<PAGE> 1
1933 Act File No. 33-24848
1940 Act File No. 811-5669
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---
Pre-Effective Amendment No._____ ............................. ___
Post-Effective Amendment No. 26 .............................. X
___
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
---
Amendment No. 27 ............................................. X
___
FOUNTAIN SQUARE FUNDS
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road, Columbus, Ohio 43219-3035
(Address of Principal Executive Offices)
(614) 470-8000
(Registrant's Telephone Number)
Melanie Mayo West, Esquire
Howard & Howard Attorneys, P.C.
Suite 101, The Pinehurst Office Center
1400 North Woodward Avenue
Bloomfield Hills, Michigan 48304-2856
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
X immediately upon filing pursuant to paragraph (b)
- ---
on ____________________________ pursuant to paragraph (b)
- ---
60 days after filing pursuant to paragraph (a)(1)
- ---
on ____________________________ pursuant to paragraph (a)(1)
- ---
75 days after filing pursuant to paragraph (a)(2)
- ---
on ____________________________ pursuant to paragraph (a)(2) of Rule 485.
- ---
If appropriate, check the following box:
____ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has filed with the Securities and Exchange Commission a declaration
pursuant to Rule 24f-2 under the Investment Company Act of 1940, and:
X filed the Notice required by that Rule on September 25, 1997; or
- ---
___ intends to file the Notice required by that Rule on or
about ___________________; or
____ during the most recent fiscal year did not sell any securities pursuant to
Rule 24f-2 under the Investment Company Act of 1940, and, pursuant to Rule
24f-2(b)(2), need not file the Notice.
<PAGE> 2
CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of FOUNTAIN SQUARE FUNDS,
which is comprised of fourteen portfolios, each portfolio offering two separate
classes of shares (unless otherwise noted): Investment A Shares and Investment C
Shares: (1) Fountain Square U.S. Government Securities Fund; (2) Fountain Square
Quality Bond Fund; (3) Fountain Square Quality Growth Fund; (4) Fountain Square
Mid Cap Fund; and (5) Fountain Square Balanced Fund; (6) Fountain Square Ohio
Tax Free Bond Fund; (7) Fountain Square International Equity Fund; (8) Fountain
Square Equity Income Fund; (9) Fountain Square Fixed Income Fund; and (10)
Fountain Square Municipal Bond Fund; (11) Fountain Square Pinnacle Fund; Trust
Shares and Investment Shares of: (12) Fountains Square Commercial Paper Fund;
and (13) Fountain Square Government Cash Reserves Fund; and one share class of
(14) Fountain Square U.S. Treasury Obligations Fund, relates only to Fund (11),
and is comprised of the following:
<TABLE>
<CAPTION>
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
PROSPECTUS HEADING
(RULE 404(c) CROSS REFERENCE)
-----------------------------
<S> <C> <C>
Item 1. Cover Page ........................... Cover Page.
Item 2. Synopsis ............................. Synopsis: Expenses of the Fund -
Investment A Shares; Expenses of the
Funds - Investment C Shares.
Item 3. Condensed Financial
Information .......................... Performance Information.
Item 4. General Description of
Registrant ........................... Synopsis: Objective of the Fund; Portfolio
Investments and Strategies; Voting Rights.
Item 5. Management of the Fund ................ Fountain Square Funds Information;
Management of the Fund; Distribution of
Shares of the Fund; Distribution Plan; Other
Payments to Financial Institutions;
Administration of the Fund; Expenses of the
Fund, Investment A Shares, and Investment
C Shares; Brokerage Transactions.
Item 5A. Management's Discussion of
Fund Performance .................... Incorporated by reference to Annual Report
to Shareholders of the Fountain Square
Funds dated July 31, 1997 (File No. 811-5669).
Item 6. Capital Stock and Other
Securities .......................... Dividends and Capital Gains; Shareholder
Information; Voting Rights; Massachusetts
Law; Effect of Banking Laws; Tax Information;
Federal Income Tax.
Item 7. Purchase of Securities Being
Offered ............................. Net Asset Value; Investing in the Fund;
Share Purchases; Minimum Investment Required;
Investing In Investment A Shares;
What Shares Cost; Purchases at Net Asset
Value; Dealer Concessions; Reducing/Eliminating
the Sales Charge;
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
Quantity Discounts and Accumulated
Purchases; Letter of Intent; Fifth Third Bank
Club 53, One Account Plus, One Account
Gold, One Account Advantage and One
Account Platinum Programs; Purchases with
Proceeds from Redemptions of Unaffiliated
Mutual Fund Shares; Purchase with
Proceeds from Distributions of Qualified
Retirement Plans or Other Trusts
Administered by Fifth Third Bank;
Concurrent Purchases; Investing in
Investment C Shares; Exchanging Securities
for Fund Shares; Systematic Investment
Program; Certificates and Confirmations;
Exchanges.
Item 8. Redemption or Repurchase ............. Redeeming Shares; Systematic Withdrawal
Program; Accounts With Low Balances;
Contingent Deferred Sales Charge.
Item 9. Pending Legal Proceedings ............ None.
</TABLE>
<PAGE> 4
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
<TABLE>
<S> <C> <C>
Item 10. Cover Page............................ Cover Page.
Item 11. Table of Contents..................... Table of Contents.
Item 12. General Information and History....... General Information About the Trust.
Item 13. Investment Objectives and Policies.... Investment Objective and Policies
of the Fund.
Item 14. Management of the Fund................ Fountain Square Funds Management;
Officers and Trustees; Trustees'
Compensation.
Item 15. Control Persons and Principal
Holders of Securities................. Trust Ownership.
Item 16. Investment Advisory and Other Services Investment Advisory Services; Advisor
to the Fund; Advisory Fees;
Administrative Services; Transfer
Agent and Dividend Disbursing Agent;
Distribution Plan and Administrative
Services Agreement (Investment C Shares
Only).
Item 17. Brokerage Allocation.................. Brokerage Transactions.
Item 18. Capital Stock and Other Securities.... Not applicable.
Item 19. Purchase, Redemption and Pricing Purchasing Shares; Redeeming Shares;
of Securities Being Offered........... Determining Net Asset Value.
Item 20. Tax Status............................ Tax Status; The Fund's Tax Status;
Shareholders' Tax Status; Capital Gains.
Item 21. Underwriters.......................... Distribution Plan and Administrative
Services Agreement (Investment C Shares
Only).
Item 22. Calculation of Performance Data....... Total Return; Yield; Performance
Comparisons.
Item 23. Financial Statements.................. Not applicable.
</TABLE>
<PAGE> 5
FOUNTAIN SQUARE PINNACLE FUND
(A PORTFOLIO OF FOUNTAIN SQUARE FUNDS)
INVESTMENT A SHARES
INVESTMENT C SHARES
PROSPECTUS
The Investment A Shares and Investment C Shares of the Fountain Square Pinnacle
Fund (the "Fund") offered by this prospectus represent interests in a
diversified portfolio of securities which is one of a series of investment
portfolios of the Fountain Square Funds (the "Trust"), an open-end management
investment company (a mutual fund).
This prospectus contains the information you should read and know before you
invest in Investment A Shares or Investment C Shares of the Fund. Keep this
prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information for
Investment A Shares and Investment C Shares, dated January 21, 1998, with the
Securities and Exchange Commission. The information contained in the Combined
Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Combined Statement of Additional
Information free of charge, obtain other information or make inquiries about
the Fund by writing to the Trust or calling toll-free (888) 799-5353.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF FIFTH
THIRD BANK, ARE NOT ENDORSED OR GUARANTEED BY FIFTH THIRD BANK, AND ARE NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. 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 January 21, 1998
<PAGE> 6
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Expenses of the Fund
Investment A Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses of the Fund
Investment C Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fountain Square Pinnacle Fund
Financial Highlights - Investment A Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OBJECTIVE OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pinnacle Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acceptable Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PORTFOLIO INVESTMENTS AND STRATEGIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowing Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diversification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted and Illiquid Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
When-Issued and Delayed Delivery Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lending of Portfolio Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity Investment Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Temporary Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial Paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FOUNTAIN SQUARE FUNDS INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advisor's Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Portfolio Managers' Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution of Shares of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administrative Services Agreement (Investment C Shares Only) . . . . . . . . . . . . . . . . . . . . . . . .
Other Payments to Financial Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administration of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administrative Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Custodian, Transfer Agent and Dividend Disbursing Agent . . . . . . . . . . . . . . . . . . . . . . . . . .
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses of the Fund, Investment A Shares, and Investment C Shares . . . . . . . . . . . . . . . . . . . . .
Brokerage Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INVESTING IN THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minimum Investment Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing In Investment A Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases at Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dealer Concessions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reducing/Eliminating the Sales Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Quantity Discounts and Accumulated Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Letter of Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fifth Third Bank Club 53, One Account Plus, One Account Gold, One Account Advantage and One
Account Platinum Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Predecessor Fund Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Concurrent Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing in Investment C Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchanging Securities for Fund Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Systematic Investment Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certificates and Confirmations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends and Capital Gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXCHANGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
REDEEMING SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
By Telephone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
By Mail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Systematic Withdrawal Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts with Low Balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent Deferred Sales Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SHAREHOLDER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Massachusetts Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EFFECT OF BANKING LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TAX INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ADDRESSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
i
<PAGE> 7
EXPENSES OF THE FUND
INVESTMENT A SHARES
INVESTMENT A SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
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
</TABLE>
INVESTMENT A SHARES
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
<TABLE>
<S> <C>
Management Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.80%
12b-1 Fee (after waivers) (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Other Expenses (after waivers) (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.65%
Total Investment A Shares Operating Expenses (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.45%
</TABLE>
(1) As of the date of this prospectus, the Investment A Shares are not
paying or accruing 12b-1 fees. Investment A Shares will not accrue or
pay 12b-1 fees until a separate class of shares for shareholders of the
Predecessor Fund and certain trust or qualified plan customers of
financial institutions is created or a determination is made that such
investors will be subject to the 12b-1 fees. Investment A Shares can
pay up to 0.35% as a 12b-1 fee to the distributor.
(2) Other expenses for the Fund have been reduced to reflect the
anticipated voluntary waiver of a portion of the administration fee.
(3) Total Investment A Shares Operating Expenses for the Fund are
estimated to be 1.90%, absent the voluntary waiver of the 12b-1 fee
and a portion of the administration fee.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING
THE VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER IN INVESTMENT A SHARES 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.
LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF
THE MAXIMUM FRONT-END SALES CHARGE PERMITTED UNDER THE RULES OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC.
EXAMPLE
You would pay the following expenses on a $1,000 investment in Investment A
Shares, assuming (1) 5% annual return; (2) redemption at the end of each time
period; and (3) payment of the maximum sales charge. Investment A Shares
charge no redemption fees.
<TABLE>
<S> <C>
1 Year . . . . . . . . . . . . . . . . . . . $59
3 Years . . . . . . . . . . . . . . . . . . . $89
</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.
1
<PAGE> 8
EXPENSES OF THE FUND
INVESTMENT C SHARES
- --------------------------------------------------------------------------------
INVESTMENT C SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price) . . . . . . . . . . . . . . . . . . . . None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) (1) . . . . . . . . . . . . . . . . . . . . . . . . 1.00%
Redemption Fees (as a percentage of amount redeemed, if applicable) . . . . . . . . . . . . . . . . . . . . . . . . None
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
</TABLE>
INVESTMENT C SHARES
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
<TABLE>
<S> <C>
Management Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.80%
12b-1 Fee (after waivers) (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.50%
Administrative Service Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.25%
Other Expenses (after waivers) (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.65%
Total Investment C Shares Operating Expenses (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.20%
</TABLE>
(1) The contingent deferred sales charge is 1.00% of the lesser of the
original purchase price or the net asset value of shares redeemed
within one year of the purchase date. (See "Contingent Deferred Sales
Charge").
(2) The Investment C Shares of the Fund can pay up to 0.75% as a 12b-1 fee
to the distributor.
(3) Other expenses for the Fund have been reduced to reflect the
anticipated voluntary waiver of a portion of the administration fee.
(4) Total Investment C Shares Operating Expenses for the Fund are
estimated to be 2.55%, absent the voluntary waiver of a portion of the
12b-1 fee and administration fee.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING
THE VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER IN INVESTMENT C SHARES 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.
LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF
THE MAXIMUM FRONT-END SALES CHARGE PERMITTED UNDER THE RULES OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC.
EXAMPLE
You would pay the following expenses on a $1,000 investment in Investment C
Shares, assuming (1) 5% annual return; (2) either redemption in Year 1 or no
redemption; and (3) payment of the maximum sales charge.
<TABLE>
<S> <C>
1 Year (with redemption) . . . . . . . . . . $32
1 Year (assuming no redemption) . . . . . . . $22
3 Years . . . . . . . . . . . . . . . . . . . $69
</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.
2
<PAGE> 9
FOUNTAIN SQUARE PINNACLE FUND
FINANCIAL HIGHLIGHTS - INVESTMENT A SHARES
- -------------------------------------------------------------------------------
(For a share outstanding throughout each period)
The following table reflects the performance results from January 1, 1987
through December 31, 1996 of shares of the Pinnacle Fund (the "Predecessor
Fund"), an open-end investment company which was the predecessor fund to the
Fountain Square Pinnacle Fund. The Predecessor Fund was advised by the Fund's
investment advisor, Heartland Capital Management, Inc. ("Heartland"). The
Predecessor Fund was managed with the same investment objective and
substantially identical investment policies as the Fund. Shareholders of the
Predecessor Fund will receive Investment A Shares of the Fountain Square
Pinnacle Fund in exchange for their shares as part of a fund reorganization.
For this reason, the historic performance of the Predecessor Fund is provided
below.
The data in the table has been derived from, and should be read in conjunction
with, financial statements for the Predecessor Fund, which for 1996 were audited
by Geo. S. Olive & Co. LLC, certified public accountants. Of course, past
performance of the Predecessor Fund is not indicative of future results of the
Fund. In addition, Fund performance would have been lower than Predecessor Fund
performance due to higher expenses of the Fund.
The Fund expects to quote total returns that include performance of the
Predecessor Fund for the period between March 6, 1985 and the commencement of
the Fund's operations. All performance figures quoted for Investment C Shares
the Fund will be adjusted to reflect the deduction of fees, including Rule 12b-1
fees, associated with the Fund (excluding waivers or reimbursements) and will
reflect the reinvestment of all dividends and capital gains distributions.
(Adjusted for a 2-for-1 share split effective September 8, 1989)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1996 1995 1994 1993 1992
- ------------------------------------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 22.47 $ 18.83 $ 21.15 $ 21.83 $ 22.14
- ------------------------------------------------- ------- ------- ------- ------- -------
Income from investment operations
- -------------------------------------------------
Net investment income 0.05 0.11 0.09 0.10 0.13
- -------------------------------------------------
Net realized and unrealized gains (losses)
on investments 5.04 6.54 (0.34) 0.62 (0.29)
- ------------------------------------------------- ------- ------- ------- ------- -------
Total from investment operations 5.09 6.65 (0.25) 0.72 (0.16)
- ------------------------------------------------- ------- ------- ------- ------- -------
Less distributions
- -------------------------------------------------
Dividends to shareholders from net
investment income (0.05) (0.11) (0.09) (0.10) (0.13)
- -------------------------------------------------
Distributions to shareholders from net
realized gains on investment transactions (3.55) (2.90) (1.98) (1.30) (0.02)
- ------------------------------------------------- ------- ------- ------- ------- -------
Total distributions (3.60) (3.01) (2.07) (1.40) (0.15)
- -------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 23.96 $ 22.47 $ 18.83 $ 21.15 $ 21.83
- -------------------------------------------------
TOTAL RETURN 22.5% 35.4% (1.1%) 3.3% (0.7%)
- -------------------------------------------------
Ratios to Average Net Assets
- -------------------------------------------------
Expenses 1.16% 1.14% 1.15% 1.17% 1.18%
- -------------------------------------------------
Net investment income 0.18% 0.44% 0.41% 0.46% 0.67%
- -------------------------------------------------
Supplemental data
- -------------------------------------------------
Net assets, end of period (000 omitted) $16,491 $14,673 $13,014 $15,135 $14,721
- -------------------------------------------------
Portfolio turnover rate 44% 68% 91% 85% 33%
- -------------------------------------------------
Average commission rate paid $0.0606 $0.0590 -- -- --
- -------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1991 1990 1989 1988 1987
- ------------------------------------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.87 $ 18.23 $ 14.53 $ 14.02 $ 12.85
- ------------------------------------------------- ------- ------- ------- ------- -------
Income from investment operations
- -------------------------------------------------
Net investment income 0.25 0.36 0.25 0.22 0.18
- -------------------------------------------------
Net realized and unrealized gains (losses)
on investments 6.48 (0.94) 4.25 0.74 1.78
- ------------------------------------------------- ------- ------- ------- ------- -------
Total from investment operations 6.73 (0.58) 4.50 0.96 1.96
- ------------------------------------------------- ------- ------- ------- ------- -------
Less distributions
- -------------------------------------------------
Dividends to shareholders from net
investment income (0.25) (0.35) (0.25) (0.22) (0.23)
- -------------------------------------------------
Distributions to shareholders from net
realized gains on investment transactions (1.21) (0.43) (0.55) (0.23) (0.56)
- ------------------------------------------------- ------- ------- ------- ------- -------
Total distributions (1.46) (0.78) (0.80) (0.45) (0.79)
- -------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 22.14 $ 16.87 $18.23 $ 14.53 $ 14.02
- -------------------------------------------------
TOTAL RETURN 39.9% (3.1%) 31.0% 6.7% 15.2%
- -------------------------------------------------
Ratios to Average Net Assets
- -------------------------------------------------
Expenses 1.27% 1.40% 1.50% 1.54% 1.63%
- -------------------------------------------------
Net investment income (loss) 1.33% 2.05% 1.52% 1.61% 1.34%
- -------------------------------------------------
Supplemental data
- -------------------------------------------------
Net assets, end of period (000 omitted) $12,116 $ 7,338 $ 6,337 $ 4,656 $ 3,308
- -------------------------------------------------
Portfolio turnover rate 55% 53% 45% 43% 86%
- -------------------------------------------------
Average commission rate paid -- -- -- -- --
- -------------------------------------------------
</TABLE>
3
<PAGE> 10
OBJECTIVE OF THE FUND
- --------------------------------------------------------------------------------
The investment objective and policies of the Fund appear below. The investment
objective of the Fund 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 and limitations of the Fund
may be changed by the Board of Trustees ("Trustees") without approval of
shareholders. Shareholders will be notified before any material change in
these policies becomes effective.
Additional information about investment limitations, strategies and certain
investment policies mentioned below, appears in the "Portfolio Investments and
Strategies" section of this prospectus and in the Combined Statement of
Additional Information.
PINNACLE FUND
The Fund's investment objective is long-term capital appreciation. The Fund
pursues this investment objective by investing primarily in common stocks
which, in the opinion of Heartland, offer opportunities for long-term capital
appreciation. The Fund is not intended to be a current income producing
investment and will not purchase securities with a view toward short-term
profits.
ACCEPTABLE INVESTMENTS. Subject to the investment limitations discussed below,
the securities in which the Fund may invest include, but are not limited to,
the following:
o Common stocks and securities convertible into common stock, such as
convertible bonds, convertible debentures and convertible preferred stock,
which are exchange-listed or over-the-counter securities of small or large,
well-established or unseasoned companies.
In addition, the Fund may borrow money, enter into repurchase agreements, lend
portfolio securities, invest in restricted and illiquid securities, and engage
in when-issued and delayed delivery transactions. (See "Portfolio Investments
and Strategies.")
CONVERTIBLE SECURITIES. Convertible securities are securities which may be
exchanged or converted into a predetermined number of the issuer's underlying
common stock at the option of the holder during a specified time period.
Convertible securities in which the Fund may invest may take the form of
convertible bonds, convertible preferred stock or debentures. As used herein,
the term "investment grade" means convertible securities rated Baa or higher by
Moody's Investors Service, Inc. ("Moody's") or BBB or higher by Standard &
Poor's Ratings Group ("S&P"), or unrated securities that are determined by
Heartland to be of comparable quality. The investment characteristics of each
convertible security vary widely, which allows convertible securities to be
employed for different investment objectives.
Convertible bonds and convertible preferred stocks are fixed income securities
that generally retain the investment characteristics of income securities until
they have been converted, but also react to movements in the underlying equity
securities. The holder is entitled to receive the fixed income of a bond or
the dividend preference of a preferred stock until the holder elects to
exercise the conversion privilege.
INVESTMENT LIMITATIONS. The Fund's investment limitations are discussed below
under "Borrowing Money," "Diversification," and "Restricted and Illiquid
Securities."
4
<PAGE> 11
PORTFOLIO INVESTMENTS AND STRATEGIES
- --------------------------------------------------------------------------------
BORROWING MONEY
The Fund will not borrow money directly or through reverse repurchase
agreements (arrangements in which a 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, a Fund may borrow money up to one-third of the value of
its total assets and pledge assets as necessary to secure such borrowings.
This policy cannot be changed without the approval of holders of a majority of
a Fund's shares.
DIVERSIFICATION
With respect to 75% of the value of total assets, the Fund will not invest more
than 5% in securities of any one issuer or acquire more than 10% of the
outstanding voting securities of 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 U.S.
government securities. This policy cannot be changed without the approval of
holders of a majority of a Fund's shares.
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.
The Fund may invest in commercial paper issued in reliance on the exemption
from registration afforded by Section 4(2) of the Securities Act of 1933.
Section 4(2) commercial paper is restricted as to disposition under federal
securities law, and is generally sold to institutional investors, such as the
Fund, who agree that they are purchasing the paper for investment purposes and
not with a view to public distribution. Any resale by the purchaser must be in
an exempt transaction. Section 4(2) commercial paper is normally resold to
other institutional investors through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2) commercial paper, thus
providing liquidity. The Fund believes that Section 4(2) commercial paper and
certain other restricted securities, which meet the criteria for liquidity
established by the Trustees, are quite liquid. Therefore, the Fund intends to
treat these securities as liquid and not subject to the investment limitation
applicable to illiquid securities. In addition, because these securities are
liquid, the Fund will not subject such securities to the limitation otherwise
applicable to restricted securities.
5
<PAGE> 12
REPURCHASE AGREEMENTS
The securities in which the Fund invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell U.S.
government securities or other 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, that Fund could receive less than the repurchase price on any sale of
such securities. The Fund will only enter into repurchase agreements with
banks and other recognized financial institutions such as broker/dealers which
are deemed by Heartland to be creditworthy pursuant to guidelines established
by the Trustees.
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/less than the market value of the securities on the settlement date. The
Fund may dispose of a commitment prior to settlement if Heartland 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.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, the Fund may lend 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 Heartland 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. 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.
6
<PAGE> 13
TEMPORARY INVESTMENTS
For defensive purposes only, and in such amounts up to 100% of total assets as
Heartland in its judgment believes market conditions warrant, the Fund may also
invest temporarily in cash and money market instruments during times of unusual
market conditions and to maintain liquidity as described below. Temporary
investments may include obligations such as:
o commercial paper and other money market instruments;
o securities issued and/or guaranteed as to payment of principal
and interest by U.S. government, its agencies, or
instrumentalities;
o instruments of domestic banks; and
o repurchase agreements.
COMMERCIAL PAPER. The Fund may acquire commercial paper rated A-1 by S&P,
Prime-1 by Moody's, or F-1 by Fitch Investors Service, and money market
instruments (including commercial paper) which are not rated but are determined
by the Trustees to be of comparable quality to other bank or corporate
obligations.
BANK INSTRUMENTS. The Fund may acquire instruments of domestic banks (such as
certificates of deposit, demand and time deposits, saving shares, and bankers'
acceptances) if those banks have capital, surplus, and undivided profits of
over $100,000,000 and/or if their deposits are insured by the Federal Deposit
Insurance Corporation ("FDIC").
INVESTMENT COMPANIES. In addition, the Fund may purchase shares of other
investment companies, primarily for the purpose of investing short-term cash on
a temporary basis. Investment in shares of other investment companies may
subject the Fund to additional or duplicative fees and expenses.
EQUITY INVESTMENT RISKS
As with other mutual funds that invest primarily in equity securities, the Fund
is subject to market risks. Since equity markets tend to be cyclical, the
possibility exists that common stocks could decline over short or even extended
periods of time. Because the Fund invests in both small and medium
capitalization stocks, there are some additional risk factors associated with
investment in the Fund. For small or unseasoned companies, stocks tend to be
more thinly traded and therefore subject to more abrupt or erratic price
movements than larger, well-established companies. The Fund will not invest
more than 5% of its total net assets in securities of companies having a record
of less than three years of continuous operations (including the record of any
predecessor).
In general, stocks in the small and medium capitalization sectors of the United
States equity market tend to be slightly more volatile in price than larger
capitalization stocks, such as those included in the S&P 500 Index. This is
because, among other things, both small and medium-sized companies have less
certain growth prospects than larger companies, have a lower degree of liquidity
in the equity market, and tend to have a greater sensitivity to changing
economic conditions. Further, in addition to exhibiting slightly higher
volatility, the stocks of medium-sized companies may, to some degree, fluctuate
independently of the stocks of large companies. That is, the stocks of small or
medium-sized companies may decline in price as the price of large company stocks
rises or vice versa. Therefore, investors should expect that the Fund will be
slightly more volatile than, and may fluctuate independently of, broad stock
market indices such as the Standard & Poor's 500 Index.
FOUNTAIN SQUARE FUNDS INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising
all the Trust's powers except those reserved for the shareholders.
INVESTMENT ADVISOR. Pursuant to an investment advisory contract with the
Trust, investment decisions for the Fund are made by Heartland, the Fund's
advisor, subject to direction by the Trustees. Heartland 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.
ADVISORY FEES. Heartland receives an investment advisory fee at
annual rate of 0.80% of the Fund's average net assets. The investment
advisory contract provides for the voluntary waiver of expenses by
Heartland from time to time. Heartland 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.
7
<PAGE> 14
ADVISOR'S BACKGROUND. Heartland, an Indiana corporation and registered
investment advisor, is a wholly-owned subsidiary of Fifth Third
Bancorp., an Ohio corporation. As of December 31, 1997, Heartland
acted as investment advisor for institutional and individual portfolios
with assets of approximately $963 million. Heartland has been an
investment advisor since 1984 and has managed mutual fund assets since
1985.
PORTFOLIO MANAGERS' BACKGROUND. The employees of Heartland who are
primarily responsible for the day-to-day management of the Fund's
portfolio are: Mr. Robert D. Markley, President and Chief Executive
Officer of Heartland; Mr. Thomas F. Maurath, Executive Vice President
of Heartland; and Mr. Barry F. Ebert, an employee of Heartland. Each
of Messrs. Markley, Maurath and Ebert has been primarily responsible
for management of the Fund since its inception and management of the
Predecessor Fund since its inception on March 6, 1985.
Mr. Markley is a Chartered Financial Analyst and holds a B.A. in
Marketing from Michigan State University and an M.B.A. from
Northwestern University. Mr. Maurath is also a Chartered Financial
Analyst who earned a B.B.A. in Accounting from the University of Notre
Dame and an M.B.A. from Indiana University. Mr. Ebert holds both a
B.B.A. in Finance and an M.B.A. from the University of Wisconsin.
DISTRIBUTION OF SHARES OF THE FUND
BISYS Fund Services L.P. serves as the distributor for the Trust. BISYS Fund
Services L.P. is wholly-owned by BISYS Group, Inc., 150 Clove Road, Little
Falls, NJ 07424, a publicly owned company engaged in information processing
and record keeping services to and through banking and other financial
organizations.
The distributor may offer to pay financial institutions an amount equal to 1%
of the net asset value of Investment C Shares purchased by their clients or
customers at the time of purchase. These payments will be made directly by the
distributor from its assets, and will not be made from assets of the Fund.
Financial institutions may elect to waive the initial payment described above;
such waiver will result in the waiver by the Fund of the otherwise applicable
contingent deferred sales charge.
DISTRIBUTION PLAN
Under a distribution plan adopted in accordance with Investment Company Act
Rule 12b-1 (the "Distribution Plan"), Investment A Shares and Investment C
Shares may pay a fee to the distributor in an amount computed at an annual rate
of up to 0.35% and 0.75%, respectively, of the average daily net assets of each
class of shares to finance any activity which is principally intended to result
in the sale of shares subject to the Distribution Plan. For Investment A
Shares and Investment C Shares, the distributor may select financial
institutions such as banks, fiduciaries, custodians for public funds,
investment advisors, and broker/dealers to provide sales services or
distribution-related support services as agents for their clients or customers.
The Distribution Plan is a compensation type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund
does not pay for unreimbursed expenses of the distributor, including amounts
expended by the distributor in excess of amounts received by it from the Fund,
interest, carrying or other financing charges in connection with excess amounts
expended, or the distributor's overhead expenses. However, the distributor may
be able to recover such amounts or may earn a profit from future payments made
by shares under the Plan. The Fund will not accrue or pay distribution
expenses pursuant to the Distribution Plan with respect to Investment A Shares
until a separate class of shares has been created for certain trust or employee
benefit customers of Fifth Third Bank or a determination is made that such
investors will be subject to the distribution expenses.
8
<PAGE> 15
ADMINISTRATIVE SERVICES AGREEMENT (INVESTMENT C SHARES ONLY)
In addition, the Fund has entered into an Administrative Services Agreement
with respect to Investment C Shares with Fifth Third Bank, under which the Fund
may make payments up to 0.25 of 1% of the average daily net asset value of
Investment C Shares to obtain certain administrative services for shareholders
and for the maintenance of shareholder accounts ("Administrative Services").
Under the Administrative Services Agreement, Fifth Third Bank will either
perform Administrative Services directly or will select certain firms to
perform Administrative Services, for which such firms may receive all or a
portion of the Administrative Services fee.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS
In addition to payments made pursuant to the Distribution Plan and
Administrative Services Agreement, BISYS Fund Services and Fifth Third Bank,
from their own assets, may pay financial institutions supplemental fees for the
performance of sales services, distribution-related support services, or
shareholder and administrative services.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or savings 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 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 laws.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. BISYS Fund Services L.P. serves as the administrator.
The administrator generally assists in all aspects of the Trust's
administration and operation including providing the Fund with certain
administrative personnel and services necessary to operate the Fund, such as
legal and accounting services. BISYS Fund Services L.P. provides these at an
annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE FUND
------------------ ----------------------
<S> <C>
0.20% of the first $1 billion
0.18% of the next $1 billion
0.17% in excess of $2 billion
</TABLE>
The administrator may periodically waive all or a portion of its administrative
fee which will cause the yield of the Fund to be higher than it would otherwise
be in the absence of such a waiver.
Pursuant to a separate agreement with BISYS Fund Services L.P., Fifth Third
Bank performs sub-administration services on behalf of the Fund including
providing certain administrative personnel and services necessary to operate
the Fund for which it receives a fee from BISYS Fund Services L.P. computed
daily and paid periodically calculated at an annual rate of 0.025% of average
daily net assets.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Fifth Third Bank,
Cincinnati, Ohio, is custodian for the securities and cash of the Fund,
transfer agent for the shares of the Fund, and dividend disbursing agent for
the Fund.
9
<PAGE> 16
INDEPENDENT AUDITORS. The independent auditors for the Fund are Ernst & Young
LLP, Cincinnati, Ohio.
EXPENSES OF THE FUND, INVESTMENT A SHARES, AND INVESTMENT C SHARES
Holders of Investment A Shares and Investment C Shares pay their allocable
portion of Trust and Fund expenses.
The Trust expenses for which holders of Investment A Shares and Investment C
Shares pay their allocable portion include, but are not limited to: the cost
of organizing the Trust and continuing its existence; registering the Trust
with federal and state securities authorities; Trustees' fees; auditors' fees;
the cost of meetings of Trustees; legal fees of the Trust; association
membership dues; and such non-recurring and extraordinary items as may arise
from time to time.
The Fund expenses for which holders of Investment A Shares and Investment C
Shares pay their allocable portion include, but are not limited to:
registering the Fund and Investment A Shares and Investment C Shares of the
Fund; investment advisory services; taxes and commissions; custodian fees;
insurance premiums; auditors' fees; legal expenses of the Fund; organizational
expenses; and such non-recurring and extraordinary items as may arise from time
to time.
At present, the only expenses which are allocated specifically to Investment A
Shares and Investment C Shares as classes are expenses under the Trust's
Distribution Plan and fees for Administrative Services. However, the Trustees
reserve the right to allocate certain other expenses to holders of Investment A
Shares and Investment C Shares as they deem appropriate ("Class Expenses"). In
any case, Class Expenses would be limited to: distribution fees; transfer
agent fees as identified by the transfer agent as attributable to holders of
Investment A Shares and Investment C Shares; printing and postage expenses
related to preparing and distributing materials such as shareholder reports,
prospectuses and proxies to current shareholders; registration fees paid to the
Securities and Exchange Commission and to state securities commissions;
expenses related to administrative personnel and services as required to
support holders of Investment A Shares and Investment C Shares; legal fees
relating solely to Investment A Shares or Investment C Shares; and Trustees'
fees incurred as a result of issues related solely to Investment A Shares or
Investment C Shares.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, Heartland looks for prompt execution of the order at a favorable
price. In working with dealers, Heartland 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, Heartland may give consideration to
those firms which have sold or are selling shares of the Fund. Heartland makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees.
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.
10
<PAGE> 17
NET ASSET VALUE
- --------------------------------------------------------------------------------
The net asset value per share of the Fund fluctuates daily. The net asset
value for shares of the Fund is determined by adding the interest of each class
of shares in the market value of all securities and other assets of the Fund,
subtracting the interest of each class of shares in the liabilities of such
Fund and those attributable to each class of shares, and dividing the remainder
by the total number of each class of shares outstanding. The net asset value
for each class of shares may differ due to the variance in daily net income
realized by each class. Such variance will reflect only accrued net income to
which the shareholders of a particular class are entitled.
The net asset value of each class of shares of the Fund is determined as of the
close of trading (normally 4:00 p.m., Eastern time) on the New York Stock
Exchange, Monday through Friday, except on 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 and days during which no shares are
tendered for redemption and no orders to purchase shares are received.
INVESTING IN THE FUND
- --------------------------------------------------------------------------------
The Fund offers investors two classes of shares that either carry sales loads
or contingent deferred sales charges in different forms and amounts and which
bear different levels of expense.
SHARE PURCHASES
Shares of the Fund are sold on days on which the New York Stock Exchange and
the Federal Reserve Bank of Cleveland are open for business. 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 of Fund shares
may not be available to investors in all states.
Shares of the Fund may be purchased either through a financial institution
(such as Heartland or a bank or broker-dealer that has a sales agreement with
the distributor) or by wire or check directed to the Fund. For certain clients
of Heartland who obtained shares of the Fund as part of the Predecessor Fund
reorganization, special procedures for purchasing shares apply. See "Purchases
by Certain Heartland Clients" below.
Purchase orders must be received by the Trust by 2:30 p.m. (Eastern time) in
order for shares to be purchased at that day's price. Payment may be made to
the Trust's custodian either by check or federal funds. Purchases by check are
considered received after payment by check is converted into federal funds and
received by the custodian. This is normally the next business day after the
Trust receives the check. Proceeds from redeemed shares purchased by check will
not be sent until the check has cleared. When payment is made with federal
funds, the order is considered received when federal funds are received by the
Trust.
Orders placed through financial institutions, including Heartland, must be
received by the financial institution and transmitted to the Trust before 2:30
p.m. (Eastern time) in order for shares to be purchased at that day's price. It
is the financial institution's responsibility to transmit orders promptly,
however, investors should allow sufficient time for orderly processing and
transmission.
Purchases by Certain Heartland Clients. Shareholders of the Funds who were
formerly shareholders of the Predecessor Fund at the time of its reorganization
with the Fund may purchase additional shares of the Fund by calling the Trust
toll-free at (800) 282-5706 or by mailing a request to: Fountain Square
Pinnacle Fund, P.O. Box 5354, Cincinnati, Ohio 45201-5354. Shareholders should
call the Trust for assistance in purchasing by mail.
Purchases by All Other Investors. Investors other than Heartland clients may
purchase shares of the Fund by contacting the Trust toll-free at (888) 799-5353.
Federal funds should be wired to the Fund as follows: ABA No. 042 000 314 Fifth
Third Cincinnati, Attention: Fountain Square Funds Department; For Credit to:
(shareholder name and account number); For Further Credit to: Fountain Square
Pinnacle Fund (Name of Applicable Class of Shares). Investors not purchasing
directly from the Trust should consult their financial institutions for wiring
instructions.
ADDITIONAL INFORMATION
From time to time, shares of the Fund may be purchased by Heartland, Fifth Third
Bank, the Distributor, or the Administrator in connection with various
promotions of the Fountain Square Funds. In these cases, Heartland, Fifth Third
Bank, the Distributor, or the Administrator will distribute Fund shares to
existing or potential investors as an incentive to purchase the Fund. As of the
date of this prospectus, the Fund's administrator is participating in
11
<PAGE> 18
a promotion sponsored by the Cincinnati Enquirer which will entitle one or more
persons to receive Fund Investment A Shares purchased by the Administrator. In
addition, through March 31, 1998, Fifth Third Bank is offering a special $50
investment bonus to individuals who purchase shares of a Fountain Square Stock
or Bond Mutual Fund through Fifth Third Securities, Inc. The minimum
investment required to receive the $50 investment bonus, payable in shares of
Fountain Square Funds, is $5,000 and the minimum holding period is six months.
For more information regarding the $50 investment bonus, you should call a
Fifth Third Securities Investment Consultant or the Fund at 1-888-799-5353.
In connection with the sale of shares of the Fund, the distributor may make
certain payments to all dealers selling shares of the Fund which include
financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising
campaigns regarding one or more Funds of the Trust, and/or other
dealer-sponsored special events. In some instances, this compensation will be
made available only to certain dealers whose representatives have sold a
significant amount of shares of Funds in the Trust. Compensation may include
payment for travel expenses, including lodging, to various locations for meeting
or seminars of a business nature. Compensation may also include the following
types of non-cash compensation offered through promotional contests: travel and
lodging at non-business locations; tickets for entertainment events; and
merchandise. None of the aforesaid compensation is paid for by the Fund or its
shareholders. In some cases, the distributor, in its sole discretion, may
uniformly offer to pay to all dealers selling shares of the Fund, all or a
portion of any applicable sales charge which it normally retains.
Minimum Investment Required. The minimum initial investment in shares of the
Fund by an investor is $1,000. Subsequent investments must be in amounts of at
least $50.
INVESTING IN INVESTMENT A SHARES
Investment A Shares of the Fund are sold at their 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 A PERCENTAGE
OF PUBLIC OF NET AMOUNT
AMOUNT OF TRANSACTION OFFERING PRICE 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, normally 4:00 p.m. (Eastern time) Monday through
Friday, except on 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 and days during which no Shares are tendered for redemption and no
orders to purchase shares are received. No orders to purchase or redeem shares
are processed on the following holidays: New Year's Day, Martin Luther King,
Jr. 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. Investment A 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; shareholders of the Predecessor Fund at the time
of its reorganization with the Fund; clients of Fifth Third Bank who make
purchases through Fifth Third Investment Advisors; and registered
representatives and employees of the distributor and broker-dealers who have
entered into sales agreements with the distributor, as well as their spouses
and children under 21. Investment A Shares may also be purchased at net asset
value by qualified employee benefit plans under the Internal Revenue Code,
subject to minimum requirements with respect to number of employees or amount
of purchase which may be established by the distributor. Finally, no sales
load is imposed for Investment A Shares purchased by broker-dealers, investment
advisors, or financial planners who place trades for their own accounts or the
accounts of their clients and who charge a management, consulting, or other fee
for their services.
12
<PAGE> 19
DEALER CONCESSIONS. For sales of Investment A 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 normally be retained by the
distributor.
The sales charge for Investment A Shares sold other than through registered
broker/dealers will be retained by the distributor. The distributor may pay
fees to financial institutions out of the sales charge in exchange for sales
and/or administrative services performed on behalf of the financial
institution's customers in connection with the initiation of customer accounts
and purchases of Investment A Shares.
REDUCING/ELIMINATING THE SALES CHARGE. The sales charge can be reduced or
eliminated on the purchase of Investment A Shares through:
o quantity discounts and accumulated purchases;
o signing a 13-month letter of intent;
o Fifth Third Bank's Club 53, One Account Plus, One Account
Gold, One Account Advantage, or One Account Platinum Programs;
o purchases made by shareholders of the Predecessor Fund;
o purchases with proceeds from redemptions of unaffiliated
mutual fund shares;
o purchases with proceeds from distributions of qualified
retirement plans or other trusts administered by Fifth Third
Bank; or
o concurrent purchases.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table above,
larger purchases of the Fund's Investment A Shares 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 Investment A Shares of the Fund is made, the
distributor will aggregate such additional purchases with previous purchases of
Investment A Shares of the Fund provided the prior purchase is still invested
in either of these Funds. For example, if a shareholder already owns
Investment A 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 Investment A Shares of a Fund 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.
13
<PAGE> 20
LETTER OF INTENT. If a shareholder intends to purchase at least $50,000 of Fund
Investment A 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 Investment A Shares, is not purchased.
In this event, an appropriate number of escrowed Investment A Shares may be
redeemed in order to realize the difference in the sales charge.
This letter of intent will not obligate the shareholder to purchase Investment
A 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; however, these previous purchases will not receive the reduced sales
charge.
FIFTH THIRD BANK CLUB 53, ONE ACCOUNT PLUS, ONE ACCOUNT GOLD, ONE ACCOUNT
ADVANTAGE AND ONE ACCOUNT PLATINUM PROGRAMS. All shareholders who have a Club
53 Account, One Account Plus, One Account Gold, One Account Advantage or One
Account Platinum through Fifth Third Bank are eligible for a reduced sales
charge on the purchase of Investment A Shares of the Fund. Shareholders should
consult their Fifth Third Securities Representative for details about these
account programs.
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 . . . . . . . . . . . . . . . . . . . . . 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>
PREDECESSOR FUND SHAREHOLDERS. Holders of Investment A Shares of the Fund who
acquired their shares through the reorganization of the Predecessor Fund into
the Fund are eligible to purchase additional Investment A Shares of the Fund at
net asset value without a sales charge.
PURCHASES WITH PROCEEDS FROM REDEMPTIONS OF UNAFFILIATED MUTUAL FUND SHARES.
Investors may purchase Investment A Shares of the Fund at net asset value,
without a sales charge, with the proceeds from the redemption of shares of an
unaffiliated mutual fund that is not a money market or stable net asset value
fund. If the purchase of Investment A Shares is made with proceeds from the
redemption of mutual fund shares that were not sold with a sales charge or
commission, the investor must have held such mutual fund shares for at least 90
days to be eligible for the purchase of Investment A Shares at net asset value.
The purchase must be made within 60 days of the redemption, and the Trust must
be notified by the investor in writing, or by his financial institution, at the
time the purchase is made.
14
<PAGE> 21
PURCHASES WITH PROCEEDS FROM DISTRIBUTIONS OF QUALIFIED RETIREMENT PLANS OR
OTHER TRUSTS ADMINISTERED BY FIFTH THIRD BANK. Investors may purchase
Investment A 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 Fund in the Trust, the purchase price of which includes a sales charge.
For example, if a shareholder concurrently invested $20,000 in Investment A
Shares of one of the Funds of the Trust with a sales charge, and $30,000 in
Investment A Shares of another Fund with a sales charge, the sales charge would
be reduced on both purchases.
To receive this sales charge reduction, the Trust must be notified by the
shareholder in writing or by their financial institution at the time the
concurrent purchases are made. The Trust will reduce the sales charge after it
confirms the purchases.
INVESTING IN INVESTMENT C SHARES
Investment C Shares are sold at net asset value next determined after an order
is received. A contingent deferred sales charge of 1.00% will be charged on
assets redeemed within the first full 12 months following purchase. For a
complete description of this charge, see "Contingent Deferred Sales Charge."
Investment C Shares provide an investor the benefit of putting all of the
investor's dollars to work from the time the investment is made, but will have
a higher expense ratio and pay lower dividends than Investment A Shares of the
Fund due to the imposition of the 12b-1 fee and the Administrative Services
fee.
No orders to purchase or redeem Investment C Shares are processed on 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.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange certain securities or a combination of certain
securities and cash for Fund Shares. The securities and any cash must have a
market value of at least $25,000. The Fund reserves the right to determine the
acceptability of securities to be exchanged. On the day securities are
accepted by the Fund, they are valued in the same manner as the Fund values its
assets. Investors wishing to exchange securities should first contact the
Trust.
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 $50. 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 the Trust, 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 on their account application or by contacting the
Trust.
CERTIFICATES AND CONFIRMATIONS
The transfer agent 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.
<PAGE> 22
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
appropriate Fund.
Dividends are paid to all shareholders who are invested in the Fund on its
record date. The Fund's dividends are declared and paid quarterly.
EXCHANGES
- --------------------------------------------------------------------------------
A shareholder may exchange shares of the Fund for shares of the same class of
any of the other Funds in the Trust by calling or sending a written request to
the Trust.
Shareholders may exchange shares of the Fund for shares of the same class of
any of the other Funds in the Trust by calling the Trust toll-free at (888)
799-5353 or sending a written request to the Trust. Shareholders of the Fund
who were formerly shareholders of the Predecessor Fund at the time of its
reorganization with the Fund must open an account with Fifth Third Securities,
Inc. to facilitate exchanges. No charge will be imposed to open the account,
but other transactions, not involving exchanges among Funds of the Trust may
carry charges. Telephone exchange instructions may be recorded. If reasonable
procedures are not followed by the Trust, it may be liable for losses due to
unauthorized or fraudulent telephone instructions.
Orders to exchange shares of the Fund for shares of the same class of any of
the other Funds in the Trust will be executed by redeeming the shares owned at
net asset value and purchasing shares of the same class of any of the other
Funds at the net asset value determined after the exchange request is received.
Orders for exchanges received by the Trust prior to 2:30 p.m. (Eastern time) on
any day that the Trust is open for business will be executed as of the close of
business that day. Orders for exchanges received after 2:30 p.m. (Eastern
time) on any business day will be executed at the close of the next business
day.
When exchanging into and out of Investment A Shares of the Funds in the Trust,
shareholders who have paid a sales load once upon purchasing Investment A
Shares of any Fund will not have to pay a sales load again on an exchange.
When exchanging into and out of Investment C Shares of the Funds in the Trust,
the time for which the exchanged-for shares are to be held will be added to the
time for which exchanged-from shares were held for purposes of satisfying the
applicable holding period. For more information, see "Contingent Deferred
Sales Charge."
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.
16
<PAGE> 23
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at their net asset value, less any applicable contingent
deferred sales charge, next determined after the Fund receives the redemption
request. Redemptions will be made on days on which the New York Stock Exchange
and the Federal Reserve Bank of Cleveland are open for business. Telephone or
written requests for redemption must be received in proper form as described
below and can be made through a shareholder's financial representative or
directly through the Trust. For certain clients of Heartland who obtained
shares of the Fund as part of the Predecessor Fund reorganization, special
procedures apply.
Orders placed through financial institutions including Heartland must be
received by the financial institution and transmitted to the Trust before 2:30
p.m. (Eastern time) in order for shares to be redeemed at that day's price. It
is the financial institution's responsibility to transmit orders promptly,
however, investors should allow sufficient time for orderly processing and
transmission.
BY TELEPHONE
Shares may be redeemed in any amount by calling the Trust, provided that the
Trust has received a properly completed authorization form. Shareholders of the
Fund who were formerly shareholders of the Predecessor Fund at the time of its
reorganization with the Fund may redeem shares of the Fund by calling the Trust
toll-free at (800) 282-5706. All other shareholders may redeem their shares by
contacting the Trust toll-free at (888) 799-5353. Proceeds will be mailed in
the form of a check to the shareholder's address of record or by wire transfer
to the shareholder's account at a domestic commercial bank that is a member of
the Federal Reserve System. Proceeds from redeemed shares purchased by check or
through ACH will not be wired until that method of payment has cleared.
Telephone instructions may be recorded. If reasonable procedures are not
followed by the Trust, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
For calls received before 2:30 p.m. (Eastern time), a check will be sent to the
address of record. Normally, a check for the proceeds is mailed within three
business days, but in no event more than seven days after receipt of a proper
request for redemption has been received provided the Fund or its agents have
received payment for shares from the shareholder. 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 Trust to accept telephone requests must be
completed. Authorization forms and information on this service are available
from the Trust 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
Shareholders of the Fund who were formerly shareholders of the Predecessor Fund
at the time of its reorganization with the Fund may redeem shares of the Fund by
sending a written request to:
Fountain Square Pinnacle Fund Redemptions
P.O. Box 5354
Cincinnati, Ohio 45201-5354
All other shareholders may redeem shares by sending a written request to:
Fifth Third Bank
Fountain Square Funds Redemptions 1090EC
38 Fountain Square Plaza
Cincinnati, Ohio 45263
The written request should include the shareholder's name, the Fund and
applicable Class name, the account number, the share or dollar amount requested
and the proper endorsement. Shareholders should call the applicable telephone
number of the Trust 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:
17
<PAGE> 24
o a trust company or commercial bank whose deposits are insured
by the FDIC;
o a member of the New York, American, Boston, Midwest, or
Pacific Stock Exchange;
o a savings and loan association or a savings bank whose
deposits are insured by the Savings Association Insurance
Fund, which is administered by the FDIC; or
o any other "eligible guarantor institution," as defined in the
Securities Exchange Act of 1934.
The Trust does not accept signatures guaranteed by a notary public.
The Trust and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Trust may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Trust and its transfer agent reserve the
right to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed to the shareholder within three
business days, 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
exhaust, 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 his or her
financial representative or by contacting the Trust. 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. A contingent deferred
sales charge may be imposed on Investment C Shares redeemed under the 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 $1,000.
Before redeeming shares to close an account, the Trust will notify the
shareholder in writing and allow the shareholder 30 days to purchase additional
shares to meet the minimum requirement.
CONTINGENT DEFERRED SALES CHARGE
Shareholders redeeming Investment C Shares from their Fund account within one
full year of the purchase date of those shares will be charged a contingent
deferred sales charge by the Fund's distributor of 1.00%. Any applicable
contingent deferred sales charge will be imposed on the lesser of the net asset
value of the redeemed Investment C Shares at the time of purchase or the net
asset value of the redeemed Investment C Shares at the time of redemption.
18
<PAGE> 25
The contingent deferred sales charge will be deducted from the redemption
proceeds otherwise payable to the shareholder and will be retained by the
distributor. The contingent deferred sales charge will not be imposed with
respect to: (1) shares acquired through the reinvestment of dividends or
distributions of long-term capital gains; and (2) shares held for more than one
full year from the date of purchase. Redemptions will be processed in a manner
intended to maximize the amount of redemption which will not be subject to a
contingent deferred sales charge. In computing the amount of the applicable
contingent deferred sales charge, redemptions are deemed to have occurred in
the following order: (1) shares acquired through the reinvestment of dividends
and long-term capital gains; (2) shares held for more than one full year from
the date of purchase; (3) shares held for fewer than one full year from the
date of purchase, on a first-in, first-out basis. A contingent deferred sales
charge is not assessed in connection with an exchange of Fund shares for shares
of other funds in the Trust (see "Exchanges"). Any contingent deferred sales
charge imposed at the time the exchanged for shares are redeemed is calculated
as if the shareholder had held the shares from the date on which he became a
shareholder of the exchanged-from shares.
The contingent deferred sales charge will be eliminated with respect to the
following redemptions: (1) redemptions following the death or disability, as
defined in Section 72(m)(7) of the Internal Revenue Code of 1986, of a
shareholder; (2) redemptions representing distributions from an Individual
Retirement Account or other retirement plan to a shareholder; and (3)
involuntary redemptions by the Fund of shares in shareholder accounts that do
not comply with the minimum balance requirements. No contingent deferred sales
charge will be imposed on redemptions of shares held by Directors, employees
and registered representatives of the Fund, the distributor, or affiliates of
the Fund or distributor; employees of any financial institution that sells
shares of the Fund pursuant to a sales agreement with the distributor; and
spouses and children under the age of 21 of the aforementioned persons. The
Trustees reserve the right to discontinue any elimination of the contingent
deferred sales charge. Shareholders will be notified of such elimination. Any
Investment C Shares purchased prior to the termination of such waiver would
have the contingent deferred sales charge eliminated as provided in the Fund's
prospectus at the time of the purchase of the shares. If a shareholder making
a redemption qualifies for an elimination of the contingent deferred sales
charge, the shareholder must notify the transfer agent in writing that he is
entitled to such elimination.
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 the 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.
19
<PAGE> 26
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 advisor, transfer agent, custodian, fund accountant, or dividend
disbursing agent to such an investment company or from purchasing shares of
such a company as agent for and upon the order of their customers. The Trust's
other investment advisor, Fifth Third Bank, is subject to such banking laws and
regulations.
Fifth Third Bank believes that it may perform the investment advisory services
for any 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 advisors and other means of continuing available investment
services. It is not expected that an existing Fund's shareholders would suffer
any adverse financial consequences (if another advisor with equivalent
abilities to Fifth Third Bank is found) as a result of any of these
occurrences.
TAX INFORMATION
- --------------------------------------------------------------------------------
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and
to receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Fund, if any, will not be combined for tax purposes with those realized by any
of the other Funds.
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.
20
<PAGE> 27
Shareholders are urged to consult their own tax advisors regarding the status
of their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund will advertise total return and yield, including
Predecessor Fund performance as described above, for each class of shares.
Total return represents the change, over a specified period of time, in the
value of an investment in each class of shares of 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 each class of shares of the Fund is calculated by dividing the net
investment income per share (as defined by the Securities and Exchange
Commission) earned by each class of shares over a thirty-day period by the
maximum offering price per Share of each class 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 each class of shares and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders.
The performance information reflects the effect of non-recurring charges, such
as the maximum sales load or contingent deferred sales load which, if excluded,
would increase the total return and yield.
From time to time, advertisements for each class of shares of the Fund may
refer to ratings, rankings, and other information in certain financial
publications and/or compare the performance of such class of shares to certain
indices.
21
<PAGE> 28
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Fountain Square Pinnacle Fund
c/o Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
- -----------------------------------------------------------------------------------------
Investment Advisor
Heartland Capital Management, Inc. 36 South Pennsylvania Street
Suite 610
Indianapolis, Indiana 46204
- -----------------------------------------------------------------------------------------
Custodian, Transfer Agent, Dividend Disbursing Agent,
and Sub- Administrator
Fifth Third Bank 38 Fountain Square Plaza
Cincinnati, Ohio 45263
- -----------------------------------------------------------------------------------------
Distributor and Administrator
BISYS Fund Services, L.P. 3435 Stelzer Road
Columbus, Ohio 43219
- -----------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young LLP 1300 Chiquita Center
250 East Fifth Street
Cincinnati, Ohio 45202
- -----------------------------------------------------------------------------------------
</TABLE>
22
<PAGE> 29
FOUNTAIN SQUARE PINNACLE FUND
(A PORTFOLIO OF FOUNTAIN SQUARE FUNDS)
INVESTMENT A SHARES
INVESTMENT C SHARES
COMBINED STATEMENT OF ADDITIONAL INFORMATION
The Investment A Shares and Investment C Shares of Fountain Square Pinnacle
Fund (the "Fund") represent interests in a diversified portfolio of securities.
This Combined Statement of Additional Information should be read with the
prospectus for Investment A Shares and Investment C Shares dated January 21,
1998. This Statement is not a prospectus itself. To receive a copy of the
prospectus, please write the Fund or call toll-free, (888) 799-5353.
FOUNTAIN SQUARE FUNDS
C/O FIFTH THIRD BANK
38 FOUNTAIN SQUARE PLAZA
CINCINNATI, OHIO 45263
Statement dated January 21, 1998
<PAGE> 30
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
GENERAL INFORMATION ABOUT THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Types of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
When-Issued and Delayed Delivery Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Reverse Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Lending of Portfolio Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Restricted And Illiquid Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Investment Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
FOUNTAIN SQUARE FUNDS MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Officers and Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Trust Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Trustees' Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Trustee Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
INVESTMENT ADVISORY SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Advisor to the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Advisory Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ADMINISTRATIVE SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Transfer Agent and Dividend Disbursing Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
BROKERAGE TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
PURCHASING SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Distribution Plan and Administrative Services Agreement (Investment C Shares Only) . . . . . . . . . . . . . 11
Conversion to Federal Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Exchanging Securities for Fund Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
DETERMINING NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Determining Market Value of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Use of Amortized Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
REDEEMING SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Redemption in Kind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
TAX STATUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
The Fund's Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Shareholders' Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Capital Gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
YIELD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
PERFORMANCE COMPARISONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
i
<PAGE> 31
GENERAL INFORMATION ABOUT THE TRUST
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 15, 1988. This Combined Statement of Additional
Information relates only to Investment A Shares and Investment C Shares
(individually and collectively referred to as "Shares," as the context may
require) of the Fountain Square Pinnacle Fund (the "Fund").
The Fund is advised by Heartland Capital Management, Inc. ("Heartland"), 36
South Pennsylvania Street, Suite 610, Indianapolis, Indiana 46204.
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND
- --------------------------------------------------------------------------------
The prospectus discusses the objective of the Fund and the policies employed to
achieve that 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 (the "Trustees") without shareholder approval. Shareholders will
be notified before any material change in these policies becomes effective.
TYPES OF INVESTMENTS
BANK INSTRUMENTS
The Fund may invest in the instruments of banks and savings
and loans whose deposits are insured by the Bank Insurance
Fund or the Savings Association Insurance Fund, both of which
are administered by the Federal Deposit Insurance Corporation,
such as certificates of deposit, demand and time deposits,
savings shares, and bankers' acceptances. However, these
instruments are not necessarily guaranteed by those
organizations.
CONVERTIBLE SECURITIES
The Fund may invest in convertible securities. Convertible
securities are securities, including 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 in which the Fund may invest may take the form of
convertible preferred stock, convertible bonds or convertible
debentures. The investment characteristics of each
convertible security vary widely, which allows convertible
securities to be employed for a variety of investment
strategies.
Convertible securities are senior to equity securities, and
therefore have a claim to assets of the corporation prior to
the holders of common stock in the case of liquidation.
However, convertible securities are generally subordinated to
similar non-convertible securities of the same company. The
interest income and dividends from convertible bonds and
preferred stocks provide a stable stream of income with
generally higher yields than common stocks, but lower than
non-convertible securities of similar quality. The Fund will
exchange or convert the convertible securities held in its
portfolio into shares of the underlying common stock when, in
Heartland's opinion, the investment characteristics of the
underlying common shares will assist the Fund in achieving its
investment objective. Otherwise, the Fund may hold or trade
the convertible securities.
1
<PAGE> 32
In selecting convertible securities for the Fund, Heartland
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, Heartland 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.
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 value of its total assets.
REPURCHASE AGREEMENTS
The Fund requires its custodian to take actual or constructive possession of the
securities subject to repurchase agreements and these securities will be marked
to market daily. To the extent that the original seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase price
on any sale of such securities. In the event that such a defaulting seller
filed for bankruptcy or became insolvent, disposition of such securities by the
Fund might be delayed pending court action. The Fund believes that under the
regular procedures normally in effect for custody of the Fund's portfolio
securities subject to repurchase agreements, a court of competent jurisdiction
would rule in favor of the Fund and allow retention or disposition of such
securities. The Fund will only enter into repurchase agreements with banks and
other recognized financial institutions such as broker/dealers which are deemed
by Heartland to be creditworthy pursuant to guidelines established by the
Trustees.
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 a percentage of the
instrument's market value in cash and agrees that on a stipulated date in the
future it will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but the
ability to enter into reverse repurchase agreements does not ensure that the
Fund will be able to avoid selling portfolio instruments at a disadvantageous
time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated on the Fund's records at the trade date. These securities are
marked to market daily and maintained until the transaction is settled.
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. The Fund would not have the right to vote securities on loan,
but would terminate the loan and regain the right to vote if that were
considered important with respect to the investment.
2
<PAGE> 33
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 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 Heartland, 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:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security
and the number of other potential buyers:
o dealer undertakings to make a market in the security: and
o the nature of the security and the nature of the marketplace trades.
PORTFOLIO TURNOVER
The Fund will not attempt to set or meet portfolio turnover rates since any
turnover would be incidental to transactions undertaken in an attempt to
achieve the Fund's investment objectives. Although the Fund's portfolio
turnover rate cannot be predicted, it is expected to be less than 100% for the
current fiscal year.
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. The Fund will not borrow money
or engage in reverse repurchase agreements for investment
leverage, but rather as a temporary, extraordinary, or
emergency measure or to facilitate management of the portfolio
by enabling the Fund to meet redemption
3
<PAGE> 34
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.
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 are necessary for clearance of purchases and sales of
securities.
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, the deposit of assets in
escrow in connection with the purchase of securities on a
when-issued basis 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 total assets. This
shall not prevent the Fund from purchasing or holding U.S.
government obligations, money market instruments, bonds,
debentures, notes, certificates of indebtedness, or other debt
securities, entering into repurchase agreements, or engaging
in other transactions permitted by the Fund's investment
objective, policies, and limitations or the Trust's
Declaration of Trust.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity
contracts, or commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including
limited partnership interests, although the Fund may invest in
securities of issuers whose business involves the purchase or
sale of real estate.
DIVERSIFICATION OF INVESTMENTS
With respect to 75% of the value of its total assets, the Fund
will not purchase securities issued by any one issuer (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 any one issuer.
4
<PAGE> 35
DEALING IN PUTS AND CALLS
The Fund will not buy or sell puts, calls, straddles, spreads,
or any combination of these.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total
assets in any one industry, except that the Fund may invest
more than 25% of the value of its total assets in 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 the Fund may be deemed to be an underwriter under the
Securities Act of 1933 in connection with the sale of
securities in accordance with its investment objective,
policies, and limitations.
The above limitations cannot be changed with respect to the Fund without
approval of the holders of a majority of the Fund's Shares. 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 the value of its net
assets in securities that are subject to restrictions on
resale under federal securities law.
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 more than seven
days after notice, certain restricted securities not
determined by the Trustees to be liquid, and non-negotiable
time deposits with maturities over seven days.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will limit its investments in other investment
companies to no more than 3% of the total outstanding voting
stock of any investment company, invest no more than 5% of its
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. It should be noted that investment companies incur
certain expenses such as management fees and, therefore, any
investment by the Fund in shares of another investment company
would be subject to such expenses.
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.
5
<PAGE> 36
The Fund will not invest more than 5% of the value of its total
assets in bonds where the principal and interest are the
responsibility of companies (or guarantors, where applicable)
with 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, Fifth Third
Bank or Heartland, owning individually more than 1/2 of 1% of
the issuer's securities, together own more than 5% of the
issuer's securities.
INVESTING IN MINERALS
The Fund will not purchase interests in oil, gas, or other
mineral exploration or development programs or leases, except
they may purchase the securities of issuers which invest in or
sponsor such programs.
ARBITRAGE TRANSACTIONS
The Fund will not enter into transactions for the purpose of
engaging in arbitrage.
PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not purchase securities of a company for the
purpose of exercising control or management.
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. 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, Heartland, Fifth
Third Bancorp, The BISYS Group, Inc., BISYS Fund Services, Inc., BISYS Fund
Services Ohio, Inc., or BISYS Fund Services Limited Partnership.
- --------------------------------------------------------------------------------
Albert E. Harris
5905 Graves Road
Cincinnati, OH 45243
Birthdate: July 2, 1932
Chairman of the Board of Trustees
Formerly, Chairman of the Board EDB Holdings, Inc. (retired July, 1993)
6
<PAGE> 37
- --------------------------------------------------------------------------------
Edward Burke Carey
394 East Town Street
Columbus, OH 43215
Birthdate: July 2, 1945
Member of the Board of Trustees
President of Carey Leggett Realty Advisors
- --------------------------------------------------------------------------------
Lee A. Carter
425 Walnut Street
Cincinnati, OH 45202
Birthdate: December 17, 1938
Member of the Board of Trustees
Formerly, President, Local Marketing Corporation (retired December 31, 1993)
- --------------------------------------------------------------------------------
Stephen G. Mintos
3435 Stelzer Road
Columbus, Ohio 43219-3035
Birthdate: February 5, 1954
President
From January 1987 to the present, employee of BISYS Fund Services, Inc.
- --------------------------------------------------------------------------------
George R. Landreth
3435 Stelzer Road
Columbus, Ohio 43219-3035
Birthdate: July 11, 1942
Vice President
From December 1992 to present, employee of BISYS Fund Services, Inc.; from July
1991 to December 1992, employee of PNC Financial Corporation.
7
<PAGE> 38
- --------------------------------------------------------------------------------
Jeffrey C. Cusick
3435 Stelzer Road
Columbus, Ohio 43219-3035
Birthdate: May 19, 1959
Secretary and Treasurer
From July 1995 to present, employee of BISYS Fund Services, Inc.; from
September 1993 to July 1995, Assistant Vice President, Federated Administrative
Services; from 1989 to September 1993, Manager, Client Services, Federated
Administrative Services.
- --------------------------------------------------------------------------------
TRUST OWNERSHIP
As of the date of this Statement of Additional Information, officers and
Trustees own less than 1% of the outstanding Shares of the Fund and there are
no persons known to be beneficial owners of more than 5% of the Fund's
outstanding shares.
8
<PAGE> 39
TRUSTEES' COMPENSATION
<TABLE>
<CAPTION>
NAME AGGREGATE
POSITION WITH COMPENSATION FROM
TRUST TRUST*+
- --------------------------------------------------------------------------------
<S> <C>
Edward Burke Carey
Trustee $7,800
Lee A. Carter
Trustee $6,600
Albert E. Harris
Trustee, Chairman of the Board $9,800
</TABLE>
*Information is furnished for the fiscal year ended July 31, 1997. The Trust
is the only investment company in the Fund complex.
+The aggregate compensation is provided for the Trust which is comprised of
thirteen portfolios.
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
- --------------------------------------------------------------------------------
ADVISOR TO THE FUND
The Fund's advisor is Heartland Capital Management, Inc., 36 South Pennsylvania
Street, Suite 610, Indianapolis, Indiana 46204. Heartland is a wholly-owned
subsidiary of Fifth Third Bancorp., 38 Fountain Square Plaza, Cincinnati, Ohio
45263.
Heartland shall not be liable to the Trust, the Fund, or any shareholder of the
Fund for any losses that may be sustained in the purchase, holding, or sale of
any security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
Because of the internal controls maintained by Fifth Third Bank to restrict the
flow of non-public information, the Fund's investments are typically made
without any knowledge of Fifth Third Bank's or affiliates' lending relationship
with an issuer.
ADVISORY FEES
For its advisory services, Heartland receives an annual investment advisory fee
as described in the Fund's prospectus.
9
<PAGE> 40
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
BISYS Fund Services L.P., 3435 Stelzer Road, Columbus, Ohio 43219, provides
administrative personnel and services to the Fund for the fees set forth in the
prospectus. Pursuant to a separate agreement with BISYS Fund Services L.P.,
Fifth Third Bank performs sub-administration services on behalf of the Fund,
for which it receives compensation from BISYS Fund Services L.P.
Under the custodian agreement, Fifth Third Bank holds each Fund's portfolio
securities and keeps all necessary records and documents relating to its
duties. Fees for custody services are based upon the market value of Fund
securities held in custody plus out-of-pocket expenses. Fifth Third Bank
expects to waive all of its fees earned as the custodian.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Fifth Third Bank serves as transfer agent and dividend disbursing agent for the
Funds. The fee paid to the transfer agent is based upon the size, type and
number of accounts and transactions made by shareholders.
Fifth Third Bank also maintains the Trust's accounting records. The fee paid
for this service is based upon the level of the Fund's average net assets for
the period plus out-of-pocket expenses.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, Heartland will look for prompt execution of the order at a
favorable price. In working with dealers, Heartland 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. Heartland
makes decisions on portfolio transactions and selects brokers and dealers
subject to guidelines established by the Trustees.
Heartland may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to Heartland
or Fifth Third Bank and may include:
o advice as to the advisability of investing in securities;
o security analysis and reports;
o economic studies;
o industry studies;
o receipt of quotations for portfolio evaluations; and
o similar services.
Heartland and its affiliates exercise reasonable business judgment in selecting
brokers who offer brokerage and research services to execute securities
transactions. They determine in good faith that commissions charged by such
persons are reasonable in relationship to the value of the brokerage and
research services provided.
10
<PAGE> 41
Research services provided by brokers may be used by Heartland and Fifth Third
Bank in advising the Fund and other accounts. To the extent that receipt of
these services may supplant services for which Heartland or its 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 Heartland, 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 Heartland 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 Heartland 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 an applicable sales
charge or contingent deferred sales charge on days the New York Stock Exchange
and the Federal Reserve Bank of Cleveland are open for business. The procedure
for purchasing Investment A Shares or Investment C Shares of the Fund is
explained in the prospectus under "Investing in the Fund."
DISTRIBUTION PLAN AND ADMINISTRATIVE SERVICES AGREEMENT (INVESTMENT C SHARES
ONLY)
With respect to Investment A Shares and Investment C Shares of the Fund, the
Trust has adopted a Plan pursuant to Rule 12b-1 which was promulgated by the
Securities and Exchange Commission pursuant to the Investment Company Act of
1940. The Plan provides for payment of fees to the distributor to finance any
activity which is principally intended to result in the sale of the Fund's
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, the distributor may
enter into agreements to pay fees to brokers for distribution and
administrative support services and to other participating financial
institutions and persons for distribution assistance and support services to
the Fund and its shareholders. 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 Trust'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 a Fund will facilitate more
efficient portfolio management and assist the Fund in seeking to achieve its
investment objective.
Pursuant to the Plan, with respect to Investment A Shares, the Fund is
authorized to pay the distributor a monthly distribution fee computed at an
annual rate of up to 0.35% of the average aggregate net asset value of the
Investment A Shares of the Fund held during the month. As of the date of this
Statement of Additional Information, the Fund is not accruing or paying 12b-1
fees for Investment A Shares. The Funds do not intend to accrue or pay 12b-1
fees with respect to Investment A Shares until either separate classes of
shares have been created for shareholders of the Predecessor Fund and for
certain fiduciary investors for the Funds or a determination is made that such
investors will be subject to the 12b-1 fees.
11
<PAGE> 42
Pursuant to the Plan, with respect to Investment C Shares, the Fund is
authorized to pay the distributor a monthly distribution fee computed at the
annual rate of up to 0.75% of the average aggregate net asset value of the
Investment C Shares of the Fund held during the month.
With respect to Investment C Shares, the Fund may enter into an Administrative
Services Agreement to permit the payment of fees to financial institutions,
including Fifth Third Bank, to cause services to be provided to shareholders by
a representative who has knowledge of the shareholder's particular
circumstances and goals. Benefits to shareholders of Investment C Shares of
the Fund may include: (1) providing personal services to shareholders; (2)
investing shareholder assets with a minimum of delay and administrative detail;
(3) enhancing shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest or dividends may be earned. To this end, all payments from
shareholders must be in federal funds or be converted into federal funds.
Fifth Third Bank acts as the shareholder's agent in depositing checks and
converting them to federal funds.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange securities they already own for Shares of the Fund or
they may exchange a combination of securities and cash for Fund Shares. Any
securities to be exchanged must meet the investment objective and policies of
the Fund, must have a readily ascertainable market value, must be liquid, and
must not be subject to restrictions on resale. An investor should forward the
securities in negotiable form with an authorized letter of transmittal to Fifth
Third Bank. The Fund will notify the investor of its acceptance and valuation
of the securities within five business days of their receipt by Fifth Third
Bank.
The Fund values such securities in the same manner as the Fund values its
assets. The basis of the exchange will depend upon the net asset value of
Shares of the Fund on the day the securities are valued. One Share of the Fund
will be issued for each equivalent amount of securities accepted.
Any interest earned on the securities prior to the exchange will be considered
in valuing the securities. All interest, dividends, subscription, conversion,
or other rights attached to the securities become the property of the Fund,
along with the securities.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
Net asset values of the Fund generally change each day. The days on which the
net asset value is calculated by the Fund are described in the prospectus.
DETERMINING MARKET VALUE OF SECURITIES
The market value of the Fund's portfolio securities are determined as follows:
o for equity securities, according to the last sale price on a
national securities exchange, if available;
o in the absence of recorded sales for listed equity securities,
according to the mean between the last closing bid and asked
prices;
12
<PAGE> 43
o for unlisted equity securities, the latest bid prices;
o for bonds and other fixed income securities, as determined by
an independent pricing service;
o for short-term obligations, according to the mean between bid
and asked 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; or
o for all other securities, at fair value as determined in good
faith by the Board of Trustees.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may reflect institutional trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics, and other market data.
USE OF AMORTIZED COST
The Trustees have decided that the fair value of debt securities authorized to
be purchased by the Fund with remaining maturities of 60 days or less at the
time of purchase may be their amortized cost value, unless the particular
circumstances of the security indicate otherwise. Under this method, portfolio
instruments and assets are valued at the acquisition cost as adjusted for
amortization of premium or accumulation of discount rather than at current
market value. The Executive Committee continually assesses this method of
valuation and recommends changes where necessary to assure that the Fund's
portfolio instruments are valued at their fair value as determined in good
faith by the Trustees.
REDEEMING SHARES
- --------------------------------------------------------------------------------
Shares are redeemed at the next computed net asset value after the Trust
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.
Investment C Shares redeemed within one year of purchase may be subject to a
contingent deferred sales charge. The contingent deferred sales charge may be
reduced with respect to a particular shareholder where a financial institution
selling Investment C Shares elects not to receive a commission from the
distributor with respect to its sale of such Shares.
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.
13
<PAGE> 44
TAX STATUS
- --------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Fund must,
among other requirements:
o derive at least 90% of its gross income from dividends,
interest, and gains from the sale of securities;
o derive less than 30% of its gross income from the sale of
securities held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income
earned during the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends received as cash or
additional shares. No portion of any income dividend paid by the Fund is
eligible for the dividends received deduction available to corporations. These
dividends, and any short-term capital gains, are taxable as ordinary income.
CAPITAL GAINS
Long-term capital gains distributed to shareholders will be treated as
long-term capital gains regardless of how long shareholders have held 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 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 monthly
reinvestment of all dividends and distributions.
YIELD
- --------------------------------------------------------------------------------
The Fund may advertise SEC yields for Investment A Shares and Investment C
Shares.
The yield for the Fund is determined by dividing the net investment income per
share (as defined by the SEC) 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 12-month period and is reinvested every six months.
The yield does not necessarily reflect income actually earned by the Fund
because
14
<PAGE> 45
of certain adjustments required by the SEC 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, the performance will be reduced for those shareholders paying those fees.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The Fund's performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio
securities;
o changes in the Fund's expenses; and
o various other factors
The Fund's performance fluctuates on a daily basis largely because net earnings
and offering price per share fluctuate daily. Both net earnings and net asset
value 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 Funds use in advertising may
include:
o DOW JONES INDUSTRIAL AVERAGE ("DJIA") represents share prices
of selected blue-chip industrial corporations. The DJIA
indicates daily changes in the average price of stock of these
corporations. Because it represents the top corporations of
America, the DJIA index is a leading economic indicator for
the stock market as a whole.
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
categories by making comparative calculations using total
return. Total return assumes the reinvestment of all capital
gains distributions and income dividends and takes into
account any change in net asset value over a specific period
of time. From time to time, the Fund will quote its Lipper
ranking in the applicable funds category in advertising and
sales literature.
o 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.
15
<PAGE> 46
o S&P/BARRA GROWTH INDEX is a sub-index of the S&P 500 composite
index of common stocks. The index represents approximately
fifty percent of the S&P 500 market capitalization and is
comprised of those companies with higher price-to-book ratios
(one distinction associated with "growth stocks"). The index
is maintained by Standard and Poor's in conjunction with
BARRA, an investment technology firm.
o STANDARD & POOR'S RATINGS GROUP DAILY STOCK PRICE INDICES of
500 and 400 Common Stocks are composite indices of common
stocks in industry, transportation, and financial and public
utility companies that can be used to compare to the total
returns of funds whose portfolios are invested primarily in
common stocks. In addition, the S&P indices assume
reinvestment of all dividends paid by stocks listed on its
indices. Taxes due on any of these distributions are not
included, nor are brokerage or other fees calculated in the
S&P figures.
Advertisements and other sales literature for the Fund may quote total returns
which are calculated on non-standardized base periods. These total returns
also represent the historic change in the value of an investment in the Fund
based on monthly/quarterly reinvestment of dividends over a specified period of
time.
As of the date of this Statement of Additional Information, no historical
performance of the Fund was available. The Fund, however, expects to quote
total returns of the Pinnacle Fund, an open-end investment company which was
the predecessor fund to the Fountain Square Pinnacle Fund (the "Predecessor
Fund"), calculated as described in the Prospectus for the Fund for the period
between March 6, 1985 and December 31, 1997. The Predecessor Fund was managed
with the same investment objective and substantially identical investment
policies as the Fund by Heartland from March 6, 1985 through commencement of
operations of the Fund.
Advertisements may quote performance information for the Fund which does not
reflect the effect of the sales load.
16
<PAGE> 47
APPENDIX
- --------------------------------------------------------------------------------
STANDARD AND POOR'S RATINGS GROUP CORPORATE AND MUNICIPAL BOND RATING
DEFINITIONS
AAA--Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
NR--NR indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy. S&P may apply a plus (+)
or minus (-) to the above rating classifications to show relative standing
within the classifications.
MOODY'S INVESTORS SERVICE, INC. CORPORATE AND MUNICIPAL BOND RATING DEFINITIONS
AAA--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
AA--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA--Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable over
any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
NR--Not rated by Moody's. Moody's applies numerical modifiers, 1, 2 and 3 in
each generic rating classification from Aa through B in its bond rating system.
The modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
17
<PAGE> 48
FITCH INVESTORS SERVICE, INC. LONG-TERM DEBT RATING DEFINITIONS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
NR--NR indicates that Fitch does not rate the specific issue. Plus (+) or
Minus (-): Plus and minus signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus
signs, however, are not used in the AAA category.
STANDARD AND POOR'S RATINGS GROUP MUNICIPAL NOTE RATING DEFINITIONS
SP-1--Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given
a plus sign (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
SP-3--Speculative capacity to pay principal and interest.
MOODY'S INVESTORS SERVICE SHORT-TERM LOAN RATING DEFINITIONS
MIG1/VMIG1--This designation denotes best quality. There is a present strong
protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG2/VMIG2--This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
FITCH INVESTORS SERVICE, INC. SHORT-TERM DEBT RATING DEFINITIONS
F-1+--Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1--Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
F-1+.
F-2--Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as the F-1+ and F-1 categories.
STANDARD AND POOR'S RATINGS GROUP COMMERCIAL PAPER RATING DEFINITIONS
A-1--This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to have extremely strong safety
characteristics are denoted with a plus (+) sign.
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<PAGE> 49
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATING DEFINITIONS
PRIME-1--Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of senior short-term promissory obligations.
Prime-1 repayment capacity will often be evidenced by the following
characteristics:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
o Well-established access to a range of financial markets and
assured sources of alternate liquidity.
P-2--Issuers (or supporting institutions) rated Prime-2 (P-2) have a strong
capacity for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
19
<PAGE> 50
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
<TABLE>
<S> <C>
(a) Financial Statements incorporated by reference to the Annual Report to Shareholders of the
Fountain Square Funds dated July 31, 1997 (File No. 811-5669).
(b) Exhibits:
(1) Conformed Copy of Declaration of Trust of the Registrant including Amendments No. 1
through 7 (4);
(i) Conformed copy of Amendment No. 8 to the Declaration of Trust (8);
(ii) Conformed copy of Amendment No. 9 to the Declaration of Trust (7);
(iii) Conformed copy of Amendment No. 10 to the Declaration of Trust (9);
(iv) Conformed copy of Amendment No. 11 to the Declaration of Trust;
(2) Copy of By-Laws of the Registrant (4);
(3) Not applicable;
(4) Not applicable;
(5) (i) Conformed Copy of Investment Advisory Contract of the Registrant through and
including Exhibit J (4);
(a) Conformed Copy of Exhibits K-M to Investment Advisory Contract of
Registrant (9);
(ii) Conformed Copy of Sub-Advisory Agreement (3);
(iii) Conformed Copy of Investment Advisory Contract of the Fountain Square Pinnacle Fund (12);
(6) (i) Conformed Copy of Distribution Agreement of the Registrant (6);
(a) Conformed Copy of amended Schedules A-C to Distribution Agreement;
(ii) Copy of Administrative Service Agreement of the Registrant (8);
(a) Conformed Copy of amended Exhibit A to Administrative Service Agreement;
(7) Not applicable;
(8) (i) Conformed Copy of Custody Agreement of the Registrant (11);
(a) (formerly Exhibit 8(i)) Conformed Copy of amended Exhibit B to Custody Agreement
(9);
(ii) (formerly Exhibit 8) Conformed Copy of (Sub-)Custody Agreement (4);
(9) (i) Conformed Copy of Transfer Agency and Accounting Services Agreement of the Registrant
(4);
(a) Conformed Copy of amended Schedule A to Transfer Agency and Accounting Services
Agreement;
(ii) Conformed Copy of Management and Administration Agreement of the Registrant
(9);
(a) Conformed copy of amended Schedule A to Management and Administration Agreement;
(iii) Conformed Copy of Sub-Administration Agreement (9);
(a) Conformed Copy of amended Schedule A to Sub-Administration Agreement;
(10) Conformed Copy of Opinion and Consent of Counsel as to legality of shares being
registered (5);
(11) (i) Conformed Copy of Consent of Coopers & Lybrand LLP;
(ii) Conformed Copy of Consent of Geo. S. Olive & Co. LLC;
(12) Not applicable;
(13) Conformed Copy of Initial Capital Understanding (4);
(14) Not applicable;
(15) (i) Conformed Copy of Rule 12b-1 Plan through and including Exhibits A and B
(6);
(a) Conformed Copy of amended Exhibits A and B to Rule 12b-1 Plan;
(ii) Form of Rule 12b-1 Agreement (6);
(a) Copy of amended Exhibit A to Rule 12b-1 Agreement;
(16) (i) Copy of Schedule for Computation of Fund Performance Data for Fountain Square
Balanced Fund (1);
(ii) Copy of Schedule for Computation of Fund Performance Data for Fountain Square
Commercial Paper Fund (4);
</TABLE>
C-1
<PAGE> 51
<TABLE>
<S> <C>
(iii) Copy of Schedule for Computation of Fund Performance Data for Fountain Square
Government Cash Reserves Fund (4);
(iv) Copy of Schedule for Computation of Fund Performance Data for Fountain Square
Mid Cap Fund (1);
(v) Copy of Schedule for Computation of Fund Performance Data for Fountain Square
Quality Bond Fund (1);
(vii) Copy of Schedule for Computation of Fund Performance Data for Fountain Square
Quality Growth Fund (1);
(viii) Copy of Schedule for Computation of Fund Performance Data for Fountain Square
Ohio Tax Free Bond Fund (2);
(ix) Copy of Schedule for Computation of Fund Performance Data for Fountain Square
U.S. Government Securities Fund (1);
(x) Copy of Schedule for Computation of Fund Performance Data for Fountain Square
U.S. Treasury Obligations Fund (4);
(xi) Copy of Schedule for Computation of Fund Performance Data for Fountain Square
International Equity Fund (4);
(xii) Copy of Schedules for Computation of Fund Performance Data for Fountain Square
Equity Income Fund, Fountain Square Bond Fund For Income, and Fountain Square
Municipal Bond Fund (7);
(xiii) Copy of Schedule for Computation of Fund Performance Data for Fountain Square Pinnacle
Fund;
(17) Financial Data Schedule (13);
(18) Conformed Copy of Amended and Restated Multiple Class Plan;
(19) Conformed Copy of Power of Attorney (6);
</TABLE>
KEY:
(1) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 11 on Form N-1A filed March 25, 1993 (File Nos. 811-5669
and 33-24848).
(2) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 on Form N-1A filed September 24, 1993. (File Nos.
811-5669 and 33-24848).
(3) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 on Form N-1A filed June 1, 1994. (File Nos. 811-5669
and 33-24848).
(4) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 15 on Form N-1A filed February 28, 1995. (File Nos.
811-5669 and 33-24848).
(5) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 16 on Form N-1A filed on or about September 30, 1995.
(File Nos. 811-5669 and 33-24848).
(6) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 17 on Form N-1A filed on or about January 18, 1996.
(File Nos. 811-5669 and 33-24848).
(7) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 18 on Form N-1A filed on or about October 1, 1996 (File
No. 811-5669 and 33-24848).
(8) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed on or about October 28, 1996 (File
Nos. 811-5669 and 33-24848).
(9) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 22 on Form N-1A filed on or about September 30, 1997
(File Nos. 811-5669 and 33-24848).
C-2
<PAGE> 52
(10) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 23 on Form N-1A filed on or about September 30, 1997
(File Nos. 811-5669 and 33-24848).
(11) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 25 on Form N-1A filed on or about November 26, 1997 (File
Nos. 811-5669 and 33-24848).
(12) To be filed by amendment.
(13) Response is incorporated by reference to Post-Effective Amendment No.
12 on Form N-1A for Pinnacle Fund filed on or about April 16, 1997
(File Nos. 811-04188 and 2-95077).
Item 25. Persons Controlled by or Under Common Control with Registrant:
None
Item 26. Number of Holders of Securities
Not applicable
C-3
<PAGE> 53
Item 27. Indemnification:
Response is incorporated by reference to Registrant's
Post-Effective Amendment No. 7 on Form N-1A filed September
27, 1991. (File Nos. 811-5669 and 33-24848).
Item 28. Business and Other Connections of Investment Adviser:
FIFTH THIRD BANK
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Other Substantial
Position with Business, Profession,
Name Fifth Third Bank Vocation or Employment
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Clement L. Buenger Director
- ----------------------------------------------------------------------------------------------------------
George A. Schaefer, Jr. President, Chief Executive
Officer and Director
- ----------------------------------------------------------------------------------------------------------
George W. Landry Executive Vice President and
Cashier
- ----------------------------------------------------------------------------------------------------------
Stephen J. Schrantz Executive Vice President
- ----------------------------------------------------------------------------------------------------------
P. Michael Brumm Executive Vice President and
Chief Financial Officer
- ----------------------------------------------------------------------------------------------------------
Michael K. Keating Executive Vice President, and
Secretary
- ----------------------------------------------------------------------------------------------------------
Thomas B. Donnell Chairman, Fifth Third Bank of
Northwestern Ohio and Director
- ----------------------------------------------------------------------------------------------------------
Robert P. Niehaus Executive Vice President
- ----------------------------------------------------------------------------------------------------------
Michael D. Baker Executive Vice President
Henry W. Hobson, III Senior Vice President
- ----------------------------------------------------------------------------------------------------------
J. Patrick Bell Senior Vice President
- ----------------------------------------------------------------------------------------------------------
Tom A. Bobenread Senior Vice President
- ----------------------------------------------------------------------------------------------------------
James J. Hudepohl Senior Vice President
- ----------------------------------------------------------------------------------------------------------
Edward H. Silva, Jr. Senior Vice President
- ----------------------------------------------------------------------------------------------------------
</TABLE>
C-5
<PAGE> 54
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Gerald L. Wissel Senior Vice President and
Director of Audit
- ----------------------------------------------------------------------------------------------------------
Neal E. Arnold Senior Vice President and
Director of Audit
- ----------------------------------------------------------------------------------------------------------
Paul L. Reynolds Vice President, General Counsel
and Assistant Secretary
- ----------------------------------------------------------------------------------------------------------
John F. Barrett Director President and CEO, Western-
Southern Life Insurance Company
- ----------------------------------------------------------------------------------------------------------
Richard T. Farmer Director Chairman & CEO, Cintas Corp.
- ----------------------------------------------------------------------------------------------------------
John D. Geary Director Former President, Midland
Enterprises, Inc.
- ----------------------------------------------------------------------------------------------------------
Joseph H. Head, Jr. Director Chairman & CEO, Atkins and
Pearce
- ----------------------------------------------------------------------------------------------------------
William G. Kagler Director Chairman, Skyline Chili, Inc.
- ----------------------------------------------------------------------------------------------------------
William J. Keating Director Retired Publisher and Chairman,
The Cincinnati Enquirer
- ----------------------------------------------------------------------------------------------------------
James D. Kiggen Director Chairman, CEO & President, Xtek,
Inc.
- ----------------------------------------------------------------------------------------------------------
Robert B. Morgan Director President and Chief Executive
Officer, Cincinnati Financial
Corp.
- ----------------------------------------------------------------------------------------------------------
Michael H. Norris Director Former President, The Deerfield
Manufacturing Co.
- ----------------------------------------------------------------------------------------------------------
Brian H. Rowe Director Chairman, GE Aircraft Engines
- ----------------------------------------------------------------------------------------------------------
John J. Schiff, Jr. Director Chairman, John J. & Thomas R.
Schiff & Co.
- ----------------------------------------------------------------------------------------------------------
Dennis J. Sullivan, Jr. Director Executive Counselor, Dan Pinger
Public Relations
- ----------------------------------------------------------------------------------------------------------
Dudley S. Taft Director President, Taft Broadcasting Co.
- ----------------------------------------------------------------------------------------------------------
Joan R. Herschede Director President and CEO, The Frank
Herschede Company
- ----------------------------------------------------------------------------------------------------------
Ivan W. Gorr Director Retired as Chairman & CEO,
Cooper Tire & Rubber Co.
- ----------------------------------------------------------------------------------------------------------
Milton C. Boesel, Jr. Director Counsel, Ritter, Robinson,
McCready & James
- ----------------------------------------------------------------------------------------------------------
Gerald V. Dirvin Director Retired Executive Vice
President, The Proctor & Gamble
Company
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
HEARTLAND CAPITAL MANAGEMENT, INC.
- ----------------------------------------------------------------------------------------------------------
Other Substantial
Position with Business, Profession,
Name Heartland Vocation or Employment
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Robert D. Markley President and Chief
Executive Officer
- ----------------------------------------------------------------------------------------------------------
Thomas F. Maurath Executive Vice President
- ----------------------------------------------------------------------------------------------------------
</TABLE>
C-6
<PAGE> 55
Item 29. Principal Underwriters:
(a) BISYS Fund Services Limited Partnership, formerly known as The
Winsbury Company Limited Partnership ("BISYS"), acts as
distributor and administrator for Registrant. BISYS also
distributes the securities of American Performance Funds,
AmSouth Mutual Funds, The ARCH Fund, Inc., The BB&T Mutual
Funds Group, The Coventry Group, Empire Builder Tax Free Bond
Fund, First Choice Funds Trust, Fountain Square Funds, Hirtle
Callaghan Trust, HSBC Family of Funds, The Infinity Mutual
Funds, Inc., Intrust Funds, The Kent Funds, MarketWatch Funds,
Meyers Sheppard Investment Trust, Minerva Funds, The MMA
Praxis Mutual Funds, M.S.D.&T. Funds, Pacific Capital Funds,
The Parkstone Advantage Fund, Pegasus Funds, Qualivest Funds,
The Republic Funds Trust, The Republic Advisors Funds Trust,
The Riverfront Funds, Inc., SBSF Funds, Inc., Sefton Funds,
The Sessions Group, Summit Investment Trust, The Time Horizon
Funds and The Victory Portfolios, each of which is an
investment management company.
(b) Directors, officers and partners of BISYS, as of December 31,
1997 were as follows:
<TABLE>
<CAPTION>
Name and Principal Business Positions and Offices with
Addresses Positions and Offices with BISYS Registrant
----------------------------- --------------------------------- ---------------------------
<S> <C> <C>
The BISYS Group, Inc. Sole Shareholder of BISYS Fund None
150 Clove Road Services, Inc. and Sole Limited
Little Falls, NJ 07424 Partner
BISYS Fund Services, Inc. Sole General Partner None
3435 Stelzer Road
Columbus, Ohio 43219
G. Ronald Henderson Executive Officer None
3435 Stelzer Road
Columbus, Ohio 43219
J. David Huber Senior Vice President None
3435 Stelzer Road Business Development
Columbus, Ohio 43219 Fund Services Division
Stephen G. Mintos Executive Vice President President
3435 Stelzer Road General Manager
Columbus, Ohio 43219 Fund Services Division
Kenneth B. Quintenz Executive Officer None
3435 Stelzer Road
Columbus, Ohio 43219
</TABLE>
(c) Not applicable.
C-7
<PAGE> 56
Item 30. Location of Accounts and Records.
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Registrant 3435 Stelzer Road
Columbus, Ohio 43219-3035
Fifth Third Bank 38 Fountain Square Plaza
("Sub-Administrator, Transfer Cincinnati, Ohio 45263
Agent and Dividend
Disbursing Agent")
BISYS 3435 Stelzer Road
("Administrator") Columbus, Ohio 43219-3035
Fifth Third Bank 38 Fountain Square Plaza
("Advisor") Cincinnati, Ohio 45263
Heartland Capital 36 South Pennsylvania St.
Management Inc. Suite 610
("Advisor to the Indianapolis, In 46204
Fountain Square
Pinnacle Fund")
Morgan Stanley Asset 1221 Avenue of the Americas
Management Inc. New York, New York 10020
("Sub-Advisor to the Fountain
Square International Equity
Fund")
Fifth Third Bank 38 Fountain Square Plaza
("Custodian") Cincinnati, Ohio 45263
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered, a copy of the Registrant's latest
annual report to shareholders, upon request and without
charge.
Registrant hereby undertakes to file a post-effective
amendment, using financial statements which need not be
audited, within four to six months from the effective date of
this post-effective amendment.
C-8
<PAGE> 57
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FOUNTAIN SQUARE FUNDS, has duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereto duly authorized, in the City of Columbus and State
of Ohio, on the 21st day of January, 1998.
FOUNTAIN SQUARE FUNDS
BY: /s/Stephen G. Mintos
Stephen G. Mintos, President*
January 21, 1998
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the following
person in the capacity and on the date indicated:
<TABLE>
<CAPTION>
NAME TITLE DATE
<S> <C> <C>
By: /s/ Stephen G. Mintos President January 21, 1998
-------------------------------- (Principal Executive Officer);
Stephen G. Mintos Attorney-in-Fact for the
PRESIDENT Persons Listed Below
/s/ Jeffrey C. Cusick Treasurer and January 21, 1998
-------------------------------- Secretary
Jeffrey C. Cusick (Principal Financial
and Accounting Officer)
NAME TITLE
Edward Burke Carey* Trustee
Lee A. Carter* Trustee
Albert E. Harris* Trustee
*By Power of Attorney
</TABLE>
C-9
<PAGE> 58
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit
- -------
<S> <C>
1(iv) Conformed Copy of Amendment No. 11 to the Declaration of Trust
6(i)(a) Conformed Copy of amended Schedules A-C to Distribution Agreement
6(ii)(a) Conformed Copy of amended Exhibit A to Administrative Service Agreement
9(i)(a) Conformed Copy of amended Schedule A to Transfer Agency and Accounting Services
Agreement
9(ii)(a) Conformed Copy of amended Schedule A to Management and Administration Agreement
9(iii)(a) Conformed Copy of amended Schedule A to Sub-Administration Agreement
11(i) Conformed Copy of Consent of Geo. S. Olive & Co. LLC
11(ii) Conformed Copy of Consent of Ernst & Young LLP
15(i)(a) Conformed Copy of amended Exhibits A and B to Rule 12b-1 Plan
15(ii)(a) Conformed Copy of amended Exhibit A to Rule 12b-1 Agreement
16(xiii) Copy of Schedule for Computation of Fund Performance Data for Fountain Square Pinnacle
Fund
18 Conformed Copy of Amended and Restated Multiple Class Plan
</TABLE>
C-10
<PAGE> 1
Exhibit 1(iv)
FOUNTAIN SQUARE FUNDS
AMENDMENT NO. 11
DECLARATION OF TRUST
dated December 17, 1997
This Declaration of Trust is amended as follows:
Strike the first paragraph of Section 5 of Article III from the
Declaration of Trust and substitute in its place the following:
Section 5. Establishing and Designation of Series or Class.
Without limiting the authority of the Trustees set forth in
Article XII, Section 8, inter alia, to establish and designate
any additional Series or Class, or to modify the rights and
preferences of any existing Series or Class, the Series and
Classes of the Trust shall be, and hereby are, established and
designated as:
Fountain Square Balanced Fund:
Investment A Shares;
Investment C Shares;
Fountain Square Commercial Paper Fund:
Investment A Shares;
Trust Shares;
Fountain Square Government Cash Reserves Fund:
Investment A Shares;
Trust Shares;
Fountain Square International Equity Fund:
Investment A Shares;
Investment C Shares;
Fountain Square Mid-Cap Fund:
Investment A Shares;
Investment C Shares;
Fountain Square Ohio Tax Free Bond Fund:
Investment A Shares;
Investment C Shares;
Fountain Square Quality Bond Fund:
Investment A Shares;
Investment C Shares;
Fountain Square Quality Growth Fund:
Investment A Shares;
Investment C Shares;
Fountain Square U.S. Government Securities Fund:
Investment A Shares;
Investment C Shares;
<PAGE> 2
Fountain Square Equity Income Fund;
Investment A Shares;
Investment C Shares;
Fountain Square Bond Fund For Income;
Investment A Shares;
Investment C Shares;
Fountain Square Municipal Bond Fund;
Investment A Shares;
Investment C Shares;
Fountain Square Pinnacle Fund;
Investment A Shares;
Investment C Shares; and
Fountain Square U.S. Treasury Obligations Fund
The remainder of Section 5 of Article III of the Declaration of Trust
shall remain in effect as previously constituted.
The undersigned Secretary of Fountain Square Funds hereby certifies
that the above-stated Amendment is a true and correct Amendment to the
Declaration of Trust, as adopted by the Board of Trustees on the 17th day of
December, 1997.
WITNESS the due execution hereof this 31st day of December, 1997.
/s/ Jeffrey C. Cusick
------------------------------
Jeffrey C. Cusick
Secretary
<PAGE> 1
Exhibit 6(i)(a)
DATED: DECEMBER 1, 1995
AMENDED: DECEMBER 17, 1997
SCHEDULE A
TO THE
DISTRIBUTION AGREEMENT
BETWEEN FOUNTAIN SQUARE FUNDS AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
NAME OF FUND
------------
Fountain Square Government Cash Reserves Fund
Fountain Square Commercial Paper Fund
Fountain Square U.S. Treasury Obligations Fund
Fountain Square U.S. Government Securities Fund
Fountain Square Quality Bond Fund
Fountain Square Ohio Tax Free Bond Fund
Fountain Square Quality Growth Fund
Fountain Square Mid-Cap Fund
Fountain Square Balanced Fund
Fountain Square International Equity Fund
Fountain Square Equity Income Fund
Fountain Square Bond Fund for Income
Fountain Square Municipal Bond Fund
Fountain Square Pinnacle Fund
FOUNTAIN SQUARE FUNDS
By: /s/ Stephen G. Mintos
---------------------------
Stephen G. Mintos
President
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By: /s/ George O. Martinez
---------------------------
George O. Martinez
Senior Vice President
A-1
<PAGE> 2
DATED: DECEMBER 1, 1995
AMENDED: DECEMBER 17, 1997
SCHEDULE B TO THE
DISTRIBUTION AGREEMENT
BETWEEN FOUNTAIN SQUARE FUNDS AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
NAME OF FUND
------------
Fountain Square Government Cash Reserves Fund
Fountain Square Commercial Paper Fund
Fountain Square U.S. Treasury Obligations Fund
Fountain Square U.S. Government Securities Fund
Fountain Square Quality Bond Fund
Fountain Square Ohio Tax Free Bond Fund
Fountain Square Quality Growth Fund
Fountain Square Mid-Cap Fund
Fountain Square Balanced Fund
Fountain Square International Equity Fund
Fountain Square Equity Income Fund
Fountain Square Bond Fund for Income
Fountain Square Municipal Bond Fund
Fountain Square Pinnacle Fund
FOUNTAIN SQUARE FUNDS
By: /s/ Stephen G. Mintos
---------------------------
Stephen G. Mintos
President
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By: /s/ George O. Martinez
---------------------------
George O. Martinez
Senior Vice President
B-1
<PAGE> 3
DATED: DECEMBER 1, 1995
AMENDED: DECEMBER 17, 1997
SCHEDULE C
TO THE
DISTRIBUTION AGREEMENT
BETWEEN FOUNTAIN SQUARE FUNDS AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
NAME OF FUND
------------
Fountain Square Government Cash Reserves Fund
Fountain Square Quality Bond Fund
Fountain Square Ohio Tax Free Bond Fund
Fountain Square Quality Growth Fund
Fountain Square Mid-Cap Fund
Fountain Square Balanced Fund
Fountain Square International Equity Fund
Fountain Square Equity Income Fund
Fountain Square Bond Fund for Income
Fountain Square Municipal Bond Fund
Fountain Square Pinnacle Fund
FOUNTAIN SQUARE FUNDS
By: /s/ Stephen G. Mintos
---------------------------
Stephen G. Mintos
President
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By: /s/ George O. Martinez
---------------------------
George O. Martinez
Senior Vice President
C-1
<PAGE> 1
Exhibit 6(ii)(a)
DATED: DECEMBER 1, 1995
AMENDED: DECEMBER 17, 1997
EXHIBIT A
TO
FOUNTAIN SQUARE FUNDS
ADMINISTRATIVE SERVICE AGREEMENT
INVESTMENT C SHARES
This Agreement is adopted by Fountain Square Funds with respect to the
Investment C Shares of the following Funds of the Trust:
U.S. Government Securities Fund
Quality Bond Fund
Quality Growth Fund
Mid-Cap Fund
Balanced Fund
Ohio Tax Free Bond Fund
International Equity Fund
Equity Income Fund
Bond Fund For Income
Municipal Bond Fund
Pinnacle Fund
In compensation for the services provided pursuant to this Agreement,
FIFTH THIRD BANK will be paid a monthly fee computed at the annual rate of up to
0.25% of the average aggregate net asset value of the Investment C Shares of
each applicable Fund held during the month.
FOUNTAIN SQUARE FUNDS FIFTH THIRD BANK
By: /s/ Stephen G. Mintos By: /s/ Scott N. Degerberg
--------------------------- ---------------------------
Stephen G. Mintos Scott N. Degerberg
President Vice President
A-1
<PAGE> 1
Exhibit 9(i)(a)
DATED: DECEMBER 12, 1989
AMENDED: DECEMBER 17, 1997
SCHEDULE A
TO THE
TRANSFER AGENCY AND ACCOUNTING SERVICES AGREEMENT
BETWEEN
THE FIFTH THIRD BANK
AND
FOUNTAIN SQUARE FUNDS
The following sets forth the list of Funds included and the
compensation paid by the Funds to Fifth Third Bank for its services under the
Transfer Agency and Accounting Services Agreement:
FUNDS
-----
(A) Money Market Funds
Fountain Square U.S. Treasury Obligations Fund
Fountain Square Commercial Paper Fund
Fountain Square Government Cash Reserves Fund
(B) Fluctuating Net Asset Value Funds
Fountain Square Balanced Fund
Fountain Square Mid-Cap Fund
Fountain Square Government Securities Fund
Fountain Square Quality Bond Fund
Fountain Square Quality Growth Fund
Fountain Square Ohio Tax Free Bond Fund
Fountain Square International Equity Fund
Fountain Square Equity Income Fund
Fountain Square Bond Fund for Income
Fountain Square Municipal Bond Fund
Fountain Square Pinnacle Fund
COMPENSATION
------------
(A) Transfer Agency Fees
(1) Accounts Maintained on Fifth Third Bank's System (other than
the International Equity Fund)
<TABLE>
<S> <C>
Base Fee (omnibus accounts only): $300.00 per month per Fund
-------------------------------- per Class
Transaction Charges (omnibus accounts only): $4.50 per transaction
-------------------------------------------
</TABLE>
A-1
<PAGE> 2
<TABLE>
<S> <C>
Per Account Charges
(fully disclosed/non-omnibus accounts): $20.00 per account per year
-------------------------------------- for Money Market Funds
$16.00 per account per year
for Fluctuating Net Asset
Value Funds
</TABLE>
The monthly fee for omnibus accounts is limited to a maximum
of $800.00 per Fund per class.
(2) Accounts Maintained on a Sub-Transfer Agent's System (other
than the International Equity Fund or Accounts of the Pinnacle
Fund in existence as of date of reorganization).
$25.00 per account per year. The minimum monthly fee per Fund
per month shall be $600.00.
(3) International Equity Fund
Flat Fee: $18,000.00 annually to be paid by the Fund in equal
monthly amounts of $1,500.00.
Per Account Charges: $16.00 per account per year.
(4) Pinnacle Fund Accounts in Existence As of Date of
Reorganization
Flat Fee: $18,000.00 annually to be paid by the Fund in equal
monthly amounts of $1,500.00.
Per Account Charges: $17.50 per account per year.
In addition to the above transfer agent fees, the Funds will reimburse Fifth
Third Bank for certain out-of-pocket costs, including items such as expenses for
postage, forms, statements, record storage, printing, communication lines,
statement mailings, confirmations and other shareholder correspondence and any
assessments taxes or levies assessed on the transfer agent for services provided
under the contract. These out-of-pocket expenses will be charged to the Funds at
Fifth Third Bank's cost. Fifth Third Bank will not mark up any of these charges
to the Funds.
A-2
<PAGE> 3
(B) Fund Accounting Fees (Per Fund Per Year)
(1) All Funds Except International Equity Fund
Assets Fees
------ ----
Up to $500 million 0.020%
Over $500 million and
up to $1 billion 0.015%
Over $1 billion 0.010%
There shall be an annual fee of $10,000 per additional Class
of shares per Fund. The minimum annual fee per Fund shall be
$30,000.
(2) International Equity Fund
0.050% of Fund assets, with a minimum fee of $50,000.00 per
year.
In addition to the above Fund accounting fees, the Funds shall reimburse Fifth
Third Bank for certain out-of-pocket expenses, including pricing of portfolio
securities.
FOUNTAIN SQUARE FUNDS
BY: /S/ Stephen G. Mintos
---------------------------
Stephen G. Mintos
President
FIFTH THIRD BANK
BY: /S/ Scott N. Degerberg
---------------------------
Scott N. Degerberg
Vice President
A-3
<PAGE> 1
Exhibit 9(ii)(a)
DATED: APRIL 1, 1997
AMENDED: DECEMBER 17, 1997
SCHEDULE A
TO THE
MANAGEMENT AND ADMINISTRATION AGREEMENT
BETWEEN FOUNTAIN SQUARE FUNDS AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
NAME OF FUND COMPENSATION*
------------ -------------
<S> <C>
Fountain Square Government Cash Reserves Fund Annual Rate of:
Twenty one-hundredths of one percent (0.20%) of all
Fountain Square Commercial Paper Fund Funds' average daily net assets up to $1 billion
Fountain Square U.S. Treasury Obligations Fund Eighteen one-hundredths of one percent (0.18%) of
all Funds' average daily net assets in excess of $1
Fountain Square U.S. Government Securities Fund billion up to $2 billion
Fountain Square Quality Bond Fund Seventeen one-hundredths of one percent (0.17%) of
all Funds' average daily net assets in excess of $2
Fountain Square Ohio Tax Free Bond Fund billion
Fountain Square Quality Growth Fund
Fountain Square Mid-Cap Fund
Fountain Square Balanced Fund
Fountain Square International Equity Fund
Fountain Square Equity Income Fund
Fountain Square Bond Fund for Income
Fountain Square Municipal Bond Fund
Fountain Square Pinnacle Fund
</TABLE>
FOUNTAIN SQUARE FUNDS BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By: /s/ Stephen G. Mintos By: /s/ George O. Martinez
----------------------------- -----------------------------
Stephen G. Mintos George O. Martinez
President Senior Vice President
- ---------------------------------
* All fees are computed daily and paid periodically.
XX The rate of compensation includes up to four classes of shares per
portfolio. An additional minimum fee of $10,000 per portfolio for each
additional class will be assessed.
A-1
<PAGE> 1
Exhibit 9(iii)(a)
DATED: DECEMBER 1, 1995
AMENDED: DECEMBER 17, 1997
SCHEDULE A
TO THE
SUB-ADMINISTRATION AGREEMENT
BETWEEN
BISYS FUND SERVICES LIMITED PARTNERSHIP
AND
FIFTH THIRD BANK
<TABLE>
<CAPTION>
NAME OF FUND COMPENSATION*
------------ -------------
<S> <C>
Fountain Square Government Cash Reserves Fund Annual Rate of up to two and one-half one-
hundredths of one percent (0.025%) of all Funds'
Fountain Square Commercial Paper Fund average daily net assets.
Fountain Square U.S. Treasury Obligations Fund
Fountain Square U.S. Government Securities Fund
Fountain Square Quality Bond Fund
Fountain Square Ohio Tax Free Bond Fund
Fountain Square Quality Growth Fund
Fountain Square Mid-Cap Fund
Fountain Square Balanced Fund
Fountain Square International Equity Fund
Fountain Square Equity Income Fund
Fountain Square Bond Fund for Income
Fountain Square Municipal Bond Fund
Fountain Square Pinnacle Fund
</TABLE>
FIFTH THIRD BANK BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By: /s/ Scott N. Degerberg By: /s/ George O. Martinez
----------------------------- -----------------------------
Scott N. Degerberg George O. Martinez
Vice President Senior Vice President
A-1
<PAGE> 1
Exhibit 11(i)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the use of our report, dated February 5, 1997, on the financial
statements of Pinnacle Fund, and to the references to our Firm under the
heading "Financial Highlights" in the Post Effective Amendment No. 25 to the
Registration Statement filed by Fountain Square Pinnacle Fund with the
Securities and Exchange Commission.
/s/ GEO. S. OLIVE & CO. LLC
- ---------------------------
Geo. S. Olive & Co. LLC
Indianapolis, Indiana
January 20, 1997
<PAGE> 1
Exhibit 11(ii)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent
Auditors" in the Prospectus pertaining to Fountain Square Pinnacle Fund
included in Post-Effective Amendment No. 26 to the Registration Statement (Form
N-1A No. 33-24848) of Fountain Square Funds.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Cincinnati, Ohio
January 21, 1998
<PAGE> 1
Exhibit 15(i)(a)
DATED: DECEMBER 1, 1995
AMENDED: DECEMBER 17, 1997
EXHIBIT A
TO
FOUNTAIN SQUARE FUNDS
RULE 12B-1 PLAN
INVESTMENT A SHARES
The Rule 12b-1 Plan is adopted by Fountain Square Funds with respect to
the Investment A Shares of the Series of the Trust set forth below (the
"Applicable Funds"):
Commercial Paper Fund
Government Cash Reserves Fund
U.S. Government Securities Fund
Quality Bond Fund
Quality Growth Fund
Mid-Cap Fund
Balanced Fund
Ohio Tax Free Bond Fund
International Equity Fund
Equity Income Fund
Bond Fund For Income
Municipal Bond Fund
Pinnacle Fund
In compensation for the services provided pursuant to this Plan, BISYS
Fund Services Limited Partnership will be paid a monthly fee computed at the
annual rate of up to 0.35% of the average aggregate net asset value of the
Investment A Shares of each Applicable Fund held during the month.
FOUNTAIN SQUARE FUNDS
By: /s/ Stephen G. Mintos
-----------------------------
Stephen G. Mintos, President
A-1
<PAGE> 2
DATED: DECEMBER 1, 1995
AMENDED: DECEMBER 17, 1997
EXHIBIT B
TO
FOUNTAIN SQUARE FUNDS
RULE 12B-1 PLAN
INVESTMENT C SHARES
The Rule 12b-1 Plan is adopted by Fountain Square Funds with respect to
the Investment C Shares of the Series of the Trust set forth below (the
"Applicable Funds"):
U.S. Government Securities Fund
Quality Bond Fund
Quality Growth Fund
Mid-Cap Fund
Balanced Fund
Ohio Tax Free Bond Fund
International Equity Fund
Equity Income Fund
Bond Fund For Income
Municipal Bond Fund
Pinnacle Fund
In compensation for the services provided pursuant to this Plan, BISYS
Fund Services Limited Partnership will be paid a monthly fee computed at the
annual rate of up to 0.75% of the average aggregate net asset value of the
Investment C Shares of each Applicable Fund held during the month.
FOUNTAIN SQUARE FUNDS
By: /s/ Stephen G. Mintos
-----------------------------
Stephen G. Mintos, President
B-1
<PAGE> 1
Exhibit 15(ii)(a)
EXHIBIT A
TO
RULE 12B-1 AGREEMENT
The following Funds and their respective Classes of Shares shall be
subject to the Rule 12b-1 Agreement by and between the Participating
Organization and BISYS:
Fountain Square Commercial Paper Fund
Investment A Shares
Fountain Square Government Cash Reserves Fund
Investment A Shares
Fountain Square U.S. Government Securities Fund
Investment A Shares
Investment C Shares
Fountain Square Quality Bond Fund
Investment A Shares
Investment C Shares
Fountain Square Quality Growth Fund
Investment A Shares
Investment C Shares
Fountain Square Mid-Cap Fund
Investment A Shares
Investment C Shares
Fountain Square Balanced Fund
Investment A Shares
Investment C Shares
Fountain Square Ohio Tax-Free Bond Fund
Investment A Shares
Investment C Shares
Fountain Square International Equity Fund
Investment A Shares
Investment C Shares
Fountain Square Equity Income Fund
Investment A Shares
Investment C Shares
Fountain Square Bond Fund For Income
Investment A Shares
Investment C Shares
Fountain Square Municipal Bond Fund
Investment A Shares
Investment C Shares
Fountain Square Pinnacle Fund
Investment A Shares
Investment C Shares
<PAGE> 1
Exhibit 16(xiii)
THE FOUNTAIN SQUARE FUNDS
TOTAL RETURN
INVESTOR A SHARES
LOAD CALCULATIONS
PINNACLE FUND
AGGREGATE TOTAL RETURN
WITH SALES LOAD OF: 4.50%
- ---------------------------
T = (ERV/P) - 1
WHERE: T= TOTAL RETURN
ERV= REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P= A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
SINCE INCEPTION: (03/04/85 TO 12/31/97):
(6,735.0 / 1,000) - 1 = 573.50%
YEAR TO DATE: (12/01/97 TO 12/31/97):
(1,354.0 / 1,000) - 1 = 35.40%
QUARTERLY: (10/01/97 TO 12/31/97):
(1,042.0 / 1,000) - 1 = 4.20%
MONTHLY: (12/01/97 TO 12/31/97):
(1,026.0 / 1,000) - 1 = 2.60%
<PAGE> 2
THE FOUNTAIN SQUARE FUNDS
TOTAL RETURN
INVESTOR C SHARES
CDSC LOAD CALCULATIONS
PINNACLE FUND
AGGREGATE TOTAL RETURN
T = (ERV/P) - 1
WHERE: T= TOTAL RETURN
ERV= REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P= A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
EXAMPLE:
WITH CDSC OF: 0.00%
- ---------------------------
SINCE INCEPTION: (03/04/85 TO 12/31/97):
(6,735.0 / 1,000) - 1 = 573.50%
WITH CDSC OF: 1.00%
- ---------------------------
YEAR TO DATE: (12/01/97 TO 12/31/97):
(1,344.0 / 1,000) - 1 = 34.40%
QUARTERLY: (10/01/97 TO 12/31/97):
(1,032.0 / 1,000) - 1 = 3.20%
MONTHLY: (12/01/97 TO 12/31/97):
(1,016.0 / 1,000) - 1 = 1.60%
<PAGE> 1
Exhibit 18
FOUNTAIN SQUARE FUNDS
MULTIPLE CLASS PLAN
AS AMENDED DECEMBER 17, 1997
This Multiple Class Plan ("Plan") is adopted by FOUNTAIN SQUARE FUNDS
(the "Trust"), a Massachusetts business trust, with respect to the classes of
shares (the "Classes") of the portfolios of the Trust (the "Funds") set forth in
exhibits hereto.
1. PURPOSE
This Plan is adopted pursuant to Rule 18f-3 under the Investment
Company Act of 1940, as amended (the "Rule"), in connection with the
issuance by the Trust of more than one class of shares of any or all of
the Funds ("Covered Classes") in reliance on the Rule.
2. SEPARATE ARRANGEMENTS/CLASS DIFFERENCES
The Funds set forth on Exhibit A offer two Classes of shares which are
titled Investment A Shares and Trust Shares. The Funds set forth on
Exhibit B offer two Classes of shares which are titled Investment A
Shares and Investment C Shares. The only expenses allocated to the
shares as a Class are, for Investment A Shares, those expenses incurred
under the Trust's distribution plan adopted pursuant to Rule 12b-1 (the
"Rule 12b-1 Plan"), and for Investment C Shares, those expenses
incurred under the Rule 12b-1 Plan and those incurred under an
administrative service arrangement (the "Administrative Services
Agreement").
Investment A Shares and Investment C Shares may be purchased through
Fifth Third Securities, Inc., as well as from the Distributor.
Trust Shares may be purchased through the Trust and Investment Division
of The Fifth Third Bank.
The minimum initial investments in the Covered Classes are $1,000.00
for Trust Shares and $1,000.00 for Investment A Shares and Investment C
Shares. Subsequent investments may be made in the amount of $50.00 for
all Covered Classes.
Shareholders are entitled to one vote for each share held on the record
date for any action requiring a vote by the shareholders and a
proportionate fractional vote for each fractional share held.
Shareholders of the Trust will vote in the aggregate and not by Fund or
Class except (i) as otherwise expressly required by law or when the
Trustees determine that the matter to be voted upon affects only the
interests of the shareholders of a particular Fund or Class, and (ii)
only holders of Investment A Shares and/or Investment C Shares, as the
case may be, will be entitled to vote on matters submitted to a
shareholder vote with respect to the Rule 12b-1 Plan applicable to such
Class.
<PAGE> 2
3. EXPENSE ALLOCATIONS
The expenses incurred pursuant to the Rule 12b-1 Plan will be borne
solely by the Investment A Shares and/or the Investment C Shares, as
may be the case, of the applicable Fund. The expenses incurred pursuant
to the Administrative Services Agreement will be borne solely by the
Investment C Shares of the applicable Fund.
4. EXCHANGE FEATURES
A shareholder may exchange shares of one Fund for the appropriate Class
of shares of any other Fund in the Trust. Shares of Funds with a sales
charge may be exchanged at net asset value for shares of other Funds
with an equal sales charge or no sales charge. Shares of Funds with a
sales charge may be exchanged for shares of Funds with a higher sales
charge at net asset value, plus the additional sales charge. Shares of
Funds with no sales charge, whether acquired by direct purchase,
reinvestment of dividends on such shares, or otherwise, may be
exchanged for shares of Funds with a sales charge at net asset value,
plus the applicable sales charge. When an exchange is made from a Fund
with a sales charge to a Fund with no sales charge, the shares
exchanged and additional shares which have been purchased by
reinvesting dividends or capital gains on such shares retain the
character of the exchanged shares for purposes of exercising further
exchange privileges.
5. EFFECTIVENESS
This Plan shall become effective with respect to each Class, (i) to the
extent required by the Rule, after approval by a majority vote of: (a)
the Trust's Board of Trustees; (b) the members of the Board of Trustees
of the Trust who are not interested persons of the Trust and have no
direct or indirect financial interest in the operation of the Trust's
Plan; and/or (ii) upon execution of an exhibit adopting this Plan with
respect to such Class.
6. AMENDMENT
This Plan may be amended at any time, with respect to any Class, by a
majority vote of: (i) the Trust's Board of Trustees; and (ii) the
members of the Board of Trustees who are not interested persons of the
Trust and have no direct or indirect financial interest in the
operation of this Plan.
/s/ Stephen G. Mintos
-----------------------------
Stephen G. Mintos
President
2
<PAGE> 3
FOUNTAIN SQUARE FUNDS
EXHIBIT A
TO THE
MULTIPLE CLASS PLAN
TRUST SHARES
INVESTMENT A SHARES
Each of the portfolios of the Fountain Square Funds (the "Trust") set
forth below shall be covered by the Multiple Class Plan adopted by the Trust and
to which this Exhibit is attached with respect to the Trust Shares and the
Investment A Shares of such portfolio:
Commercial Paper Fund
Government Cash Reserves Fund
U.S. Treasury Obligations Fund
Witness the due execution hereof this 17th day of December, 1997.
FOUNTAIN SQUARE FUNDS
By: /s/ Stephen G. Mintos
-----------------------------
Stephen G. Mintos
President
3
<PAGE> 4
FOUNTAIN SQUARE FUNDS
EXHIBIT B
TO THE
MULTIPLE CLASS PLAN
INVESTMENT A SHARES
INVESTMENT C SHARES
Each of the portfolios of the Fountain Square Funds (the "Trust") set
forth below shall be covered by the Multiple Class Plan adopted by the Trust and
to which this Exhibit is attached with respect to the Investment A Shares and
the Investment C Shares of such portfolio:
U.S. Government Securities Fund
Quality Bond Fund
Quality Growth Fund
Mid-Cap Fund
Balanced Fund
Ohio Tax Free Bond Fund
International Equity Fund
Equity Income Fund
Bond Fund For Income
Municipal Bond Fund
Pinnacle Fund
Witness the due execution hereof this 17th day of December, 1997.
FOUNTAIN SQUARE FUNDS
By: /s/ Stephen G. Mintos
-----------------------------
Stephen G. Mintos
President
4
