior to determining net asset value. Capital gains
realized by the Fund, if any, will be distributed at least once every 12 months.
Dividends and capital gains will be reinvested in additional shares on payment
dates at the ex-dividend date net asset value without a sales charge unless cash
payments are requested by shareholders by writing to the Fund or Fifth Third
Bank as appropriate.
Dividends are paid to all shareholders invested in the Fund on the record date.
Dividends are declared and paid annually.
EXCHANGES
- --------------------------------------------------------------------------------
A shareholder who is a customer of the Fifth Third Trust and Investment Division
may exchange shares of the 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.
Shareholders who are clients of Fifth Third Securities may exchange shares of
the 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
Fund, it may be liable for losses due to unauthorized or fraudulent telephone
instructions.
Orders to exchange shares of the Fund for shares of any of the other Funds will
be executed by redeeming the shares owned at net asset value and purchasing
shares of any of the other Funds at the
net asset value determined after the exchange request is received. Orders for
exchanges received by a Fund prior to 4:00 p.m. (Cincinnati time) on any day
that Fund is open for business will be executed as of the close of business that
day. Orders for exchanges received after 4:00 p.m. (Cincinnati time) on any
business day will be executed at the close of the next business day.
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 the Fund will not have
to pay a sales load again on an exchange.
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 the Fund
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 as described below and can be made through the
Fifth Third Trust and Investment Division or Fifth Third Securities by their
respective customers or directly through the Fund by all other investors.
THROUGH FIFTH THIRD BANK OR FIFTH THIRD SECURITIES
BY TELEPHONE. Shareholders who are customers of Fifth Third Trust and
Investment Division may telephone their Fifth Third Bank Trust Officer.
Shareholders other than those of the Fifth Third Trust and Investment Division
may telephone Fifth Third Securities at (513) 744-8888 in Cincinnati or toll-
free (800) 334-0483. 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.
For calls received before 4:00 p.m. (Cincinnati time), proceeds will normally be
disbursed the next 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. In no event
will proceeds be disbursed 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 the Fifth Third Trust and Investment Division, Fifth Third
Securities, or the distributor.
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 the Fifth Third Trust and
Investment Division may redeem shares by sending a written request to:
Fifth Third Bank
Trust and Investment Division
Fountain Square Redemptions 1090E5
38 Fountain Square Plaza
Cincinnati, OH 45263
Shareholders other than those of the Fifth Third Trust and Investment Division
may redeem shares by sending a written request to:
Fifth Third Securities, Inc.
Fountain Square Redemptions
P.O. Box 1639
Cincinnati, OH 45201
The written request should include the shareholder's name, the Fund name, the
account number, the share or dollar amount requested and the proper endorsement.
Shareholders should call their Trust Officer or their Fifth Third Securities
representative 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
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; 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.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, Fund shares
are redeemed to provide for periodic withdrawal payments in an amount directed
by the shareholder. Depending upon the amount of the withdrawal payments, the
amount of dividends paid and capital gains distributions with respect to Fund
shares, and the fluctuation of the net asset value of Fund shares redeemed under
this program, redemptions may reduce, and eventually deplete, the shareholder's
investment in the Fund. For this reason, payments under this program should not
be considered as yield or income on the shareholder's investment in the Fund. To
be eligible to participate in this program, a shareholder must have an account
value of at least $10,000. A shareholder may apply for participation in this
program through Fifth Third Securities. Due to the fact that shares are sold
with a sales charge, it is not advisable for shareholders to be purchasing
shares while participating in this program.
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 $2,500.
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 Fund in the
Trust have equal voting rights except that, in
matters affecting only a particular Fund, only shares of that Fund 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 a Fund's operation and for the election of
Trustees under certain circumstances.
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 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 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 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, as amended, 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 customers. The Fund's
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 a
Fund may occur, including the possible alteration or termination of any
automatic or other Fund share investment or 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 existing Fund's 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, as amended, applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
However, the Fund may invest in the stock of certain foreign
corporations which would constitute a Passive Foreign Investment Company (PFIC).
Federal income taxes may be imposed on the Fund upon disposition of PFIC
investments.
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.
Investment income received by the Fund from sources within foreign countries may
be subject to foreign taxes withheld at the source. The United States has
entered into tax treaties with many foreign countries that entitle the Fund to
reduced tax rates or exemption on this income. The effective rate of foreign tax
cannot be predicted since the amount of Fund assets to be invested within
various countries is unknown. However, the Fund intends to operate so as to
qualify for treaty-reduced tax rates where applicable.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional Shares. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held the Shares. No federal income tax is due on any
dividend earned in an IRA or qualified retirement plan until distributed.
If more than 50% of the value of the Fund's assets at the end of the tax year is
represented by stock or securities of foreign corporations, the Fund intends to
qualify for certain Internal Revenue Code stipulations that would allow
shareholders to claim a foreign tax credit or deduction on their U.S. income tax
returns. The Internal Revenue Code, as amended, may limit a shareholder's
ability to claim a foreign tax credit. Furthermore, shareholders who elect to
deduct their portion of the Fund's foreign taxes rather than take the foreign
tax credit must itemize deductions on their income tax returns.
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 total return and yield.
Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income and capital
gains distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the maximum offering price per share of the Fund on
the last day of the period. This number is then annualized using semi-annual
compounding. The yield does not necessarily reflect income actually earned by
the Fund and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
The performance information reflects the effect of the maximum sales load which,
if excluded, would increase the total return and yield.
From time to time, the Fund may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Fountain Square International Federated Investors Tower
Equity Fund Pittsburgh, Pennsylvania 15222-3779
- --------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- --------------------------------------------------------------------------------------------------
Investment Adviser
Fifth Third Bank 38 Fountain Square Plaza
Cincinnati, Ohio 45263
- --------------------------------------------------------------------------------------------------
Sub-Adviser
Morgan Stanley Asset Management Inc. 1221 Avenue of the Americas
New York, New York 10020
- --------------------------------------------------------------------------------------------------
Custodian, Transfer Agent, and Dividend Disbursing Agent
Fifth Third Bank 38 Fountain Square Plaza
Cincinnati, Ohio 45263
- --------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- --------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street, N.W.
Washington, D.C. 20037
- --------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young One Oxford Centre
Pittsburgh, Pennsylvania 15219
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Fifth Third Bank
Investment Adviser
65-1041
Federated Securities Corp. is the distributor of the Funds.
4041103A (5/94)
Fountain Square International Equity Fund
(A Portfolio of Fountain Square Funds)
Supplement to Statement of Additional Information dated August 1, 1994
A. Please delete the section entitled "When-Issued and Delayed
Delivery Transactions" on page 5 and replace it with the following:
"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."
B. Please insert the following as the last sentence in the section
entitled "Portfolio Turnover" on page 5:
"During the period from August 19, 1994 (date of initial public
investment) to January 31, 1995, the portfolio turnover rate for the
Fund was 16%."
C. Please delete Craig P. Churman's name and biographical information
from the list of Officers and Trustees on page 8.
D. Please insert the following as the second paragraph in the section
entitled "Fund Ownership" on page 8:
"As of January 31, 1995, Fifth Third Bank, acting in various capacities
for numerous accounts, was the owner of record of 7,723,229 shares
(97.82%) of the Fund, and therefore, may, for certain purposes, be
deemed to control the Fund and be able to affect the outcome of certain
matters presented for a vote of shareholders."
E. Please insert the following as a new section immediately following
the section entitled "Fund Ownership" on page 8. In addition, please
insert the heading "Trustees' Compensation" immediately following
the heading "Fund Ownership" on the Table of Contents page.
"Trustees' Compensation
NAME , AGGREGATE
POSITION WITH COMPENSATION FROM
TRUST TRUST*+
J. Christopher Donahue $ 0.00
Chairman of Board of
Trustees and Treasurer
Edward Burke Carey $6,000.00
Trustee
Lee A. Carter $6,000.00
Trustee
Albert E. Harris $6,000.00
Trustee
* Information is furnished for the fiscal year ended July 31, 1994. 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."
F. Please insert the following as the second paragraph in the section
entitled "Advisory Fees" on page 9:
"During the period from August 19, 1994 (date of initial public
investment) to January 31, 1995, the Fund's adviser earned $252,811 in
investment advisory fees."
G. Please delete the section entitled "Sub-Advisory Fees" on page 9
and replace it with the following:
"For its sub-advisory services, Morgan Stanley Assets Management, Inc.
receives an annual sub-advisory fee, payable by the adviser, as
described in the prospectus.
During the period from August 19, 1994 (date of initial public
investment) to January 31, 1995, the Fund's sub-adviser earned $126,406
in sub-advisory fees."
H. Please insert the following as the second sentence in the section
entitled "Administrative and Custody Services" on page 9:
"During the period from August 19, 1994 (date of initial public
investment) to January 31, 1995, Federated Administrative Services
earned $61,599 in administrative fees from the Fund."
I. Please delete the section entitled "Administrative Arrangements"
from page 10. In addition, please delete the heading "Administrative
Arrangements" from the Table of Contents page.
J. Please insert the following as the last paragraph in the section
entitled "Brokerage Transactions" on page 10:
"During the period from August 19, 1994 (date of initial public
investment) to January 31, 1995, the Fund paid $189,952 in brokerage
commissions on brokerage transactions. For the same period, Morgan
Stanley & Co., Incorporated, an affiliate of the Fund, earned $30,835 in
brokerage commissions, representing 16.2% of the total brokerage
commissions paid by the Fund. These transactions with Morgan Stanley &
Co., Incorporated amounted to 8% of the value of the Fund's securities
transactions on which commissions were paid. Morgan Stanley & Co.,
Incorporated executed trades for the Fund in Mexico and Indonesia which,
in general, involve higher transaction costs than trades done in such
other markets as Japan or the European countries, which accounts for the
difference in these percentages."
K. Please insert the following as the last paragraph of the section
entitled "Distribution Plan" which begins on page 10:
"During the period from August 19, 1994 (date of initial public
investment) to January 31, 1995, the Fund incurred no distribution
services fees."
L. Please delete the section entitled "Tax Consequences" from page
11.
M. Please delete the fourth bullet point in the section entitled
"Determining Market Value of Securities" on page 11 and replace it with
the following:
"o for short-term obligations, according to the prices as furnished by
an independent pricing service, except that short-term obligations with
remaining maturities of less than 60 days, at the time of purchase, may
be valued at amortized cost; and"
N. Please insert the following as the first paragraph in the section
entitled "Total Return" on page 12:
"The Fund's cumulative total return from August 19, 1994 (date of
initial public investment) to January 31, 1995 was (13.94%). Cumulative
total return reflects the Fund's total performance over a specific
period of time. This total return assumes and is reduced by the payment
of the maximum sales load. The Fund's total return is representative of
only six months of investment activity since the Fund's effective date."
O. Please insert the following as the first paragraph in the section
entitled "Yield" on page 12:
"The Fund's yield for the thirty-day period ended January 31, 1995 was
1.71%."
February 28, 1995
FIFTH THIRD BANK
Investment Adviser
Federated Securities Corp. is the distributor of the Funds
350756854
G00167-01 (2/95)
FOUNTAIN SQUARE INTERNATIONAL EQUITY FUND
(A PORTFOLIO OF THE FOUNTAIN SQUARE FUNDS)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus of
Fountain Square International Equity Fund ("the Fund") dated August 1, 1994.
This Statement is not a prospectus itself. To receive a copy of the prospectus,
customers of Fifth Third Trust and Investment Division may write to the Trust or
call (513) 579-6056 in Cincinnati or toll-free (800) 654-5372; customers of
Fifth Third Securities may write to the Trust or call (513) 744-8888 in
Cincinnati or toll-free (800) 334-0483.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated August 1, 1994
TABLE OF CONTENTS
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GENERAL INFORMATION ABOUT THE FUND 1
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INVESTMENT OBJECTIVE AND POLICIES OF THE FUND 1
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Types of Investments 1
Reverse Repurchase Agreements 4
Lending of Portfolio Securities 4
Restricted and Illiquid Securities 4
When-Issued and Delayed
Delivery Transactions 5
Money Market Instruments
Repurchase Agreements 5
Portfolio Turnover 5
Investment Limitations 6
FOUNTAIN SQUARE FUNDS MANAGEMENT 8
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Officers and Trustees 8
Fund Ownership 8
Trustee Liability 9
INVESTMENT ADVISORY SERVICES 9
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Adviser to the Fund 9
Sub-Adviser 9
Advisory Fees 9
Sub-Advisory Fees 9
ADMINISTRATIVE AND CUSTODY SERVICES 9
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ADMINISTRATIVE ARRANGEMENTS 10
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BROKERAGE TRANSACTIONS 10
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PURCHASING SHARES 10
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Distribution Plan 10
DETERMINING NET ASSET VALUE 11
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Determining Market Value
of Securities 11
Trading in Foreign Securities 11
REDEEMING SHARES 11
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Redemption in Kind 11
TAX STATUS 12
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The Fund's Tax Status 12
Foreign Taxes 12
Shareholders' Tax Status 12
TOTAL RETURN 12
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YIELD 12
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PERFORMANCE COMPARISONS 13
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GENERAL INFORMATION ABOUT THE FUND
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Fountain Square International Equity 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 OF THE FUND
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The prospectus discusses the objective of the Fund and the policies employed to
achieve the objective. The following discussion supplements the description of
the Fund's investment policies in the prospectus. The Fund's investment
objective cannot be changed without approval of shareholders. Unless otherwise
indicated, the investment policies described below may be changed by the Board
of Trustees ("Trustees") without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
TYPES OF INVESTMENTS
CONVERTIBLE SECURITIES
The Fund may invest in convertible securities. Convertible securities
include fixed-income securities that may be exchanged or converted into a
predetermined number of shares of the issuer's underlying common stock at
the option of the holder during a specified period. Convertible
securities may take the form of convertible preferred stock, convertible
bonds or debentures, units consisting of "usable" bonds and warrants or a
combination of the features of several of these securities. The
investment characteristics of each convertible security vary widely,
which allows convertible securities to be employed for a variety of
investment strategies.
The Fund will exchange or convert convertible securities into shares of
underlying common stock when, in the opinion of Fifth Third Bank, the
Fund's investment adviser, or Morgan Stanley Asset Management Inc.,
("sub-adviser") (collectively referred to as "adviser"), the investment
characteristics of the underlying common shares will assist the Fund in
achieving its investment objective. The Fund may also elect to hold or
trade convertible securities. In selecting convertible securities, the
Fund's adviser evaluates the investment characteristics of the
convertible security as a fixed-income instrument, and the investment
potential of the underlying equity security for capital appreciation. In
evaluating these matters with respect to a particular convertible
security, the Fund's adviser considers numerous factors, including the
economic and political outlook, the value of the security relative to
other investment alternatives, trends in the determinants of the issuer's
profits, and the issuer's management capability and practices.
WARRANTS
The Fund may invest in warrants. Warrants are options to purchase common
stock at a specific price (usually at a premium above the market value of
the optioned common stock at issuance) valid for a specific period of
time. Warrants may have a life ranging from less than one year to twenty
years, or they may be perpetual. However, most warrants have expiration
dates after which they are worthless. In addition, a warrant is worthless
if the market price of the common stock does not exceed the warrant's
exercise price during the life of the warrant. Warrants have no voting
rights, pay no dividends, and have no rights with respect to the assets
of the corporation issuing them. The percentage increase or decrease in
the market price of the warrant may tend to be greater than the
percentage increase or decrease in the market price of the optioned
common stock. The Fund will not invest more than 5% of the value of its
total assets in warrants. No more than 2% of this 5% may be warrants
which are not listed on the New York or American Stock Exchanges.
Warrants acquired in units or attached to other securities may be deemed
to be without value for purposes of this policy.
FUTURES AND OPTIONS TRANSACTIONS
The Fund may attempt to hedge all or a portion of its portfolio or gain
relatively rapid, liquid and cost-effective exposure to certain markets
by buying and selling futures contracts and options on futures contracts.
FUTURES CONTRACTS. A futures contract is a firm commitment by two
parties, the seller who agrees to make delivery of the specific type of
security called for in the contract ("going short") and the buyer who
agrees to take delivery of the security ("going long") at a certain time
in the future. However, a securities index futures contract is an
agreement pursuant to which two parties agree to take or make delivery of
an amount of cash equal to the difference between the value of the index
at the close of the last trading day of the contract and the price at
which the index was originally written. No physical delivery of the
underlying security in the index is made.
The Fund may purchase or sell a futures contract to protect the Fund from
fluctuations in the value of its securities caused by anticipated changes
in interest rates or market conditions. The Fund may also invest in
securities index futures contracts when the sub-adviser believes such
investment is more efficient, liquid or cost-effective than investing
directly in the securities underlying the index.
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PURCHASING PUT OPTIONS ON FUTURES CONTRACTS. The Fund may purchase listed
put options or over-the-counter put options on futures contracts. Unlike
entering directly into a futures contract, which requires the purchaser
to buy a financial instrument on a set date at a specified price, the
purchase of a put option on a futures contract entitles (but does not
obligate) its purchaser to decide on or before a future date whether to
assume a short position at the specified price. The Fund may purchase put
options on futures contracts to protect its portfolio investments against
decreases in value resulting from market factors such as an anticipated
changes in interest rates or when the sub-adviser believes such
investment is more efficient, liquid or cost-effective than investing
directly in the futures contract or the underlying securities or when
such futures contracts or securities are unavailable for investment upon
favorable terms.
WRITING PUT OPTIONS ON FUTURES CONTRACTS. The Fund may write listed put
options on financial futures contracts to hedge its portfolio or when the
sub-adviser believes such investment is more efficient, liquid or cost-
effective than investing directly in the futures contract or the
underlying securities or when such futures contracts or securities are
unavailable for investment upon favorable terms. When the Fund writes a
put option on a futures contract, it receives a premium for undertaking
the obligation to assume a long futures position (buying a futures
contract) at a fixed price at any time during the life of the option.
PURCHASING CALL OPTIONS ON FUTURES CONTRACTS. The Fund may buy listed
call options on financial futures contracts to hedge its portfolio. When
the Fund purchases a call option on a futures contract, it is purchasing
the right (not the obligation) to assume a long futures position (buy a
futures contract) at a fixed price at any time during the life of the
option.
WRITING CALL OPTIONS ON FUTURES CONTRACTS. The Fund may write listed call
options or over-the-counter call options on futures contracts to hedge
its portfolio or when the sub-adviser believes such investment is more
efficient, liquid or cost-effective than investing directly in the
futures contract or the underlying securities or when such futures
contracts or securities are unavailable for investment upon favorable
terms. When the Fund writes a call option on a futures contract, it is
undertaking the obligation of assuming a short futures position (selling
a futures contract) at the strike price at any time during the life of
the option if the option is exercised.
LIMITATION ON OPEN FUTURES POSITION. The Fund will not maintain open
positions in futures contracts it has sold or options it has written on
futures contracts if, in the aggregate, the value of the option positions
(marked to market) exceeds the current market value of its securities
portfolio plus or minus the unrealized gain or loss on those open
positions, adjusted for the correlation of volatility between the
securities or securities index underlying the futures contract and the
futures contracts. If this limitation is exceeded at any time, the Fund
will take prompt action to close out a sufficient number of open
contracts to bring its open futures and options positions within this
limitation.
"MARGIN" IN FUTURES TRANSACTIONS. Unlike the purchase or sale of a
security, the Fund does not pay or receive money upon the purchase or
sale of a futures contract. Rather, the Fund is required to deposit an
amount of "initial margin" in cash or U.S. Treasury bills with the
custodian (or the broker, if legally permitted). The nature of initial
margin in futures transactions is different from that of margin in
securities transactions in that futures contracts initial margin does not
involve a borrowing by the Fund to finance the transactions. Initial
margin is in the nature of a performance bond or good-faith deposit on
the contract which is returned to the Fund upon termination of the
futures contract, assuming all contractual obligations have been
satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund
pays or receives cash, called "variation margin," equal to the daily
change in value of the futures contract. This process is known as
"marking to market." Variation margin does not represent a borrowing or
loan by the Fund but is instead settlement between the Fund and the
broker of an amount one would owe the other if the futures contract
expired. In computing its daily net asset value, the Fund will mark to
market its open futures positions.
The Fund is also required to deposit and maintain margin when they write
call options on futures contracts.
PURCHASING AND WRITING OVER-THE-COUNTER OPTIONS. The Fund may purchase
and write over-the-counter options on portfolio investments in negotiated
transactions with the buyers or writers of such options. Over-the-counter
options are two-party contracts with price and terms negotiated between
buyer and seller. In contrast, exchange-traded options are third-party
contracts with standardized strike prices and expiration dates and are
purchased from a clearing corporation. Exchange-traded options have a
continuous liquid market while over-the-counter options may not.
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FOREIGN CURRENCY TRANSACTIONS
CURRENCY RISKS. The exchange rates between the U.S. dollar and foreign
currencies are a function of such factors as supply and demand in the
currency exchange markets, international balances of payments,
governmental intervention, speculation and other economic and political
conditions. Although the Fund values its assets daily in U.S. dollars,
the Fund may not convert its holdings of foreign currencies to U.S.
dollars daily. The Fund may incur conversion costs when it converts its
holdings to another currency. Foreign exchange dealers may realize a
profit on the difference between the price at which the Fund buys and
sells currencies.
The Fund will engage in foreign currency exchange transactions in
connection with its portfolio investments. The Fund will conduct its
foreign currency exchange transactions either on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency exchange market
or through forward contracts to purchase or sell foreign currencies.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Fund may enter into
forward foreign currency exchange contracts in order to protect against a
possible loss resulting from an adverse change in the relationship
between the U.S. dollar and a foreign currency involved in an underlying
transaction. However, forward foreign currency exchange contracts may
limit potential gains which could result from a positive change in such
currency relationships. The adviser believes that it is important to have
the flexibility to enter into forward foreign currency exchange contracts
whenever it determines that it is in the Fund's best interest to do so.
The Fund will not speculate in foreign currency exchange.
The Fund will not enter into forward foreign currency exchange contracts
or maintain a net exposure in such contracts when it would be obligated
to deliver an amount of foreign currency in excess of the value of its
portfolio securities or other assets denominated in that currency or, in
the case of a "cross-hedge" denominated in a currency or currencies that
the adviser believes will tend to be closely correlated with that
currency with regard to price movements. Generally, the Fund will not
enter into a forward foreign currency exchange contract with a term
longer than one year.
FOREIGN CURRENCY OPTIONS. A foreign currency option provides the option
buyer with the right to buy or sell a stated amount of foreign currency
at the exercise price on a specified date or during the option period.
The owner of a call option has the right, but not the obligation, to buy
the currency. Conversely, the owner of a put option has the right, but
not the obligation, to sell the currency.
When the option is exercised, the seller (i.e., writer) of the option is
obligated to fulfill the terms of the sold option. However, either the
seller or the buyer may, in the secondary market, close its position
during the option period at any time prior to expiration.
A call option on foreign currency generally rises in value if the
underlying currency appreciates in value, and a put option on foreign
currency generally rises in value if the underlying currency depreciates
in value. Although purchasing a foreign currency option can protect the
Fund against an adverse movement in the value of a foreign currency, the
option will not limit the movement in the value of such currency. For
example, if the Fund was holding securities denominated in a foreign
currency that was appreciating and had purchased a foreign currency put
to hedge against a decline in the value of the currency, the Fund would
not have to exercise their put option. Likewise, if the Fund were to
enter into a contract to purchase a security denominated in foreign
currency and, in conjunction with that purchase, were to purchase a
foreign currency call option to hedge against a rise in value of the
currency, and if the value of the currency instead depreciated between
the date of purchase and the settlement date, the Fund would not have to
exercise its call. Instead, the Fund could acquire in the spot market the
amount of foreign currency needed for settlement.
SPECIAL RISKS ASSOCIATED WITH FOREIGN CURRENCY OPTIONS. Buyers and
sellers of foreign currency options are subject to the same risks that
apply to options generally. In addition, there are certain additional
risks associated with foreign currency options. The markets in foreign
currency options are relatively new, and the Fund's ability to establish
and close out positions on such options is subject to the maintenance of
a liquid secondary market. Although the Fund will not purchase or write
such options unless and until, in the opinion of the Fund's adviser, the
market for them has developed sufficiently to ensure that the risks in
connection with such options are not greater than the risks in connection
with the underlying currency, there can be no assurance that a liquid
secondary market will exist for a particular option at any specific time.
In addition, options on foreign currencies are affected by all of those
factors that influence foreign exchange rates and investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price
of the option position may vary with changes in the value of either or
both currencies and may have no relationship to the investment merits of
a foreign security. Because foreign currency
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transactions occurring in the interbank market involve substantially
larger amounts than those that may be involved in the use of foreign
currency options, investors may be disadvantaged by having to deal in an
odd lot market (generally consisting of transactions of less than $1
million) for the underlying foreign currencies at prices that are less
favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely
basis. Available quotation information is generally representative of
very large transactions in the interbank market and thus may not reflect
relatively smaller transactions (i.e., less than $1 million) where rates
may be less favorable. The interbank market in foreign currencies is a
global, around-the-clock market. To the extent that the U.S. option
markets are closed while the markets for the underlying currencies remain
open, significant price and rate movements may take place in the
underlying markets that cannot be reflected in the options markets until
they reopen.
FOREIGN CURRENCY FUTURES TRANSACTIONS. By using foreign currency futures
contracts and options on such contracts, the Fund may be able to achieve
many of the same objectives as it would through the use of forward
foreign currency exchange contracts. The Fund may be able to achieve
these objectives possibly more effectively and at a lower cost by using
futures transactions instead of forward foreign currency exchange
contracts.
SPECIAL RISKS ASSOCIATED WITH FOREIGN CURRENCY FUTURES CONTRACTS AND
RELATED OPTIONS. Buyers and sellers of foreign currency futures contracts
are subject to the same risks that apply to the use of futures generally.
In addition, there are risks associated with foreign currency futures
contracts and their use as a hedging device similar to those associated
with options on currencies, as described above.
Options on foreign currency futures contracts may involve certain
additional risks. Trading options on foreign currency futures contracts
is relatively new. The ability to establish and close out positions on
such options is subject to the maintenance of a liquid secondary market.
To reduce this risk, the Fund will not purchase or write options on
foreign currency futures contracts unless and until, in the opinion of
the Fund's adviser, the market for such options has developed
sufficiently that the risks in connection with such options are not
greater than the risks in connection with transactions in the underlying
foreign currency futures contracts. Compared to the purchase or sale of
foreign currency futures contracts, the purchase of call or put options
on futures contracts involves less potential risk to the Fund because the
maximum amount at risk is the premium paid for the option (plus
transaction costs). However, there may be circumstances when the purchase
of a call or put option on a futures contract would result in a loss,
such as when there is no movement in the price of the underlying currency
or futures contract.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These transactions
are 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 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 at the trade date. These securities are marked to market daily
and are maintained until the transaction is settled.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Fund or the borrower. The Fund may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in securities issued in reliance on the exemption from
registration afforded by Section 4(2) of the Securities Act of 1933. Section
4(2) securities are restricted as to disposition under the federal securities
laws and are generally sold to institutional investors, such as the Fund, who
agree that they are purchasing such securities for
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investment purposes and not with a view to public distributions. Any resale by
the purchaser must be in an exempt transaction. Section 4(2) securities are
normally resold to other institutional investors like the Fund through or with
the assistance of the issuer or investment dealers who make a market in such
securities, thus providing liquidity. The Fund believes that Section 4(2)
securities and possibly certain other restricted securities which meet the
criteria for liquidity established by the Trustees are quite liquid. The Fund
intends, therefore, to treat the restricted securities which meet the criteria
for liquidity established by the Trustees, including Section 4(2) securities, as
determined by the Fund's adviser, as liquid and not subject to the investment
limitation applicable to illiquid securities.
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under the Securities and Exchange commission ("SEC")
Staff position set forth in the adopting release for Rule 144A under the
Securities Act of 1933 (the "Rule"). The Rule is a non-exclusive safe harbor for
certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for resale under Rule
144A. The Fund believes that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities to the Trustees. The
Trustees consider the following criteria in determining the liquidity of certain
restricted securities:
- - the frequency of trades and quotes for the security;
- - the number of dealers willing to purchase or sell the security and the number
of other potential buyers;
- - dealer undertakings to make a market in the security; and
- - the nature of the security and the nature of the marketplace trades.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The Fund engages in
when-issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with the Fund's investment objective and
policies, not for investment leverage.
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. Settlement dates may be a month or more after
entering into these transactions, and the market values at the time of delivery
of the securities purchased may vary from the purchase prices.
No fees or 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 at the trade date. These securities are marked to
market daily and maintained until the transaction is settled.
The Fund may engage in these transactions to an extent that would cause the
segregation of an amount up to 20% of the total value of its assets.
MONEY MARKET INSTRUMENTS
The Fund may acquire money market instruments rated in one of the two highest
rating categories by a Nationally Recognized Statistical Rating Organization or
which, in the opinion of the adviser or sub-adviser, are of commensurate
quality.
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 found by the adviser to be
creditworthy pursuant to guidelines established by the Trustees.
PORTFOLIO TURNOVER
It is not anticipated that the portfolio trading engaged in by the Fund will
result in its annual rate of portfolio turnover exceeding 100%. The Fund's
adviser does not anticipate that portfolio turnover will result in adverse tax
consequences. However, relatively high portfolio turnover may result in high
transaction costs to the Fund.
- --------------------------------------------------------------------------------
INVESTMENT LIMITATIONS
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities, except that it may borrow
money directly or through reverse repurchase agreements in amounts up to
one-third of the value of its total assets, including the amount
borrowed, and except to the extent that the Fund may enter into futures
contracts.
The Fund will not borrow money or engage in reverse repurchase agreements except
as a temporary, extraordinary, or emergency measure or to facilitate management
of the Fund by enabling it 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 any borrowings in excess of 5% of its
total assets are outstanding.
INVESTING IN COMMODITIES
The Fund will not invest in commodities, except that the Fund reserves
the right to engage in transactions involving futures contracts options,
and forward contracts with respect to securities, securities indexes or
currencies.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including real estate
limited partnership interests, although the Fund may invest in securities
of issuers whose business involves the purchase or sale of real estate or
in securities which are secured by real estate or interests in real
estate.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets in
any one industry (other than securities issued or guaranteed by the U.S.
government, its agencies, or instrumentalities and repurchase agreements
collateralized by such securities).
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities which the Fund may purchase in
accordance with its investment objective, policies, and 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 purchases and sales of portfolio securities. A deposit or
payment by the Fund of initial or variation margin in connection with
financial futures contracts or related options transactions is not
considered the purchase of a security on margin.
DIVERSIFICATION OF INVESTMENTS
With respect to securities comprising 75% of the value of its total
assets, the Fund will not purchase securities issued by any one issuer
(other than cash, cash items or securities issued or guaranteed by the
government of the United States or its agencies or instrumentalities and
repurchase agreements collateralized by such securities) if as a result
more than 5% of the value of its total assets would be invested in the
securities of that issuer. The Fund will not acquire more than 10% of the
outstanding voting securities of such issuer.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets, except to
secure permitted borrowings. In these cases, the Fund may pledge assets
as necessary to secure such borrowings. For purposes of this limitation,
where applicable, (a) the deposit of assets in escrow in connection with
the writing of covered call or secured put options and the purchase of
securities on a when-issued basis and (b) collateral arrangements with
respect to: (i) the purchase and sale of securities options (and options
on securities indexes) and (ii) initial or variation margin for futures
contracts, will not be deemed to be pledges of the Fund's assets.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities up
to one-third of the value of its total assets. This shall not prevent the
purchase or holding of U.S. government obligations, corporate bonds,
debentures, notes, certificates of indebtedness, or other debt securities
of any issuer, repurchase agreements, or other transactions which are
permitted by the Fund's investment objective, policies, and limitations
or Declaration of Trust.
- --------------------------------------------------------------------------------
The above investment limitations cannot be changed without approval of the
Fund's shareholders. The following limitations may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its total assets in securities
subject to restrictions on resale under the Securities Act of 1933,
except for restricted securities which meet the criteria for liquidity as
established by the Trustees. In order to comply with registration
requirements of a certain state, the Fund has agreed to limit its
investment in restricted securities to 5% of its total assets. If state
requirements change, this policy may be changed without notice to
shareholders.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including, as applicable, repurchase agreements
providing for settlement in more than seven days after notice,
over-the-counter options, and certain restricted securities not
determined by the Trustees to be liquid.
INVESTING IN MINERALS
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, except it may purchase the
securities of issuers which invest in or sponsor such programs.
PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not purchase securities of a company for the purpose of
exercising control or management.
INVESTING IN WARRANTS
The Fund will not invest more than 5% of its net assets in warrants,
including those acquired in units or attached to other securities. To
comply with certain state restrictions, the Fund will limit its
investments in such warrants not listed on the New York or American Stock
Exchanges to 2% of its net assets. (If state restrictions change, this
latter restriction may be revised without notice to shareholders.) For
purposes of this investment restriction, warrants will be valued at the
lower of cost or market, except that warrants acquired by the Fund in
units with or attached to securities may be deemed to be without value.
INVESTING IN PUT OPTIONS
The Fund will not purchase put options on securities or futures
contracts, unless the securities or futures contracts are held in the
Fund's portfolio or unless the Fund is entitled to them in deliverable
form without further payment or after segregating cash in the amount of
any further payment.
WRITING COVERED CALL OPTIONS
The Fund will not write call options on securities or futures contracts
unless the securities or futures contracts are held in the Fund's
portfolio or unless the Fund is entitled to them in deliverable form
without further payment or after segregating cash in the amount of any
further payment.
INVESTMENT IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will limit its investment in other investment companies to no
more than 3% of the total outstanding voting stock of any investment
company, will invest no more than 5% of total assets in any one
investment company, and will invest no more than 10% of its total assets
in investment companies in general. The Fund will purchase securities of
closed-end investment companies only in open-market transactions
involving only customary broker's commissions. However, these limitations
are not applicable if the securities are acquired in a merger,
consolidation, reorganization, or acquisition of assets. The Fund will
invest in other investment companies primarily for the purpose of
investing its short-term cash on a temporary basis. The adviser and sub-
adviser will waive their investment advisory and sub-advisory fees on
assets invested in securities of open-end investment companies.
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 ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Trust, the investment adviser, or a
sub-adviser owning individually more than 1/2 of 1% of the issuer's
securities, together own more than 5% of the issuer's securities.
- --------------------------------------------------------------------------------
Except with respect to the Fund's policy of 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.
Under normal circumstances, the Fund does not expect to borrow money in excess
of 5% of the value of its net assets during the coming fiscal year.
For 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 Fifth Third Bank, Fifth Third Bancorp, Federated
Investors, Federated Securities Corp., or Federated Administrative Services.
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
J. Christopher Donahue*+ Chairman of the President and Trustee, Federated Investors; President and Trustee, Federated
Federated Investors Board of Advisers, Federated Management, and Federated Research; President and
Tower Trustees, Director, Federated Research Corp.; President, Passport Research, Ltd.;
Pittsburgh, PA President and Trustee, Federated Administrative Services, Federated Services Company, and
Treasurer Federated Shareholder Services.
- --------------------------------------------------------------------------------------------------------------------------------
Edward Burke Carey Member of Chairman of Carey Leggett Realty Advisors.
395 East Town St. Board of
Columbus, Ohio Trustees
- --------------------------------------------------------------------------------------------------------------------------------
Lee A. Carter+ Member of President of Local Marketing Corporation.
Cincinnati Commerce Board of
Center Trustees
600 Vine Street
Suite 2020
Cincinnati, Ohio
- --------------------------------------------------------------------------------------------------------------------------------
Albert E. Harris Member of Chairman of the Board EDB Holdings, Inc. (retired December, 1992); Formerly
P.O. Box 583 Board of Senior Vice President, The Procter & Gamble Company (retired October, 1987).
Milford, Ohio Trustees
- --------------------------------------------------------------------------------------------------------------------------------
Craig P. Churman Vice President Vice President, Federated Administrative Services.
Federated Investors and Assistant
Tower Treasurer
Pittsburgh, PA
- --------------------------------------------------------------------------------------------------------------------------------
Jay S. Neuman Secretary Corporate Counsel, Federated Investors; prior to January, 1991, Associate
Federated Investors Counsel, The Boston Company Advisors, Inc.
Tower
Pittsburgh, PA
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* This Trustee is deemed to be an "interested person" of the Funds or the Trust
as defined in the Investment Company Act of 1940.
+ Members of the Trust's 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 outstanding shares of the Fund.
- --------------------------------------------------------------------------------
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be 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 adviser is Fifth Third Bank. 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 Fund.
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.
SUB-ADVISER
Morgan Stanley Asset Management Inc. is the sub-adviser to the Fund under the
terms of a Sub-Advisory Agreement between Fifth Third Bank and Morgan Stanley
Asset Management Inc.
ADVISORY FEES
For its advisory services, Fifth Third Bank receives an annual investment
advisory fee as described in the prospectus.
SUB-ADVISORY FEES
For its sub-advisory services, Morgan Stanley Asset Management Inc. receives an
annual sub-advisory fee as described in the prospectus.
STATE EXPENSE LIMITATIONS
The adviser and sub-adviser have 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 fees in any single fiscal year.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory and sub-advisory fees paid will be
reduced proportionally by the amount of the excess, subject to an annual
adjustment.
This arrangement is not part of the advisory contract or sub-advisory
agreement and may be amended or rescinded in the future.
ADMINISTRATIVE AND CUSTODY SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services ("FAS"), which is a subsidiary of Federated
Investors, provides administrative personnel and services to the Funds for the
fees set forth in the prospectus.
Under the custodian agreement, Fifth Third Bank holds the Fund's domestic
portfolio securities and keeps all necessary records and documents relating to
its duties. Pursuant to an agreement with Fifth Third Bank, Morgan Stanley Trust
Company, Brooklyn, NY, acts as the Fund's sub-custodian for foreign assets held
outside the United States and employs subcustodians who were approved by the
Trustees of the Fund in accordance with regulations of the Securities and
Exchange Commission. Morgan Stanley Trust Company is an affiliate of Morgan
Stanley Asset Management Inc. Fees for custody services are based upon the
market value of Fund securities held in custody plus certain securities
transaction charges.
ADMINISTRATIVE ARRANGEMENTS
- --------------------------------------------------------------------------------
The distributor pays fees to brokers and dealers for distribution and
administrative services and to administrators for administrative services. The
administrative services include, but are not limited to, providing office space,
equipment, telephone facilities, and various personnel, including clerical,
supervisory, and computer, as is necessary or beneficial to establish and
maintain shareholders' accounts and records, process purchase and redemption
transactions, process automatic investments of client account cash balances,
answer routine client inquiries regarding the Fund, assist clients in changing
dividend options, account designations, and addresses, and providing such other
services as the Fund may reasonably request.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser and sub-adviser look for prompt execution of the order
at a favorable price. In working with dealers, the adviser and sub-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 and sub-adviser make decisions on portfolio
transactions and select brokers and dealers subject to guidelines established by
the Trustees.
The adviser and sub-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 sub-adviser and may include:
- - advice as to the advisability of investing in securities;
- - security analysis and reports;
- - economic studies;
- - industry studies;
- - receipt of quotations for portfolio evaluations; and
- - similar services.
The adviser and sub-adviser and their 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 and the
sub-adviser in advising the Fund and other accounts. To the extent that receipt
of these services may supplant services for which the adviser and the
sub-adviser or their affiliates might otherwise have paid, it would tend to
reduce their expenses.
Although investment decisions for the Fund are made independently from those of
the other accounts managed by the adviser and sub-adviser, investments of the
type the Fund may make may also be made by those other accounts. When the Fund
and one or more other accounts managed by the adviser and sub-adviser are
prepared to invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner believed by
the adviser and sub-adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or the
size of the position obtained or disposed of by the Fund. In other cases,
however, it is believed that coordination and the ability to participate in
volume transactions will be to the benefit of the Fund.
PURCHASING SHARES
- --------------------------------------------------------------------------------
Shares of the Fund are sold at their net asset value with 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."
DISTRIBUTION PLAN
With respect to 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
Federated Securities Corp. to finance any activity which is principally intended
to result in the sale of Fund shares subject to the Plan. Such activities may
include the advertising and marketing of 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, Federated Securities Corp. may pay fees to brokers for distribution
and administrative services and to administrators for administrative services as
to 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 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 shares and prospective shareholders.
The Trustees expect that the Plan will result in the sale of a sufficient number
of 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.
TAX CONSEQUENCES
Exercise of this exchange privilege is treated as a sale for federal
income tax purposes. Depending upon the cost basis of the securities
exchanged for shares of the Fund, a gain or loss may be realized by the
investor.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
Net asset value generally changes each day. The days on which net asset value is
calculated by the Fund are described in the prospectus. Net asset value will not
be calculated on days on which the New York Stock Exchange is closed.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as follows:
- - for equity securities, according to the last sale price in the market in which
they are primarily traded (either a national securities exchange or the
over-the-counter market), if available;
- - in the absence of recorded sales for equity securities, according to the mean
between the last closing bid and asked prices;
- - for bonds and other fixed-income securities, as determined by an independent
pricing service;
- - for short-term obligations, according to the prices as furnished by an
independent pricing service, except that short-term obligations with
maturities of less than 60 days may be valued at amortized cost; and
- - for all other securities, at fair value as determined in good faith by the
Trustees.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider yield, quality, coupon
rate, maturity, type of issue, trading characteristics, and other market data.
The Fund will value futures contracts and options at their market values
established by the exchanges on which they are traded at the close of trading on
such exchanges unless the Trustees determine in good faith that another method
of valuing such investments is necessary to appraise their fair market value.
TRADING IN FOREIGN SECURITIES
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange. In computing the net asset value, the
Fund values foreign securities at the latest closing price on the exchange on
which they are traded immediately prior to the closing of the New York Stock
Exchange. Certain foreign currency exchange rates may also be determined at the
latest rate prior to the closing of the New York Stock Exchange. Foreign
securities quoted in foreign currencies are translated into U.S. dollars at
current rates. Occasionally, events that affect these values and exchange rates
may occur between the times at which they are determined and the closing of the
New York Stock Exchange. If such events materially affect the value of portfolio
securities, these securities may be valued at their fair value as determined in
good faith by the Trustees, although the actual calculation may be done by
others.
REDEEMING SHARES
- --------------------------------------------------------------------------------
Shares are redeemed at the next computed net asset value after the Fund 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 $5,000.
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 the 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:
- - derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
- - derive less than 30% of its gross income from the sale of securities held less
than three months;
- - invest in securities within certain statutory limits; and
- - distribute to its shareholders at least 90% of its net income earned during
the year.
However, the Fund may invest in the stock of certain foreign corporations which
would constitute a Passive Foreign Investment Company (PFIC). Federal income
taxes may be imposed on the Fund upon disposition of PFIC investments.
FOREIGN TAXES
Investment income on certain foreign securities in which the Fund may invest may
be subject to foreign withholding or other taxes that could reduce the return on
these securities. Tax treaties between the United States and foreign countries,
however, may reduce or eliminate the amount of foreign taxes to which the Fund
would be subject.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and capital gains
received as cash or additional shares. The Fund's dividends, and any short-term
capital gains, are taxable as ordinary income.
CAPITAL GAINS
Shareholders will pay federal tax on long-term capital gains distributed
to them regardless of how long they have held the Fund shares.
TOTAL RETURN
- --------------------------------------------------------------------------------
The average annual total return for the Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the maximum offering price per share at the end of the period. The number of
shares owned at the end of the period is based on the number of shares purchased
at the beginning of the period with $1,000, less any applicable sales load,
adjusted over the period by any additional shares, assuming the reinvestment of
all dividends and distributions.
YIELD
- --------------------------------------------------------------------------------
The yield for the Fund is determined by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the maximum offering price per share of the Fund on
the last day of the period. This value is then annualized using semi-annual
compounding. This means that the amount of income generated during the
thirty-day period is assumed to be generated each month over a twelve-month
period and is reinvested every six months. The yield does not necessarily
reflect income actually earned by the Fund because of certain adjustments
required by the Securities and Exchange Commission and, therefore, may not
correlate to the dividends or other distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the Fund,
performance will be reduced for those shareholders paying those fees.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The performance of the Fund depends upon such variables as:
- - portfolio quality;
- - average portfolio maturity;
- - type of instruments in which the portfolio is invested;
- - changes in interest rates and market value of portfolio securities;
- - changes in the Fund's expenses; and
- - various other factors.
The Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per share fluctuate daily. Both net earnings and offering
price per share are factors in the computation of yield and total return as
described above.
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:
- - LIPPER ANALYTICAL SERVICES, INC. ("LIPPER"), an independent mutual fund rating
service, ranks funds in various fund categories by making comparable
calculations using total return. Total return assumes the reinvestment of all
capital gains distributions and income dividends and takes into account any
change in net asset value over a specified period of time. From time to time,
the Fund will quote its Lipper ranking in the appropriate category in
advertising and sales literature.
- - MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
- - EUROPE, AUSTRALIA, AND FAR EAST (EAFE) is a market capitalization weighted
foreign securities index, which is widely used to measure the performance of
European, Australian, New Zealand and Far Eastern stock markets. The index
covers approximately 1,020 companies drawn from 18 countries in the above
regions. The index values its securities daily in both U.S. dollars and local
currency and calculates total returns monthly. EAFE U.S. dollar total return
is a net dividend figure less Luxembourg withholding tax. The EAFE is
monitored by Capital International, S.A., Geneva, Switzerland.
Advertisements and other sales literature for the Fund may quote total returns
which are calculated on non-standardized base periods. The total return
represents the historic change in the value of an investment in the Fund based
on reinvestment of dividends over a specified period of time.
Advertisements may quote performance information which does not reflect the
effect of the sales load.
4041103B 5/94
