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[LOGO OF FIFTH THIRD FUNDS APPEARS HERE]
[PICTURE APPEARS HERE]
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COMMERCIAL PAPER FUND
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GOVERNMENT CASH RESERVES FUND
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U.S. TREASURY OBLIGATIONS FUND
Fifth Third Funds -------------------------------
Money Market Mutual Funds
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Semi-Annual Report to Shareholders TAX EXEMPT MONEY MARKET FUND
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January 31, 1999
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NOTICE OF DELIVERY OF PROSPECTUSES,
SEMI-ANNUAL REPORTS AND ANNUAL REPORTS
In order to reduce expenses of the Fifth Third Funds incurred with the mailing
of prospectuses, prospectus supplements, semi-annual reports and annual reports
to multiple shareholders at the same address, Fifth Third Funds may in the
future deliver one copy of a prospectus, prospectus supplement, semi-annual
report or annual report to a single investor sharing a street address or post
office box with other investors, provided that all such investors have the same
last name or are believed to be members of the same family. If you share an
address with another investor and wish to receive your own prospectus,
prospectus supplements, semi-annual reports and annual reports, please call the
Trust toll-free at (888) 799-5353.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by a prospectus for the Funds, which contains facts
concerning the objectives and policies, management fees, expenses and other
information.
For more complete information on the Fifth Third Funds, including fees, expenses
and sales charges, please call 1-888-799-5353 for a prospectus, which you should
read carefully before you invest or send money. The Fifth Third Funds are
distributed by BISYS Fund Services, L.P.
Fifth Third Bank and its affiliate Heartland Capital Management, Inc. serve as
Investment Advisors to the Funds and receive a fee for their services.
Fifth Third Funds, like all mutual funds:
. are NOT FDIC insured
. have no bank guarantee
. may lose value
<PAGE>
Letter from the Chief Investment Officer
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Dear Shareholder:
We are pleased to present the Fifth Third Money Market Funds' semiannual
report to Shareholders for the six-month period ended January 31, 1999.
This letter includes a review of the principles that guide our investment
strategy, comments on recent economic and market conditions, and a
discussion of our outlook for the coming period.
Strong returns after a shaky August
In our opinion, the financial markets performed well for the six-month
period ended January 31, 1999. For example, the Standard & Poor's 500
Stock Index/1/ delivered a total return of 15.02% for the six-month
period ended January 31, 1999. Low inflation and low interest rates,
coupled with moderate economic growth, drove the S&P 500 Index to an all-
time high as the period began. In August 1998, however, problems in
foreign markets, such as Japan and Russia, caused several large companies
to forewarn investors that their earnings could be lower than expected.
In our view, that helped to trigger a 14% decline in the stock market
during August 1998--the worst monthly performance for the S&P 500 Index
in a decade. The Federal Reserve Bond (the Fed) lowered the discount rate
(the interest rate the Fed charges banks for overnight loans) three times
in the fall to shore up financial markets and provide additional
liquidity. That policy increased liquidity and helped to restore investor
confidence in the stock market. The economy and the market experienced a
strong fourth quarter as sales of U.S. companies' products and services
rebounded with the economy. In the fixed-income markets, investor
uncertainty at the beginning of the period caused a flight to quality
that pushed Treasury yields down and in turn led to outsized returns for
the Treasury sector. Although corporate issues recovered, some lost
ground later in the period. Inflation and yields remained low throughout
the period. The yield on the 30-year Treasury bond fell from 5.71% at the
beginning of the period to 5.09% at the end of the period. Regardless of
short-term stock market volatility, we will continue to focus on the long
term. Thank you for your continued confidence in the Fifth Third Funds.
Sincerely,
/s/ James D. Berghausen
James D. Berghausen, CFA
Chief Investment Officer
Fifth Third Bank
Past performance is not indicative of future results. An investment in
any of the Fifth Third Money Market Funds is not insured or guaranteed by
the FDIC or any other government agency. Although each of the Fifth Third
Money Market Funds seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Funds.
/1/The Standard & Poor's 500 Stock Index represents the performance of
the U.S. stock market as a whole.
1
<PAGE>
Fifth Third Money Market Funds
An interview with Molly Murphy, portfolio manager
Q. What were conditions like in the money markets during the six-month period
ended January 31, 1999?
A. The period began with uncertainty about whether the Federal Reserve Board
would lower short-term interest rates. We believe investors worried that the
continued economic problems in Asia, the Russian government's default on its
short-term debt and the emerging economic problems in Brazil could hurt the
health of the U.S. economy and lead to a global credit crunch. In response, the
Fed added liquidity to the financial markets by reducing short-term interest
rates three times during the period--once each in September, October and
November--for a total rate reduction of 75 basis points.
Q. How did you manage the Funds in that environment?
A. We maintained neutral average maturities during the period for the Fifth
Third Commercial Paper Fund and the Fifth Third Government Cash Reserves Fund.
We did not want to expose shareholders to risks associated with assumptions
about the future direction of interest rates. We kept the Fifth Third U.S.
Treasury Obligations Fund's average maturity slightly shorter than its peer
group of funds. The Fund seeks to invest heavily in repurchase agreements, which
are relatively short-term instruments. Moreover, we increased that exposure to
repos from 70% of assets to as high as 85% of assets during the period. We did
so because high demand for T-bills caused their yields to plummet relative to
yields on repurchase agreements. Later in the period, however, repos' yield
advantage declined; we then increased the Fund's average maturity to a neutral
position.
Q. What is your outlook going forward?
A. We expect volatility in the money markets as investors speculate about how
the Federal Reserve Board will manage interest rates. We are likely to see
continuing economic problems in foreign markets, especially Latin America,
coupled with moderate economic growth and low inflation in the United States.
That mix makes it difficult to foresee whether or not the Fed will change rates.
Therefore, we will seek to maintain the Funds' neutral average maturities for
now.
Fifth Third Commercial Paper Fund is a no-load money market mutual fund that
invests primarily in high-quality commercial paper. Commercial paper represents
very short-term loans made by banks and other corporations.
Fifth Third Government Cash Reserves Fund is a no-load money market mutual fund
that invests in short-term U.S. government securities. The Fund limits its
investments to U.S. government securities paying interest that generally would
be exempt from state personal income tax.
Fifth Third U.S. Treasury Obligations Fund is a no-load money market mutual fund
that invests in short-term U.S. Treasury obligations and repurchase agreements
fully collateralized by such Treasury securities.
Fifth Third Tax Exempt Fund/1/ is a no-load money market mutual fund that
invests in a portfolio of high-grade short-term municipal bonds and notes,
tax-exempt commercial paper and tax-exempt short-term discount notes.
- --------------------------------------------------------------------------------
An investment in the Fifth Third Money Market Funds is not insured or guaranteed
by the FDIC or any other government agency. Although the Fund seeks to preserve
the value of your investment at $1.00 per share, it is possible to lose money by
investing in the Fund.
/1/The Fund's income may be subject to certain state and local taxes and,
depending on your tax status, the federal alternative minimum tax.
2
<PAGE>
Fifth Third Commercial Paper Fund
Schedule of Portfolio Investments
January 31, 1999
(Amounts in thousands)
(Unaudited)
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Principal Security Amortized
Amount Description Cost
- --------------------------------------------------------------------------------
Certificates of Deposit -- 1.1%
Banks -- 1.1%
$ 5,000 Societe Generale, Yankee CD,
4/28/99 $ 4,998
---------
Total Certificates of Deposit 4,998
---------
Commercial Paper -- 71.7%
Banks -- 8.4%
10,000 Bank One Corp., 4/30/99 9,883
15,000 J.P. Morgan, 4/27/99 14,823
12,000 Societe Generale, 2/8/99 11,989
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Total 36,695
---------
Basic Materials -- 3.9%
6,000 Air Products & Chemicals, 3/1/99 5,977
5,000 Cargill, Inc., 2/12/99 4,992
6,000 Cargill, Inc., 3/5/99 5,973
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Total 16,942
---------
Brokerage -- 3.8%
7,000 Goldman Sachs, 2/12/99 6,989
10,000 Goldman Sachs, 4/21/99 9,893
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Total 16,882
---------
Consumer Products -- 6.1%
10,000 Coca-Cola Co., 2/9/99 9,989
7,000 Procter & Gamble, 2/24/99 6,978
10,000 Procter & Gamble, 2/26/99 9,965
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Total 26,932
---------
Energy -- 3.4%
10,000 Florida Power Corp., 2/1/99 10,000
5,000 Petrofina Delaware, 2/9/99 4,995
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Total 14,995
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Financial -- 46.1%
17,000 A.I. Credit Corp., 2/3/99 16,995
7,000 American Express Credit Corp., 2/11/99 6,991
5,000 American Express Credit Corp., 2/23/99 4,985
5,000 American Express Credit Corp., 3/17/99 4,969
5,000 American General Finance Corp., 3/5/99 4,979
7,000 American General Finance Corp., 3/10/99 6,965
5,000 American General Finance Corp., 3/30/99 4,960
6,000 Associates First Capital Corp., 2/16/99 5,988
5,000 Associates First Capital Corp., 5/27/99 4,923
6,000 Associates First Capital Corp., 6/18/99 5,887
6,000 CIT Group, 3/11/99 5,969
6,000 CIT Group, 3/12/99 5,969
10,000 Deutsche Bank Financial, 2/10/99 9,987
7,000 Deutsche Bank Financial, 4/8/99 6,938
6,000 Ford Motor Credit Corp., 2/22/99 5,983
6,000 Ford Motor Credit Corp., 3/19/99 5,962
5,000 General Electric Capital Corp., 2/17/99 4,989
5,000 General Electric Capital Corp., 4/20/99 4,946
7,000 General Electric Capital Corp., 8/4/99 6,828
7,000 Metlife Funding, 2/22/99 6,980
5,000 Metlife Funding, 3/2/99 4,981
15,000 Pitney Bowes Credit Corp., 2/1/99 15,000
6,000 Prudential Funding, 2/10/99 5,993
5,000 Prudential Funding, 2/18/99 4,989
6,000 Prudential Funding, 6/15/99 5,893
10,000 U.B.S. Finance, 4/12/99 9,906
7,000 U.B.S. Finance, 6/15/99 6,875
7,000 Xerox Credit Corp., 3/3/99 6,972
10,000 Xerox Credit Corp., 3/4/99 9,959
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Total 202,761
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Total Commercial Paper 315,207
---------
Corporate Bonds -- 5.5%
Financial -- 2.3%
5,000 CIT Group Holdings, 6.38%, 5/21/99 5,007
5,000 Ford Motor Credit, Floating Rate
Note, 6/1/99 (5.51%, 3/1/99) (b) 5,005
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Total 10,012
---------
Technology -- 3.2%
4,020 AT&T Corp., 4.38%, 5/1/99 4,007
10,000 IBM Corp., Floating Rate Note,
4/1/99 (4.90%, 4/1/99) (b) 9,998
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Total 14,005
---------
Total Corporate Bonds 24,017
---------
Funding Agreement -- 4.6%
20,000 General American Life, Floating Rate
Note, 7/30/99, (5.70%, 3/1/99) (b) 20,001
---------
Total Funding Agreement 20,001
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-Continued-
3
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Fifth Third Commercial Paper Fund
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Principal Security Amortized
Amount Description Cost
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Repurchase Agreements -- 17.4%
$ 42,487 Deutsche Bank, 4.70%, dated 1/29/99,
due 2/1/99, collateralized by U.S.
Treasury Note, 5.50%, due 5/31/03
with a value of $30,264 and U.S.
Treasury Bond, 14.00%, due 11/15/11
with a value of $13,073. $ 42,487
17,000 SG Cowen, 4.73%, dated 1/29/99,
due 2/1/99, collateralized by U.S.
Treasury Bond, 12.00%, due 8/15/13
with a value of $17,355. 17,000
17,000 Warburg/Dillion, 4.70%, dated 1/29/99,
due 2/1/99, collateralized by U.S.
Treasury Notes, 6.63%-7.75%, due
11/30/99-3/31/02 with a value of $17,346. 17,000
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Total Repurchase Agreements 76,487
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Total Investments (Amortized Cost
$440,710) (a) -- 100.3% 440,710
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Liabilities in excess of other
assets -- (0.3)% (1,364)
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TOTAL NET ASSETS -- 100.0% $439,346
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(a) Also represents cost for federal tax purposes.
(b) Current rate and next demand date shown.
(See notes which are an integral part of the Financial Statements)
4
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Fifth Third Government Cash Reserves Fund
Schedule of Portfolio Investments
January 31, 1999
(Amounts in thousands)
(Unaudited)
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Principal Security Amortized
Amount Description Cost
- --------------------------------------------------------------------------------
U.S. Government Agencies -- 100.2%
Federal Farm Credit Bank -- 17.5%
$ 14,112 Discount Note, 2/11/99 $ 14,092
14,700 Discount Note, 2/23/99 14,654
8,424 Discount Note, 2/24/99 8,397
10,000 Discount Note, 6/8/99 9,829
10,000 Discount Note, 7/29/99 9,771
10,000 Discount Note, 8/10/99 9,756
4,000 Discount Note, 9/17/99 3,879
20,000 Discount Note, 10/26/99 19,323
14,850 Discount Note, 12/13/99 14,252
25,000 5.50%, 4/1/99 25,014
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Total 128,967
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Federal Home Loan Bank -- 61.0%
15,000 Discount Note, 2/3/99 14,994
35,000 Discount Note, 2/5/99 34,977
8,000 Discount Note, 2/12/99 7,987
20,000 Discount Note, 2/16/99 (d) 19,955
20,000 Discount Note, 2/18/99 19,951
7,000 Discount Note, 2/17/99 6,984
30,000 Discount Note, 2/19/99 29,923
25,000 Discount Note, 2/24/99 24,918
25,012 Discount Note, 2/26/99 24,923
5,000 Floating Rate Note, 2/26/99
(4.76%, 2/2/99) (b) 5,000
13,000 Discount Note, 3/3/99 12,944
6,000 Discount Note, 3/9/99 5,970
5,000 Floating Rate Note, 3/10/99
(4.73%, 2/2/99) (b) 4,998
25,000 Discount Note, 3/12/99 (d) 24,863
20,000 Discount Note, 3/17/99 19,878
15,000 Discount Note, 3/19/99 14,903
20,000 Discount Note, 3/24/99 19,858
20,000 Floating Rate Note, 3/26/99
(4.85%, 2/3/99) (b) 19,991
35,000 Discount Note, 3/31/99 34,719
15,000 Floating Rate Note, 4/1/99
(4.85%, 2/3/99) (b) 14,998
10,000 Discount Note, 4/5/99 9,913
20,000 Floating Rate Note, 4/9/99
(4.91%, 2/3/99) (b) 19,991
10,000 Discount Note, 4/21/99 9,894
10,000 Discount Note, 4/23/99 9,891
8,000 Discount Note, 4/28/99 7,905
10,000 Discount Note, 5/12/99 9,865
9,000 5.83%, 11/26/99 9,064
9,000 5.83%, 12/24/99 9,071
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Total 448,328
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Student Loan Marketing
Association -- 19.0%
5,000 Floating Rate Note, 2/8/99
(4.62%, 2/2/99) (b) 5,000
124,400 Master Note, 4.86%, 7/1/00 (c) 124,399
10,000 5.53%, 3/4/99 10,000
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Total 139,399
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Tennessee Valley Authority -- 2.7%
20,000 Discount Note, 2/10/99 19,974
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Total U.S. Government Agencies 736,668
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Short Term Securities Purchased with
Collateral -- 0.8%
Commercial Paper -- 0.1%
266 AIG Funding, 4.78%, 2/1/99 266
300 DuPont De Nemours & Co., 4.76%,
2/2/99 300
300 Harvard University, 4.82%, 2/1/99 299
125 Xerox Corp., 4.82%, 2/1/99 125
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Total 990
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Repurchase Agreements -- 0.7%
5,086 Morgan Stanley, 4.70%, dated
1/29/99, due 2/1/99 (at amortized
cost), collateralized by U.S. Treasury
Notes, 5.38%-7.25%, due
6/30/03-8/15/04 with a value
of $5,217. 5,087
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Total Short Term Securities
Purchased with Collateral 6,077
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Total Investments (Amortized
Cost $742,745) (a) -- 101.0% 742,745
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Liabilities in excess of other
assets -- (1.0)% (7,064)
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TOTAL NET ASSETS -- 100.0% $735,681
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(a) Also represents cost for federal tax purposes.
(b) Current rate and next demand date shown.
(c) Current rate shown.
(d) All or part of this security has been loaned at January 31, 1999.
(See Notes which are an integral part of the Financial Statements)
5
<PAGE>
Fifth Third U.S. Treasury Obligations Fund
Schedule of Portfolio Investments
January 31, 1999
(Amounts in thousands)
(Unaudited)
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Principal Security Amortized
Amount Description Cost
- --------------------------------------------------------------------------------
U.S. Government Securities--18.9%
U.S. Treasury Notes--18.9%
$ 20,000 6.38%, 4/30/99 $ 20,066
10,000 6.25%, 5/31/99 10,041
20,000 6.00%, 6/30/99 20,048
30,000 6.75%, 6/30/99 30,240
30,000 5.88%, 8/31/99 30,202
40,000 5.75%, 9/30/99 40,316
40,000 6.00%, 10/15/99 40,341
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Total U.S. Government Securities 191,254
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Repurchase Agreements--81.2%
45,000 Barclays Capital, 4.72%, dated
1/29/99, due 2/1/99 (at amortized
cost), collateralized by U.S. Treasury
Note, 5.88%, due 11/15/99 with a
value of $45,901. 45,000
45,000 Bear Stearns & Co., 4.72%, dated
1/29/99, due 2/1/99 (at amortized
cost), collateralized by U.S. Treasury
Notes, 4.63%-7.50%, due
11/30/00-2/15/08 with a value
of $18,205, U.S. Treasury Bonds,
6.25%-12.50%, due 2/15/06-8/15/23
with a value of $21,638 and U.S.
Treasury Bill, due 11/12/99 with a
value of $6,376. 45,000
45,000 Chase Securities, 4.65%, dated
1/29/99, due 2/1/99 (at amortized
cost), collateralized by U.S. Treasury
Note, 7.13%, due 9/30/99, with a
value of $45,905. 45,000
165,915 Deutsche Bank, 4.70%, dated
1/29/99, due 2/1/99 (at amortized
cost), collateralized by U.S. Treasury
Notes, 3.63%-6.38%, due
1/31/99-1/15/08 with a value of
$62,962 and U.S. Treasury Bonds,
7.13%-11.75%, due 2/15/01-2/15/23
with a value of $106,271. 165,915
45,000 First Chicago, 4.72%, dated 1/29/99,
due 2/1/99 (at amortized cost),
collateralized by U.S. Treasury Bills,
due 2/4/99-6/17/99 with a value of
$38,777 and U.S. Treasury Notes,
6.88%-7.50%, due 11/15/01-5/15/06
with a value of $7,123. 45,000
45,000 JP Morgan, 4.72%, dated 1/29/99,
due 2/1/99 (at amortized cost),
collateralized by U.S. Treasury Notes,
6.75%, due 6/30/99 with a value of
$45,901. 45,000
39,000 Merrill Lynch, 4.65%, dated 1/29/99,
due 2/1/99 (at amortized cost),
collateralized by U.S. Treasury
Bonds, 6.75%-11.63%, due
11/15/02-8/15/26 with a value of
$39,785. 39,000
45,000 Nesbitt Burns, 4.70%, dated 1/29/99,
due 2/1/99 (at amortized cost),
collateralized by U.S. Treasury Notes,
5.00%-8.50%, due 2/15/99-11/15/05
with a value of $26,615, U.S. Treasury
Bonds, 8.13%-9.25%, due
2/15/16-8/15/21 with a value of
$7,930 and U.S. Treasury Bills due
3/4/99-10/14/99 with a value of
$11,356. 45,000
45,000 Prudential Securities, 4.69%, dated
1/29/99, due 2/1/99 (at amortized
cost), collateralized by U.S. Treasury
Bond, 6.88%, due 8/15/25 with a
value of $45,901. 45,000
151,000 SG Cowen, 4.73%, dated 1/29/99,
due 2/1/99 (at amortized cost),
collateralized by U.S. Treasury Notes,
4.25%-6.50%, due 2/28/99-2/15/08
with a value of $80,502 and U.S.
Treasury Bonds, 6.75%-12.00%,
due 8/15/13-8/15/26 with a value
of $73,604. 151,000
151,000 Warburg/Dillion, 4.70%, dated
1/29/99, due 2/1/99 (at amortized
cost), collateralized by U.S. Treasury
Notes, 5.75%-7.75%, due
11/30/99-5/31/02 with a value of
$154,083. 151,000
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Total Repurchase Agreements 821,915
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Total Investments (Amortized Cost
$1,013,169) (a)--100.1% 1,013,169
-----------
Liabilities in excess of other
assets--(0.1)% (753)
-----------
TOTAL NET ASSETS--100.0% $1,012,416
-----------
(a) Also represents cost for federal tax purposes.
(See Notes which are an integral part of the Financial Statement)
6
<PAGE>
Fifth Third Tax Exempt Money Market Fund
Schedule of Portfolio Investments
January 31, 1999
(Amounts in thousands)
(Unaudited)
- --------------------------------------------------------------------------------
Principal Security Amortized
Amount Description Cost
- --------------------------------------------------------------------------------
Commercial Paper -- 6.0%
$ 900 Illinois Health Facility, 3.10%,
2/18/99 $ 900
2,000 New York State, 2.95%, 2/3/99 2,000
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Total Commercial Paper 2,900
--------
Municipal Bonds -- 94.6%
General Obligation -- 32.6%
1,000 Berea City, Ohio, 3.25%, due
4/15/98 1,000
495 Brecksville, Ohio, 3.40%, due
12/29/99 496
995 Brown City, Michigan, School
District, 4.10%, due 8/20/98 998
1,000 Chicago, Illinois, Floating Rate Note,
3.55%, 10/21/98 (b) 1,000
1,000 Clark County, Nevada School
District, 7.30%, due 3/1/99 1,003
200 Columbus, Ohio, 6.75%, due 7/1/06
(Prerefunded 7/1/99 @ 100) 203
510 Dayton, Ohio, 3.10%, due 12/1/99 510
1,255 Delaware, Ohio, 3.90%, due 6/2/99 1,255
2,650 Fairfield, Ohio, 3.90%, due 6/11/99 2,652
1,500 Hamilton County, Ohio, 3.75%, due
6/11/99 1,500
1,000 Hancock County, Ohio, 3.42%, due
12/1/99 1,003
300 Hilliard, Ohio, 3.85%, due 9/9/99 301
610 Hudson, Ohio, 3.95%, due 5/4/99 610
400 London, Ohio, 4.25%, due 7/22/99 400
2,300 New York State, Tollway Authority,
Floating Rate Note, 3.45%,
2/1/99 (b) 2,300
62 Powell Village, Ohio, 3.20%, due
12/1/99 62
275 Wapakoneta, Ohio, 4.80%, due
6/23/99 276
250 Worthington, Ohio, City School
District, 7.45%, due 12/1/12
(Prerefunded 12/1/99 @ 102) 264
--------
Total 15,833
--------
Revenue Bonds -- 62.0%
1,000 Allen County, Ohio, Health Care,
Floating Rate Note, 2.75%,
2/3/99 (b) 1,000
1,000 American Municipal Power Ohio,
Inc., Electric Systems, 3.40%, due
12/3/99 1,000
2,400 Ashtabula County, Ohio, Industrial
Development, Floating Rate Note,
2.90%, 2/3/99 (b) 2,401
845 Claremore Oklahoma, Public Works
Authority, 4.30%, due 6/1/99 848
915 Clark County, Kentucky, Pollution
Control, Floating Rate Note, 3.75%,
4/15/99 (b) 915
590 Columbus, Indiana, Floating Rate
Note, 2.90%, 2/3/99 (b) 590
400 Delaware City, Pennsylvania,
Floating Rate Note, 3.15%, 2/1/99 (b) 400
1,000 Farmington, New Mexico, Pollution
Control, Floating Rate Note, 3.15%,
2/1/99 (b) 1,000
300 Franklin County, Ohio, Hospital,
4.50%, due 6/1/99 301
2,000 Grand Rapids, Michigan, Water
Supply, Floating Rate Note, 2.60%,
2/3/99 2,000
500 Hamilton County, Ohio, Sewer
System, 4.50%, due 12/1/99 506
400 Harris County, Texas, Floating Rate
Note, 3.25%, 2/1/99 (b) 400
600 Harris County, Texas, Health
Facilities Development Corp.,
Floating Rate Note, 3.25%, 2/1/99 (b) 600
800 Kansas City, Missouri, Floating Rate
Note, 3.20%, 2/1/99 (b) 800
100 Kansas City, Missouri, Industrial
Development Authority, Floating
Rate Note, 3.20%, 2/1/99 (b) 100
900 Kentucky, Development Financial
Authority, Floating Rate Note, 2.65%,
2/4/99 (b) 900
1,000 Kentucky, Higher Education, 4.55%,
due 6/1/99 1,003
1,200 Lexington Fayette County, Kentucky,
3.70%, due 4/1/99 1,200
400 Lower Neches Valley Authority,
Texas, Floating Rate Note, 3.30%,
2/18/99 (b) 400
400 Lubbock, Texas, Floating Rate Note,
3.20%, 2/1/99 (b) 400
1,000 Metro Service District of Oregon,
6.75%, due 7/1/22, (Prerefunded
7/1/99 @ 102) 1,048
2,500 Metropolitan, Atlanta, Transit
Authority, Floating Rate Note, 2.85%,
2/4/99 (b) 2,500
600 Michigan Hospital Facility, Floating
Rate Note, 2.95%, 2/3/99 (b) 600
1,100 Michigan State Hospital Finance
Authority, Floating Rate Note,
2.95%, 2/3/99 (b) 1,100
1,000 Missouri Higher Education, 4.20%,
due 8/15/99 1,003
2,500 New Jersey State Transportation,
Floating Rate Note, 2.82%, 2/4/99 (b) 2,500
800 New York State, Medical Care
Facility Financing Agency, Floating
Rate Note, 3.45%, 2/1/99 (b) 800
500 Ocean City, New Jersey, Utility
Authority Waste Water, 4.75%,
due 1/1/00 508
300 Phoenix, Arizona, 4.00%, due 7/1/99 301
- continued -
7
<PAGE>
Fifth Third Tax Exempt Money Market Fund
- --------------------------------------------------------------------------------
Principal Security Amortized
Amount Description Cost
- --------------------------------------------------------------------------------
$ 900 Uinta County, Wyoming, Pollution
Control, Floating Rate Note, 3.15%,
2/1/99 (b) $ 900
900 Washington State, Health Care
Facility Authority, Floating Rate
Note, 3.15%, 2/1/99 (b) 900
1,100 York County, Pennsylvania Industrial
Development, Floating Rate Note,
2.75%, 2/3/99 (b) 1,100
--------
Total 30,024
--------
Total Municipal Bonds 45,857
--------
Money Market -- 0.6%
300 Federated Tax Free Trust 300
--------
Total Money Market 300
--------
Total Investments (Amortized Cost
$49,057) (a) -- 101.2% 49,057
--------
Liabilities in excess of other
assets -- (1.2)% (561)
--------
TOTAL NET ASSETS -- 100.0% $48,496
--------
(a) Also represents cost for federal tax purposes.
(b) Current rate and next reset date shown.
(See Notes which are an integral part of the Financial Statements)
8
<PAGE>
<TABLE>
<CAPTION>
Fifth Third Funds
Statements of Assets and Liabilities
January 31, 1999 (Amounts in thousands, except per share amounts)
(Unaudited)
- --------------------------------------------------------------------------------------------------
Commercial Government U.S. Treasury Tax Exempt
Paper Cash Reserves Obligations Money Market
Fund Fund Fund Fund
---------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Assets:
Investments, at amortized cost $ 364,223 $ 742,745 $ 191,254 $ 49,057
Repurchase agreements, at amortized cost 76,487 -- 821,915 --
------------ ------------- ------------ ------------
Total Investments 440,710 742,745 1,013,169 49,057
Interest receivable 553 1,982 3,296 449
Other assets -- 138 -- --
------------ ------------- ------------ ------------
Total Assets 441,263 744,865 1,016,465 49,506
------------ ------------- ------------ ------------
Liabilities:
Dividends payable 1,680 2,736 3,769 113
Payable for return of collateral
received for securities on loan -- 6,077 -- --
Payable to Custodian -- 29 -- 873
Accrued expenses and other payables:
Investment advisory fees 141 252 222 18
Administration fees 5 8 11 1
Distribution fees 11 82 -- 2
Other 80 -- 47 3
------------ ------------- ------------ ------------
Total Liabilities 1,917 9,184 4,049 1,010
------------ ------------- ------------ ------------
Net Assets:
Paid-in capital 439,346 735,696 1,012,211 48,498
Accumulated undistributed net
realized gains (losses) on
investment transactions (3) 10 184 (2)
Accumulated undistributed (distributions in
excess of) net investment income 3 (25) 21 --
------------ ------------- ------------ ------------
Net Assets $ 439,346 $ 735,681 $1,012,416 $ 48,496
============ ============= ============ ============
Net Assets
Institutional Shares 387,230 258,084 1,012,416 9,390
Investment A Shares 52,116 477,597 NA 39,106
------------ ------------- ------------ ------------
Total $ 439,346 $ 735,681 $1,012,416 $ 48,496
============ ============= ============ ============
Outstanding units of beneficial
interest (shares)
Institutional Shares 387,232 258,061 1,012,209 9,390
Investment A Shares 52,116 477,646 NA 39,109
------------ ------------- ------------ ------------
Total 439,348 735,707 1,012,209 48,499
============ ============= ============ ============
Net asset value
Offering and redemption price
per share - Institutional Shares
and Investment A Shares $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============= ============ ============
</TABLE>
(See Notes which are an integral part of the Financial Statements)
9
<PAGE>
Fifth Third Funds
Statements of Operations
For the Six Months Ended January 31, 1999
(Amounts in thousands)
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Commercial Government U.S. Treasury Tax Exempt
Paper Cash Reserves Obligations Money Market
Fund Fund Fund Fund*
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 10,845 $ 18,087 $ 23,637 $ 595
------------- ------------- ------------- -------------
Total Income 10,845 18,087 23,637 595
------------- ------------- ------------- -------------
EXPENSES:
Investment advisory fees 808 1,398 1,852 87
Administrative fees 362 626 830 31
Distribution fees - Investment A Shares 55 511 -- 34
Portfolio accounting fees 43 92 74 7
Custodian fees 16 19 23 3
Transfer agent fees 12 29 16 19
Trustees' fees 1 4 2 1
Miscellaneous fees 42 103 76 17
------------- ------------- ------------- -------------
Total Expenses 1,339 2,782 2,873 199
------------- ------------- ------------- -------------
Less expenses voluntarily reduced (244) (491) (1,114) (62)
------------- ------------- ------------- -------------
Net Expenses 1,095 2,291 1,759 137
------------- ------------- ------------- -------------
Net Investment Income 9,750 15,796 21,878 458
------------- ------------- ------------- -------------
Realized/Unrealized Gains from Investments:
Net realized gains from investment transactions 3 11 193 --
------------- ------------- ------------- -------------
Change in net assets resulting from operations $ 9,753 $ 15,807 $ 22,071 $ 458
============= ============= ============= =============
</TABLE>
(See Notes which are an integral part of the Financial Statements)
10
<PAGE>
Fifth Third Funds
Statements of Changes in Net Assets
(Amounts in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Commercial Paper Fund Government Cash Reserves Fund
----------------------------------- -------------------------------
Period Ended Period Ended
January 31, 1999 Year Ended January 31, 1999 Year Ended
(Unaudited) July 31, 1998 (Unaudited) July 31, 1998
----------------------------------- -------------------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
Operations--
Net investment income $ 9,750 $ 22,601 $ 15,796 $ 16,092
Net realized gains (losses) on investment
transactions 3 -- 11 6
----------- ----------- ----------- -----------
Change in net assets resulting from
operations 9,753 22,601 15,807 16,098
----------- ----------- ----------- -----------
Distributions to Institutional Shareholders:
From net investment income (8,728) (20,971) (6,790) (9,366)
Distributions to Investment A Shareholders:
From net investment income (1,023) (1,632) (9,038) (6,726)
----------- ----------- ----------- -----------
Change in net assets from shareholder
distributions (9,751) (22,603) (15,828) (16,092)
----------- ----------- ----------- -----------
Fund Share (Principal) Transactions--
Proceeds from shares issued 678,279 1,320,142 823,796 421,706
Dividends reinvested 209 495 6,610 --
Cost of shares redeemed (644,044) (1,291,001) (466,024) (323,513)
----------- ----------- ----------- -----------
Change in net assets from share
transactions 34,444 29,636 364,382 98,193
----------- ----------- ----------- -----------
Change in net assets 34,446 29,634 364,361 98,199
Net Assets:
Beginning of period 404,900 375,266 371,320 273,121
----------- ----------- ----------- -----------
End of period $ 439,346 $ 404,900 $ 735,681 $ 371,320
=========== =========== =========== ===========
</TABLE>
(See Notes which are an integral part of the Financial Statements)
11
<PAGE>
Fifth Third Funds
Statements of Changes in Net Assets
(Amounts in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Treasury Obligations Fund Tax Exempt Money Market Fund
------------------------------------ ---------------------------------
Period Ended Period Ended Year Ended
January 31, 1999 Year Ended January 31, 1999 September 30,
(Unaudited) July 31, 1998 (Unaudited) 1998 (a)
------------------------------------ ---------------------------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets:
Operations--
Net investment income $ 21,878 $ 36,250 $ 458 $ 1,756
Net realized gains (losses) on investment
transactions 193 (9) -- (2)
----------- ----------- ----------- -----------
Change in net assets resulting from
operations 22,071 36,241 458 1,754
----------- ----------- ----------- -----------
Distributions to Institutional Shareholders:
From net investment income (21,903) (36,250) (99) (6)
Distributions to Investment A Shareholders:
From net investment income -- -- (359) (1,750)
----------- ----------- ----------- -----------
Change in net assets from shareholder
distributions (21,903) (36,250) (458) (1,756)
----------- ----------- ----------- -----------
Fund Share (Principal) Transactions--
Proceeds from shares issued 1,082,917 1,831,037 54,624 182,537
Dividends reinvested 4,046 7,545 230 1,648
Cost of shares redeemed (950,804) (1,501,571) (58,805) (192,020)
----------- ----------- ----------- -----------
Change in net assets from share
transactions 136,159 337,011 (3,951) (7,835)
----------- ----------- ----------- -----------
Change in net assets 136,327 337,002 (3,951) (7,837)
Net Assets:
Beginning of period 876,089 539,087 52,447 60,284
----------- ----------- ----------- -----------
End of period $ 1,012,416 $ 876,089 $ 48,496 $ 52,447
=========== =========== =========== ===========
</TABLE>
(a) The Tax Exempt Money Market Fund Institutional Shares commenced operations
on September 21, 1998.
(See Notes which are an integral part of the Financial Statements)
12
<PAGE>
Fifth Third Funds
Notes to Financial Statements
January 31, 1999
(Unaudited)
- --------------------------------------------------------------------------------
(1) Organization
Fifth Third Funds, formerly known as the Fountain Square Funds (the "Trust"), is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
an open-end management investment company. At January 31, 1999, the Trust
consisted of sixteen separate investment portfolios. The accompanying financial
statements and notes relate only to the Commercial Paper Fund, Government Cash
Reserves Fund, U.S. Treasury Obligations Fund, and the Tax Exempt Money Market
Fund (individually the "Fund" and collectively the "Funds").
The Commercial Paper Fund, Government Cash Reserves Fund, and the Tax Exempt
Money Market Fund offer two classes of shares: Institutional Shares (formerly
known as Trust Shares) and Investment A Shares (formerly known as Investment
Shares). Each class of shares has identical rights and privileges except with
respect to distribution (12b-1) fees paid by the Investment A Shares, voting
rights on matters affecting a single class of shares and the exchange privileges
of each class of shares. The U.S. Treasury Obligation Fund offers only one class
of shares.
(2) Reorganization
The Trust entered into an Agreement and Plan of Reorganization and Liquidation
with The Cardinal Group pursuant to which all of the assets and liabilities of
each Cardinal Group Portfolio were transferred to a portfolio of the Trust in
exchange for shares of the corresponding portfolio of the Trust. The Cardinal
Government Securities Money Market Fund transferred its assets and liabilities
to the Government Cash Reserves Fund. The Cardinal Tax Exempt Money Market Fund
transferred its assets and liabilities to the Tax Exempt Money Market Fund. The
reorganization, which qualified as a tax-free exchange for federal income tax
purposes, was approved by shareholders of The Cardinal Group at a special
shareholder meeting held on July 24, 1998, and was completed on September 21,
1998. The following is a summary of shares outstanding, net assets, net asset
value per share and unrealized appreciation immediately before and after the
reorganization for the Government Cash Reserves Fund and the Tax Exempt Money
Market Fund:
<TABLE>
<CAPTION>
After
Before Reorganization Reorganization
---------------------------- --------------
Cardinal Fifth Third Fifth Third
Tax Exempt Tax Exempt Tax Exempt
Money Market Money Market Money Market
Fund Fund Fund
---------------------------- --------------
<S> <C> <C> <C>
Shares (000) 54,034 0 54,034
Net Assets (000) $54,032 $0 $54,032
Net Asset Value $1.00 $0 $1.00
Unrealized Appreciation (000) $0 $0 $0
<CAPTION>
After
Before Reorganization Reorganization
---------------------------- --------------
Cardinal Fifth Third Fifth Third
Government Government Government
Securities Cash Reserves Cash Reserves
Fund Fund Fund
---------------------------- --------------
<S> <C> <C> <C>
Shares (000) 445,357 420,417 865,774
Net Assets (000) $445,341 $420,397 $865,738
Net Asset Value $1.00 $1.00 $1.00
Unrealized Appreciation (000) $0 $0 $0
</TABLE>
13
<PAGE>
Fifth Third Funds
Notes to Financial Statements (continued)
(Unaudited)
- --------------------------------------------------------------------------------
(3) Special Meeting of Shareholders
A Special Meeting of Shareholders of the Cardinal Group was held on July 24,
1998. At the meeting, shareholders voted on the approval of the Agreement and
Plan of Reorganization and Liquidation by and between Fifth Third Funds, Fifth
Third Bank (the "Bank"), The Cardinal Group and Cardinal Management Corp.
("CMC"). The results of the votes to merge the Cardinal Government Securities
Money Market Fund with the Fifth Third Government Cash Reserve Fund and the
Cardinal Tax Exempt Money Market Fund with the Fifth Third Tax Exempt Money
Market Fund by shareholders were as follows:
FUND FOR AGAINST ABSTAIN
---- --- ------- -------
Government Cash Reserves 257,816,312 9,342,618 11,354,040
Tax Exempt Money Market 27,815,016 1,200,911 938,627
(4) Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. These
policies are in conformity with generally accepted accounting principles. The
preparation of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of income and expenses
for the period. Actual results could differ from those estimates.
A. Securities Valuations--Investments of the Funds are valued at either
amortized cost, which approximates market value, or at original cost, which
combined with accrued interest approximates market value. Under the amortized
cost method, discount or premium is accreted or amortized on a constant basis to
the maturity of the security. In addition, the Funds may not (a) purchase any
instruments with a remaining maturity greater than 397 calendar days unless such
instrument is subject to a demand feature, or (b) maintain a dollar-weighted
average portfolio maturity which exceeds 90 days.
B. Repurchase Agreements--The Funds will only enter into repurchase agreements
with banks and other recognized financial institutions, such as broker/dealers,
which are deemed by the Bank to be creditworthy pursuant to guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees"). It
is the policy of the Funds to require the custodian or sub-custodian bank to
take possession, to have legally segregated in the Federal Reserve Book Entry
System, or to have segregated within the custodian bank's vault, all securities
held as collateral under repurchase agreement transactions. Additionally,
procedures have been established by the Funds to monitor, on a daily basis, the
market value of each repurchase agreement's collateral to ensure that the value
of collateral at least equals the repurchase price to be paid under the
repurchase agreement transaction. Risks may arise from the potential inability
of counterparties to honor the terms of the repurchase agreement. Accordingly,
the Funds could receive less than the repurchase price on the sale of collateral
securities.
C. Securities Transactions and Related Income--Securities transactions are
accounted for on the date the security is purchased or sold (trade date).
Interest income is recognized on the accrual basis and includes, where
applicable, the pro rata amortization of premium or discount. Dividend income is
recorded on the ex-dividend date. Gains or losses realized on sales of
securities are determined by comparing the identified cost of the security lot
sold with the net sales proceeds.
D. When-Issued and Delayed Delivery Transactions--The Funds may engage in
when-issued or delayed delivery transactions. The Funds record when-issued
securities on the trade date and maintain security positions such that
sufficient liquid assets will be available to make payment for the securities
14
<PAGE>
Fifth Third Funds
Notes to Financial Statements (continued)
(Unaudited)
- --------------------------------------------------------------------------------
purchased. Securities purchased on a when-issued or delayed delivery basis are
valued daily and begin earning interest on the settlement date.
E. Dividends to Shareholders--Dividends from net investment income are declared
daily and paid monthly and distributable net realized gains, if any, are
declared and distributed at least annually. Dividends from net investment income
and from net realized capital gains are determined in accordance with income tax
regulations, which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for expiring capital
loss carryforwards and deferrals of certain losses.
F. Federal Taxes--It is the Fund's policy to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year substantially all of their income.
Accordingly, no provision for federal income tax is necessary.
G. Lending Portfolio Securities--To generate additional income, the Funds, may
lend up to 33% of securities in which they are invested pursuant to agreements
requiring that the loan be continuously secured by cash, U.S. Government or U.S.
Government Agency securities, shares of an investment trust or mutual fund, or
any combination of cash and such securities as collateral equal at all times to
at least 100% of the market value plus accrued interest on the securities lent.
The Funds continue to earn interest and dividends on securities lent while
simultaneously seeking to earn interest on the investment of collateral.
When cash is received as collateral for securities loaned, the Funds may invest
such cash in short-term U.S. Government Securities, Repurchase Agreements, or
other short-term corporate securities. The cash or subsequent short-term
investments are recorded as assets of the Funds, offset by a corresponding
liability to repay the cash at the termination of the loan. In addition, the
short-term securities purchased with the cash collateral are included in the
accompanying schedules of portfolio investments. Fixed income securities
received as collateral are not recorded as an asset or liability of the Fund
because the Fund does not have effective control of such securities.
There may be risks of delay in recovery of the securities or even loss of rights
in the collateral should the borrower of the securities fail financially.
However, loans will be made only to borrowers deemed by the Advisor to be of
good standing and creditworthy under guidelines established by the Board of
Trustees and when, in the judgment of the Advisor, the consideration which can
be earned currently from such securities loans justifies the attendant risks.
Loans are subject to termination by the Funds or the borrower at any time, and
are, therefore, not considered to be illiquid investments. According to GAAP, a
statement of cash flows is presented if the Fund lent out, on average, more than
10% of net assets during the year. Under this guideline, no statements of cash
flow are presented for any of the Funds during the applicable period. As of
January 31, 1999, the following Fund had securities with the following market
values on loan (Amounts in Thousands):
Market Market Value
Value of of Loaned
Collateral Securities
----------------------------
Commercial Paper Fund $0 $0
Government Cash Reserves Fund $6,077 $5,916
U.S. Treasury Obligations Fund $0 $0
Tax Exempt Money Market Fund $0 $0
The loaned securities were fully collateralized by cash, U.S. Government
securities, short-term corporate notes and repurchase agreements as of January
31, 1999.
15
<PAGE>
Fifth Third Funds
Notes to Financial Statements (continued)
(Unaudited)
- --------------------------------------------------------------------------------
(5) Shares of Beneficial Interest
Transactions in Fund shares were as follows (amounts in thousands):
<TABLE>
<CAPTION>
Government
Commercial Cash Reserves
Paper Fund Fund
---------------------- ----------------------
Shares Amounts Shares Amounts
------ ------- ------ -------
<S> <C> <C> <C> <C>
For the period ended 1/31/99:
Institutional Shares
Shares issued 642,886 $ 642,886 281,593 $ 281,593
Dividends reinvested 209 209 - -
Shares redeemed (624,214) (624,216) (244,563) (244,563)
------------ ------------- ------------ -------------
Institutional Shares 18,881 $ 18,879 37,030 $ 37,030
============ ============= ============ =============
Investment A Shares
Shares issued 35,393 $ 35,393 542,205 $ 542,203
Dividends reinvested - - 6,610 6,610
Shares redeemed (19,828) (19,828) (221,452) (221,461)
------------ ------------- ------------ -------------
Investment A Shares 15,565 $ 15,565 327,363 $ 327,352
============ ============= ============ =============
For the year ended 7/31/98:
Institutional Shares
Shares issued 1,272,208 $ 1,272,208 284,720 $ 284,720
Dividends reinvested 495 495 - -
Shares redeemed (1,246,181) (1,246,181) (226,232) (226,232)
------------ ------------- ------------ -------------
Institutional Shares 26,522 $ 26,522 58,488 $ 58,488
============ ============= ============ =============
Investment A Shares
Shares issued 47,934 $ 47,934 136,986 $ 136,986
Dividends reinvested - - - -
Shares redeemed (44,820) (44,820) (97,281) (97,281)
------------ ------------- ------------ -------------
Investment A Shares 3,114 $ 3,114 39,705 $ 39,705
============ ============= ============ =============
</TABLE>
16
<PAGE>
Fifth Third Funds
Notes to Financial Statements (continued)
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Treasury Tax Exempt
Obligations Money Market
Fund Fund
------------------------ ---------------------
Shares Amounts Shares Amounts
------ ------- ------ -------
<S> <C> <C> <C> <C>
For the period ended 1/31/99:
Institutional Shares (a)
Shares issued 1,082,913 $ 1,082,917 45,883 $ 45,883
Dividends reinvested 4,047 4,046 -- --
Shares redeemed (950,804) (950,804) (44,446) (44,446)
---------- ----------- -------- -----------
Institutional Shares 136,156 $ 136,159 1,437 $ 1,437
========== =========== ======== ===========
Investment A Shares
Shares issued -- -- 8,741 $ 8,741
Dividends reinvested -- -- 229 230
Shares redeemed -- -- (14,358) (14,359)
---------- ----------- -------- -----------
Investment A Shares -- -- (5,388) $ (5,388)
========== =========== ======== ===========
For the year ended 7/31/98:
Institutional Shares (a)
Shares issued 1,830,875 $ 1,831,037 12,864 $ 12,864
Dividends reinvested 7,545 7,545 -- --
Shares redeemed (1,501,407) (1,501,571) (4,910) (4,910)
---------- ----------- -------- -----------
Institutional Shares 337,013 $ 337,011 7,954 $ 7,954
========== =========== ======== ===========
Investment A Shares
Shares issued -- -- 169,674 $ 169,673
Dividends reinvested -- -- 1,648 1,648
Shares redeemed -- -- (187,110) (187,110)
---------- ----------- -------- -----------
Investment A Shares -- -- (15,788) $ (15,789)
========== =========== ======== ===========
</TABLE>
(a) The Tax Exempt Money Market Fund Institutional Shares commenced operations
on September 21, 1998.
17
<PAGE>
Fifth Third Funds
Notes to Financial Statements (continued)
(Unaudited)
- --------------------------------------------------------------------------------
(6) Investment Advisory Fee and Other Transactions with Affiliates
(Amounts in Thousands)
Investment Advisory Fee--The Bank, the Trust's investment Advisor, receives for
its services an annual investment advisory fee of 0.40%, which is based on a
percentage of each of the Funds' average daily net assets.
The Bank may voluntarily choose to waive a portion of its fee and reimburse
certain operating expenses of the Fund. The Bank can modify or terminate this
voluntary waiver and reimbursement at any time at its sole discretion. For the
six months ended January 31, 1999, the Bank waived $40, $0, and $648 in advisory
fees for the Commercial Paper Fund, the Government Cash Reserves Fund, and the
U.S. Treasury Obligations Fund; respectively. For the four months ended January
31, 1999 the Bank waived $17 in advisory fees for the Tax Exempt Money Market
Fund.
Administrative Fee--BISYS Fund Services ("BISYS") serves as the Trust's
administrator. The administrator generally assists in all aspects of the Trust's
administration and operation including providing the Funds with certain
administrative personnel and services necessary to operate the Fund. Pursuant to
a separate agreement with BISYS, the Bank performs sub-administrative services
on behalf of the Funds including providing certain administrative personnel and
services necessary to operate the Funds, for which it receives a fee from BISYS
computed daily as a percentage of the daily net assets of the Funds. Under the
terms of the administration agreement, BISYS' fees are computed daily as a
percentage of the average net assets of the Trust for the period. Administration
fees are computed at 0.20% of first $1 billion of net assets of the Trust, 0.18%
of net assets of the Trust between $1 billion and $2 billion, and 0.17% of more
than $2 billion of net assets of the Trust. For the six months ended January 31,
1999, the administrator waived $193, $354, and $466 in administration fees for
the Commercial Paper Fund, Government Cash Reserves Fund, and the U.S. Treasury
Obligations Fund; respectively. For the four months ended January 31, 1999, the
administrator waived $17 in administration fees for the Tax Exempt Money Market
Fund.
Distribution Services Fee--The Commercial Paper Fund, the Government Cash
Reserves Fund, and the Tax Exempt Money Market Fund have adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Effective December 1,
1995, BISYS serves as the Trust's principal distributor. Under the terms of the
Plan, the Funds will compensate the principal distributor from the net assets of
the Funds' Investment A Shares to finance activities intended to result in the
sales of each Funds' Investment A Shares. The Plan provides that the Funds may
incur distribution expenses up to 0.25% of the average daily net assets of the
Investment Shares, annually, to compensate the distributor. The distributor may
voluntarily choose to waive all or a portion of its fee. The distributor can
modify or terminate this voluntary waiver at any time at its sole discretion.
For the six month period ended January 31, 1999, the distributor waived $11 and
$137 in distribution fees, respectively for the Commercial Paper Fund and the
Government Cash Reserves Fund. For the four month period ended January 31, 1999
the distributor waived $28 in distribution fees for the Tax Exempt Money Market
Fund.
Transfer and Dividend Disbursing Agent, Accounting and Custody Fees--The Bank
serves as transfer and dividend disbursing agent for the Funds for which it
receives a fee. The fee is based on the level of each Fund's average net assets
for the period, plus out-of-pocket expenses.
The Bank is the Funds' custodian & accountant for which it receives a fee. The
fee is based on the level of each Fund's average net assets for the period, plus
out-of-pocket expenses.
Certain Officers and Trustees of the Trust are Officers and Trustees of the
above companies but are not paid any fees directly by the Trust for serving as
Officer and Trustees of the Trust.
18
<PAGE>
Fifth Third Funds
Notes to Financial Statements (continued)
(Unaudited)
- --------------------------------------------------------------------------------
(7) Insurance
Fidelity Bond and Errors/Omissions insurance coverage for the Funds and its
Officers and Trustees had been obtained through ICI Mutual Insurance Company
(ICI Mutual), an industry-sponsored mutual insurance company. The Funds include,
in other assets, deposits made for the initial capital and certificates of
deposit that collateralized standby letters of credit sponsoring potential
capital needs of ICI Mutual. In addition, these portfolios are also committed to
provide additional capital should ICI Mutual experience unusual losses arising
from its insurance underwriting. The following table details the deposits and
certificates of deposit of the Funds:
Certificates
Deposits of Deposits
----------------------------
Government Cash Reserves Fund $28,588 $175,000
Tax Exempt Money Market Fund $13,291 $ 27,000
19
<PAGE>
Fifth Third Commercial Paper Fund
Financial Highlights
- --------------------------------------------------------------------------------
(For a share of beneficial interest throughout each period)
<TABLE>
<CAPTION>
Period Ended
January 31, Year Ended July 31,
1999 ---------------------------------------------------------
Institutional Shares (Unaudited) 1998 1997 1996 1995 1994
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations
Net investment income 0.02 0.05 0.05 0.05 0.05 0.03
--------- --------- --------- --------- --------- ---------
Total from investment operations 0.02 0.05 0.05 0.05 0.05 0.03
--------- --------- --------- --------- --------- ---------
Less distributions
Distributions to shareholders
from net investment income (0.02) (0.05) (0.05) (0.05) (0.05) (0.03)
--------- --------- --------- --------- --------- ---------
Total distributions (0.02) (0.05) (0.05) (0.05) (0.05) (0.03)
--------- --------- --------- --------- --------- ---------
Net asset value, end of the period. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ========= =========
Total return 2.47%(b) 5.25% 5.11% 5.20% 5.25% 3.02%
Ratios to Average Net Assets
Expenses 0.52%(c) 0.52% 0.52% 0.49% 0.49% 0.49%
Net investment income 4.85%(c) 5.13% 4.99% 5.07% 5.12% 2.97%
Expense waiver/reimbursement (a) 0.12%(c) 0.12% 0.09% 0.08% 0.09% 0.10%
Supplemental data
Net assets, end of period
(000 omitted) $ 387,230 $ 368,348 $ 341,827 $ 300,821 $ 223,640 $ 213,126
<CAPTION>
Period Ended
January 31, Year Ended July 31,
1999 ---------------------------------------------------
Investment A Shares (Unaudited) 1998 1997 1996 1995 1994
----------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations
Net investment income 0.02 0.05 0.05 0.05 0.05 0.03
-------- -------- -------- -------- -------- -------
Total from investment operations 0.02 0.05 0.05 0.05 0.05 0.03
-------- -------- -------- -------- -------- -------
Less distributions
Distributions to shareholders
from net investment income (0.02) (0.05) (0.05) (0.05) (0.05) (0.03)
-------- -------- -------- -------- -------- -------
Total distributions (0.02) (0.05) (0.05) (0.05) (0.05) (0.03)
-------- -------- -------- -------- -------- -------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== =======
Total return 2.38%(b) 5.25% 5.11% 5.20% 5.25% 3.02%
Ratios to Average Net Assets
Expenses 0.72%(c) 0.52% 0.52% 0.49% 0.49% 0.49%
Net investment income 4.65%(c) 5.13% 4.99% 5.06% 5.12% 2.97%
Expense waiver/reimbursement (a) 0.17%(c) 0.47% 0.44% 0.40% 0.44% 0.45%
Supplemental data
Net assets, end of period
(000 omitted) $ 52,116 $ 36,552 $ 33,438 $ 19,341 $ 10,169 $ 6,147
</TABLE>
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Not Annualized.
(c) Annualized.
(See Notes which are an integral part of the Financial Statements)
20
<PAGE>
Fifth Third Government Cash Reserves Fund
Financial Highlights
- --------------------------------------------------------------------------------
(For a share of beneficial interest throughout each period)
<TABLE>
<CAPTION>
Period Ended
January 31, Year Ended July 31,
1999 ---------------------------------------------------------
Institutional Shares (Unaudited) 1998 1997 1996 1995 1994
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations
Net investment income 0.02 0.05 0.05 0.05 0.05 0.03
--------- --------- --------- --------- --------- ---------
Total from investment operations 0.02 0.05 0.05 0.05 0.05 0.03
--------- --------- --------- --------- --------- ---------
Less distributions
Distributions to shareholders
from net investment income (0.02) (0.05) (0.05) (0.05) (0.05) (0.03)
--------- --------- --------- --------- --------- ---------
Total distributions (0.02) (0.05) (0.05) (0.05) (0.05) (0.03)
--------- --------- --------- --------- --------- ---------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ========= =========
Total return 2.38%(b) 5.13% 5.01% 5.11% 5.22% 3.03%
Ratios to Average Net Assets
Expenses 0.57%(c) 0.52% 0.51% 0.50% 0.50% 0.50%
Net investment income 4.67%(c) 5.02% 4.90% 4.99% 5.17% 3.01%
Expense waiver/reimbursement (a) 0.03%(c) 0.12% 0.09% 0.07% 0.20% 0.13%
Supplemental data
Net assets, end of period
(000 omitted) $ 258,084 $ 221,034 $ 162,543 $ 132,326 $ 129,603 $ 106,632
<CAPTION>
Period Ended
January 31, Year Ended July 31,
1999 ------------------------------------------------------
Investment A Shares (Unaudited) 1998 1997 1996 1995 1994
---------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations
Net investment income 0.02 0.05 0.05 0.05 0.05 0.03
---------- --------- --------- -------- -------- --------
Total from investment operations 0.02 0.05 0.05 0.05 0.05 0.03
---------- --------- --------- -------- -------- --------
Less distributions
Distributions to shareholders
from net investment income (0.02) (0.05) (0.05) (0.05) (0.05) (0.03)
---------- --------- --------- -------- -------- --------
Total distributions (0.02) (0.05) (0.05) (0.05) (0.05) (0.03)
---------- --------- --------- -------- -------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========= ========= ======== ======== ========
Total return 2.30%(b) 5.13% 5.00% 5.11% 5.22% 3.03%
Ratios to Average Net Assets
Expenses 0.75%(c) 0.52% 0.51% 0.51% 0.50% 0.50%
Net investment income 4.49%(c) 5.02% 4.90% 4.97% 5.17% 2.96%
Expense waiver/reimbursement (a) 0.10%(c) 0.47% 0.44% 0.42% 0.45% 0.48%
Supplemental data
Net assets, end of period
(000 omitted) $ 477,597 $ 150,286 $ 110,543 $ 68,884 $ 45,726 $ 11,073
</TABLE>
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Not Annualized.
(c) Annualized.
(See Notes which are an integral part of the Financial Statements)
21
<PAGE>
Fifth Third U.S. Treasury Obligations Fund
Financial Highlights
- --------------------------------------------------------------------------------
(For a share of beneficial interest throughout each period)
<TABLE>
<CAPTION>
Period Ended
January 31, Year Ended July 31,
1999 ---------------------------------------------------------
Institutional Shares (Unaudited) 1998 1997 1996 1995 1994
----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- --------- --------- --------- --------- ---------
Income from investment operations
Net investment income 0.02 0.05 0.05 0.05 0.05 0.03
----------- --------- --------- --------- --------- ---------
Total from investment operations 0.02 0.05 0.05 0.05 0.05 0.03
----------- --------- --------- --------- --------- ---------
Less distributions
Distributions to shareholders
from net investment income (0.02) (0.05) (0.05) (0.05) (0.05) (0.03)
----------- --------- --------- --------- --------- ---------
Total distributions (0.02) (0.05) (0.05) (0.05) (0.05) (0.03)
----------- --------- --------- --------- --------- ---------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== ========= ========= ========= ========= =========
Total return 2.42%(b) 5.31% 5.11% 5.24% 5.18% 3.02%
Ratios to Average Net Assets
Expenses 0.38%(c) 0.38% 0.42% 0.43% 0.44% 0.44%
Net investment income 4.73%(c) 5.19% 5.00% 5.10% 5.07% 2.99%
Expense waiver/reimbursement (a) 0.24%(c) 0.24% 0.17% 0.12% 0.11% 0.14%
Supplemental data
Net assets, end of period
(000 omitted) $ 1,012,416 $ 876,089 $ 539,087 $ 489,228 $ 321,640 $ 336,229
</TABLE>
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Not Annualized.
(c) Annualized.
(See Notes which are an integral part of the Financial Statements)
22
<PAGE>
Fifth Third Tax Exempt Money Market Fund
Financial Highlights
- --------------------------------------------------------------------------------
(For a share of beneficial interest throughout each period)
Period Ended For the
January 31, Period Ended
1999 September 30,
Institutional Shares (Unaudited) 1998*
------------ -------------
Net asset value, beginning of period $ 1.00 $ 1.00
Income from investment operations
Net investment income 0.01 --
------------ -------------
Total from investment operations 0.01 --
------------ -------------
Less distributions
Distributions to shareholders
from net investment income (0.01) --
------------ -------------
Total distributions (0.01) --
------------ -------------
Net asset value, end of the period $ 1.00 $ 1.00
============ =============
Total return 0.90%(b) 2.74%(d)
Ratios to Average Net Assets
Expenses 0.75%(c) 0.63%(c)
Net investment income 2.66%(c) 3.09%(c)
Expense waiver/reimbursement (a) 0.20%(c) --
Supplemental data
Net assets, end of period
(000 omitted) $ 9,390 $ 7,953
<TABLE>
<CAPTION>
Period Ended
January 31, Year Ended Sept. 30,
1999 ---------------------------------------
Investment A Shares (Unaudited) 1998 1997 1996 1995 1994
------------ ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations
Net investment income 0.01 0.03 0.03 0.03 0.03 0.02
------ ------- ------ ------ ------ ------
Total from investment operations 0.01 0.03 0.03 0.03 0.03 0.02
------ ------- ------ ------ ------ ------
Less distributions
Distributions to shareholders
from net investment income (0.01) (0.03) (0.03) (0.03) (0.03) (0.02)
------ ------- ------ ------ ------ ------
Total distributions (0.01) (0.03) (0.03) (0.03) (0.03) (0.02)
------ ------- ------ ------ ------ ------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ======= ====== ====== ====== ======
Total return 0.88%(b) 2.74% 2.72% 2.67% 3.02% 1.78%
Ratios to Average Net Assets
Expenses 0.79%(c) 0.71% 0.80% 0.89% 0.81% 0.76%
Net investment income 2.62%(c) 2.88% 2.79% 2.66% 2.99% 1.78%
Expense waiver/reimbursement (a) 0.40%(c) -- -- -- -- --
Supplemental data
Net assets, end of period
(000 omitted) $39,106 $44,494 $60,284 $59,915 $64,780 $80,531
</TABLE>
* Reflects operations for the period from September 21, 1998 (commencement of
operations) to September 30, 1998.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(b) Not Annualized.
(c) Annualized.
(d) Represents total return based on the activity of Investment A Shares for
the period from October 1, 1997 to September 2, 1998 and the activity of
the Institutional Shares for the period from September 21, 1998 to
September 30, 1998. Total return for the Institutional Shares for the
period from September 21, 1998 (commencement of operations) to September
30, 1998 was 3.16% annualized.
(See Notes which are an integral part of the Financial Statements)
23
<PAGE>
Addresses
- --------------------------------------------------------------------------------
Fifth Third Government Cash Reserves Fund Fifth Third Funds
Fifth Third Commercial Paper Fund c/o Fifth Third Bank
Fifth Third Tax Exempt Money Market Fund 38 Fountain Square Plaza
Fifth Third U.S. Treasury Obligations Fund Cincinnati, Ohio 45263
- --------------------------------------------------------------------------------
Investment Advisor Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
<PAGE>
[FIFTH THIRD BANK LOGO APPEARS HERE]
Investment Advisor
